Safire Jet stalls, Eclipse wages marketing war
Camilo Salomon, president and CEO of Safire Aircraft, said he
has faced do-or-die situations before, but not in the aviation world, where, he says, every move he makes is examined by critics– qualified to judge or not. Having never worked in aviation before, he thought raising money to produce the company’s six-place twinjet would be easier.
With no cash left in the bank, Salomon said he had to temporarily halt operations on June 9, letting about 55 employees go. He thought that with new funding arriving from Geneva, he would be able to bring everyone back by June 30. When that didn’t happen, he convinced 15 diehard believers in the Safire Jet program to continue working without pay.
With the promise that new funding was a sure thing, the 15 dedicated workers agreed to stay onthe job until no later than July 6. That funding didn’t happen either. However, the loyal workers continue to support their company, with
larger rewards promised on the horizon–possibly in the form of stock options coming forthwith from unnamed investors from the United Arab Emirates and Switzerland.
However, the funding “has to happen no later than August 13–the deal is dead after that with the contract expiring,” Salomon explained.
He told AIN he is aware there is speculation that Safire plans to file bankruptcy because the new investor deal fell apart. “This is not true. We have no plans to file for bankruptcy,” he said. “Yes, funding is late, but let me assure you it is on the way–I just spoke with our investors this morning [July 15]. They asked me to have a little more patience as they finalize paperwork. It’s also a lie that the rest of our employees have walked out.”
In the interim, he deployed his skeleton workforce among three of Safire’s suppliers–two in Kansas, where the prototype’s fuselage and landing gear are being produced, and the other in Utah, where the twinjet’s wings are manufactured. Salomon is convinced that a prototype will be finished and that there will be a first flight, but, leery of criticism, he’s no longer giving dates.
Safire’s Customers Switching to Eclipse?
Eclipse Aircraft CEO Vern Raburn decided to capitalize on Safire’s woes. After hearing Safire’s promise after promise that new funding was just around the corner, but never materializing, Raburn decided to increase his customer base by convincing Safire’s customers they would be better off with Eclipse. “Where they’ll really get a jet,” he said.
Eclipse told AIN last month that it has already closed one conversion deal and expected “multiple conversions in the following weeks.” It also claimed that its telephones are “ringing off the hook” from Safire’s customers who read the Eclipse ad, which states, in part, “You recognized the promise of the very light jet category. But you may be having doubts about Safire’s long-term viability.”
For an indefinite period, Albuquerque, N.M.-based Eclipse will continue offering Safire deposit holders the opportunity to convert using their original $8,000 soft deposit. After a 30-day grace period, the dance will end, with Eclipse expecting hard deposits of $97,500 against the $1.175 million for its six-place twinjet.
Raburn said he doesn’t want to be viewed as “a bad guy,” but decided to go ahead with what some people have called a “daring marketing ploy” because he wanted people out there to know they can ask Safire for their deposits back without fearing they couldn’t afford another option. “I’ve never believed that Safire was a viable company to start with–it has always had unrealistic goals,” he said.
Furthermore, Eclipse wants to dispel scuttlebutt that it has “burnt through” more than $200 million of the $325 million in equity capital it has raised. “We’re a well funded, technology-advanced company, which is approved by insurance underwriters because we have a solid curriculum-based training program,” Raburn said.
The Eclipse chief said his company was in the process of manufacturing the certification test fleet of seven aircraft. “Our first test aircraft is on track for the end of December; we’re on track for FAA certification no later than March 2006,” he explained. “We’re not running from anyone–we pay our employees. I always call a spade a spade.”
Salomon said Eclipse’s action doesn’t bother him whatsoever. “I’ve always said that I expected a 50-percent dropout rate–for one reason or another people will not convert,” he said. “It will be interesting to see how many actual hard deposits Eclipse gets. By now, I expected more cancellations than the four we just lost–
it’s not a surprise. I hardly believe it has anything to do with Eclipse’s marketing strategy to try to take our customers.”
He said he believes that his serious, financially qualified customers are going to remain loyal. “They have faith in our product and know funding is on its way,” he said. “It’s common for competitors to offer assistance, but in this case we didn’t expect it from Eclipse, nor do we want it.”
Of Safire’s new investors, he said they will own 51 percent of the stock and will occupy four seats on the board of directors, and that things will change. One such change will be the replacement of the company’s current chairman, Miguel de Miranda Correa. Salomon will sit on the board as well, along with another (unnamed) person from Safire.
Certification in 2007?
“There isn’t anything I want to do more than to be able to pay employees and start an aggressive hiring campaign to jumpstart this company back into operations,” he said. Without being specific, he said that the jet should fly early next year; he now seriously doubts it can happen before year-end. Additionally, FAA certification will be delayed, but it’s anyone’s guess as to when. Salomon hopes it will happen before the end of 2007.
“New funding from investors will be more than $100 million, and they are quite aware it will take more than that to bring the aircraft through to certification and beyond,” he said. “We still have our firm order for 31 aircraft, and we intend to give our customers the jet they put down hard money for.” [In late 2000, Safire reported holding orders for 726 aircraft backed by refundable $8,000 deposits. In January this year, it was reporting orders for 369, 31 of which were non-refundable.–Ed.]
He said that $1.395 million was still the asking price for the Safire Jet, but that figure could change in the future. “I'm aware that some people believe that employee and vendor confidence is now too shaken for us to recover, but I don’t believe that’s the case at all,” he said.