Will Nimbus even get off the ground?

 - April 14, 2008, 10:28 AM

June 30 was a critical date for Nimbus Jets, the Fort Lauderdale, Fla., startup that last December agreed to buy 1,000 Eclipse 500 jets (a sale valued at nearly $8.4 billion) for a proposed nationwide air-taxi service. That date was the deadline by which Nimbus owed Eclipse Aviation deposits in the amount of $11.7 million, or 20 percent of the estimated price for the first two-year delivery commitment of 70 aircraft.

At press time Nimbus said it was “in the process of trying to negotiate an extension [of the deadline] with Eclipse, as well as the dollar amount of the deposit.” According to Nimbus Jets chairman Ilia Lekach, the amount of the deposit could be negotiated to as little as $5.5 million. “We gave them a deposit of $2 million at the beginning of the year for the first 10 airplanes,” he added.

Eclipse would not elaborate at press time on the status of that deposit commitment, but the prospect of its happening as originally intended appeared murky. Indeed, the viability of Nimbus Jets itself is in question. According to the company’s independent auditing firm, it’s doubtful that Nimbus Jets has the “ability to continue as a going concern.” The auditor reported that Nimbus has “a deficiency in working capital and incurred losses since inception, and its ability to ultimately develop profitable operations is dependent upon future events, including obtaining financing.”

At the end of last year Nimbus Jets had a deficit of $10.9 million. Stated Nimbus: “We currently do not have all of the necessary management and employees to market and operate our business model. We have no experience operating an air-taxi service. We need to attract and retain experienced personnel to develop our infrastructure.”

All of the company’s revenues are currently generated by its taketoauction.com business, but that unit is scheduled to be “disposed of” by December 31. As reported in AIN in April, a commitment for $1.2 billion to Nimbus from Dafin Asset Finance (with offices in South Africa and the Isle of Man) has not materialized and the commitment has since been described as “unbinding.” A spokesman for Dafin would not comment on the status of its financial commitment, saying only, “We believe that deposits are required for 60 aircraft only, not 70. To our knowledge all financial commitments from Nimbus, including deposit commitments, are being met.”

Meanwhile, Eclipse Aviation, which has downplayed the magnitude of the Nimbus order, is preparing a July 13 rollout in Albuquerque, N.M., of its new, six-place entry-level business jet in preparation for its first flight this summer.

Nimbus’ order isn’t the only large fleet buy that’s drawing skepticism. An ambitious order was announced in late May from Switzerland-based startup Aviace AG (see article below). This company, which is attempting to form “international jet clubs” throughout Europe, signed an agreement with Eclipse Aviation for the purchase of 112 Eclipse 500s at the list price of $837,500 each. Aviace has given Eclipse a nonrefundable deposit of approximately $10 million.

Controversial Source of More Financing

Eclipse Aviation said it has secured more than $220 million in investment, still some $80 million short of the $300 million funding needed to reach certification. In trying to help Eclipse close that gap, Sen. Pete Domenici (R-N.M.) and Jeff Bingaman (D-N.M.) ran afoul of Sen. John McCain (R-Ariz.) early last month. The New Mexico senators proposed that Congress make small jet manufacturers eligible (Eclipse is not mentioned by name but clearly the provision is tailored to the company) to receive up to $50 million in federally guaranteed loans by tapping into the $10 billion emergency spending bill passed to help airlines struggling after September 11.

McCain blocked the provision because he saw it as an end-run around his panel, the Senate Commerce Committee, in which he is the ranking Republican. McCain also believes the provision is singling out one segment of the industry when all of aviation is calling for help. Domenici vowed to bring the provision up again in future appropriations bills.

The question of the viability of the Nimbus and Aviace deals and future financing requirements notwithstanding, progress continues on the development of the Eclipse 500. Early last month the company received FAA approval for its friction-stir welding process for assembling the jet. The company said it is the first to use this “advanced manufacturing technology in production of thin-gauge aircraft aluminum.”

Friction-stir welding, a highly automated and faster process than other structural jointing processes, according to Eclipse, will replace more than 60 percent of the rivets on major assemblies of the Eclipse 500, including the cabin, aft fuselage, wings and engine mounts.

Just a few days before the FAA approved the assembly process, the Williams International EJ22 turbofan engine destined to power the Eclipse 500 completed its first flight. It flew for approximately 50 min on its flying testbed, a modified Sabreliner 60. At 770 lb of thrust and 85 lb in weight, the engine has the highest thrust-to-weight ratio of any commercial turbofan ever produced, Eclipse asserts.

Starting last month, initial deposits for the Eclipse 500 entry-level mini-jet no longer go into an escrow account, which under a previous provision required the new airplane to attain certain milestones before funds would be released to the company. All other aspects of the deposit plan are identical to those of the past Sterling Deposit Program, namely an initial deposit of $97,500 and another deposit of $52,500 when the Eclipse 500 attains FAA certification.

As an incentive, Eclipse Aviation said it will waive the $52,500 payment due at certification for all orders placed between now and the end of the year. Eclipse emphasized this is not a reduction in the $837,500 purchase price–that money is instead combined with the remaining payments.

Certification of the Eclipse 500 is planned for December next year, with deliveries to start in early 2004.