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Can Eclipse Make It?

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Looking backward into a century of aircraft development, one truth has remained constant: One man's visionary is another's wild-eyed kook when it comes to new product development. I thought of that recently when I visited the Eclipse factory in Albuquerque. The jury is still out on whether Eclipse will be the vision thing or the kook thing, but one thing appears obvious: The current company is well-positioned to succeed if and when the market for personal jets comes back.

And personal jet is the description du jour. You don't hear the term VLJ—very light jet--much anymore and some people in the industry tell me they think it's because that term was too tightly coupled to Eclipse, a failure that the remaining players want to, understandably, distance themselves from. In preparing a report for Aviation Consumer, I delved back into the archives 10 years and was astonished to recall the hype that surrounded the Eclipse announcement and introduction.

At Oshkosh in 1997, then-NASA administrator Daniel Goldin predicted a production rate of 20,000 GA aircraft a year, dominated by light jets of the VLJ ilk. When Eclipse formally announced, buyers were literally standing in line at midnight outside the company's office and FedExing deposit checks to buy an early position. Shortly thereafter, a lively secondary market developed and some people made a ton of money selling early positions at a profit. Later, many more lost tons of money when the company tanked.

The operative thinking in 2000 was that the Eclipse would be "disruptive technology" because quantum advances in manufacturing engines and airframes would reduce its price point to a third of existing airframes. That would ignite high volume, further pressuring price downward. The reasoning proved fallacious. Despite all the hype, the high volume was elusive, if it was ever there at all, even at Eclipse's loss-leader intro prices. And second, Eclipse's initial cost-of-product estimates were off-scale low. One owner told me that bankruptcy records indicated his Eclipse cost about $3 million to build, but sold for a little over $1 million. That means that Eclipse had to find improbable economies of scale to just break even. It also means that the current 259 aircraft are significantly undervalued, even after owners pay for expensive upgrades.

And speaking of undervalued, the current investors, led by Mason Holland, got into this deal for a song and a cheap one at that. The estimated original investment was more than a billion dollars and Holland's group paid $40 million for the assets; four cents on the dollar. That's not quite free, but it's close. In a twist of good fortune, Sikorsky President Jeff Pino owns an Eclipse and recalling Victor Kiam, he likes it so much be bought the company. Actually, Sikorsky invested in Eclipse under the guise of providing parts and service support, but that business won't amount to lunch money in a $6 billion defense giant like Sikorsky. In all likelihood, Sikorsky sees the same thing Holland and company did: an opportunity to develop a meaningful commercial light jet market without risking much money.

Right now, Eclipse is sustaining itself by upgrading the existing 259 airplanes to varying degrees, a business with a limited shelf life. Holland says it's a question of when, not if the Eclipse will go back into production. That will take some additional investment, but nothing approaching what has already been spent. It will also take a market turn and no one knows when that's going to happen.

And what of the airplane itself? I flew one with owner David Green over the weekend and I can see why owners love these things. With the new avionics upgrades, the airplane is the integrated, state-of-the-art jewel Eclipse originally intended but never delivered. It's comfortable, fast and amazingly quiet. It doesn't have exceptional range, but it has enough. It's fast enough to eat up half a continent, but not so fast as to leave a single pilot trailing in a wake of burnt kerosene and longing for an assistant in the right seat.

If it can sell at somewhere between $2.5 and to under $3 million and Eclipse can find a market for 100 to 125 a year, why can't they make it? Call me a kook, but I think it's doable.

Comments (28)

Kook.

Posted by: JOHN EWALD | December 10, 2010 9:01 AM    Report this comment

Well, I'll admit, history is on your side of the argument. (g)

Posted by: Paul Bertorelli | December 10, 2010 9:18 AM    Report this comment

YES! Eclipse can make it. Will they? Who can say? In many cases the Eclipse fills the gap left by the cabin-class twin (340, 414, Navajo, Duke). It's a fast, comfortable airplane that will haul several people with ease, but it does not have the robust load hauling qualities of a King Air or a larger jet. This market is slowly drying up as airplanes made in the 70s and 80s are aging. The VLJ bubble was premature and had too many players for the market to sustain itself, especially when the economy tanked, but there will be a market for these airplanes. The Mustang is proving that.

Posted by: Ryan Lunde | December 10, 2010 9:58 AM    Report this comment

Is the Eclipse still using a welded aluminum fusealge design? I seem to recall that being a "feature" when I first heard about them 12 years ago. Or am I thinking of another plane that since disappeared?

Posted by: Andrew Upson | December 10, 2010 1:11 PM    Report this comment

Yes, friction stir welded aluminum fuselage. I think the wings are conventional riveted.

Posted by: Paul Bertorelli | December 10, 2010 1:14 PM    Report this comment

Hmmm. Be real interesting to see how those hold up to fatigue. Welds are notorious for having poor fatigue properties. And yes, I know they supposedly had a method that would cure that, but until number of them cross 10k hours and 20k landings without problems with the heat affected zone I'll be skeptical.

Posted by: Andrew Upson | December 10, 2010 5:33 PM    Report this comment

Sounds like the Eclipse might turn into an okay airplane. It may well go the way of the Starship though, simply for the fact that a new Eclipse and a Mustang cost about the same amount. For similar money - I'll take the Cessna. Support and service are a non-issue, and the construction techniques, while admittedly not as impressive or high tech as the Eclipse, are proven and reliable.

Posted by: Josh Johnson | December 10, 2010 6:18 PM    Report this comment

The Cirrus Jet is the one to beat. It's cheaper, sexier, and 1/2 the maintenance. Cirrus also has a proven name in Aviation. Wiki says 431 orders exist for the Cirrus already (not sure if that's true or not) which is a huge vote of confidence.

Posted by: Mark Fraser | December 10, 2010 6:23 PM    Report this comment

Josh, "about the same amount" is one of those things marketers debate over. The Mustang's current is about $3.1M. If the Eclipse can sell profitably at $2.5M, there's some daylight between the two. No really knows if that's enough to make a market of it. Eclipse is a tad faster, but the Mustang has better range.

Posted by: Paul Bertorelli | December 10, 2010 7:08 PM    Report this comment

Yes, 600k certainly is significant. Is it enough to overcome the black eye that Eclipse took with their initial offering of aircraft with inoperative systems and loss of parts and service support for a while? They very well might sell 100 per year, but it sure looks like the Piperjet is aimed squarely at the same market. Should be interesting. Speaking of failed companies, it also appears that Thielert is trying to gain traction again with their diesels.

Posted by: Josh Johnson | December 11, 2010 6:50 AM    Report this comment

All things being equal and the new owners being up to the task, given that they scored all that design, testing and development for a few cents in the dollar, I would expect them to be able to significantly undercut Cessna and hence create a market. I don't know if all things are equal though.

I'm sorry Eclipse failed. I followed them and the A380 development avidly during that period. On reflection I reckon they were working on a similar principle to scram jet research: "If we can just accelerate this thing to the right speed it will suck in enough oxygen to kick off." I like that they tried but I blame the people involved for blowing whatever chance it ever had. Them and the clowns involved in the GAP program. How much money was thrown away over that FJ22 motor?

Posted by: John Hogan | December 11, 2010 7:09 AM    Report this comment

I remember saying on this blog maybe a year ago that $40 million for the assets of Eclipse may turn out to be the bargain of the century. But the questions I ponder are: Did the projections of high volume prove fallacious? Or did Eclipse just way underestimate the time and total costs to get their product to the market place? As both Airbus with the A380, and Boeing with the 787 appear to have done. The biggest problem may have been that Eclipse had no revenue stream from existing products to help fund the bloated development costs for the new product. Another thing that has always puzzled me is, while I can understand the vehement skepticism of the aviation press towards Eclipse (except for one), I could never quite understand its seeming love affair with Adam. Could the attitudes towards the press of the respective CEO’s of the two companies played a large part in how the press treated the Eclipse and Adam products?

Posted by: JOHN MININGER | December 13, 2010 8:11 AM    Report this comment

I flew a factory demo Eclipse (and briefly put a deposit on a delivery slot) about a year before the company collapsed. Easy flying, but when I looked hard at the interior size and range, I finally settled on a Twin Commander turboprop which had 50% more range/35 KTS less speed/same fuel burn/twice the interior volumee and load hauling capacity...all for one half the price. As a 40 year+ business owner, pilot and student of business, I've observed a few things about market snad human nature: you can compete in the marketplace on some combination of PRICE-SERVICE-PRODUCT.

Posted by: Glenn Kautt | December 13, 2010 9:55 AM    Report this comment

The Eclipse always intrigued me, but I remember saying to myself that there was no way they were going to make money on it with such huge development costs. Any of the current or soon to be production VLJ/personal jets like the Mustang, Phenom 100, PiperJet, or Cirrus Jet, are coming in at perhaps a couple hundred million to develop. How Vern Rayburn and company managed to a) raise and b) blow through $1billion on a such a small airplane, technological marvel that it may be, is a mystery to me. A $40mil investment for the assets is great, if they can start selling airplanes again for a realistic price. If I'm going to toss $2.5mil out the window, though, it would probably be on a gently used PC-12 or a small fleet of MU-2's that have longer legs and bigger payloads at almost the same speed.

Posted by: Charles Seitz | December 13, 2010 9:56 AM    Report this comment

Sorry, I hit the send button prior to finishing my last submission. Eclipse started a whole new competition on PRICE. It never go SERVICE down, and currently that remains a big question mark. As for PRODUCT, several other compeitiors (Cessna, et. al.) have come up with products which will match the real Eclipse price point of $2.5 million and deliver a better product in terms of capacity, speed, or underlying service. In fact, seeing Cessna reach down into the single turboprop market makes it clear they are thinking a product/price point in the $1-1.5 million range. That would fit nicely below the Mustang, and would undercut the TBM, filling a gap which only Piper has filled. Since Piper is financially a longer-term question mark, Cessna could win on PRICE-PRODUCE-perceived SERVICE. In summary, Eclipse may be able to fill a niche, but at a price point north of $2.0 million, they are likely to get crushed for new jets.

Posted by: Glenn Kautt | December 13, 2010 11:02 AM    Report this comment

This might be a bit off subject but I would like to know what happened to the original management team. I has always thought that Eclipse was trying to sell a pipe dream and wondered if this whole thing was a well devised plan to steal millions from potential buyers and investors. And that did happen. How much money did upper management take out of the company while they were in position? I would like to see AVweb do an in-depth story of this subject.

Posted by: David Botich | December 13, 2010 11:20 AM    Report this comment

I mean no disrespect to the other bloggers here, but as an owner/operator of an Eclipse, I have to say much of this discussion about business economics misses the important point that Paul made in his article: "It's comfortable, fast and amazingly quiet". I operate 135 charter and the other GA aircraft mentioned here are viewed by the public as 'puddle jumpers'. By contrast, the Eclipse delivers a ride as comfortable and even quieter than an airliner in the mid- to upper-30's. We compete hands down with Lears and Citations when the load is 2-3 people. As for cabin size, forward facing seats in the Eclipse give people a spacious airy experience. They LOVE the visibility compared to being stuffed in the back of a Mustang. No contest. This comfort level, combined with low operating costs will determine the outcome. The New Eclipse delivers service, parts and support second to none.

Paul is not a kook!

Posted by: Marc Arnold | December 13, 2010 12:33 PM    Report this comment

This may be a bit off the subject also, but I’ve always wondered how many millions of dollars of his own money Eclipse board of director member Al Mann lost on the whole venture.

Posted by: JOHN MININGER | December 13, 2010 12:38 PM    Report this comment

I thought about Eclipse last week while reading up on the SpaceX Falcon launch. Turns out that SpaceX uses friction stir welding on their rockets. I know that SpaceX plans to eventualy re-use the first stage but I guess they won't know how many cycles the stage can be re-used for until they actually start doing it.

AS for the Eclipse...owners seem to like them especially after they finally got a complete bird. A question for Marc Arnold or Paul...Does the upgraded panel include Synth. Vis. ? If not that's a big miss these days.

Posted by: Ray Dietz | December 13, 2010 1:00 PM    Report this comment

How well they hold up after 10-20k landings is a moot point. I am under the impression that the original airplanes have a 10 year, 10k cycles or hours (which ever comes first) life limit. I believe that the complete suite of factory upgrades doubles that. If this is accurate, that would be a significant factor on the future value of used airframes.

Posted by: Paul Tollini | December 13, 2010 1:11 PM    Report this comment

"Synth. Vis. ?" no, not now, but IS&S has video input configurations using the same hardware on other planes, so it is likely to be offered in the future.

Posted by: Marc Arnold | December 13, 2010 6:49 PM    Report this comment

I saw the AvioNG FMS/2.0 at the factory and I did not see synthetic vision on it. Don't know if it's a planned upgrade. They are working on a life extension program, however.

Posted by: Paul Bertorelli | December 13, 2010 6:52 PM    Report this comment

Could the attitudes towards the press of the respective CEO’s of the two companies played a large part in how the press treated the Eclipse and Adam products?<<

It probably did. The old Eclipse become increasingly difficult to cover. During the runup, they were accessible and friendly, but as the delays mounted and they took some criticism, they became increasingly insular and hostile toward at least some of the press and, unfortunately, customers.

For a company like that--or any, really--you need a press staff that can roll with the punches and stay positive no matter what. Shutting people out and not returning calls--which they did--just makes things worse.

Adam had delays, too, but you could always get a phone call returned. They didn't seem to take criticism personally. The new management at Eclipse is a breath of fresh air, in my view.

Posted by: Paul Bertorelli | December 13, 2010 7:00 PM    Report this comment

Most people haven't really seen these jets up close.

The Eclipse is a SMALL jet. The cabin is more or less like a Bonanza A-36, perhaps just a tad wider but shorter. The door opens right at the back left seat, there is no center aisle per se. The seats are just arranged so that a person can get into that rear 5th seat. There is no 6th seat. A Piper Saratoga has more seats and cargo capacity (although not pressurized and certainly not as fast). Comparing it to a Cessna 340 is a gross misunderstanding. The 340 is a substantial airplane, while the Eclipse is not. The Eclipse could be compared to the Cessna 310 if anything (it sits lower to the ground, though) or the Baron, with the difference being in the speed.

The competitors Mustang and Phenom, are much bigger aircraft. They indeed can be compared to the Cessna 340 for their cabin size. The Phenom probably has over twice the cabin size of the Eclipse, being actually slightly larger than the 340.

So having a .6M price difference is not enough to account for the difference in size.

The PiperJet Altaire appears to have an even larger cabin size, and if they maintain the price estimate, THIS will be the one to beat.

Posted by: Arnold Pieper | December 15, 2010 9:42 AM    Report this comment

Arnold

Your assessment of relative cabin sizes is correct. I'm not sure what you mean when you say the Eclipse is not a "substantial" plane.

I have 4,000 hours flying Cessna 400's (401, 421, 441) and those cabins are much larger. The question of value is more complicated, of course. Aircraft are a trade off. Otherwise we'd all be flying $10,000 F-16's!

Looking at the charter market, the NBAA estimates 70% of US charter flights are 3 or fewer pax for distances less than 800 nm. As a charter operator, that's my market and the Eclipse is very well suited. Are the Mustang and Phenom larger? Yes. (I have a Phenom on order.) Would two businessmen chartering an out&back want to spend another $1-2K to have a more spacious cabin? In most cases, no.

No airplane fits all mission requirements. There is, however, a strong case to be made that the Eclipse offers a great value proposition for a large niche of the market.

My passengers just showed up... Gotta go!

Marc Arnold

PS. An optional sixth seat is available for the Eclipse. I have one and it is easy to reconfigure the cabin for each trip as needed.

Posted by: Marc Arnold | December 15, 2010 11:10 AM    Report this comment

Hi Marc, Thanks for sharing your perspective and point of view. By "substantial" I meant size only. The 340 sits tall, called by many a "personal airliner", you litteraly climb a stairway and "walk through" the cabin to get to the cockpit (hence the term "Cabin Class" applied to the Cessna 340 and the 400 series).

The same can be said about the Mustang and Phenom, with the latter being larger by a margin.

The Eclipse is not a "Cabin Class" airplane.

I'm not detracting from the Eclipse in any way, I do believe in its value. As a personal jet it's probably an exciting aircraft.

I just think that many people make a mess when they trow the Eclipse in the same bag as bigger business Jets. They do look very hard to distinguish in pictures, and the interior scenes shown on their websites can be very misleading.

When you walk up to them, however, it's a different experience.

I venture to say the Eclipse is actually the first of the "new light twins", which effectively replace the Senecas, C-310s, Barons, Aerostars and other such light twins, which are practically extinct as a species, but if you think about it, they're really being replaced with the "Personal Jets" such as the Eclipse, Cirrus Jet, Diamond Jet, etc.

The Mustang and Phenom do not belong in this comparison, although when you use them all for charter, of course, they all have their value. Can't question that.

Posted by: Arnold Pieper | December 15, 2010 1:28 PM    Report this comment

I'm surprised that no one has mentioned the trade off in purchase price and operating cost versus redundancy between single and twin engined jets.

I'm guessing that most charter customers won't really care whether their plane has one or more engines. Plane Sense has done a great job with their use of the Pilatus PC-12.

I'm guessing that on the same typical mission, e.g. 500 NM, the PC-12 will be less expensive to fly than the Eclipse (net of engine reserves, etc.),complete the flight within minutes of its faster little twin, and do so with a significantly larger cabin, far more confidence inspiring ramp presence, and with the capability of carrying a far larger and greater load. One expample. The new Piper and Cirrus single tubro-fans, although smaller than the PC-12, offer similar efficiencies using a single engine.

Do I fly a single? No. I fly a BE-20 and am wiling to pay a lot more in maintenance and operating costs for the comfort of a second powerplant.

Posted by: Charles Clark | December 15, 2010 3:00 PM    Report this comment

Charles, I think the TBM 850 is a better comparison performance and volume-wise. The Pilatus would be my pick but its at least one size larger.

Posted by: John Hogan | December 15, 2010 6:43 PM    Report this comment

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