Eclipse sells DayJet 500s as owner lawsuits mount against Eclipse

 - October 27, 2008, 11:54 AM

On October 21, Eclipse Aviation formally placed defunct charter operator DayJet’s 28 Eclipse 500s on the used airplane market. According to the manufacturer, the airplanes will be sold in “as is” condition. At last month’s NBAA Convention, Eclipse chairman and CEO Roel Pieper told AIN, “We have the responsibility to refurbish the aircraft and bring them back into the market.” Although a group of buyers led by Houston-based JetsAmerica was planning to offer $500,000 each for the DayJet Eclipses, Pieper believes that prices should trend higher and that fleet buyers waiting for Eclipse 500 deliveries might want to buy some of the former DayJet airplanes so they can launch their businesses earlier.

JetsAmerica had planned to make its low-bid offer directly to UT Finance, the United Technologies subsidiary that holds equity in the DayJet airplanes, but Pieper said that Eclipse must approve any sale of those airplanes. The 28 airplanes are still outfitted in DayJet livery, including leather seats, and have accumulated between 150 and 450 cycles. Some have remaining time on the original Eclipse warranty, and none of the 28 jets has Avio 1.5 avionics upgrades or flight-into-known-icing capability.

The DayJet airplanes are in three different configurations, and Eclipse did not specify when any upgrades might be available or whether they are included at no extra cost. Early models without the performance upgrades and with the original Avidyne-based Avio avionics offer a 355-knot maximum cruise speed and 950-nm range (NBAA IFR).

Another set is available with the same Avio avionics but including the later aerodynamic configuration, and these can fly 1,125 nm and up to 370 knots. Probably the highest-priced former DayJet Eclipse 500s are those with Avio NG (IS&S instrument panel), including optional SkyWatch HP, Class-B TAWS, AC power outlets, weather radar and third AHRS. Interested buyers were urged “to call for pricing and further details.”

Lawsuits Multiply
Meanwhile, two more Eclipse 500 deposit-holders ave filed lawsuits against Eclipse Aviation for not refunding their deposits. Belgium-based Royal Properties filed a lawsuit on October 8, accusing Eclipse Aviation, among other things, of failing to return “the deposit it paid despite the occurrence of a Refund Event and Royal Properties’ effective notice of demand for a refund.”

Robert Bigler of Cupertino, Calif., made essentially the same claim in his lawsuit, filed September 25. Bigler’s deposit totaled $182,000. On October 17, Eclipse responded to Bigler’s lawsuit with its own court filing, essentially denying most of Bigler’s claims and asserting, “Plaintiff did not comply with the contract requirements for obtaining a refund, and therefore has not yet given the required ‘effective notice’ under the contract at issue. Plaintiff’s claims therefore are premature.”

By press time, a group of deposit-holders that was proposing to force Eclipse Aviation into involuntary bankruptcy had not yet made a move. The plan was to try to persuade a judge in Delaware, where Eclipse is incorporated, that the company defrauded customers by taking deposits for jets that were supposed to be delivered within six months of the deposit being paid, without delivering the airplanes. “I think there will be no judge who will do that,” Pieper told AIN. “I’m disappointed that these people think that way, but that is because of the previous culture and attitude around Eclipse, and I would have hoped that these people would give us the time to fix what needs to be fixed and then come back to us. I think most of them will understand that there are so many other financial obligations that doing something like this makes no sense, just causes more damage, and then they’re not going to get any money anyway. I would be surprised if a bankruptcy judge would even go there with all the jobs at stake and all the other obligations at stake. I’m disappointed that these people hold a grudge against the company while they see the company changing.”

Some deposit-holders–fewer than 10, said Pieper–have changed their mind and canceled their refund requests.

Any refunds that do occur will have to wait for a final round of funding to come through, which Eclipse had been working on obtaining but had not announced as of October 21. After taking over as CEO of Eclipse following the departure of founder Vern Raburn in late July, Pieper has slashed costs, laid off 650 employees and cut production until a planned ramp-up begins early next year. The goal is to reach nearly one airplane per day in the first half of next year and 1.5 per day in the second half, but this is dependent on the needed funding.

Pieper has also spent a lot of time persuading suppliers to stick with Eclipse while money owed them is paid. “We have all our suppliers on board,” he said, and agreements are in place “for when they’re going to get paid and how they’re going to get paid.”

In an October report on Eclipse issued by Teal Group, vice president of analysis Richard Aboulafia wrote, “We doubt that Eclipse can survive as an ongoing business. There is a chance that additional cash injections would keep it alive for another year or two. But for now, our forecast calls for production to end in 2009.”

Eclipse still had not received FAA certification for the Garmin 400W navigator upgrade to the Eclipse 500’s avionics system by October 21. EASA certification is another important milestone, but this will not occur until the 400W modification is approved. And until EASA certification occurs, deliveries to European buyers will have to wait.

“We have a good order book,” Pieper said. “In fact, the order book will probably increase by at least 50 percent when EASA certification happens.” Taking the U.S. orders and those waiting for EASA approval into account, Pieper said, “We have three years of production, easily.”