Special Report

In an effort to inform our readers and to give Eclipse Aviation a chance to explain progress of the Eclipse 500 project, the editors of AOPA Pilot presented Eclipse President and CEO Vern Raburn with a question-and-answer interview on September 12, 2000. A similar interview was conducted with Eclipse competitor, Safire Aircraft Company ( www.aopa.org/members/files/pilot/2001/safire_qna.html).

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AOPA Pilot: There has been talk of a "paradigm shift" or a new approach to the way people view and use general aviation with Eclipse. Essentially, you're taking more than just an airplane to the marketplace of ideas; rather, you're selling a whole new way of thinking, correct? How will you market that concept, and what kind of reception do you expect from the industry? From the public?

Vern Raburn: The Eclipse 500 will deliver such a leap in price/performance value that it will enable large numbers of people to enjoy the benefits of private jet travel for the first time. This "air limo" concept is just one of the numerous new uses the Eclipse 500 will make possible.

We expect that the 500 will also be used for new applications in areas including corporate aviation. The company jet will now be available for anyone, not just CEOs and VPs. The 500 is ideal for smaller companies creating new flight departments or companies interested in creating an in-house cargo service (when FedEx is just too slow). All of these usages are in addition to applications where the Eclipse 500 simply replaces old, poorly performing aircraft.

We don't plan to market these ideas per se. I believe that intelligent entrepreneurs will be able to identify and capitalize on the opportunities the Eclipse 500 creates. This has historically been the case with truly disruptive technology. There are more people in the marketplace with better ideas about how to use our aircraft than we can imagine.

The reception from the aviation industry as a whole has been extremely skeptical- just as we expected. Industry skeptics are not willing to believe we can manufacture the Eclipse 500 at the price, performance and specifications we have communicated. Their philosophy is, "We couldn't so you can't-WCSYC."

The response from the marketplace though has been fantastic! The overall response could probably be summarized as, "Finally, someone is willing to innovate and change things!"

Pilot: NASA recently lost its funding for the SATS (Small Aircraft Transportation System), for which the Eclipse appears ideally suited. If this funding is not restored, how would SATS's downsizing-or demise-affect Eclipse?

Raburn: NASA has actually not lost funding for SATS. The Senate Appropriations Committee voted to approve SATS funding on September 13. Funding for SATS must still be approved by the full Senate and be accepted by the House of Representatives.

The decrease or demise of SATS funding could affect a program like Eclipse by possibly resulting in the decreased speed to implementation of some of the advanced technology that would be implemented in years after 2007/2008. This is particularly true in the ground side and terminal operations areas. If such an event were to happen it would be a waste of a great national asset, our GA airports. But it would fundamentally not change the benefits and value of the Eclipse 500.

Pilot: When do you expect to have a conforming prototype or a flying prototype of any kind?

Raburn: The Eclipse development program is unlike other GA development programs. But it is exactly like any current Boeing or Airbus development program. We are not building a proof-of-concept or prototype aircraft. Instead, we are using advanced computational techniques and tools to design, develop, and test the aircraft before first flight. We are also using empirical techniques such as wind tunnel testing, engineering flight simulator, and "iron bird" mockups to validate the design. Thus, the first flight in June 2002 will be with a fully conforming preproduction aircraft built on production tooling.

Pilot: When do you expect to deliver the first airplane and how long to you expect to work on each production/certification phase between now and then?

Raburn: The first customer delivery will take place in August 2003.

We have just finished a four-day long preliminary design review (PDR). During the PDR every part of the aircraft, including structure, systems, avionics, engines, performance, production methods, and maintenance, were reviewed and approved. The next step will be our type certificate application to the FAA this fall. Critical or final design review will occur next spring.

First flight will be in June 2002. The flight test program will entail multiple aircraft, will involve thousands of hours of fleet hours, and will culminate in FAA certification in June 2003 followed by first customer delivery in August 2003.

Pilot: We were told the actual price will keep pace with inflation. So assuming that recent inflation trends continue, by the time the actual aircraft is built, it will cost about $1.7 million? Why announce artificially low prices now? Why not just wait?

Raburn: There's a big error in your arithmetic. The actual level of inflation from 1991 through Q2 2000 has been 2.75 percent per year. That means that if the current rate of inflation continues, our list price would be the following:

Using the 2.75 percent rate it will be 2026 before your suggested price of $1.7 million occurs. Even using the last 90-day inflation rate of 3.1 percent (U.S. Department of Labor Statistics, September 15, 2000, Report of CPI-U Change) your $1.7 million would not be reached before 2023!

All capital goods industries-trucking, machine tools, construction equipment, jet engines, and aviation-quote prices in current year dollars and invoice in year dollars at delivery because no one can accurately speculate the rate of inflation over the years to come. So our pricing policy is exactly the same as all other capital goods industries. The alternative is to inform people we can't tell them the price they will pay until they come to pick up the airplane.

One last comment on price. All of our Platinum deposit holders will pay a list price of $837,500. There is not an inflation rate applied to their purchase price.

Pilot: What marketing efforts are planned? For example, VisionAire sponsored NASCAR races.

Raburn: Obviously, the majority of our funds are allocated toward the research, development, and procurement necessary to create, manufacture, and certify the Eclipse 500.

For the next several years, the majority of marketing dollars will be spent on aviation trade shows (AirVenture, NBAA, AOPA Expo, etc.) and the Web. For instance, Eclipse plans to sponsor Forums Plaza at EAA AirVenture for the next couple of years. As we near certification we will expand the reach of our marketing efforts to markets broader than traditional GA.

Pilot: Has a scale model of the jet been used in wind tunnel tests? If so, what have the tests revealed?

Raburn: As we show on our Web site, initial wind tunnel tests were completed in March. These tests revealed some discrepancies, which led to changes in wing root fairings. But overall they verified the stability, control and handling characteristics of the aircraft. We then reentered the wind tunnel in late-June for additional testing, including tests for speed brake and flap effectiveness. We also tested various ice shapes on the airframe to ensure there will be no surprises during our icing certification tests. At present we have more than 1,700 data runs collected in nearly 1,000 hours of wind tunnel testing. All of this data has been programmed into our engineering flight simulator and we are doing development flight-testing now. The 500 flies very well!

Pilot: How many vendors have you selected (besides avionics, engines that is)? For example, who will make the landing gear? Design and produce the interior?

Raburn: Nearly 90 percent of the vendors required are in the final stage selection. Landing gear is part of this group. The interior vendor is completing detail design now. The final vendor selections will be made by the end of this year.

Pilot: What are you doing with customer deposits and how many have you received?

Raburn: We are holding the customer deposits in an independent escrow account. Our board has decided not to use deposits for development purposes. But we will use the deposits for working capital after certification of the aircraft. We do collect interest on deposits. Again this is similar to large aircraft manufacturers and not the typical aviation start-up. The effect of the interest on the cash flow of the program is minimal. But the interest is a way of obtaining a true level of commitment with our customers.

We understand and respect that some individuals do not view this approach as "fair." We are delighted to keep those folks informed of the program's progress. Through our Internet auction sales program, these individuals will have an opportunity to purchase an early delivery position aircraft without making any of the deposits or commitments currently required.

As a policy, we are not disclosing the number of deposits we have collected. This is primarily due to the lack of an industry standard about what constitutes an order. Comparisons to companies with "orders" that are fully refundable, at any time, and represent less then 1 percent of the purchase cost are simply not "apples to apples" comparisons. Suffice it to say, we are well ahead of our business plan sales and now have more than $30 million in deposits securing mostly non-refundable delivery positions.

Pilot: How many jets do you have to sell each year to turn a profit?

Raburn: Due to our investment in innovative construction, manufacturing, and business methods, our breakeven point is very close to what current industry aircraft sales volumes are. We do not need to sell 1,000 aircraft per year to make money. As a competitive issue, we do no disclose exact financial numbers.

Pilot: Since this airplane is a turbine aircraft, the pilot will need a type rating. Is the training necessary to get the type rating included in the purchase price? Will there be company sponsored or supervised training available for purchasers through Eclipse, or are you contracting with an outside company to provide this training?

Raburn: Eclipse is committed to making world-class training available for all owners and operators of the Eclipse 500 jet. Don Taylor, our vice president of safety, training, and flight operations, is overseeing the development of training programs, including ground school, simulator, and flight training.

Traditional type transition training is included in the purchase price. If a customer with a private pilot, single-engine license and only minimal instrument experience wants to become type-rated in the Eclipse 500, we will be able to provide that training. But that level of training would be at an additional cost.

We are exploring several business approaches to training, including contracting with one of the established training firms, creating a joint venture with those firms, or establishing an "Eclipse Flight Academy" on our own. A decision on which approach to use will be made in late-2001.

Pilot: What insurance considerations do you anticipate for pilots transitioning into the Eclipse, especially those with little or no turbine or multiengine time?

Raburn: Because of the advanced systems, displays, training, and support that Eclipse will provide, we are confident that low-time pilots, or pilots with limited turbine experience will be able to transition to the Eclipse 500 successfully. This ease of transition in turn will help ensure that these pilots will be insurable on a reasonable basis.

We have had preliminary discussions with the major underwriters about this issue and have received positive indications that this will be possible. One important point though: Simply purchasing the 500 will not qualify a pilot to be insured and fly the aircraft. Pilots will have to both train and demonstrate adequate skills to safely pilot the 500. We believe strongly that the 500 will be easier than most aircraft to achieve this level of skill, but not all pilots will succeed in this effort.

Pilot: How many non-pilots have placed deposits or at least expressed interest in Eclipse?

Raburn: Several non-pilots have placed deposits for the 500 and there has been significant interest in ownership expressed by other non-pilots. We believe this interest will lead to both an increase in new pilot starts and a major opportunity for aircraft management/crewing services.

Pilot: Will Eclipse or Williams provide maintenance training with the purchase price or is this contracted with an outside agency?

Raburn: Maintenance training is not included in the cost of the aircraft. Like flight training, we are evaluating which course to follow for establishing maintenance training.

Pilot: Is Eclipse planning a cargo version of the 500 with a big door? Why limit this technology to only passenger travel?

Raburn: We believe the Eclipse 500 will find significant applications in the cargo markets, particularly for very high-value, time-sensitive material. But the 500 will never be a cargo plane any more than a Baron is a cargo plane. For the cargo that the 500 is best suited for, the current door is more than adequate.

Pilot: Why the big public relations campaign before you even have a flying airplane while potential competitors are remaining relatively low-key?

Raburn: I'm not sure what you mean by "big" public relations campaign. We worked on our project for nearly two years and employed more than 140 people before we announced our existence. We have spent virtually nothing on advertising and we haven't sponsored any car races. The total number of press releases we have issued can be counted on two hands.

We ARE committed to open and regular communication about our progress, so we do invest in keeping in contact with the press and analysts who cover our progress. This is the normal course of business in the high technology sector; so it is surprising to hear from the press and analysts that other companies don't meet and talk with them.

Perhaps your perception of a "big" public relationships campaign is due more to the market's response to the Eclipse 500 than any action we have taken. The fact is that the marketplace is extremely interested in what we're doing and the publishing world, ranging from USA Today and Fortune to all of the aviation publications, will cover what their readers are interested in.

Pilot: Have you studied other aircraft manufacturers to pinpoint what they may have done right or wrong?

Raburn: Extensively. The primary causes of failure fall into one of three categories.

1. Undercapitalization/unrealisticly low budgets: The vast majority of failures fall into this category. It seems that the standard response to how much capital will be required to develop a new airplane is $30 million. This is simply not possible. Although a simple single-engine piston aircraft could be certified for something approaching the $30 million figure, any new turbine aircraft is going to require significantly more capital.
2. Poor execution: The development of a new aircraft requires extensive and competent management systems. Most new companies simply do not have either the management experience or management systems to handle a three- to five- year, multi-million dollar, million man-hour project.
3. Minimal product innovation: Developing a new aircraft that is only 4 to 5 percent better than existing aircraft is not a path to success. Given the long-term nature of aircraft (particularly GA aircraft), customers will not take large risks on a new aircraft from a new aircraft company to just go 4 to 5 percent faster or farther. This is the fundamental reason that Cessna (and Piper and Beech/Raytheon) continue to successfully sell 30- to 40-year-old designs.

There are numerous other contributing reasons, but we feel the three reasons listed above, in some combination, cover the majority of aircraft company failures over the last 30 years.

Pilot: The engines on the Eclipse have been placed very close together, at least partly to protect them from bird strikes. Will the engines be able to pass standard bird-strike tests or do you plan to request a waiver?

Raburn: Williams International is certifying the EJ22 under FAR Part 33 with standard required bird-strike survivability.

Pilot: What sort of ice protection do you plan to offer on the Eclipse?

Raburn: The engine inlet will use bleed air heat for anti-icing protection. The wing and tail will use new generation pneumatic deicing boots. The windshield and all probes (pilot, TAT, static, AOA/stall) will be electric deice.

Pilot: Describe your work to date with the FAA regarding certification. How can you be so confident that you can obtain your certification on such an ambitious schedule, when other manufacturers-even established airframe manufacturers-often encounter certification delays of months or even years?

Raburn: We have been working with the FAA in a collaborative, partnership fashion for more than two years. They have been involved in virtually every major design decision and, in fact, participated in our just completed design review. In short, we have treated the FAA as our partner in developing the Eclipse 500 instead of as our adversary.

Although we cannot guarantee our certification schedule, because of our partnership approach with the FAA we believe that the number of "surprises" that typically affect the certification schedules of other manufactures will be minimal.

Pilot: Was the change to a five-seat standard cabin arrangement necessary to keep range and speed promises made at the introduction? Do you anticipate any other, similar changes before the airplane arrives in the marketplace?

Raburn: Removing a seat has absolutely nothing to do with speed since weight only has a second order effect on an aircraft's speed. Also, since a seat only weighs 24 pounds the effect on range is virtually meaningless. The aircraft is still a six-seat aircraft and the five-seat configuration simply reflects the way a majority of our customers plan to use the aircraft.

Pilot: There's been talk of eventually extending Reduced Vertical Separation Minimums (RVSM) to the airspace above the continental United States. Will Eclipse be designed for RVSM approval, or will it be easy to obtain later?

Raburn: We believe that RVSM will be required in the continental U.S. sometime within the next 10 years. The Eclipse avionics CNS suite is architected to be easily upgraded to capabilities such as RVSM. But full details of the CNS suite will not be disclosed until next year.

Pilot: Would you recognize that this project is a gamble?

Raburn: Any kind of breakthrough or innovation requires the assumption of risk or, as you call it, a gamble. But the aviation industry is conditioned to believe that risk equals failure. That relationship simply does not have to be true. The principal engines of growth in today's business economy are the PC and the Internet. Those products and technologies were also "gambles." In a rational marketplace there are no rewards without risks. We expect to richly reward our investors and customers for supporting our ambitious undertaking.

To take a virtual tour of Eclipse, see the Web site www.eclipseaviation.com/500jet/virtualtour.htm.

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