What's Next for Eclipse ?

Now that the drama regarding Eclipse Aviation Corporation bankruptcy has been resolved, with Eclipse Aerospace winning the bid for $40M (or, well $20M plus promises to Al Mann and others, and discounting the $10M that Al Mann put in himself, leaving $10M, of which around half was borrowed, we can conclude that the fabulous assets of EAC (and none of the even more fabulous liabilities) were "locked up" for about $5M plus another $5M OPM (other people's money). Anyone think a $5M+ player is going to restart production with those kind of "deep pockets"? I think there's two probabilities:

1) No How
2) No Way

IMHO: They're gonna flip that sucker like a pancake!

From the press releases (admittedly, perhaps a bit, "Verntastic"), the facilities and infrastructure, and inventory and IP, were all substantial, worth MUCH more than $5M or $10M. For comparison, Cessna paid $26M for Columbia, a company with a very nice, but MUCH lower price point than the Eclipse (at least, a sustainable price point). That was during the "boom" times; but with all probability, there's going to be another "boom" time again, as our investigation of the past five business cycles, over the past 40 years showed.And when it comes, the Eclipse facility will be a hot commodity- I'd figure, with IP and what will be by then, a fully functioning parts and service network. I'd say to the tune of $100M or more.

And until then, Eclipse Aerospace wins, and the customers and supplier base wins, with parts and service support. NewCo might even make some bucks selling off excess facilities. Or subcontracting bits and pieces for other OEMs (aviation or non-aviation related) in lieu of manufacturing restart up. And make some bucks on the training program. And some bucks on the DayJet fleet. And some bucks on the assembly line articles- if they can be finished and delivered, even without PC (using individual FAA inspection- there's not all that many of them). And make some bucks either selling or licensing the EA400 Single Engine Jet (Con-Jet). For that matter, even licensing the EA500, without ever restarting production in ABQ.

Maybe some bucks in licensing the Phoestrex patent? (If the legal squable- yes, ANOTHER Eclipse OldCo legal squabble, has been patched up with the patent holders- see Dave Ivedorne's excellent post, on March 25, 2009, 2:54 PM). Although OldCo claimed it patented Monday and sunrises, there is some legal dispute in those regards as well. (I think a patent for Friday afternoon would be more marketable than the one for Monday morning though).

Or doing some sort of contract FSW for a military program or two?

I for one, think some foreign interests might pursue Eclipse, either license or the entire factory; Piper was bought by Imprimis, based in Brunei. (Apparently, for $20M in 1998+ $35M in 2003 + $31M profit = $86M. According to GAMA; in FY 2008, Piper delivered 216 pistons, and 52 turbines, Eclipse delivered 161 aircraft- in the first 8 months or so- I suspect Eclipse "out billed" Piper, and it would have been even more so if EAC hadn't stalled in the last part of the year).

And Emivest of Dubai owns the old (VERY old now) SJ30 program (nie, Sino-Swearingen SJ30; arguably/possibly, the only GA story rivaling Eclipse for weirdness).

How interested were the Russians? Since Eclipse denied (for a while anyway) any Russian connection, I figure just the opposite was true, to some extent. And remember, oil prices, on which the Russian boom was based, were over $125/barrel in the heady times of initial ETIRC involvement, but plummeted to below $50/barrel, when the time came to close the deal.

How interested were the Chinese? Definitely some courtship, at least contemplated. ("AIN has been in contact with a person who said he represents a Chinese company interested in bidding on the Eclipse assets, but he would not reveal any details by the time this article was published. He also would not confirm if he represents China Commercial Aircraft, which is interested in bidding on Eclipse’s assets, according to a March 17 article in the Albuquerque Journal." For those not following the Chinese aviation industry, there has been a shakeout/re-organization in progress, actually, for the last six months or so- which might have, er, dare I say- disrupted- plans for Chinese involvement. As might engine and avionics technology export concerns, etc. By sitting on the assets, EAC-NewCo might be, literally, buying time, for these details to be worked out. (The blog reported the FBI was asking questions some months back, presumably related to technology export concerns, with an undisclosed suitor).

And per the article about Columbia Aircraft above, they were owned by an affiliate of the Malaysian government.

How about Fuji Heavy Industries- they are doing the FSW wing assembly, with tooling and technology shipped from Albuquerque to Japan- maybe they'd be interested in buying the rest of the tooling and IP for an EA500 final assembly line in Japan? (Or just keeping in in New Mexico, for ease of dealing with a Production Certificate).

And I'm not arguing that production of the EA500 won't restart, and not even that it won't restart in ABQ- I think it very well might. (And personally, I hope so- on both accounts).

But I just don't see it happening with the current team that took months scraping together $5-10M. It will be a deep pockets adventure ($100-200M, if the ETIRC figures used in 2008 are a reasonable guide).

Could the current owners restart production? Possibly. But why would they want to, if they can "flip" the company for a 500-1000% return in a couple of years? And make a profit in the mean time, by providing parts and service.

Personally, I think they've made a very smart move by acquiring the assets to Eclipse. If the plane turns out to be a turkey, they make a mint by providing engineering, service, and parts. On the other hand, if turns out to be a great airplane, that just enhances the market value of the production facilities, once the larger economy improves in a year or two. Which is about the time it will take to work through the Dayjet fleet and customer-delivered rework.

So I think they're pretty smart guys (and seemingly, pretty honest guys too). My bet is they are smart enough to be aware of the adage;

"Q: How do you make a small fortune in aviation?"
"A: By starting with a large one."

I think there is nowhere that this is more true than in the manufacturing end of aviation.

Of course, priorities change, when working with OPM (other people's money). As we have well seen.

Still, I'd buy stock in Spatula City!

"NEGLIGENT MISREPRSENTATION, NEGLIGENT FAILURE TO OVERSEE AND CONTROL, CONSTRUCTIVE FRAUD, BREACH OF FIDUCIARY DUTIES, CIVIL CONSPIRACY AND VIOLATIONS OF THE NEW MEXICO UNFAIR PRACTICES ACT"

There has been some buzz on the blog about pending civil legal action involving jilted depositors. Looks like, as usual, the blog was on to something.

A casual perusal of www.NMCourts.gov/caselookup/app, and using a small variety of names and keywords commonly associated with the former Eclipse Aviation Corporation* reveals:

Case Number: D-202-CV-200911924
SM et al .v. Raburn V et al
Court: ALBUQUERQUE DISTRICT
Filing Date: 10/09/2009
(140 plaintiffs)
Which alleges:
"NEGLIGENT MISREPRSENTATION, NEGLIGENT FAILURE TO OVERSEE AND CONTROL, CONSTRUCTIVE FRAUD, BREACH OF FIDUCIARY DUTIES, CIVIL CONSPIRACY AND VIOLATIONS OF THE NEW MEXICO UNFAIR PRACTICES ACT"

Against defendants (with the results of an internet name search and their probable association with Eclipse):

Vern Raburn...(CEO)
Harold Poling...(BoD)
Kent Kresa...(BoD)
Al Mann...(BoD)
Edward Lundeen...(VP International Sales)
Roland Pieper...(CEO)
Mike McConnell...(President & GM)
Andrew Kamm...(VP Finance)
Mark Borseth...(CFO)
Margaret Billson...(COO)
Todd Fierro...(VP of manufacturing)
John Ricciardelli...(VP Product Support)
Andrew Vitka...(VP/Chief Accounting Officer)
Matthew Malfitano...(Director of sales)
Ricardo Conreras...(legal dept)

This case was filed on Oct 9th; a few days later several others were filed, with different plaintiffs:
Case Number: D-1329-CV-200902423
VF Manufacturing .v. Vern Raburn
Court: BERNALILLO DISTRICT
Filing Date: 10/14/2009
"Breach of Contract"
(2 plaintiffs)

Case Number: D-101-CV-200903325
Opus et al .v. Vern Raburn et al
Court: Santa Fe District
Filing Date: 10/14/2009
"Contract Miscellaneous"
(79 plaintiffs)

Case Number: D-202-CV-200912018
Echo Leasing, et al .v. Raburn, V. et al
Court: ALBUQUERQUE DISTRICT
Filing Date: 10/14/2009
Other Damages
(45 plaintiffs)

While the first suit names (with 140 plaintiffs) features exclusively prominent figures, these last three have a mixture of prominent, and seemingly obscure (nothing came up on the internet in association with Eclipse) persons- I am sad to see difficulty in anyone's life- whether it be financial, health, family, or legal duress. Many involved with Eclipse have already suffered enough duress already. (I would suspect some were just "in the wrong place, at the wrong time").

On the other hand, to read the old Eclipse Press Releases, many of which were patently ludicrous, makes a person wonder, just who knew what- and when.

While it is distressing to contemplate how much cash Eclipse incinerated, WAY past the point of economic viability, at least to a) anyone who has studied the aviation industry for a modest amount of time, and/or b) who doesn't believe in Santa Claus anymore; it is worth pointing out that nobody seems to have profiteered from this misadventure. In fact, just the opposite- it seems there was every effort made to keep the corporation afloat. (And THAT is probably the crux of the legal action- some the desperate actions seem...well, shall we say, desperate).

There were undoubtedly lots of important issues on the line (figuratively, as well as literally); partially assembled aircraft, financial obligations to investors and tax payers, and jobs at Eclipse and at suppliers- so dedication to purpose is to be admired. These are all great things for the aviation community to rally around. But, there comes a point, where trying harder doesn't help if the business plan just isn't viable- at that point, trying harder just digs the hole deeper, and doesn't fill it in. Eclipse just keep digging deeper, and asked depositors (who did not have innate knowledge of the privately held company's finances) to do the same. The moral threshold seems to have been when "customers" were treated as de facto "investors". But that's probably not where the legal line is, as the purchase contracts were probably constructed to indemnify Eclipse in the event of financial difficulty. IANAL (I am not a lawyer, as Dave I would say), but the allegations seem to be related to issue of the depositors, as de facto investors, not being properly represented or informed by the Board of Directors and officers of the corporation./?/! (I think the depositors accepted the technical risk involved with the EA500, and EA400, but were perhaps unaware of the true financial risk ?).

So, it will be interesting to see how much of the Eclipse saga gets revealed "for the record". As one of aviation's favorite disruptive ex-CEOs once said, paraphrasing, "(I) would be happy to respond to critics who aren’t anonymous".

It looks like there will be a day in court, to do just that. (About 266 non-anonymous critics involved- not sure how much "happiness" is involved though, on anyone's part. Let's hope there is, somehow, an outcome that satisfies everyone- a pretty tall order, I fear. The best outcome might be just knowing what went on, and why).

(*For new readers, it is important to point out, this involves the former Eclipse Aviation Corporation, NOT the new Eclipse Aerospace Corporation).

NBAA 2009

Honeywell released their eighteenth annual business aviation outlook this week, coincident with the NBAA convention in Orlando FL (Oct 20-22). The chart shows their overall forecast of the biz jet deliveries for the next 10 years. Next year is forecast to be about 10 percent slower than this year.

In the "glass half full" department, if one considers that most 2009 deliveries occurred in the first half of this year, then perhaps it is correct to infer that the current delivery rates represent the bottom of the production rate forecast.

(In the "glass half empty" department, the forecast shows strong sales for the nine years after 2010; some earlier review of the past five business cycles suggests that their is about an eight year period, which would have a downward trend resuming in 2019 or so. Maybe globalization, etc. will keep it from happening in 2019. Then again, it was supposed to keep it from happening this time too...).

Jack Pelton, Cessna's CEO, had some words of cautious optimism. Pelton commented "the international markets seem less frozen than our domestic market right now, particularly Western Europe and South America" (indeed as our friend Baron noted on his recent visit to Brazil).

China is stimulating the business jet market somewhat as well, relaxing domestic flight plan filing to three hours, and reducing tariffs.

In the cool news department, Garmin unveiled their G3000 suite, for "light turbine" aircraft. (Still a couple years away from deployment).

In other cool news, Learjet has their in-development model 85 mockup on display there too, with it's revised flight deck.

It will be interesting to hear what visitors to the NBAA show have to say regarding attendance and displays- please drop a line or make a post to update us!

Shooting Fish in a Barrel

It was interesting to read the Eclipse Aerospace Customer Communique" last week (I guess they figure the previous owners gave the term "press releases" a bad name).

Over the past months, there has been much speculation on when (or if) production of new aircraft will resume. The new owners are cautious about that, saying it is months to years away. I don't have any idea, other than regrettably endorsing their cautious note, as it appears the market will be slow for months to come.

So, a quesion might arise, did the new owners get a good deal when they purchased the assets?

Well, that depends, on what they paid, and what they got.

The figure of $40M is used as lot, but the not so fine print is $20M in cash, plus $20M in notes.

The notes are "promises", so the real skin is $20M. (Earlier buzz had it that Al Mann put up $10M, M&M put up $5M, and somehow another $5M showed up in an unmarked bag- or something like that).

So, what came with the deal?
How about 400K square feet of floorspace?
350,000 sq ft at the main airport, and another 41,000 sq ft at a nearby satellite airport. (At $10M, that's 25 $/sq ft).

And, then there's the airplanes on the assembly line, some nearly finished, some less nearly- maybe 25-30 total. Maybe enough parts on hand to finish some of them? Or a good prelude to low-rate spares/completion delivery from suppliers. (At $10M, and say 25 planes in semi-completion, that's $400K each)

Plus another 28 or so Dayjet airplanes- earlier configurations in some cases, but still, flying assets. (At $10M, that's $357K per airplane).

And how about the flight test airplanes? I don't know if these were refurbished and delivered, or used for customer training, or demonstrators- I think there were around half a dozen of them. (Let's say five flight test airplanes- for $10M that comes out to $2M each- early models yes, but also configured for testing, a blg plus for future development exercises.

Speaking of flying airplanes, and future development exercises- how about the EA400 (aka "Conjet"). How many people did it take, and how long? Beats me. But figuring the engineering, wind tunnel, and construction time; plus avionics, engines, structure, etc, I'd say 50 people x 2 years x $100K/man-year = $10M for the design, construction, and preliminary testing. (At Least- probably double that cost in real life).

How about a captive market for service, since most of parts are not PMA'd, and will have to go through the TC holder? The best-case upgrade (already equipped with new boots and AvioNG) is 150-ish $K, probably on the long side of double that for older configurations- say they can clear $50K per mod, with 200 airplanes (260 less Dayjet, test fleet, reluctant participants), that's $10M. (Or more, with other maintenance).

Any one of these seems to be a good case for buying the assets, especially if a mutually beneficial deal was pre-arranged with Mr. Mann, for later action.

And, I've left out the TC for the EA-500. In 2002, Eclipse said it "will need a total of 'somewhere north of $300 million' to certify the Eclipse 500 and establish production...". So, figure real world, and 2010 numbers, will combine to double that to $600M, and a third of it goes to design, test and certification; that's $200M. Buying this for $10M is an outrageous bargain, IMHO. (How realistic of "stab" is that? Seems like Cirrus was looking at an additional $120M past the flying prototype stage for the Vision certification program).

Now throw in office furniture, computers, copiers.

And, FSW technology; semi-adaptable to other uses, if the layup molds are changed, such as subassmbly work for Detroit, or other airframer OEM's.

I have to admit, I think the Eclipse Aerospace owners got a heck of a bargain.

So what's the key to success? Cash flow. And what generates cash flow? Service work. Which is exactly what I expect them to concentrate on.

Restart manufacturing? I think that is a ways off- if it ever happens. Personally, I think it will. But I'm not sure when (12-30 months, I'd guess).

Or by whom. Or where.

My bet would be a different owner, but still in Albuquerque. We no doubt remember talk of the Russians or Chinese having an interest. I'm still betting on it staying in NM, regardless of where the owner is from. I think the current owners are capable, but they are probably adverse to the hefty investment -and high risk- involved with restarting production. (I suspect Al Mann is in it this time for the sort term, until the economy recovers enough for him to cash out of the airplane manufacturing game. Just a couple of years ago, Cessna paid $26M for Columbia- I like that airplane, but think the Eclipse "package" -factory floorspace, tooling, TC, aircraft and equipment inventory- is enormously more valuable).

I think there is a very good arguement to be made for buying Eclipse assets (in fact, I just recited it above). Once the GA/Bizjet market recovers, I should think a number of OEM's and investment companies would be interested in all or part of their physical assets and/or "Intellectual Property". (For example, I expected Alan Klapmeier to have an interest in acquiring the EA-400 program, after he left Cirrus, and they kept the jet program). The background of the current ownership seems more atuned to merchandising, than manufacturing. And the old adage "How do you make a small fortune in aviation? Start out with a large fortune", would seem to substantiate their priorities.

The good news, for those longing for a restart of the production line: I think the airplane really is very good, especially with the new AvioNG 1.5 configuration. Good enough, that I can't imagine it not going back into production. But that will probably take hundreads of millions of dollars- a long way from the investiment the current owners ponied up. In the mean time, I expect Eclipse Aerospace to have good cash flow with service (it sounds like they are treating the aircraft owners right)- and will probably experience an even better ROI if they can sell the company once the market is strong enough to justify a restart of production.

Still, it will be intriguing to watch. Low rate production might not be that expensive to restart. I believe there was a number going around of 7,000 hours to build an Eclipse. With a shop rate of maybe $60 per hour with overhead and benefits, that would seem doable, and falls right in line with the blog's earlier guestimates of labor cost being about 1/4 of the cost of production. (Engines being another 1/4 also seems about right, airframe components being about 1/4, and avionics and systems being the remaining 1/4; all more or less. Since the suppliers are already tooled up, resuming delivery, even at a low rate, might not be too difficult). I expect the Eclipse show to be interesting for some time to come.

And it is great news that the aircraft owners have factory support once again!

A Little Dab (of Precaution) Will Do 'Ya

(And, a brief absence of precaution can do 'ya in...)

The product on the right is Prist fuel additive- mostly for our turbine power friends, although they make a product for avgas too ("Prist Hi-Flash...for aircraft operating in extremely cold climates or in aircraft that are flying in freezing temperature for extended periods of time").

I'm a piston-head guy, and plead indulgence (and solicit correction) regarding this topic, but with the intent of promoting safety, we proceed. There is some suspicion that fuel icing might have been a factor (perhaps a human factor) in a turbine-powered aircraft accident earlier this year.

I had always assumed jet fuel had anti-ice ingredients mixed in "from the refinery", but I have been informed, such is not always the case.

While Prist is not the only brand of fuel additive available, it seems to be what the "Kleenex" brand name is to paper tissues. Prist's home page has a nice history of their fuel additive product (they also make transparancy cleaners).

Of interest to those of us less familiar with the product, "PRIST® Hi-Flash™ Fuel Additive must be injected into a stream of fuel and not “poured” or “splash blended” into a tank." (However, "For fueling from slower flowing fueling systems (ie: remote or hand pumps), or into aircraft requiring slower fueling (ie: helicopters); PRIST HI-FLASH comes in a ‘LO-FLO’ version specifically designed to mix properly under these fueling conditions. PRIST HI-FLASH LO-FLO comes in 8 oz aerosol cans."). The Prist web site has an informative details of handling the additive.

In addition to anti-icing benefits, Prist (and other fuel additives) have biocidal/antifungal properties to keep your fuel tanks from becoming amusing Petri dishes.

While most turbine airframes have engine oil/fuel heat exchangers which cool the engine lubricating oil, and heat the fuel to prevent jelling -and perhaps ice formation- and do not require fuel additives, it seems it is mandatory for some (from the FAQ section of Prist's web site):

• Aerospatiale/Mooney - TBM 700
• Beechcraft Raytheon - Beechjet 400 & Starship’s
• Bombardier Learjet - 23-24-25-28-29 & 35/36 Series
• Cessna Citation – Caravan, Corsair/Conquest, Citation I & II
• Hansa – HFB-320
• Mitsubishi - MU-2 Series & MU-300 Series
• Piaggio - Avanti
• An ever increasing number of Very Light Jets (VLJs)

I would encourage all our turbine flying friends to re-examine their familiarity additives.

For additional general reading on fuel systems:
Jet Fuel Quality: Flying Clean and Dry

Not to leave our piston friends out on the topic of engine intake icing...

The picture of the Piper in a tree was addressed with a helpful email, cautioning the use of carburetor heat to prevent more visits with tree doctors, (and other doctors). As a piston driver, the correspondent's letter had great impact, and we all thank him for his helpful information:

"Hello,

"I am Writing your Blog with a simple message, based on your picture, to use Carburetor Heat with the lycoming engine, as a habit on all landings. Maybe it will save someone an Airplane, or maybe a picture on a Blog.

"I fly out of our local field- It is dry here, were it not for the mountain Range to the west of us, this place would be a desert.

"I know what I am saying will upset many pilots, but I feel it might do some good.

"I have no connection to the manufacturing or inside tales to give, but I have read your Blog, hoping for the best for Eclipse and the future of aviation. I belong to a small flying club with a few piston aircraft. We try to fly the aircraft by the "book". Our Instructor is from the local FBO, and is a very good instructor.

"Three years ago on a nice warm day, like today, a member was up in our Cherokee 235, it had just been refurbished, we were proud of it., and he was flying it by the "book"." APPROACH AND LANDING, 5. carburetor heat -off [unless icing conditions exist ]". It was a warm dry day and we had learned with the lycoming engine to use carb heat, as needed. As he entered the pattern he lost power. Carb heat only made matters worse [as it should], and with the heavy 540 in front, he was on his way down before he had time to do anything but find a road to land on. Our new shoulder harness left him with only a sore shoulder ,but the plane was a total loss.

"A year later our FBO rented out his Cherokee 180, as the Pilot went around the field, He also lost Power, as he came into land, He wasn't able to make the field, and so lined with the road running in front of the airport at Meadowlake Airport. No Carb Heat, as he was about to flare he faced a car coming down the road, and a head on collision, so at the last moment, he turned into the field to avoid hitting the car, and landed in a tree, Your Picture.

"From these experiences we have learned with the lycoming engine, GET IN THE HABIT, ALWAYS USE CARBURETOR HEAT ON LANDING, I hope these story's do some good for someone, and keep someone from landing in a tree.

"Sincerely,
xxx"

We certainly are thankful for the inputs, regarding the importance of fuel additives for turbines, and carb heat for Lycomings.

Not to Beat a Dead Horse...

State of the Biz Av Economy, Part 4 of 3 (or something like that!)

In this concluding (I promise!) examination of the aviation business climate, I thought I'd summarize with some articles from significant observers/participants in the industry, following our review of Molly McMillin's Wichita Eagle article from last week.

(Partly prompted by Friday's sad news of another 240 job cuts at HawkerBeech; "Friday's WARN notices put the number of layoffs at HBC in the past 10 months at 3,553, or about 36 percent of last October's total work force."

Aviation Week reviewed the GA market in their Aug 10 article "GA Shipments Continue Downward Spiral". ("The second quarter of 2009 further compounded the economic woes of the general aviation manufacturing sector as the number of deliveries plunged some 49 percent, according to statistics released last week by the General Aviation Manufacturers Association. This has led to a 45.9 percent decline in total deliveries through the first half of the year.")

The Aviation Week Intelligence Network had coverage (Sept 23) of Wichita Suffers From Bizjet Downturn. "A severe downturn in the aviation industry has led to the loss of 30,000 jobs in Wichita as the impact from mass layoffs at companies such as Cessna, Hawker Beechcraft and Bombardier Learjet has rippled through small suppliers and the economy, according to Mayor Carl Brewer."

Our friend Richard Aboulafia, of the Teal Group, recently had an EXCELLENT two-part expose' of the state of affairs-

TEAL GROUP BIZAV OVERVIEW (PART 1)
("Our forecast assumes a three-year downturn. The key demand drivers – economic growth and corporate profits – will only recover in late 2010. It will take some time to reduce record inventories of available jets for sale. This means new business jet deliveries won’t start to recover until 2012. The trough year of our forecast – 2011 – will see business jet deliveries reduced by 40% relative to 2008. Our forecast then calls for a five-year recovery period with 10% growth per year starting in 2012.")

TEAL GROUP BUSINESS AVIATION OVERVIEW (PART 2) ("A closer look at the driving factors.")

Chad Trautvetter had a nice Sept piece in Aviation International News (AIN), which captures a quote many will be relieved to hear
UBS: Bizjet Market ‘Less Worse, Not Better’


But, as a note of caution, I will refresh our memories with Honeywell's Oct 2008 outlook (sorry, somebody there is cringing, or worse):
"The 2008 survey indicates record aircraft deliveries will continue into 2009 with a likely peak next year or in 2010...The stability in overall purchase expectations is supported by the increasingly global nature of the industry."

(Ah yes, I remember that widely repeated refrain- something like "the global demand for biz jets will damp out the US cyclical demand". Boy, that's so obviously erroneous in hindsight- but at the time, .I have to admit, it sounded reasonable to me too...).

To add insult to injury, or rather, injury to insult, Honeywell did not only not see their customer's market declining, they didn't even see their own market declining. From July 27, 2009: "Honeywell 2nd-Qtr earnings drop 38 percent as recession continues to take toll" (Oops. It will be interesting to see what the "18th Business Aviation Outlook" forecast says- should be out in a few weeks).

Bombardier has an aviation business forecast too, good reading,
Bombardier Business Aircraft Forecast 2009-2018

"Bombardier remains confident that there is strong
potential for the business jet industry over the next 10 years.".

(A bit understated, not nearly as disruptive as some forecasts we've heard in the past... :)

Let's hope for our friends in the industry, that better times are coming soon...

For Sale- By Owner (and dealer, and factory)

A delightful surprise came my way late last week- an article by journalist Molly McMillin. Molly covers the aviation industry for the Wichita (Ks) Eagle newspaper, and has graciously consented to allowing her article from last Thursday to be posted for us to discuss.

"Fewer business jets for sale: Despite fewer used business jets on the market, the market is still characterized by oversupply and weak pricing".

by Molly McMillin, Sep 17, 2009,The Wichita Eagle

”The number of used business jets on the market fell in August, the second decline in three months after 18 consecutive monthly increases, a recently released report says.

Although it's come down slightly from record highs, the number of business jets on the market is still 36 percent higher than it was a year ago, according to UBS analyst David Strauss in a report.

Seventeen percent of the business jet fleet is up for sale. The average asking price for newer models is down 30 percent from peak levels. Pricing fell another 2 to 3 percent in August, the report said.

The asking price for a Citation Excel was roughly unchanged last month but is down 38 percent from its peak, it said.

The price of a Hawker Beechcraft Hawker 800XP declined about 3 percent last month and is now 37 percent down from its peak.

The average asking price of a Cessna Citation X declined about 3 percent in August and is down 47 percent from its recent peak, the report said.

The used business jet market is a leading indicator of new business jet sales.

The business jet market is still characterized by significant oversupply, weak pricing and tight financing, Strauss wrote.

"We think record high used available inventories will continue to overhang orders, pressure existing backlogs and could force further production cuts," he said.

Although there is indication of modest improvement, "we still see risk of an extended downturn," Strauss wrote.

Rich Jiwanlal, Hawker Beechcraft vice president for human resources, said last week that business conditions have not improved in any meaningful way.

"These are very, very challenging times," Jiwanlal said.

Leaders from Cessna Aircraft's parent company told analysts last week that business jet deliveries are expected to decline slightly in 2010 before moving higher.

This year, Cessna's jet deliveries are expected to be down about 40 percent to 275 over last year's shipments.

At the end of August, Strauss estimated there were 3,014 business jets for sale, about 1 percent lower than the previous month and 36 percent higher than a year ago.

Business jet inventories decreased 2 percent in August, Strauss reported.

Of the five major planemakers, Bombardier had the highest percentage of its fleet up for sale at 18 percent. That's followed by Cessna and Hawker Beechcraft at 17 percent, Dassault at 15 percent and Gulfstream at 14 percent, the report said.”

It's refreshing to see good journalism, and makes me eager to read more of Molly's articles. She has a great blog site too- Air Capital Insider