Cirrus Restructures ND Debt, Presses On with Jet
Cirrus has restructured more than $13 million worth of loan and lease obligations related to its Grand Forks, N.D. production facility with that city’s Growth Fund. Cirrus employs approximately 90 people in Grand Forks who make composite component parts for its SR-series piston aircraft, which are then shipped to the company’s assembly line in Duluth, Minn.
Since 1996, Grand Forks has issued various bonds and loans in support of these activities, including construction of more than 160,000 sq ft of facilities. Cirrus made no loan or lease payments to Grand Forks during the second half of last year while negotiating the restructuring, talks Cirrus CEO Dale Klapmeier characterized as “tough but fair.”
The deferred payments amount to $442,704. Under the deal Cirrus will receive a “rent holiday” for the last six months of 2011 and a reduced rent through June 2012, at which time it will make a lump-sum payment to bring its loan current. Klapmeier called the new deal “reasonable.”
He said that the company plans to press on with its SF50 Vision jet program, which has attracted deposits for 480 airplanes and is “slowly ramping up.” Klapmeier said 20 engineers are currently working on the SF50 and that a revised timetable for the program likely will be issued within the next three months. “That is a long way from where we were in 2008 and where we would like to be with the staff on it [now],” he said, adding, “You will see tremendous progress over the next few months on the jet, and people will see the path we are on.
“It does take an enormous investment to get this thing [the SF50] going,” Klapmeier said. “Over the last three years we have been making progress on the program and reducing risk, but we have not been progressing toward certification in any meaningful way because we haven’t had the financial backing to do that.” He said Cirrus’s sale to Caiga, China Aviation Industry General Aircraft, in June for a reported $210 million, changed that. “Now we have a financial partner that has the ability and the desire to back a program like this and a vision of where aviation should go in the future internationally. They absolutely see the value in a small personal jet,” he said.
Klapmeier said the company continues to use the non-conforming prototype that first flew in 2008 as an active research test bed for various systems and plans to use it for natural icing testing this winter.
He downplayed press reports that Cirrus is planning to put a single-engine turboprop, possibly based on the Epic Escape, into production. Caiga bought the assets of bankrupt kitbuilder Epic Aircraft in 2010 for $4.3 million. These included various kit aircraft and production aircraft designs and prototype aircraft. Klapmeier said Caiga asked Cirrus “to evaluate the turboprop market” as part of a “long-term product plan.”
“There is nothing decided there,” he said, adding that the SF50 is the company’s top new product priority.
He said a team of Caiga managers regularly commutes to Cirrus headquarters in Duluth, but Caiga has yet to install any executives there permanently.
For 2011, sales of the company’s piston aircraft again declined, falling to 255 from 264 in 2010. Klapmeier said total company employment is approximately 490, down from 1,500 in 2008. However, he said the company is in “a much stronger financial position on those sales because of the strides in efficiency we have made to make these airplanes profitable at the lower [production] numbers. It is hard to [expand], or to shrink, a company to profitability, but I am definitely looking forward to [expanding] the company again.”
Klapmeier pointed to some recent bright spots for the company, including the sale of 25 SR-20 trainers to the U.S. Air Force Academy over the summer. He said the deal has spurred sales discussions with foreign militaries and could lead to future fleet sales.