If Eclipse Aviation is to turn into a phoenix, the 260 owners of the 259 delivered five-seat twinjets will be the ones breathing new life into an otherwise dead bird.
That reality has set off a fierce marketing campaign for owner support from at least two entities that are likely to seek to purchases the assets of the Albuquerque-based airframer in the weeks to come.
A Delaware court was expected to convert Eclipse's Chapter 11 standing to a Chapter 7 liquidation status on 4 March, a transition neither Eclipse nor its secured creditors had disputed.
Sources close to the proceedings say a court-appointed trustee spearheading the creditors' interests will seek to sell the company as a whole, rather than in pieces, within 30-60 days of the Chapter 7 declaration.
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Angling to buy the complete package is an owners' group that would run the company as a co-operative and at least one company that would attempt to turn a profit for investors, both of which would need financial buy-in from the 260 owners. The 260th aircraft is complete but remains in limbo due to the ongoing court proceedings.
GETTING ORGANISED
The owners' group is an extension of an earlier ah hoc group of 200 Eclipse owners and deposit holders that had organised in part to ensure continued support and upgrades for their aircraft in Chapter 11 reorganisation process. The group is now attempting to gain the support and financial commitment from all owners, some of whom have "deep pockets". The group is formulating a plan to maintain the existing fleet as well as to eventually restart production.
In a 26 February letter to owners, the ad hoc group organisers cautioned that "a number of outside entities" were viewing the owners as "an income stream that they can fully exploit like a monopoly". The letter goes on to say that one potential bidder planned to charge owners a $300,000 surcharge for any modification, plus "marked up cost of parts and labour". Another would charge owners a yearly fee of $90,000 "just to access service", according to the letter.
Concerns about the legality of continuing to fly the very light jets during the uncertain period led the US Federal Aviation Administration to issue a special airworthiness information bulletin, confirming in part that the aircraft can continue flying if "in an airworthy condition" and that the FAA, "contrary to media reports", had no plans to ground the fleet. In addition, the agency confirmed that if Eclipse is dissolved with no new owner, the FAA will become the "custodian" of the aircraft's type certificate. "This allows for continued support of in-service aircraft," the bulletin reads.
GROWING OPTIMISM
One owner told Flight International that optimism is growing given the FAA support and the fact that upgrades and parts, some at significant discounts compared with OEM prices, continue to be available despite the fact that the four Eclipse factory-authorised service centres are closed.
Potential-for-profit bidder Phil Friedman, who on 26 February formed a New Eclipse Acquisition to bid for Eclipse assets, plans to open enough service centres to enable owners can reach one within 1h flying time. Friedman has been meeting owners and investors to gain support for his plan, which calls for "stabilising" the existing fleet in the first two years, bringing all aircraft to the current type certificate level in terms of performance modifications and avionics.
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By 2011, Friedman would begin producing about 100 aircraft a year at the factory, priced at $2.4 million each. Originally priced at less than $1 million, the Eclipse 500 most recently sold for $2.15 million before the company declared bankruptcy in November. Critical to his plan is keeping a key group of 20-50 Eclipse engineers on the payroll to provide continuity for the new company, a task he is attempting to have the secured lenders fund.
BATTLE AHEAD
Friedman would not divulge the expected buy-in from the owners, although a press release announcing the new company says customers will have to pay to bring their aircraft up to date and that sales representatives will work at no charge with owners who can not afford the work "to find new buyers who have the means to pay for the upgrades".
Aviation analyst and Eclipse sceptic Richard Aboulafia believes restarting production of the Eclipse 500 will be "virtually impossible unless they can find an investor who doesn't care about profit and loss, like the Russian government". He says: "The odds are overwhelmingly against newcomers in this business, particularly ones that have a record of burning through billions of dollars with a highly suspect business plan. As for the existing jets, I can't imagine they'd have much more than a curiosity value. On the one hand, the fleet size could superficially make a case for an aftermarket support organisation - this wasn't a Beech Starship production run. On the other hand, many of the planes delivered need a great deal of work done to them, and that business case probably isn't there either."
Bringing Eclipse back to life will take more than the support of 260 owners according to aviation lawyer and senior member of the air taxi association Mark Fava. New bidders are going to have to lure greater numbers to the fold, but the poor treatment by Eclipse of many "former believers" has left a "bad taste in the mouths of many" says Fava.
"It's going to be a huge task for anyone to put this company back on the road - not just financially. Suppliers have been badly burned and customers have been badly burned and they are going to take a lot of convincing to come back. After all, without them you don't have a business." Fava's views are supported by Europe's beleaguered army of Eclipse owners and deposit holders. Here the airframer's struggles and subsequent demise has sunk the hopes, ambitions and significant investments of a plethora of private owners and operators that only a year ago were eagerly anticipating how the arrival of the Eclipse 500 in Europe would revolutionise both commercial and private travel across the continent.
"We had expected to have five Eclipse 500s in the fleet by now and be making a return on our investment," says Mike Ryan, chief executive of aircraft charter broker One Charter. "Our plan was to have 20 aircraft in our fleet within five years based across Europe providing low-cost air taxi operations. Instead, we have no aircraft, our [would-be management] customers and investors have lost thousands of pounds in non-refundable deposits and the years of work setting up the business has come to nothing," Ryan says.
Charter One will continue to operate as an aircraft broker. "We have battened down the hatches until we can come up with another plan. While we still believe in the Eclipse 500 as a product, the new owner will have to do a lot of work to secure its financial future as well make vital improvements to the aircraft - notably to the avionics before we take the risk again," he adds.
LOST INVESTMENTS
Meanwhile, Ryan says he will not enlist the help of a bankruptcy lawyer to claw back the lost deposits. "Lawyers came crawling out of the woodwork when Eclipse entered Chapter 11 last year, saying they could fight our corner, but what is the point of paying someone vast sums of money to be told what we already know - that we don't stand a chance of getting the money back."
Icelandic start-up Acceljet, which has placed 10% deposits on two Eclipse 500s totalling over $300,000, is equally pessimistic about getting its money returned. "When Eclipse increased the price of the jet last year [to $2.15 million], they promised to give us our deposit back, but we never received any money from them," says Acceljet chief executive Einar Arnarsson, who had planned to offer a low-cost air taxi operation from the company's Reykjavik base.
"Our venture was based on low direct operating costs that could be passed on to the customer, making private jet travel affordable." When the aircraft's price rises, the low-cost model ceases to be viable, he adds. "There is no chance that we will get our money back now," says Arnarsson, " and I will never return to Eclipse again. I have lost confidence in the company completely." Arnarsson says plans by the bidders to charge $300,000 for aircraft modifications are unjust. "It is totally wrong to charge customers for upgrades - avionics and known icing for example - that were to be provided by Eclipse for nothing," says Arnarsson. "It feels like we [owners, deposit holder and creditors] are all prisoners of Eclipse."
Spanish air taxi operator and management company TaxiJet is equally pessimistic about the prospects of securing the deposits of its 14 Spanish Eclipse 500 owners, which collectively total more than $3 million. Yet the Madrid-based company has grouped together with "as many Spanish owners as possible" to try to reclaim what they can of their investments. "We aren't hopeful of getting any money back, but we have to do something," says TaxiJet managing director Conor Neill, who is set to hold talks with Friedman this month in the hope that "some assurances" can be met. "It's a positive step that Eclipse's former chief financial officer has a bid on the table, but it is important that we keep the 260-strong Eclipse fleet flying," says Neill. "Parts are still being supplied for the aircraft, and maintenance in Europe is being offered by Aerlyper in Madrid. But we have to make sure that the service centres continue to stay alive, suppliers have a reason to keep the parts flowing and make sure that all the aircraft are legally able to fly otherwise it won't be long before the FAA withdraws the aircraft's type certificate - and that will be disastrous."
Source: Flight International
