Thursday, 27 August 2009

Very Little Joy

I can remember the earnest look of concern on regulators' faces when talking about VLJs. How would the ‘system’ cope with thousands of light, slow jets being flown by non-professional crews? Some suggested new rules that would require a crew of two for any jet aircraft, some suggested banning them from certain high-volume airspace and some just attended lots of conferences and meetings, many in exotic locations. For the foreseeable future, the regulators will have to find something else to fret about. The skies, be they in Europe, the US or anywhere else for that matter, aren’t about to fill up with business or personal jets of any kind, let alone small, slow ones.

I suggest that the term VLJ no longer refers to Very Light Jet, Very Little Joy seems more appropriate. Truth is, the dream of thousands of small jets leaving aircraft factories has turned into a bit of a nightmare for the companies seduced by the dream.

In no particular order…

Eclipse: The daddy of all VLJs. Vern Raeburn’s baby promised disruptive technology. The Eclipse promised a new aircraft with new engines, new avionics and new systems, all of it built in a (you’ve guessed) using new manufacturing techniques. The company succeeded in building and certifying the aircraft, burning their way through $1.7 BILLION on the way. Early, unfulfilled promises of good performance mated to a sub $1m jet caused a stir and undoubtedly made selling existing aircraft like the Piper Meridian much harder. One strange episode involved the (brief) launch of the Eclipse 400 - a single-engine, V-tail, four-seat jet designed, in my opinion, purely as a spoiler for the Cirrus Jet. According to Raeburn, the E400 'only' cost $10m.

Adam: A good bunch of people with an interesting centreline twin that probably belonged to another era. I always felt that the A700, a twin jet version of the A500 was a slight panicked response to Eclipse’s announcement. Had they started with a clean sheet of paper I’m pretty sure that their proposed VLJ wouldn’t have had the twin boom configuration.

Diamond: Christian Dries, the man behind Diamond has enough energy to run a small European country and the D-Jet is just one of his many projects. Traditionally, Diamond’s aircraft development takes place in Austria, but Dries moved the jet project to Canada, partly because it is closer to the prime market, but also because of grumbles over the difficulty of working with some European regulators. A while ago, Dries told me that he had spent €80m on the D-Jet; I expect that figure has risen considerably. Diamond is still talking about deliveries in mid-2010, but the high cost of development must be hurting, and there are rumours that Dries is looking for a company to partner with.

Cessna: Not so long ago, the Citation Mustang commanded a premium, now, if you have the cash, there are some great deals to be done. The Mustang is a good aeroplane and a safe bet. None of the VLJ players are smiling right now, but Cessna at least aren’t crying.

Cirrus: Alan Klapmeier’s enthusiasm was infectious and over 400 people sent the manufacturer $100,000 deposits without even knowing the proposed specification. The economy changed, but so did the politics at Cirrus. Last year Brent Wouters took over as CEO with founder Klapmeier remaining as Chairman. In June Klapmeier announced that he was putting a team together to buy the jet project from Cirrus Aircrfat/Arcapita. That deal fell apart during Oshkosh, and last week Klapmeier cleared his desk. Many of the deposit holders sent in cheques because they believed not only in the jet, but in Alan Klapmeier. There have been quite a few people asking for their deposits to be returned and they are being gradually refunded as cash flow allows. Yesterday, Cirrus Aircraft announced that it was closing ‘Cirrus North’, the building that housed the jet project. Wouters insists however that the company is fully committed to completing the jet. Should there be a ‘run on the bank’ from deposit holders I find it hard to see how the company could avoid a spell of legal protection from creditors.

Piper: Until recently, I was pretty sure that the Piper Jet would prove disastrous for the Florida-based manufacturer. The wing looks gorgeous, but the fuselage with its rear-mounted engine could only be loved by its mother. I’m no aerodynamicist, but I didn’t reel with shock when I heard a rumour that the nose baggage locker contains a block of concrete. (I’ve never been able to/allowed to open it when I’ve seen the jet on public display.) Notwithstanding the above, the Piper team were in fine form at Oshkosh, and Piper undoubtedly the most upbeat manufacturer.

Epic: This Epic LT turboprop kit was real, but the company announced loads of other projects. The house of cards eventually collapsed and as I write this there are plenty of people still looking for Rick Shrameck, Epic’s CEO.

Eclipse II: Mason Holland and Mike Press recently paid $40m for the liability-free assets of Eclipse. Given that those assets set others back $1.7b, I’d say they got a good deal. Initially, the plan is to provide support, spares and upgrades to existing owners. When the economy changes, production could start again.

There are of course other, even smaller players and there are still visionaries (?) pounding the streets, getting thrown out of VC offices the minute they mention 'VLJ'. I’m willing to bet that the ongoing projects at Cirrus, Piper and Diamond are causing more headaches than joy, and in this economy it is only possible to guess at the damage being done by any lack of focus resulting from what many will only think of as a millstone.

I’d be willing to bet that Eclipse Mk II will do OK. It's often the second or third owners of a set of aviation assets that make the money. I suspect that there’s some money out there... waiting for one of the existing companies to go bust in order to acquire a debt-free project... or three.

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