Offers Chance For Customers To Lock In Current Prices
ANN REALTIME REPORTING
11.27.07 1545 EST: In a candid discussion Tuesday with
ANN's Rob Finfrock, Eclipse Aviation CEO Vern Raburn admitted
production delays have conspired to complicate the Albuquerque,
NM-based planemaker's financial outlook -- "and feed the rumor
mill" claiming the company's imminent demise -- but Raburn makes no
bones about how he views his company's long-term success.
"This company has a pretty [gosh-darned -- you can figure
out what he really said -- Ed.] good record
of pulling success out of adversity," Raburn said.
Raburn doesn't shy away from reports of adversity. With
production rates still hovering below one aircraft per day,
deliveries aren't up to where Eclipse has said they need to be to
prove profitable... which means money isn't coming through the door
at the rate Eclipse expected. So, the company is reaching out for
additional capital... but in addition to looking for new financing
from investors, the company is also appealing to Eclipse position
holders with a program that could prove quite lucrative.
On Tuesday, Eclipse announced a program giving current position
holders an opportunity to fix the standard aircraft price of their
Eclipse 500 aircraft at $1,250,000 USD, without any future price
adjustments, if they agree to pay a 50 percent payment of $625,000
by December 14. That amount -- which is in addition to any previous
deposits -- will be held in an escrow account until Eclipse has
received at least $30M USD from customers accepting the offer.
"This is a chance for customers to save a substantial
amount on the purchase of their Eclipse 500 aircraft. By
fixing the price at $1,250,000 USD, they are protected from changes
in price due to increases in CPI-W or from other factors," Raburn
Raburn notes the customer program represents but a small portion
of the funding Eclipse is seeking -- and that amount, in turn, "is
relatively small as a percentage of the total capital we have
raised to date.
"We have been successful in the past in our ability to raise
capital and believe we will be able to close this financing within
120 days," Raburn wrote to customers. "In the meantime,
we are looking to raise funds now so that we can complete our
financing in an orderly fashion.
"Eclipse has made it a priority to give something back when we
were forced to make a change or didn't perform as we planned,"
Raburn says. "Here are a few examples. In 2003, after Williams
International failed, we were forced to raise the aircraft price,
but raised yours much less than the market price. We also made your
positions fully transferable, which allowed you to realize the
increased value of your position based on customer demand and price
"In 2005, when we increased the price of the Eclipse 500, we
offered certain position holders whose deposits were in escrow, the
opportunity to release their money from escrow, and save more than
$30,000," he continues. "In early 2007, when our delivery schedule
slipped, we offered affected customers an interest payment for
every month we were delayed delivering their aircraft.
"We clearly stumbled through the summer," Raburn told ANN. "But
unlike some others, we have this propensity to step up and say
"oops, we screwed up."
Raburn acknowledges the deposit program, while intended as an
incentive for current position holders, also represents additional
risk for those customers should Eclipse fail to deliver their
aircraft... but Raburn flatly places the chances of Eclipse's
long-term survival "somewhere in the 100 percent range."
"This is a rational method of raising capital -- and a real
chance for our customers to really save money," Raburn states.
"Consider this -- if you purchased an Eclipse 500 for $1,295,000
USD with a delivery date in 2008, you would save approximately
$360,000 USD -- more than half of the $625,000 USD deposit. If you
purchased an Eclipse 500 for $1,595,000 USD with a delivery date in
2010 you would save over a half-million dollars!"
Avio NG And FIKI Progress
Raburn also updated ANN on the status of certification of the
Avio NG avionics suite. "As of today, we are 82% complete with all
certification testing," Raburn says. "This means that certification
is now expected within 30 days. Production incorporation of Avio NG
is occurring as planned, with the first Avio NG equipped customer
aircraft assemblies now rolling down the line." (ANN plans to
visit Eclipse within the next 7-10 days, to witness S/N 105 -- the
first NG-equipped bird -- coming down the line --
Avio NG development has also impacted the company's plans for
foreign certification -- specifically, EASA. Eclipse says its EASA
certification program is "well underway," with certification
activities with Avio NG ramping up in early 2008 and expected
completion early in the second quarter.
Raburn also says Eclipse has completed "all high-risk
development flight testing" for flight into known icing (FIKI)
certification, "using artificial shapes on the airfoils to simulate
flight into known icing conditions and we will begin natural ice
testing next week." The company adds ice shape testing is planned
in January with natural ice testing occurring in February.
"The new de-icing boot required for flight into known icing
conditions has been qualified and is now being installed on all
production aircraft," Eclipse adds.
In summary, Raburn readily admits Eclipse isn't at the point he
expected it to be... but says the company has been a success
"We are proud to have already built more jet aircraft at a
faster rate than any other general aviation manufacturer in
history," Raburn notes," and we've delivered more jets in our first
year than any other existing company."