NBAA Convention News

Russia plans Eclipse factory

 - September 30, 2008, 5:47 AM

Despite the recent announcement that the Russian government would build the company a new factory in Ulyanovsk, embattled VLJ maker Eclipse Aviation (Booth No. 250) is continuing its search for operating capital, perhaps as much as $200 million. Meanwhile, the company has slowed its production rate, launched a major company-wide reorganization, laid off 40 percent of its workforce, and continues to conserve cash. Eclipse has only a small presence at this year’s NBAA Convention and does not plan to hold a press conference or make any announcements at the show.

“We’re continuing to pursue financing, and we think the announcement of the new factory will have a positive impact on that,” said an Eclipse spokeswoman.

On September 23 Eclipse announced that the Russian State bank Vnesheconombank (VEB) Supervisory Board, chaired by Russian Prime Minister Vladimir Putin, approved a $205 million deal to construct an assembly plant for the Eclipse EA-500 in Ulyanovsk, the birthplace of Lenin, 600 miles east of Moscow. The spokeswoman said that under the plan component parts for the EA-500 will continue to be fabricated in Albuquerque and then shipped in “kits” to Russia for assembly. Eclipse will not be able to access any capital in that deal to fund current operations.

The Russian Eclipse factory, located at the Ulyanovsk-Vostochny International Airport, is scheduled to open in 2010 and be capable of assembling 800 jets per year.

Funding Woes Continue

Negotiations for the Russian factory commenced earlier this year, shortly after Etirc (European Technology and Investment Research Center) Aviation infused capital into Eclipse and gained control of the company. Etirc Aviation has 180 Eclipse EA-500s on order and is the exclusive provider of sales, customer service, maintenance support and flight training for the Eclipse 500 in Western and Eastern Europe, the Russian Federation, the Commonwealth of Independent States and the Republic of Turkey.

That deal gives Etirc Aviation the right to establish local assembly of the Eclipse 500 within its territory. Etirc Aviation CEO Roel Pieper displaced Eclipse founder Vern Raburn as Eclipse CEO in July as part of the deal for Eclipse to receive funding from Etirc, after which Etirc further consolidated its control of the company.

Through September 12, Eclipse had delivered 251 EA-500s, 152 of them this year, according to the spokeswoman. Figures released by the General Aviation Manufacturers Association show that Eclipse delivered 50 airplanes in the first quarter and 60 airplanes in the second quarter of this year.

The company continues to employ 1,100 people at its main plant in Albuquerque as well at its Albany, N.Y. and Gainesville, Fla. service centers.

Eclipse had once claimed a back order of more than 2,500 aircraft, with almost half that number coming from per-seat, on-demand air charter company DayJet.

However, DayJet took delivery of only 28 aircraft and ceased flying operations on September 17. According to Eclipse, it has eliminated those aircraft from its EA-500 order book, which now stands at “less than 1,000.” The company also has orders for approximately 100 copies of the single-engine EA-400. However, work on the $1.35 million EA-400, originally scheduled to enter service in 2011, has been halted.

“Nothing is happening with that program right now,” said the spokeswoman.

She declined to comment on reports that as many as 300 EA-500 position holders are seeking refunds on their deposits, saying only that the company would issue the refunds within 10 days after the next round of financing closed. NBAA Convention News found four complaints about nonrefunding of purchase deposits. Geiger Excavating, Ice Blue Air, Loeb Holding and Mayer Capital Holdings have filed lawsuits against the company.

Eclipse is continuing to pursue European EASA certification for the EA-500 and final FAA approval of new, longer-wearing bias-ply tires. The spokeswoman said announcements on those items are expected soon.

Meanwhile, the federal Department of Transportation Office of Inspector General (OIG) is continuing its investigation into the certification of the Eclipse EA-500. The OIG announced that it is examining “if problems identified during the certification and manufacturing process have been corrected,” and will evaluate “the current manufacturing process to determine the effectiveness of the Eclipse quality assurance system, the adequacy of training for production personnel and the competence of the FAA designees.”

During congressional hearings September 17, Eclipse executives denied that there were any irregularities in the EA-500’s certification.