Eclipse Jet update

ECLIPSE

 

125
Fairchild
St.,
Suite
100
 

Charleston,
SC
29492



April 24, 2009

VIA: E MAIL TO CUSTOMERS 

TO: ALL ECLIPSE 500 OWNERS AND DEPOSITORS
FROM: MIKE PRESS (S/N 4) AND MASON HOLLAND (S/N 473)

At the request of our fellow owners and depositors (Customers) we are pleased to provide the following update on our progress. 

We continue to work towards our goal of acquiring the assets of Eclipse Aircraft Corporation (EAC) and immediately restarting service, modifications, and limited production of the Eclipse E500 aircraft.

In the past three weeks, both Mike Press and I have visited over 30 cities across the country and presented our plan directly to those aircraft owners and potential investors who have a sincere interest in our shared vision. To date, we have given our presentation “face to face” to over 300 aircraft owners and prior deposit holders. We have also given over 50 individual WebEx presentations for those we could not reach in person. We have adapted, and continue to adapt, our plan to meet the collective needs of our fellow customers and our investor group. Based on our meetings, we have well over 95% acceptance of our plan.

Why are we doing this? Well, it needs to be done. What we have is a situation where over 1.5 billion dollars was spent in developing a product, creating a company, building a manufacturing line, and most importantly; the successful production of 260 jet aircraft that are the most fuel efficient twin-engine jet aircraft in the world today! However, these 260 planes are not complete, someone needs to do this! The vision is not complete, this plane deserves to be produced, and someone needs to do this! We are going to do this!

Sometimes unfortunate turns in our economic cycles produce rare opportunities. Due to the lack of investment funding currently available in traditional forms and due to the current worldwide credit crisis there are few, if any, qualified bidders raising their hands to bid on the assets of EAC. Therefore, we believe there may be an opportunity to acquire these assets in a cost efficient way.

Why create a profit-making entity for this effort? Well, because without an incentive for profit, customers and investors have no one to hold accountable for their actions. It is a simple fact, if we do not produce a product of value for the customer (which includes fair pricing, timely service, and quality products), then the customers will not pay us and we will not have the opportunity to earn a profit. We then will be held accountable to our shareholders who trusted us and put their investment dollars at risk with us.

Our group is prepared to purchase the EAC assets for the right economic terms. However, if other bidders “price up” the assets past our value of the assets we will have to make a tough decision. It is simple economics. If we pay too much for the assets then we have a larger basis in cost that needs to be serviced by the ongoing entity in order to achieve a fair investment return. We will not purchase the assets at a price above the point in which we would have to charge what we believe would be above market rates for aircraft or services. 

In our view, the big losers if we do not win the bid for the assets are the current plane owners. We are the only viable bidder raising our hand and offering our investment dollars at risk to immediately provide service, immediately begin modifications to complete the existing fleet, and prepare for the start of limited production when the markets allow for more product. 

If you have not done so, please reach out to us and view our plan. We continue to offer individual interactive presentations either in person or via a WebEx presentation/phone call. In the mean time, in the pages attached to this letter, you will find more detail on the status of the asset bidding process and a series of FAQ’s and our replies as they relate to our plan and progress.

Our tag line is “Customer First” and we mean it! We will complete your product, we will increase its value in the market place, and we will continue to develop this fantastic aircraft and complete the vision of the world’s most fuel efficient jet!

Sincerely,


Mason Holland (S/N 473) Mike Press (S/N 4)


Thanks for that, Mike and Mason. As mentioned on the blog yesterday, your entire missive is a bit long for the blog (yes, it really is a thorough update) so herewith the highlights:-

Enclosures: Official Status Report as of April 24, 2009

DATE: APRIL 24, 2009
SUBJECT: STATUS REPORT RE: OUR BID TO BUY EAC’S ASSETS

THE BANKRUPTCY

EAC’s Ch. 7 Trustee has not announced a plan for the sale of the assets (the Assets) of Eclipse Aviation Corporation and its subsidiaries (collectively, EAC), and we are not aware of one.
EAC’s principal secured creditors effectively control EAC’s bankruptcy insofar as they must consent to waive their liens on the Assets in order for EAC’s Trustee to sell those Assets.
EAC’s principal secured creditors are the collection of hedge funds that own EAC’s secured senior debt (the Note Holders) and Al Mann (Mann), who is both a Note Holder and furnished EAC its debtor-in- possession (DIP) debt. The Note Holders hold almost $600M in EAC secured senior debt, and Mann (separate and apart from his interest EAC’s secured senior debt) holds approximately $10MM in EAC DIP debt.

EAC’s Ch. 7 Trustee can, among other things, choose to dismiss the bankruptcy and allow EAC’s principal secured creditors to foreclose on their liens, or he can sell all or substantially all of the Assets; provided that EAC’s principal secured creditors are willing to waive their liens on the Assets. We expect the Trustee to eventually do the latter.

OUR BID
In the last 30 days, we have travelled to more than 30 cities and visited with more than 300 Eclipse 500 (E500) owners, depositors, vendors and other potential investors. Further, we have spent hundreds of hours trying to reach some form of agreement with the Eclipse Owners Group (EOG) led by David Green and Kevin Padrick, among others, to ensure that the owners’ interests are properly reflected in our plan of operations (our Plan) and in an effort to win the EOG’s support for our bid. We have had good success in building a consensus for our Plan among the hundreds with whom we have visited. We have been unable to reach a consensus with the EOG on anything.

OTHER BIDS
Others are rumored to be interested in fielding a bid for the Assets. The EOG proposes an evolving plan that calls for a not-for-profit service cooperative and relationship with
Hawker-Beechcraft to provide service; however, we believe it will be very difficult for the EOG to assemble the capital required to win in an open bidding process. Based upon our current information, we believe EAC’s principal secured creditors are asking for a significant amount of cash (far in excess of the EOG’s expectations). Further, Daher-Socata, a French company and a Chinese company are interested in the Assets. We have met with both of them as has the EOG and other potential bidders. What we have been told, is that both Daher-Socata and the Chinese company want majority control of any partnership and could move the entire factory overseas. We do not believe giving control of the IP or the assets, to a foreign company is in
the best interest of the Eclipse customers; owners and/or deposit holders. Further, there is Phil Friedman (Friedman Plan) and Peter Reed. We are aware of the Friedman Plan update letter that went out to the owners on April 10th 2009. We believe that this letter was an attempt by Friedman to demonstrate to the owners that his plan was more favorable than the EOG not-for-profit plan.

While we agree that the Friedman plan is better than the EOG plan, we still believe that it contains fatal flaws and bad assumptions. For one, it still spreads the NRE burden over the current fleet of owners for the first two years instead of capitalizing the company initially with the vision of an earlier production ramp-up and spreading these NRE costs over future production.  

OUR PLAN
Our Plan champions the interests of both the E500 owners and depositors. After we buy the Assets, we intend to promptly resume service and support for the fleet (S/N 1-260) and begin preparations to resume production (with S/N 261). We have spent hundreds of hours working with former EAC employees and consultants determining the most efficient methods to resume service, support AND production, and we believe our Plan reflects best practices. We cannot provide specific pricing for our goods and services until we determine the price we’ll be required to pay to buy the Assets and the cost to us for the materials and labor required for us to resume service, support and production. However, we have assembled a group of trained Eclipse personnel and are in the finishing stages of the development of the modification process documentation. As soon as we purchase the assets of EAC we will be able to perform the first upgrades and validate our pricing and labor estimates. We stand committed to pricing work for modifications with margins well below industry averages for comparable parts. More importantly, we will spread any additional engineering burden for those modifications over a much larger fleet number than the current fleet of 260. Our investors consider this an investment in the company to keep these prices as low as possible and spreading the engineering burden cost over the anticipated future fleet size.

OWNERS
Our Plan includes a series of priorities for E500 owners –
Service and support are our 1st priorities – We are prepared to promptly provide service and support related goods and services to the fleet through the existing Eclipse Service Network (ESN). Further, we are currently in discussions with veteran European service organizations who wish to join the ESN. Upgrades are our 2nd priority – We are prepared to promptly begin upgrading the current fleet, including the DayJet aircraft. ESN personnel are working today to complete the upgrade documentation (Service Bulletins) to perform ETT, AvioNG, FIKI, AvioNG 1.5 and EASA upgrades. The ESN is currently hiring some of the most experienced E500 technicians available in the market to position themselves to perform these upgrades at the lowest, reasonable material and labor costs to the owners. Production is our 3rd priority – Once service, support and upgrades are back online and well underway, we will turn to resumption of production. We intend to complete the E500 aircraft on the production line as our first step in validating the feasibility of resuming production. These aircraft will be completed to EAC’s current production specification and sold with a full factory warranty. We will offer these aircraft first to the Production Line Group members who contracted with EAC to buy them, and, if they do not determine to buy them, then to others. Actual full production of new aircraft will begin as soon as market conditions warrant; we anticipate sometime in the next 12 to 24 months. New production will expand the fleet and thereby (1) build the E500 brand and each owner’s market liquidity and value and (2) reduce his direct operating costs. The owners will enjoy material, immediate benefits from an expanding fleet. By contrast, in the absence of an expanding fleet, the owners will suffer as the E500 will be relegated to the status of a failed and discontinued aircraft, and its (1) brand, (2) market liquidity and value and (3) direct operating costs will move against owners.

DEPOSITORS
Our Plan includes a series of priorities for E500 depositors –
Coupon Program – We are prepared to offer each E500 depositor credit (a Coupon) toward the purchase of new E500 at our then-market price. We will have a certain number of Coupon-eligible aircraft in production at all times, and we will sell and deliver those aircraft to E500 depositors who wish to apply their (otherwise lost) deposits to the purchase of a new E500.
Factory Reconditioned Aircraft – Further, we are prepared to purchase aircraft from current owners, recondition those aircraft so they comply with EAC’s current production specification and then sell those aircraft with a full factory warranty. For example, we are prepared to process the DayJet aircraft in this manner. This program will (1) enable owners to reasonably exit their aircraft, if they would like to do so, and (2) provide E500 depositors and others an immediate opportunity to own an E500. Like new production aircraft, we will have a certain number of Coupon-eligible reconditioned aircraft for purchase by depositors from the “old Eclipse”.

FREQUENTLY ASKED QUESTIONS

Will you charge an “access” fees for service?
No.

Is Roel Pieper still your partner?
No.

Who are your partners?
There are three “founders,” although our family is growing daily, as we continue our diligence and structure our bid to buy the Assets. Our Founders are Mike Press, Mason Holland and John Cracken. Our friend Raul Segredo has returned to his day job as the owner and president of Avionica in Miami, FL. While he supports our efforts, he has elected not to continue as a partner.

Who will manage the new company?
We have retained the services of a highly respected aviation consulting firm who will aid in our transition process during the first year of our operations and with their help we have also sourced our lead candidate for the CEO position of our company. The timing is great. He is finishing up another venture and is excited about being a part of the continued vision of the EA500 VLJ. He is well respected in the aviation community and has deep experience in leading a large company responsible for the manufacturing, production, and service of jet aircraft. In addition, we have assembled a transition team of 15 highly respected aerospace industry professionals, many of whom will be placed in key management roles within our organization.

CONTACT INFO
Please feel free reach out to any of us at your convenience if you have questions or if you would like to schedule a presentation of our plan –
Mike Press – mpress@spjets.com
Mason Holland – mason.holland@benefitfocus.com
John Cracken – jcracken@croinc.com

Well, that's a pretty big post, and I've left out several pages, which went into forensic detail which I felt the blog would not be interested in. I wish these chaps the best of Irish (luck, of course) and hope that whoever ends up with the assets is able to rescue something from the ashes. Other bidders continue to promote their own plans, which I'm sure will get somewhere, eventually. The 'security detail' of 19 'ex Eclipsers' are still getting paid to keep an eye on the plant, which is good news, and the 'Nuclear Option' of forcing the note holders to release the IP to owners directly might even achieve an early end to the sale process.

All in all it's been an interesting week. My own feeling is that there is at most a month left before final dispositions are made for what remains of EAC, but I have been wrong before, in part due to my ignorance of bankruptcy practice in the U.S.

At that point I believe our blog naturally faces a crossroads. We all need to think about direction(s) 'we' might take. I would welcome suggestions to the usual address (eclipsecriticng@gmail.com) which will be included in a forthcoming headline post.

If, of course, I get any.....

Shane

Well well well...

Normally I'd expect this sort of stuff to arrive on a 'Tuesday', but this time it's true. The legal actions around Eclipse Aviation were always going to be fascinating, but even I'm surprised at this. Read on, and, well, weep, with either tears of laughter or sorrow depending on your point of view.

Oh, and thanks to ColdWetMackeralofReality, who is the actual author of the piece.

Shane

The Nuclear Option

A Motion to Compel under Title 11, Chapter 3, Subchapter IV, Sec 365 of the bankruptcy law has been filed to force the Eclipse Bankruptcy Trustee to release all ground and airborne software related to Avio and other embedded software (essentially the most valuable intellectual property related to the TC) directly to the owners.

This move has been some time in the making and yes, yours truly played a small part. I have been working with several owners for the past several months examining real-world solutions to the various problems faced by the owner community and of all the things accomplished, this and a recent meeting of the minds are the highlights that I believe will soon have a profound impact on the future of this saga. Of course, I want to remind everyone I am not a lawyer, this is my understanding of the legal issue from having participated at arm’s length.

Several weeks ago a demand letter was sent to the Trustee quoting the above section of law and demanding that the Trustee release all IP related to Avio and the ACS as required under current BK law. Thanks to the rise of software and the ever increasing pervasive nature of ‘embedded’ software in the items we use every day, Congress has made significant changes to the BK law with respect to license rights and proprietary software.

Essentially, the Trustee failed to act on (or even acknowledge) the demand letter in a timely manner so the motion to compel has been filed directly with the BK court to compel release of what amounts to all software related to Avio and other embedded software, directly to the owners. According to the law, if the trustee fails to comply the owners will essentially be able to get the software by any means (from other owners or experienced service providers for example).

This motion, if granted, is the divorce I have been advocating for months now, that separates the owners from needing to compete in the cash incineration contest to purchase the IP and just as importantly, it frees capable third parties to actively engage in the development and certification of fixes for the known and suspected issues without being held hostage by a hostile IP owner. If it plays out as expected, the owners will no longer have to fear being a captive market, they will own the critical IP, and best of all they will not have had to fork over tens of millions to get it.

Background - When Eclipse sold the aircraft they issued a ‘a personal, non-exclusive, perpetual and non-transferable (except in connection with a permitted transfer or sale of the subject aircraft) license to use any computer software or other intellectual property incorporated in the aircraft that is not the subject of a separate license agreement between Eclipse and Purchasers or the owner of such intellectual property ("Aircraft Intellectual Property") – quoted from Aircraft Purchase Agreement. Eclipse further committed to release this and related IP with their IOU’s when delivering incomplete aircraft (Post Delivery Commitment).

The executed Purchase Agreements and Post Delivery Commitments, and the rights they convey upon the purchaser, are apparently not erased by the BK proceedings, therefore all current owners will have the same rights if the motion is upheld by the BK court.

To that end, I have been developing an updated proposal that retains the possibility of moving the PW-610’s to an alternate airframe (the Excel Jet SportJet-610 previously discussed), while also defining four regional specialist centers with extensive Eclipse specific experience, training and support equipment, spares, and AOG Tiger Teams. Current thinking based on fleet distribution is East Coast, Midwest, Southeast, and West.

This will be enhanced with an expanded network of existing facilities for North America (US, Canada and Mexico - likely 2 Heavy Mod facilities, and perhaps 2 dozen FBO/light maintenance facilities) as well as an existing network for outside North America (dozen or so facilities in Europe, Asia and the Middle East). I have also been in contact with a training provider that has FAA approval for all necessary training (initial type rating, recurrent, etc.), as well as insurers. This will also include working with the existing suppliers/vendors where possible but also in qualifying alternate vendors where PMA is not practical or possible given the original supplier/vendor.

Expect to see a focus on AOG and low-hanging fruit almost immediately (tires and brakes, actuators) – including an effort to end the interference with PMA activities that is currently ongoing from at least one of the bidding parties (we have heard from multiple sources that someone is actively working to prevent willing and interested vendors from seeking PMA to provide parts right now to customers who need them).

As I have mentioned on other occasions, my belief based on discussions with owners and maintainers is that many of the issues observed are more quality escapes than design issues, therefore the service and support entity I envision would take on the development and certification of comprehensive fixes, modifications and upgrades. This would tackle the design and certification efforts including development of what would in essence be a ‘delivery spec’ or ‘completion’ STC and the much needed Service Life Extension Program. This also allows for the development of an updated ‘hot-items’ inspection to identify known quality/assembly/rigging issues that can be issued as a Service Information Letter or other mechanism, to direct attention at known areas before they become widespread problems and potentially lead to FAA action.

At this point, the best outcome is for a bifurcated or two-party solution that allows one party to acquire the assets and retain rights to future production, with a second party taking on the support of the currently fielded fleet. If these two parties work together obviously prices for parts can come down over time but any potential bidder must know and understand that alternatives will exist for both quality of service as well as parts pricing for the current owners.

This approach allows the owner community to focus their attention and their dollars on completing, supporting , and most importantly safely enjoying their own aircraft without getting tied up in the old cliché about how to make a small fortune in aviation.

Of similar importance is that the recent high-level meeting of the minds I mentioned, combined with the development re: the IP may result in far more elegant fixes for many of the current series of band-aid fixes applied to the various aircraft. Assuming that the fixes developed in support of the currently flying planes are of interest, they can potentially be sold or licensed to the party seeking the TC allowing the owners to recover some of the costs related to the development and certification of any fixes.

My team and I have already identified several potential partners for the regional specialist centers and we are ready to begin serious talks with currently identified domestic and international service partners, current and potential vendors, as well as key former Eclipse employees and managers whom we have been in contact with if we receive the support of enough of the owner community.

As always, I can be reached at ColdWetMack@gmail.com.

Another offer on the table

This clearly reached me just before the 'Birthday Post' from Stan, so is a little delayed. Other bidders are active, but the 'note holders' who are currently seeking bids are frustrated at the lack of a proper, cash offer. So far those who've announced their intentions, including Phil Friedman, have been very shy about making a definitive approach. I'm told that will change shortly, with at least one bidder shaping up. The clock is approaching midnight however, with the very real possibility that the whole saga will end with a break up auction on the 'Courthouse steps'. This would be a very undesirable outcome, especially for the owners, since the TC would be 'orphaned' and expertise necessary to support the current fleet would scatter to the four winds.

I'm also concerned that the inbox (eclipsecriticng@gmail.com) continues to be peppered with news of 'challenges' for anyone interested in the assets or supporting the aircraft. I'll handle some of this with my 'Snippets' which I'll again remind you are lower grade 'water cooler' chat, rather than established fact. What I'm finding is that a considerable proportion of these 'bytes' of data actually turn out to be pretty accurate. That's why I share them with you, but please don't take any action unless you satisfy yourself, to your own 'standard of proof' before you put time or money at risk.

We have had a pretty miserable few days here in Ireland, with rain, followed by rain, and then some more rain. Hopefully the sun will make an appearance for the weekend and all our skies will be blue. With luck our world wide economic meltdown has reached the bottom and we can all start to make positive plans, instead of trying to manage downsizing.

Anyway, enough with my blathering. Herewith Phil's (revised) plan...

Shane

New Eclipse Acquisition LLC 

Open Letter to Eclipse Owners and Depositors 

April 10, 2009

Dear Eclipse Aircraft Owners and Depositors,

The purpose of this letter is to ensure that all parties understand my plan for bringing Eclipse out of bankruptcy. We have made significant revisions to our plan based on discussions with the Eclipse Owners Group steering committee (“EOG”). We understand you have several plans to choose from, so our intent with this communication is to make sure our plan is clearly articulated.

It now appears that all alternatives are “for profit” plans. To our knowledge ours is the only plan that states the prices which owners will be paying. We are able to provide pricing because we have done considerable due diligence, including input from the Eclipse employees who have actually done the work. It is stating the obvious, but owners and depositors should demand a side-by-side comparison of all the plans, including the prices you will be charged. There should be no after-the-fact “price surprises”.


Objectives

Our objectives have always been and continue to be as follows:
• Purchase Eclipse assets and intellectual property out of Chapter 7 bankruptcy.
• Restore the brand with the objective of increasing the E500 resale price to $2.0 million.
• Upgrade the fleet to latest TC level over first 24 months.
• Resume production of new AC with upgraded avionics in the third fiscal year at 100 aircraft per annum with a price of $2.4 million.

Because this aircraft is so highly integrated, we believe ongoing production is needed to keep fleet support costs at a reasonable level per aircraft. Ongoing production will also result in a higher resale value for the aircraft and lower spares costs.

Details of our Plan
Key elements of the business plan are:
• Owners who invest at least $150,000 in New Eclipse will receive break-even pricing on their mods & upgrades.
Pricing for the key upgrades will be:
• Avio NG 1.5 + Garmin 400’s + FIKI $109,000
• Avio NG conversion (Avidyne to IS&S) $210,000

As discussed above, we did considerable due diligence on the costs to perform the mods & upgrades and believe them to be conservative. To protect the owners we are guaranteeing transparency on the mods & upgrades costs and will adjust our pricing up or down depending on the actual costs incurred versus our estimates.

• All mod work will be done by experienced ex-Eclipse personnel in the Albuquerque facilities. Over the next two years we will open 4-5 factory-owned service centers around the nation for ongoing service needs.
• Owners who do not invest in New Eclipse will pay a $100,000 per aircraft premium for their mods & upgrades.
• Depositors will also benefit from our plan. We will finish and sell the seven almost completed aircraft on the line for $1.765 million each. Depositors for these aircraft will be given priority to buy provided they invest an amount to be agreed upon. We also plan to finish and sell the next 12 aircraft on the line with depositors for these aircraft again being given first priority to buy provided they invest an amount to be agreed upon. We will use these profits and the mod profits from the non-investing owners to upgrade the aircraft avionics and reduce manufacturing costs for the restart of production in the third year.
• We will have an Aircraft Support Program (ASP) of $70,000 per year per aircraft for the first two years to cover the 60 engineering personnel we believe are necessary (a) to maintain the TC, (b) to support the fleet airworthiness, (c) to improve aircraft reliability, and (d) to support the mods & upgrades. The ASP price will decline to $25,000 per year in the third year when we restart production. All owners will have to be part of the ASP to receive support.
• Ongoing service will be provided at a 50% gross margin on a time and materials basis.
• The initial type rating will be priced at $14,000. Two day recurrent training will be $4,500.
• We will spend the next two years reducing the E500 manufacturing costs by working with the suppliers and reducing labor hours. We have studied the E500 production costs in the Eclipse data room and believe our cost targets are achievable. We have also had positive discussions with many of the key suppliers, including Pratt & Whitney Canada. These suppliers have agreed to work with us to support our effort to make future production of the aircraft profitable.
• We will not restart new production unless approved by the Board of Directors which will include at least one owner. Further, owner investors will have the option to sell their shares back to New Eclipse for $150,000 if they do not agree with the Board decision to restart production.
• We will place the aircraft IP in escrow to protect the Eclipse owners if the company fails prior to restarting production, subject to certain conditions including how much the owners actually invest.

Summary

In essence, our plan is a hybrid where we offer break-even pricing for the first two years as we bring the fleet up to the latest TC level. The plan then transitions to a “for profit” as we restart production.

We believe this hybrid plan is the best path forward for both owners and depositors. New Eclipse will consist of employees solely dedicated to the Eclipse program – their priorities will not be diffused by other products or programs. I have run aircraft manufacturing companies for 28 years and I assure you that New Eclipse will be run lean and efficiently.

Provided enough owners decide to support my plan, I am confident we will be able to raise the additional funds to purchase the Eclipse assets and IP and to provide our working capital needs. I have been contacted by many aircraft owners and outsiders that want to invest in a New Eclipse provided we have a plan to restart production and the support of the aircraft owners.

In summary, you are making a big decision on your aircraft and you deserve a side-by-side comparison of the plans, including hard data on the prices you will be charged and who will be running the organization. A decision should not be made on who puts out the best press release and there should be no after-the-fact surprises.

Regardless of which plan you choose to support, you need to do it quickly. We get daily reports of key engineers who have accepted jobs at other companies. Since this aircraft is highly integrated, it will be difficult to provide timely ongoing support if we lose these key people. Accordingly, time is of the essence.

Please feel free to contact me should you need additional information or have questions on our plan. If you believe my plan has merit, please contact the EOG to express your support for my plan.

Regards,

Phil Friedman CEO, New Eclipse Acquisition LLC
phil@harlowair.com
(702) 449-8312

A Birthday Post, by Stan Blankenship

Looking Back,



Credit where credit is due, the Eclipse critic's blog wasn't the first to take exception to the outrageous claims made by the cocksure Vern Raburn and his minions. That honor goes to Richard Aboulafia from the Teal Group whose blog and interviews with the national media provided at least one voice of caution and sanity. When I started the blog three years ago it was intended as a technical extension to support Aboulafia's views.

After the first post went up, links were sent to Aboulafia, Mac McClellan, and the two main slobbering cheerleaders for Eclipse, Zoom and Rich Karlgaard. Aboulafia's response was that I "was doing God's work". Mac ignored my msg (after all, a lowly blogger hardly deserves recognition by mainstream media).

After a few e-mails, Zoom went ballistic, threatened to report me to the authorities for threats to he and his family...told my son he would own our company and eventually claimed I owed him tens of thousands of dollars for reproducing his copyrighted material. What a nut case!

Karlgaard concluded that I was "always looking for the dark side" and when I asked, "What advice will you have for your rich aunt when she calls and tells you she wants to invest your inheritance in the hot new Eclipse Aviation IPO?" His response:

"I always cheer for the bold entrpreneur (his spelling). Doesn't mean I'll buy their stock. But without bold players -- and Vern is one -- the industry stagnates. Maybe you're too skeptical."

Turns out, not skeptical enough.

While the original intent was to only write a single post, a second one soon emerged then a third and eventually nearly 200. Somewhere along the line, the blog gained a following and more important, reader participation by some well informed individuals, experts in their fields as well as others who just added a point here and there to help fill in the mosaic. Eventually, a few supporters weighed in which led to some lively discussions; but the supporters had their points and often made them.

The collective wisdom of the blog was really evident during the 2007 contest to predict the number of deliveries. The average of all the guesses nailed the actual number. The blogger coming the closest to predicting 2007 deliveries just happened to be the blog’s resident satirist, black tulip.

As a prize, I had pledged an Eclipse model which I could pick up on ebay. Instead, I was contacted by an Eclipse buyer who had cancelled his Eclipse and ordered a Phenom 100 in its place. So he offered his brand new Eclipse model still in the box which was sent directly to black tulip.

In turn, I sent the former buyer a brand new boxed gold-filled Cross pen and pencil set that Learjet used back in the 70's for formal signings when a customer took delivery of a new Model 35. The pen and pencil set went with a request that it be used to sign the acceptance when the former Eclipse buyer takes delivery of his new Phenom 100. Not to be outdone, the former Eclipse buyer sent me a lucite paperweight containing metal chips that were represented to be the first ones cut for the Eclipse program. Nice and thanks again. It is on display in a prominent place in my lobby.

Then I learned black tulip had a special occasion scheduled. So he too received a gold filled Cross pen and pencil with a request he use the pen at the appropriate time. Those were fun days on the blog.

Just as Shane has alluded to many times, there was and is a fair amount of activity that goes on behind the scene. Most of mine was just congenial e-mail traffic but some of the material sent was downright radioactive. At one point I contacted Gordon Kirsten, a lawyer specializing in intellectual property. When I told him my name he said, "I know who you are, I’ve read your blog." Seems his best bud is a Cessna test pilot. That was my first clue that the blog must be pretty well read.

Anyway, Gordon told me that the documents that I had received were proprietary and in no way could I publish any of the content in any form without risking legal action from Eclipse. In a subsequent meeting on some additional material, Gordon brought in a trial lawyer to discuss his six figure estimate on what it might cost to defend an Eclipse lawsuit.

If the truth be know, had I received as much as a demand letter from an Eclipse attorney, I would have shut down the blog in a New York minute. But I always felt that since blogs were a part of the computer age, Vern probably considered it a badge of honor to have he and his company a blog target. Often wondered how many man-hours were spent each day at Eclipse checking the blog. The numbers from Cessna would be interesting as well.

I always felt it fortuitous that Shane picked up the torch after I laid mine down. While subject to some of the same legal constraints as someone in the U.S., Shane’s Irish location would make it quite a bit more difficult for Eclipse to take legal action had they chosen to do so. And IMHO, Shane uses his offshore status to good advantage. He has been able to solicit information from all sources though he has used the information very judiciously.

When someone would send me incendiary information, I would simply tell them if they want the world to know that kind of information, they should post it on the blog anonymously. Few did. But even with two sources, there was no way for me to post that information with no other proof in hand.

Those of you who followed the original blog know that when Roel Pieper brought in the Russians, I decided plutonium laced tea was not for me so I brought down the curtain on the original blog. It did cause me some concern when Shane decided to soldier on. Ireland is a whole lot closer to Russia and 500 euros paid to an ex-KGB thug could lead to a bad thing. My sense of paranoia increased when Putin’s picture appeared with the Eclipse and then there was that goon Pieper put on the Eclipse board.

The Russian connection was actually only one of three reasons why I wanted to escape the burden of tending a blog. A second reason was the ever growing difficulty in writing new posts. What I could contribute paled in comparison to some of the expert commentary that was being provided by some on a regular basis.

The third and perhaps most important reason for bowing out is that in late’07, my wife and I (then ages 65 & 67 respectively) took up scuba diving. Ever since, we have been on a 10 week schedule to leave the mainland to explore new places. I was able to manage the blog from Hawaii and Cozumel, but when one gets to these places, there are better things to do then moderate a blog. We’re still on the 10 week schedule. Was in Fiji in February, this time next month will be in Belize and mid-July diving the Red Sea off the Sinai Peninsula (Egypt). We’ve penciled in our dance card for Indonesia and Tahiti this fall.

The reason I bring this up is that Vern, AlexA and mirageOO (the idiot who was always so "amused" and was oh so confident that he would be serving me crow on a silver platter at Oshkosh), anyway the three of them liked to claim that the bloggers (mostly me) did not have a life, have never accomplished anything, got left at the station when the Eclipse train pulled out, that I was bitter because we could not cut it as an Eclipse supplier, blah, blah, blah, they sure liked to dish it out.

For the record, I would like those three to know that during the time they were spouting off, my company was helping Gulfstream sort out pre-design issues on the 650. While we were never told that our work related to a new airplane, after a 10 minute look at the first electronic file they sent, I replied with an e-mail that I had been in the business for 45 years and could read the tea leaves. While I have never asked, the first chips cut on the 650 were probably cut in our shop. Should have bottled some up and cast them in lucite.

In some respects, the blog succeeded way beyond my expectations. My biggest regret is that the blog was not able to convince more people sooner to be more cautious of the program. A document from the bankruptcy court shows 10,851 creditors from all over the world. The largest creditor being of course Al Mann. It’s just a pity that somebody could not reach Mann and his fellow board members to put a stop to this madness at a much earlier date..

Everybody lost in this program, even those who purchased and took delivery of a sub-million dollar jet and are now faced with an uncertain future. It’s been a Ponzi scheme from day two if not day one. Insiders have told us component costing was done on a "make the numbers work basis" to keep the projected cost below a million. Vern himself told us the rest of his plan...take orders for a few thousand...get the airplane certified...start deliveries...issue the IPO...then walk away and you know the rest. Unfortunately, as predicted by the blog, the cost to build far exceeded the selling price.

Vern’s problem was that he knew about as much about what it would take to float an IPO as he did starting an airplane company, getting a TC or the PC. Even while the blog’s resident securities expert whytech carefully explained to all of us why an IPO was not remotely possible for Eclipse, the company was still using stock options as the incentive for recruiting new employees and motivating staff. Can’t figure out if Vern was blind, stupid or criminal?

Speaking of criminal. Bernie Madoff sits in and 8' x 8' jail cell for committing a Ponzi scheme. That is using new money to deliver a product (high interest payments) to early customers (investors). Any familiarities to our friend who is probably at home tying flies in preparation for his next excursion to fish the Middle Fork of the Salmon River.

Again Vern, 10,851 creditors and you have shown less remorse than Bernie. Thanks to your efforts, thousands of lives have taken significant financial hits, dreams shattered and in some cases lives ruined. While you may claim your motives were altruistic, perhaps they were for a short time but you should have been able to draw the conclusion much earlier that the situation was hopeless. You let the Ponzi scheme run, hoping for a miracle, all the while people and companies were getting deeper and deeper in the hole. I will ask again, were you blind, stupid or criminal?

What’s next?

Some on the blog are hopeful and suggest we wait to see who ends up with the company (note the reluctance to call them a winner).

Others on the blog with experience in these matters have detailed specific difficulties the new owner will face in providing support for the fleet, specific difficulties the new owner will face restarting production.

I will go with the view of the "experienced" and that the difficulties will outweigh the hopes and dreams.

Movement, at last...

Thanks to all of you who sent me this. I think it deserves a headline, as it's the first credible sign that a reputable aviation business has an interest in the FPJ. Clearly the note holders still retain control of the assets, including the TC, until such time as they decide to sell. But this is the first solid sign of light for the owners. Lets just hope there is more good news in the next few weeks.

Shane

PRESS RELEASE
                                                                  
FOR IMMEDIATE RELEASE: April 7, 2009

Hawker Beechcraft and Eclipse Owners Group Enter into Letter of Intent

Westlake Village, CA (April 7, 2009)—David Green, Chairman of the Steering Committee for the Eclipse Owners Group (EOG) announced today that the EOG has signed a nonbinding Letter of Intent with Hawker Beechcraft Corporation (HBC). The parties will now begin negotiations for a definitive binding agreement under which HBC would provide maintenance upgrades and other aircraft services to EOG members, consisting of individual Eclipse 500 owners.

“Eclipse owners will benefit greatly by having Hawker Beechcraft as our service provider,” Green said. “HBC’s reputation across the industry and especially among its customers and suppliers is unsurpassed. This relationship is sure to create tremendous confidence in Eclipse owners that their planes will be flying for many years to come.”

In the search for a solution for Eclipse owners, the EOG will negotiate with HBC to provide the needed maintenance and support services to keep the Eclipse 500s flying in the event the EOG purchases the assets of the Eclipse Aviation Corporation (EAC).

HBC will provide services to EOG members through its Global Customer Service and Support operations, which is driven by HBC’s commitment to quality and performance excellence. HBC supports its aircraft with the largest network of trained professionals and the largest factory owned service network in the industry.

“Hawker Beechcraft is pleased to offer Eclipse 500 owners the highest quality service and support in general aviation,” said Bill Brown, HBC President, Global Customer Service and Support. “We look forward to this new relationship and keeping the Eclipse 500s in the air.”
The EOG will own the Type Certificate and be responsible to the FAA and other regulatory agencies for the reporting and compliance required to maintain the Type Certificate. HBC will provide services and support to the EOG so that the EOG can perform its regulatory obligations and keep the Eclipse 500s compliant with FAA and other regulatory rules. In order to support service for the Eclipse 500s, HBC would provide service in designated HBC service centers.

The EOG also hopes that at some future time it will be possible to restart production of the Eclipse 500.

EAC entered Chapter 11 bankruptcy on November 24, 2008 and converted to Chapter 7 on February 24th, 2009. The Chapter 7 Trustee plans to liquidate the EAC assets through an auction to be held in the near future. Several parties have come forward with potential proposals to acquire the EAC assets.

The EOG was formed to protect the assets of EAC necessary for the support, upgrades, and continued airworthiness of the Eclipse fleet on the best economic terms possible for current owners of the Eclipse 500; to evaluate the possibility of, and if appropriate implement, the purchase of EAC’s assets by the EOG or its designee; and to take actions necessary or appropriate in connection with purchasing assets of Eclipse, including forming an entity and negotiating with maintenance and support providers.

The EOG was also formed to evaluate any proposals for the purchase of EAC’s assets by other parties and, if appropriate, support such proposals if they are in the owner’s interests. The EOG will continue to evaluate proposals presented by third parties for the purchase of the EAC assets. The EOG has entered into negotiations with HBC in order to provide a viable and very attractive alternative if the best purchaser for the EAC assets is the EOG, itself.

Eclipse 500 owners who have not yet become members of the EOG should contact the EOG at their earliest convenience at eclipseownersgroup@gmail.com.

For further information, contact Nanette Metz or Randall Sanada at info@JetAlliance.com, or call (805) 409-0426.

###

Current affairs, future outcomes?

It's been a month since Eclipse Aviation Corporation joined the ranks of 'ex companies' in Chapter 7 bankruptcy. At that time it was anticipated (mostly by owners of the aircraft) that there would be a queue of willing, cash rich bidders, who would make quick and decisive offers, allowing all their problems to vanish, post haste.

Oh, how the scales have fallen from their eyes. Instead of a rapid sale and the normal 'business as usual' messages, all they are hearing from the various groups that form, dissolve and reform is waffle. What must be really disturbing for the senior note holders (who do, after all, own the assets) is the quixotic nature of some of these bidders. So far, not one 'real' company has stood up and said they WANT to buy the assets, with REAL money.

A few 'straws in the wind' for your consideration:-

1. Controller lists over 30 Cessna Mustang aircraft (or positions) all of them in or about the published 'asking' price. 27 Embraer Phenom 100 positions are on offer, several of which use the word 'sacrifice' in their offer and yet the FPJ manages only 11 ads, ALL of which are for existing aircraft and NONE even approaching the last 'list' price of $2.15 million. An earlier 'snippet' which noted several FPJ's changing hands in the $600k range has since been reinforced by reports of similar exchanges. This tells me the market for FPJ's has tanked.

2. The 28 DayJet aircraft (which most people seem to have forgotten) are about to hit the market as the finance company which owns them seeks some recovery. Word is that these aircraft are valued well below a million dollars each, and will be sold promptly. This is bad news for anyone thinking of 'restarting' production, since the DayJet birds represented a potential source of revenue, as well as providing potential customers with a cheaper alternative.

3. Once they were 'free' of EAC, numbers of people have contacted me with interesting historical details. It seems the real cost of building the FPJ never dropped below $2.3 million dollars, even during the 'volume' days last summer. Current best estimates are that the bird will cost something like $2.5 million to build in low (1 per week) numbers, possibly dropping a little if the rate rises. The killer appears to have been the totally unrealistic number of build hours being spent on each one. Consensus is about 4,000 hours per aircraft, without fixing squawks. No matter which way you try to do this, you need to sell FPJ's at something north of $2.5 million to make a profit, and closer to $3 million to offer an ROI to the moneymen. I submit that this will be very hard work, even for ex Chairman/CEO of EAC, Roel Pieper, who's joined in Mike Press's mini owners group.

4. Current press coverage of the 'revival efforts' are overwhelmingly negative, even from former supporters, some of whom ended up as (unpaid) creditors. Most find it hard to make the numbers add up or feel the much hyped market for the VLJ's has now evaporated. This has to influence prospective investors, who are also readers our discussion. One thing is clear. The fantasy of volume production and sale of a 'cheap' twin engine jet is truly a busted flush.

5. The only 'good news' concerns the 19 'caretakers' employed in ABQ, who are still getting paid.

To conclude, it appears to me that some people (especially FPJ owners) are still not getting the message. I'm reliably informed that the note holders will sell, by whatever means, very soon. It could even get to an auction on the steps of the Courthouse. I hope that's not the final outcome, but whatever happens I'm very reluctant to promote the idea that FPJ 'production' can restart in Albuquerque, New Mexico. Whatever chance there is of this it will have to be at a) a much reduced labour cost and b) without the endless cycle of trying to fit together parts that simply don't.

Spring has arrive here in our Emerald Isle. My thoughts naturally turn to exploring the many secret places dotted around, especially those where one can retire of an evening to a convivial local pub for a pint (or three...) of our very own Guinness. Remember that you can always contact me on the blog email, eclipsecriticng@gmail.com, with any view, opinions or information relevant to our discussions.

Shane