... at least, that’s the conclusion one might reach from two news items out this week. Forecast International, the Newton, CT-based research firm, in an upcoming December report predicts that production of the Eclipse 500 VLJ will come to a halt in early 2009. And, the Rocky Mountain News reports that AAI Acquisition, a Russian investment group which purchased the assets of bankrupt Adam Aircraft, has laid off most of its 200-plus work force and has suspended development of its A-700 VLJ.
Comments Forecast International analyst Douglas Royce, “"We have forecast production of 162 Eclipse 500s during 2008. We believe that the company will be able to push production out into early 2009 but will be forced to cease production within the first quarter of 2009." Forecast International predicts only about 12 Eclipse 500s will be produced in early 2009, and "even this forecast may prove too optimistic," says Royce. Forecast International says that Eclipse Aviation’s business plan depended on delivering a twin-jet aircraft at an extremely low price relative to its competition. The low price was dependent upon the use of a high-volume production strategy made possible by importing methods of production from the technology and automotive industries. The anticipated production ramp-up never happened.
Prior to May 2008, the list price of the Eclipse 500 was $1.52 million, notes FI; the price has since jumped to $2.15 million, but Eclipse Aviation is required to deliver aircraft at the earlier, lower price to customers who entered a purchase agreement and paid the required 60 percent deposit. Every aircraft delivered under the old price is delivered at a loss, says FI. Eclipse Aviation has stated that it needs $200-$300 million in new equity investment, a tough hill to climb in today’s investment markets.
At AAI, based at Centennial Airport south of Denver, only a handful of employees remain, according to the Rocky Mountain News. The newspaper quotes Jan D’Angelo, a company spokesperson whose job was among those eliminated, as saying that the Russian investors that control AAI decided to scale back because of the global financial turmoil and the dramatic hits taken recently in the Russian stock market. “I think the investors are probably regrouping to figure out their options, and I'm sure they'll update the world once they figure that out†is how D’Angelo puts it. Adam Aircraft filed for Chapter 7 bankruptcy in February.
For a decade now, the VLJs have injected enthusiasm into the general aviation marketplace. Cessna continues producing its VLJ, the Mustang, and it appears that once again the Wichita manufacturer has figured out how to take an industry concept and make a product that is sustainable. Unfortunately for the others, the path to the future looks more like a downward spiral.
So much for the theory of a mosquito wave of VLJs clogging the skies.
Thanks for reading. jfi
