Cirrus continues search for Vision jet financing
Cirrus Aircraft’s SF50 Vision single-engine jet program is “making good progress,” according to president and CEO Brent Wouters, who added that the company has spent $64 million so far on the program and will need to spend another $64 million to see the aircraft through certification. The order book as of early June stood at 431 aircraft, 106 of which were written in the first half of the year.
According to Wouters, about 20 percent of Vision deposit-holders canceled their orders, either because they were afraid that Cirrus was going to go out of business or because they needed capital for their own financial problems. He acknowledged that the Vision program “is not going as fast as we would like, and not as fast as the deposit-holders want. But 80 percent have stuck with us, and we’ve sold all of those [the canceled orders] back, and more. We’ve been fortunate with the tremendous support that we’ve gotten.”
Cirrus financial backer Arcapita continues to support the company, Wouters said, “both in actions as well as funding.” In January 2009, Arcapita took over a $30 million Cirrus third-party bank loan because the bank went out of business. “Arcapita has committed a lot more capital in the last 15 months,” he added. “Had it not done so, we would not be here. It has committed well north of $100 million to this effort, not $150 million, but it’s close.”
Cirrus will have to raise from outside sources the remaining $64 million it needs to certify the Vision jet. “Accessing other capital to do the jet is reality,” Wouters said. “Not that [Arcapita] doesn’t want to put money in it, but there are practical limitations, so we’re trying to get other capital.” Cirrus is working with debt and equity institutional investors. “We combed the world last year, and response has been much better this year,” he said. “I need professionals who can help me build a business and have the patience and luxury of having part of their portfolio in this company.”
Cirrus is also evaluating various locales to build a plant to manufacture the Vision, and that should provide another source of funds. “I’m looking at all the sources available,” he said. “There are some states that clearly want our business. We’ve got high-value jobs.”
For now, Cirrus is funding work on the Vision from cash flow generated by sales of its piston single line. “We’re spending not as much as we’d like,” Wouters said, “but what we can afford. We’re meeting our 2010 plan, and that’s the most important way to think of it.”
Klapmeier Bid Rejected
Last year, Cirrus and Arcapita were offered the opportunity to sell the Vision program to Cirrus cofounder and former chairman Alan Klapmeier. But the two parties didn’t come to an agreement, and Wouters believes that it would be difficult–if not impossible–for a separate entity to certify and build a jet outside the framework of an experienced manufacturer. “If there is an entity that’s going to do it as a separate R&D program, it will not work,” he said. “This is a Cirrus program. You’ve got to design something that is manufactureable. If you don’t think about manufacturing and get manufacturing people involved who are building airplanes from the beginning and don’t get flight training involved from the beginning, it’s not a program. Whether it’s Embraer or Cessna, they build airplanes; they know all these issues. It takes a long time to bring everybody along to the point where it’s manufactureable and deliverable. We’re at an advantage because we do make airplanes today, we know what they cost and we’ll be aware of those problems.” Wouters said Cirrus has already signed 82 percent of the suppliers for the Vision program.
The additional $64 million needed to certify the Vision jet includes tooling to build the jet, but not working capital to build the production line, according to Wouters. “Working capital can be financed,” he said.
Cirrus is still flying the prototype unpressurized Vision jet and has recently done ice-shape and natural icing flights and a flight to 28,000 feet. Detail design work continues, and engineers have finalized the engine placement relative to the fuselage. Plans call for three flying conforming prototypes and more test articles for ground testing.
If the fundraising efforts prove fruitful this year, Cirrus will build the conforming prototypes next year, then certify the Vision jet in 18 months.
“I wish the economy were stronger,” Wouters said. “We knew it would be a challenging year. It’s a complex business and involves lots of moving parts, engineering and manufacturing; it’s not for the faint of heart. We’re having a ball, but that doesn’t mean it’s all fun and games.”
“Our goal is to fulfill the vision of the Vision jet and get it to market as quickly as possible,” said Cirrus chairman Dale Klapmeier.