Modest plans, realistic schedules and a higher price set VLJ reincarnation apart
As Eclipse Aerospace loads the jig for its first new-production very-light jet, the company's ambitions are not those of its predecessor, which failed spectacularly in its bid to blacken the sky with low-cost air taxis. The new company instead aims to make a solid profit on modest production.
The original Eclipse Aviation was formed in 1998 with the vision of selling thousands of million-dollar jets into a booming air-taxi market. But its biggest customer, unable to raise financing in an economic downturn, closed its doors in 2008, taking with it 1,400 of the 2,600 orders on the books.
Eclipse's business model was based on high volume, and the failure of air-taxi operator DayJet helped push the company into bankruptcy and eventually liquidation. Its successor has a more moderate approach, with a slow production ramp targeting a recovery in the global business-jet market by around 2014-15.
“We are not in the same position as other manufacturers,” says Chairman and CEO Mason Holland. “We are growing the business at a measured pace behind the speed at which the market is moving, where others have had to consolidate and cut back to get down to the pace of the market.”
The first new-production Eclipse 550, an improved version of the original Eclipse 500, is slated for delivery in July-August 2013 and, where the original company built more than 100 aircraft in its first full production year, Eclipse Aerospace is targeting 45-50 deliveries in 2014.
“We could build up to 100,” he says. “But we're moving into production at a limited, measured pace. We have the orders for deliveries through 2013 under contract and 60% of the orders identified for 2014.” The Eclipse 550 is priced at just under $2.97 million, up from $2.15 million for the last 500s sold in 2008, but less than the competingCitation Mustang at $3.2 million and Phenom 100 at $4.1 million.
The unscheduled, on-demand air taxi market pioneered by DayJet is no longer the driver. Instead, the Eclipse 550 is being aimed at the owner-flown sector “that was not focused on by the prior company,” says Holland, as well as the “air limousine” charter market and traditional corporate flight departments. Medical supply, overnight freight and military special missions and training are other potential uses, he says.
Low cost and high volume may no longer be the business drivers, but “to move the market, we need to be competitively priced, with industry-standard or better margins for the company so we can guarantee long-term support,” he says. “We will be the last twin-engine jet to be priced below $3 million because we don't have to retire a huge R&D cost. We inherited that for pennies on the dollar.”
Eclipse Aviation halted production in October 2008 after building, and losing money on, 267 aircraft, and it was purchased out of liquidation by privately held Eclipse Aerospace. The new company's first goal was to rebuild customer support then bring in-service Eclipses up to the capability that had been promised but never delivered. It always had an eye to restarting production.
, which agreed in 2010 to invest in Eclipse and use its aftermarket capabilities to help rebuild product support, has played a key role. Sikorsky's parent, . (UTC), says the company invested “less than $25 million” in Eclipse, giving it a 42% stake. But the May announcement that Sikorsky's Polish subsidiary PZL Mielec will produce the Eclipse 550 airframe makes UTC its single-biggest supplier.
Between PZL and engine-maker Pratt & Whitney Canada, UTC companies will provide “over 75% of the aircraft as Tier 1 suppliers,” says Holland. Airframe fabrication and primary assembly will migrate from the Eclipse factory in Albuquerque, N.M., to Poland over 18 months, he says. Final assembly, completion and customer delivery will remain in Albuquerque.
The first Eclipse 550 will take 55-56 weeks to complete because “we are validating the line and focusing on the quality of the aircraft build. We are implementing process improvements the prior company needed to do, as well as new ones suggested by Sikorsky,” Holland says. Funding to restart production is coming from existing shareholders, he says.
In May, UTC CFO Greg Hayes told analysts, “we are not investing any more money in Eclipse . . . . We're in the aftermarket business supporting the planes that are out there. But we're not in the manufacturing business for light jets.” While Holland believes that could change once UTC completes its acquisition of, he says, “we have not asked them for any more money. Our future is totally independent of what they do.”
Business aviation's doldrums could yet impact the pace of Eclipse's plans. “The timing to relaunch production is based on a recovery in 2014-15. We had to start now to be ready,” says Holland. “We'll continue to adjust our plans as the market ebbs and flows.”
The aftereffects of the original Eclipse's high-profile failure appear to be fading. “All the suppliers are re-engaged. They believe the business plan is more solid and realistic,” he says. “Restarting an aviation business is tough, but we have good support. People see the value in the product, built at a measured pace for the right market segment.”