"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.