Eclipse Jets in trouble

[Marlin]

Eclipse Aviation, Jet Manufacturer, Seeks Bankruptcy (Update2)

By Michael Bathon and Dawn McCarty
Nov. 25 (Bloomberg) -- Eclipse Aviation Corp. sought bankruptcy protection as financing dried up, 19 months after the closely held planemaker won U.S. regulatory approval to build a new type of small jet.
Eclipse, based in Albuquerque, New Mexico, has assets of $100 million to $500 million and owes more than $1 billion to at least 5,000 creditors, according to Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware. The company, founded in 1998, plans to sell its assets to ETIRC Aviation Sarl, which already owns a 65 percent stake.
“Due to a variety of factors, including the current global economic uncertainties,” Eclipse was unable to raise capital, Chief Financial Officer J. Mark Borseth said in court papers. “Eclipse’s cash balance has declined to levels that jeopardize the continued operation of the company.”
Eclipse, with about 945 employees, produces the six-person 500, a “very light jet” that offers the speed and range of business jets at prices closer to those of high-end turboprops. There were 245 of the 500s in service as of late August, competing with planes from Textron Inc.’s Cessna. Honda Motor Co.’s aviation unit plans its own model in 2010.
DayJet Corp., a major Eclipse customer that flew to markets bypassed by larger airlines, filed for bankruptcy on Nov. 14 after failing to obtain more financing. DayJet signed a contract with Eclipse in 2002 for 239 of the 500-model jets with an option for 70 more, according to Eclipse’s Web site.
FAA Approval
The Federal Aviation Administration certified the design of the 500 in September 2006 and granted production approval in April 2007. FAA employees later claimed that the approvals were rushed by the agency and safety concerns were ignored.
The allegations prompted a House aviation subcommittee hearing in September and an investigation by the Transportation Department’s inspector general, Calvin Scovel, who found that the FAA was “strikingly accommodative” to Eclipse.
The FAA in June ordered emergency inspections of 500s to prevent engine-control failures after an “urgent” recommendation by the National Transportation Safety Board. A 500 experienced “an uncontrollable increase” in thrust on a June 5 landing in Chicago, the NTSB said at the time.
To finance operations in bankruptcy, Eclipse plans to borrow as much as $20 million from ETIRC and Alfred E. Mann Living Trust, court papers show.
Eclipse said its largest creditors without collateral backing their claims are owed $705.8 million. The three biggest unsecured creditors hold about $231 million in bond debt: Kings Road Investments Ltd. is owed $92.3 million, HBK Master Fund has a claim of $84.9 million, and Citadel Horizons says it’s owed $53.5 million, according to court documents.
The case is In re Eclipse Aviation Corporation, 08-13031, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net; Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net.
Last Updated: November 25, 2008 14:05 EST

[Lionheart]

Eclipse Aviation, Jet Manufacturer, Seeks Bankruptcy (Update2)

By Michael Bathon and Dawn McCarty
Nov. 25 (Bloomberg) -- Eclipse Aviation Corp. sought bankruptcy protection as financing dried up, 19 months after the closely held planemaker won U.S. regulatory approval to build a new type of small jet.
Eclipse, based in Albuquerque, New Mexico, has assets of $100 million to $500 million and owes more than $1 billion to at least 5,000 creditors, according to Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware. The company, founded in 1998, plans to sell its assets to ETIRC Aviation Sarl, which already owns a 65 percent stake.
“Due to a variety of factors, including the current global economic uncertainties,” Eclipse was unable to raise capital, Chief Financial Officer J. Mark Borseth said in court papers. “Eclipse’s cash balance has declined to levels that jeopardize the continued operation of the company.”
Eclipse, with about 945 employees, produces the six-person 500, a “very light jet” that offers the speed and range of business jets at prices closer to those of high-end turboprops. There were 245 of the 500s in service as of late August, competing with planes from Textron Inc.’s Cessna. Honda Motor Co.’s aviation unit plans its own model in 2010.
DayJet Corp., a major Eclipse customer that flew to markets bypassed by larger airlines, filed for bankruptcy on Nov. 14 after failing to obtain more financing. DayJet signed a contract with Eclipse in 2002 for 239 of the 500-model jets with an option for 70 more, according to Eclipse’s Web site.
FAA Approval
The Federal Aviation Administration certified the design of the 500 in September 2006 and granted production approval in April 2007. FAA employees later claimed that the approvals were rushed by the agency and safety concerns were ignored.
The allegations prompted a House aviation subcommittee hearing in September and an investigation by the Transportation Department’s inspector general, Calvin Scovel, who found that the FAA was “strikingly accommodative” to Eclipse.
The FAA in June ordered emergency inspections of 500s to prevent engine-control failures after an “urgent” recommendation by the National Transportation Safety Board. A 500 experienced “an uncontrollable increase” in thrust on a June 5 landing in Chicago, the NTSB said at the time.
To finance operations in bankruptcy, Eclipse plans to borrow as much as $20 million from ETIRC and Alfred E. Mann Living Trust, court papers show.
Eclipse said its largest creditors without collateral backing their claims are owed $705.8 million. The three biggest unsecured creditors hold about $231 million in bond debt: Kings Road Investments Ltd. is owed $92.3 million, HBK Master Fund has a claim of $84.9 million, and Citadel Horizons says it’s owed $53.5 million, according to court documents.
The case is In re Eclipse Aviation Corporation, 08-13031, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net; Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net.
Last Updated: November 25, 2008 14:05 EST

Dang........

[Panther_99FS]

An unfortunate sign of the times

[wombat666]

An unfortunate sign of the times

Exactly my thoughts.
And food for thought for the future, expect the HONDA to make a big impression, as it will be everything the Eclipse is not.

[Wulf190]

First Adam aircraft, and now Eclipse. The VLJ project is not looking great.

[azflyboy]

Honestly, I'm surprised Eclipse managed to last this long, given the sheer number of things they screwed up with that program.

From the time they started taking orders to now, the price of the aircraft had more than doubled, going from about $850K to just shy of $2.2 million, for an aircraft that was essentially unfinished and that never worked as promised.

The first aircraft off the line were actually delivered with a handheld GPS, since Eclipse couldn't get the equipment installed in the panel certified before delivery, which meant that the aircraft had no IFR GPS capability, something many piston singles have now. In addition to the avionics not being finished, early-build aircraft weren't certified for flight into known icing, and now I'm guessing some of those owners will never get the retrofit Eclipse promised when they sold the aircraft in that state.

As far as I know, the Avio glass cockpit system Eclipse used was never fully functional, with aircraft being delivered new with "INOP" placards over some of the equipment that wasn't working, and the system suffered from enough bugs that it was basically a flying version of Windows 98 in terms of reliability.

Aside from aircraft being delivered that never met the capability Eclipse had promised, there were also some safety issues with the aircraft, with tire failures being very common, and instances of the engine controls deciding to run away from the pilot because of a software bug. There was an AD issued not long ago after an Eclipse approaching Chicago had one engine decide to go to full power and stay there without pilot input, and the problem was apparently a software bug, which is totally unacceptable in an airplane.

Eventually the problems got so bad that people within the FAA started saying the Eclipse never should have been certified in the first place, and there was actually an investigation into exactly how Eclipse did get their type certificate issued.

It probably didn't help the PR problems when the CEO and founder of the company tried to sue bloggers for claiming (correctly) that Eclipse was in serious trouble, and as a result, the founder got himself fired from his own company not long ago.

IMHO, Eclipse basically screwed up by treating the production of an aircraft like a piece of software, with the aircraft being delivered with known "bugs" and customers promised a series of "patches" to get the aircraft to perform to the specifications Eclipse promised. People certainly aren't willing to buy unfinished cars, so I'm baffled as to why Eclipse thought they would do that with million dollar airplanes.


I think VLJ's have a future, since the Cessna Mustang has been selling well, and Piper has the Piper Jet in the works, and large companies like Cessna and Piper are probably going to bring some much needed stability and common sense into the VLJ arena.

[Naki]

Thats what happens when a software guy (Vern Raburn) builds aeroplanes!

[lefty]

expect rge HINDA to make a big impression

Who ?

[AckAck]

I translated that as HONDA, but I'm not sure that's what was meant.

Brian

[Lionheart]

Thanks for the history on that AzFlyBoy...

I never knew they had even delivered any birds yet. I have to say though that the part about the one engine going to full power or staying at full power reminds me of flight simulator, lololol... Its been a bug since FS2004 where after a long trip, you come into approach pattern to find your number two engine is not able to be controlled and you have to reload the plane. In the case of a real plane, you cant do that... eeeks!

I think I would want Apple software/hardware in my bird.

Personally, I hope they get their ducks in a row and make it out of this. I like to see companies succeed and do good. Perhaps they still can and will be able to make amends and repair the birds that they shipped out that were incomplete...


Bill

[wombat666]

I translated that as HONDA, but I'm not sure that's what was meant.

Brian

Put it down to early morning keyboard fumbles ..........

[azflyboy]

I never knew they had even delivered any birds yet. I have to say though that the part about the one engine going to full power or staying at full power reminds me of flight simulator, lololol... Its been a bug since FS2004 where after a long trip, you come into approach pattern to find your number two engine is not able to be controlled and you have to reload the plane. In the case of a real plane, you cant do that... eeeks!


Personally, I hope they get their ducks in a row and make it out of this. I like to see companies succeed and do good. Perhaps they still can and will be able to make amends and repair the birds that they shipped out that were incomplete...


Bill

I think Eclipse delivered around 200-250 airplanes before going bankrupt, but I don't know what percentage of those (if any) had all of the "patches" applied to get the performance up to what had been advertised, although I think most had at least working IFR GPS systems.

The throttle incident was apparently caused when the pilot added full power pretty quickly, and shoved the throttles forward hard enough to confuse the software controlling the engines, which is still unacceptable for something that critical.

As for Eclipse recovering, I'd doubt it. The current CEO of Eclipse is known for conducting some very fishy business deals in previous jobs, and a group of wealthy Russians have expressed interest in Eclipse.
What a lot of people suspect will happen is that the company will basically get dismantled, with the Russian investors getting the airworthiness certificates for essentially a fire-sale price.
However, since Russia is getting hit pretty hard by the current economic situation, it's not clear whether those investors still have the funds available to buy Eclipse, so the company may well end up just supporting the airplanes they've already sold, since I can't see anyone buying an airplane from a bankrupt company with such a checkered past.

[Francois]

Frankly, some luxury airplane builder biting the dust should be the very least of our worries .......

[Marlin]

They really are not folding, if they had those plans, they wouldn't have filed chapter 11.

Hopefully they will be better.

[TeaSea]

Interesting editorial comment by Tom Haines in the DEC AOPA Pilot which came in my mail yesterday. In it he examines three supposed brash departures from conventional aircraft design; the Rutan Beech Starship, the Adams A-500/700, and the Eclipse 500 VLJ.

His theme is that despite the popular conception of the industry and pilots as being some kind of brash swaggering on the edge type of leaders, the industry as a whole is actually fairly conservative.

He points out that Rutan went with a revolutionary design, which offered no major performance advantages and in fact fell far short of promise (it looks cool, but the bottom line is what counts). Beech made 50 of the machines, gave up, bought most of them back and destroyed them.

Adam's "idea of an all composite centerline thrust" machine was a good idea (-Haines) but it took too long to get out of the hanger, and ignored the emerging simultaneous development of the single engine turboprop which eventually killed it in the market (For those who wonder...it's cheaper to fly on one engine rather than two. So, if that one engine offers the same performance and reliability as two, well...). Adams attempt to convert to a twin design failed due to basic incompatibilities with his original concept.

The Eclipse was a pretty standard design, but the attempt to bring it to production and market was not. Vern Raburn decided to ignore convention and push the certification through, ending up with the wrong powerplant resulting in delays to market, and an avionics disaster which further slowed progress. For some reason when people and businesses spend millions on a jet, they expect it to have a little more than the standard 6 -Pack.

One thing that did come from all these attempts at innovation wasn't the airframes themselves, but the individual components and concepts. Rutan was a leader in composite aircraft design, which is now pretty much an industry standard concept. Even Columbia, which folded last year, has come out ahead by being bought up by Cessna, apparently a pretty good match which has kept the Columbia designs in production and actually added to the employee base at that company.

Each of these designs bring something to the industry, even when they fail. If nothing else they show what doesn't work. That's a pretty common theme throughout aviation development.

The bottom line here is that an airplane designer has to have a realistic business plan, and meet his marks or he won't make it, although someone else will surely gain from his experience.

And Francois, I know you mean nothing by your remark on luxery airplane producers it, but I would caution you that we should not be so cavalier in our attitudes. We should be concerned when good companies producing luxery goods go out of business (I personally don't think Eclipse is in this "good" catagory, although they certainly have a lot of good dedicated people). However, there seems to be this philosophy that luxery goods are somehow "bad", with little recognition that a lot of the economy and peoples livelihoods depend on the production of "luxery" goods (yachts, airplanes, cars). Some years ago the U.S. imposed huge taxes on certain luxery goods (the ole' "stick it to the rich" ploy), only to find out they succeded in wiping out vast sectors of the economy, threw people out of work, and reduced overall tax revenues because there simply wasn't anything to tax anymore.

[TeaSea]

and maybe someday i'll learn to spell "luxury".....:redf:

[rpjkw]

Recently, the biggest problems for Eclipse was the credit market has all but ceased to exist. They are working on a deal to produce their jets in Russia.

I live right under the approach to rwy 22 at Double Eagle II, and for several years have enjoyed watching them as they make practice approaches. A personal reason to hope they survive.

Bob

[Francois]

In my philosophy it is an over production of things we don't really need that has turned this economy down to where we're heading now. When the markets were saturated with every family having TWO cars (even here to some extent!), industry and marketing started pushing people to get a third.... just to continue growing and keep the oh-so-efficient factories turning.

Yes, I know all those working there would want to keep their jobs, so would I, but they actually were working on the wrong things.... more (and too many) cars !

The same holds true for almost any industry, but more so for those making things we do not actually NEED but are nice to have (and yes, for some, usually).

To sustain that over production (and in fact, over-buying) people needed even more money than they had already borrowed..... so 'smart' bankers and insurance people came up with new 'products' to lend even more money...... more vapour really.

So we're living in a consumer culture that was a disaster waiting to happen for years.

My remark was aimed at the possible total global economic melt-down that we are facing, where common (but maybe not-so-smart) people are losing their houses, where US and European car factories may have to close their doors, where millions of people lose their pensions, etc.

Seen in the above context I can't worry for one second if a niche aircraft builder closes or flourishes, to be brutally honest. If they close, it means they're making the wrong product for which their is currently no market !

The same really also goes for Boeing or Ford or Chrysler by the way.... they may have been manufacturing too for overblown markets that were based on borrowed , i.e. virtual, money !

Maybe time to turn all that research and labor into building windmills or something else that will HELP the world as we know it today.... maybe that would keep the jobs safe? If only there still is someone out there who has some REAL money to pay for them !

[wombat666]

And a very sane and sensible post Francois!
I was thinking about the large number of expensive vehicles with which the market is saturated, as I noticed the amount of shiny new Mercedes, BMW, Audi and Porsche 'SUV's in today's traffic.
Why do these exist?
Call me a cynic, but the marketing strategy behind this seems to be based on the owner of a Benz 'Road Car' having a matching Benz 'SUV' ......
Another case of 'Wretched Excess'!
We need less of this mentality and a return to investment in the basic needs required to keep the environment healthy and the average person employed in a sustainable and useful place of work.

[Marlin]

, as I noticed the amount of shiny new Mercedes, BMW, Audi and Porsche 'SUV's in today's traffic.
Why do these exist?

Because people like you are happy to advertise for them :costumes:

[TeaSea]

....and do we need all this flightsim software for that matter.....what a complete wretched excess. We should all use just the one package on the one platform....

Okay, not fair, but my point is that the market place decides these things...as it should. If Eclipse is producing a substandard luxury (note the correct spelling!) good, then it will fail. If the economic tides dictate that large high end item will not sale or be deferred then so be it.

However, before we get the thread shut down because of a gentleman's disagreement over economic philosophy, let me go back to one point which I did not make very well, which is that even failure can yield great dividends later on. AOPA article was centered on the fact that the aircraft industry really doesn't tolerate extremes either in design or in development and production...at least in terms of the end item. My own thought is that this may be so, but there are individual parts of the end item that are valuable. Lot's of smart people go into a venture to produce a viable product or technology, and it's been my experience that they don't do that to lose money or fail. More often than not they do, but I beleive it is true that the failures can often be as valuable as the successes.


Remember, Babe Ruth was at one time known for two things....he was the leader in home runs...and strike outs.

[Cratermaker]

Very nice post Francois. I agree.

It just saddens me that here in the USA, it seems economic recovery plans are all based on "how do we get the status quo going again?"

[wombat666]

Because people like you are happy to advertise for them :costumes:

Not my style, I like 'Old' cars, it's my lovely wife who just went and purchased a shiny new BMW 325I.
Bloody women ..................