Can Eclipse Make It?
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.