The Economics Of Innovation...
After creating the jet and proving the market, development of the Eclipse 500 has hit a hurdle of potentially grand proportions with their announcement last week to part ways with the engine their aircraft was built around. While the state of affairs at the company will prove itself in the coming months, some 1357 orders manifest not only interest in the design, but faith to the tune of $65 million in non-refundable deposits. Of the backlog, Eclipse CEO Vern Raburn said, "To our knowledge, the Eclipse 500 order book is greater than that of any single civilian jet in the history of aviation." Each one of those orders the company had planned to fill by 2006. Each one of those buyers expected certain performance and operating costs, which, generated around the Williams EJ22, were pegged at 56 cents per mile. Those figures and others are now more uncertain. The economic inconvenience of Eclipse's engine trouble could extend beyond that of buyers if production of the jet is significantly delayed. The city of Albuquerque is investing $30 million in infrastructure, in part to accommodate Eclipse at Double Eagle II Airport, where Eclipse plans to employ some 750 employees who might ultimately play a part in putting out a projected 1,500 Eclipse 500 jets per year. Unfortunately, without engines, it's not a jet ... it's a glider. Clearly Eclipse will work swiftly to remedy the potential damage of such a perception lest it becomes reality -- if only in the fears of potential buyers.
For Eclipse, which long held their cards close to the vest in part to avoid having their labors and market research become their competitors' best friend, it seems their hand is now flat on the table. Projecting confidence in this position, Raburn told The Albuquerque Tribune, "There is still no alternative to this airplane." But then, "this airplane" no longer exists -- the one that replaces it may share its form, but the extent of re-engineering necessitated by heavier, costlier, less-efficient or just plain different engines is yet unknown and that has some possible buyers wondering. Chris Stevens, who had plans for 2004 to launch start-up jet taxi service in Fort Worth, Texas, flying leased Eclipse 500s, thinks, "Eclipse's problem is that all their economics are hung right on this engine and (Williams') technology." Stevens' opinion is that without the EJ22, Eclipse can't make the same claims. Stevens is now considering his other options, such as existing Citations or the forthcoming six-place Cessna Mustang. The Mustang -- which shares similar performance specs with the no-longer-relevant EJ22-powered Eclipse 500 -- aims for type certification in mid-2006 and first deliveries late that year. At $2.29 million, the projected Mustang-to-Eclipse price ratio is close to 3:1.
While Eclipse spokeswoman Cory Canada last week said it's impossible to say how the engine change will affect the plane's ultimate price, Raburn told AVweb "there's absolutely no way" the Eclipse will cost more than $1 million. Eclipse had once intended to deliver approximately 140 aircraft in 2004, but its current engine conundrum leaves the project more than a couple dozen test flights behind schedule with a few more prominent hurdles to be cleared first.
...And Refreshed Competition
While GA revolutionaries wait breathlessly in the wings for Eclipse to fit a new engine, the folks at Safire ... and their light six-place S-26 ... might have a slightly more upbeat take on the whole thing. Safire announced early last month that it had secured funding through first flight for development of their own unique six-place jet. "The funds committed will allow Safire to move forward at full speed toward completing the design and building the prototype for first flight," according to a company press release; the funds arrive compliments of a "Swiss syndicate." Safire's aircraft offers six-place seating plus a lavatory and may be carried aloft by two Agilis TF1000 engines (or something similar) -- an engine that weighs in at three times that of the EJ22 for 250 pounds more thrust and is scheduled for certification in 2005. At this time, the company is still finalizing their plans for production -- and has yet to claim a location for those facilities. Once in production, the company intends to craft as many as four aircraft per day offered at an asking price near $1 million. The carrots are still dangling, and the wait for a revolutionary six-place jet goes on.