NBAA Convention News

Pieper puts focus on Eclipse profitability

 - October 6, 2008, 4:46 PM

Since taking the helm at Eclipse Aviation on July 28, chairman, CEO and investor Roel Pieper has worked to turn the manufacturer from a development company into one that can profitably produce the Eclipse 500 very light jet. “Eclipse has to be a profitable business,” Pieper told NBAA Convention News yesterday.

With a background in turning around high-tech companies, including the hugely profitable rescue of Tandem Computers, Pieper believes the steps to turn Eclipse from a money-hemorrhaging startup into a stable and profitable operating company are clear and achievable. “It’s a transition out of this research-and-development mindset to a more regular manufacturing, performance- and yield-oriented company,” he said.

It is also a transition away from the first 10 years of Eclipse Aviation’s existence, when promises made by founder and former president and CEO Vern Raburn did not always come to pass. Eclipse has proven that it can manufacture one VLJ per day, Pieper said, but under Raburn’s leadership it wasn’t clear that Eclipse would be able to transition from a development company into a stable manufacturing company.
One of Eclipse’s problems was that it was trying to deliver airplanes that weren’t completely finished in terms of full avionics, icing and performance capability.

Essentially, research and development continued as the unfinished product entered service. Now the final step is nearly in place to complete the Eclipse 500’s capability list–FAA approval of the Garmin 400w navigator installation–and when that is done, certification by European authority EASA should follow.

Troubles Multiply
Despite the recent shutdown of air-taxi operator DayJet, which had orders for a huge number of Eclipse 500s, Pieper said, “We have a good orderbook.”
After slashing costs at Eclipse and finishing the final certification steps, the company will ramp up production of the Model 500 early next year.

Pieper expects that if all goes well, Eclipse will be able to ramp back up during the first half of 2009 to the same rate of production as during the first half of 2008, when it shipped almost one per business day. During the second half of 2009, Pieper expects Eclipse to have enough momentum to grow production to 1.5 airplanes per day.

Because of Eclipse’s financial and unfinished-airplane problems, which resulted in Raburn’s departure, the company has had to work closely with suppliers to which it owes money to make sure they stick with the program while they wait for their accounts to be brought current.

The company does have enough cash on hand to move forward with the new production plans, according to Pieper, thanks in part to a recent financial infusion from its agreement to build a factory in Russia, but Eclipse is also seeking a final round of equity financing. This round, being arranged by financial firm UBS, should close in the next few weeks.

In addition, a group of depositors has formed and is threatening to try to persuade a judge to force Eclipse Aviation into involuntary bankruptcy, based on the group’s claim that the company defrauded its customers by taking deposits that were supposed to be followed by delivery within six months. These deliveries have yet to occur. “I think there will be no judge who will do that,” Pieper said of the group’s plan.