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Very Light Jets: A Reality Check for Eclipse
By Vaughn Cordle, CFA / March 2007
The perception of easy (i.e., dumb) money and current anti-airline sentiments are fueling the
entrepreneurial spirit to create a better mouse trap out of air transportation. New and improved engines,
avionics, and manufacturing processes have resulted in new low-cost aircraft designs, thereby
encouraging those who think they have a unique business plan to get in on the game.
Lots of people will try lots of things, most of which will fail, and those who do succeed will become very
rich, which gets to the very heart of capitalism and the reason why mousetraps are being improved in the
first place.
One of the most interesting experiments now in process is the Eclipse airplane being put together by
Vern Raburn. Spurred by an understandable desire to bring jet travel to the masses, Raburn has built a
very cheap, very small airplane. He has raised a prodigious amount of money and has overcome many
obstacles. Now, even with certification in hand, red flags are popping up all over the place as he seeks a
production certificate: reports of high altitude instability when fully loaded; design flaws in the windshield;
and avionics problems, to name a few. Also, it doesn't help when reputable companies like United
Airlines (pilot training) and Avidyne (avionics) have been replaced – or quit - as key suppliers.
Raburn has a long way to go if Eclipse is to become a credible manufacturer. However, if he can get
through his troubles, his price point is going to make the Eclipse tough to beat for very short haul,
regional flying of the kind that many air taxi companies are proposing and hoping to finance. Better
airplanes will undoubtedly be available for other types of air taxi missions, but it will be very difficult for
another manufacturer to approach Eclipse price and cost points. Success, however, is dependent, on
getting the plane fully built and subsequently, proving that it can support the high utilization rates on
which air taxi economics are dependent.
It is premature to predict the demise of Eclipse since there is no other aircraft that has the potential to
lower the price point for private aviation as dramatically as it can. Moreover, as of yet, no VLJ
manufacturer other than Eclipse has shown an understanding of the parts and support requirements of
air taxi companies.
Embraer has an aircraft that may prove to be the default choice for air taxi use, even though it is heavier,
more expensive and costs more to operate. The good news for Eclipse is that the Phenom 100 will not
be ready until late 2008. The bad news for Eclipse is that the Phenom 100 is designed for comfort and
robust utilization, with a cabin and baggage volume twice that of the Eclipse. More importantly perhaps,
the Phenom 100 is designed for 35,000 cycles, which is 3.5 times that of the Eclipse, meaning that
resale and residual values will be significantly lower for the Eclipse after a few years of heavy use unless
it proves more durable than is now anticipated.
AirlineForecasts has examined the business plans of many of the new upstarts that will use the new,
low-cost VLJs. Most are based on unrealistic assumptions of consumer demand and have significantly
understated the true cost of providing on-demand air taxi service. Most should not be financed.
Several of the air taxi aspirants may actually get launched, but their success will depend on choosing
aircraft that appropriately match demand in the markets they wish to serve, on good management skills,
and on the ability to raise sufficient capital.
JetBird and Pogo are two examples of new VLJ air-taxi operators that have the right management
capabilities. Moreover, both potentially have the kind of financial capability that will be required for survival
of the “surge and shakeout” that AirlineForecasts expect to occur over the next several years.
Mao Tse Tung once described our attempts to innovate by saying “A hundred flowers will bloom,”
pointing out that our potential is great but only if conditions are just right. Low cost and abundant capital,
combined with a demand for low cost and hassle-free air transportation, results in a market ripe for
innovation and entrepreneurship. However, only a lucky few will blossom fully, while others quickly wilt
under the searing heat of competition and market realities. It is too soon to tell which type of flower
Eclipse will be, but it is certain that Raburn’s ingenuity and doggedness will be sorely tested in the
months to come.
By Vaughn Cordle, CFA / March 2007
The perception of easy (i.e., dumb) money and current anti-airline sentiments are fueling the
entrepreneurial spirit to create a better mouse trap out of air transportation. New and improved engines,
avionics, and manufacturing processes have resulted in new low-cost aircraft designs, thereby
encouraging those who think they have a unique business plan to get in on the game.
Lots of people will try lots of things, most of which will fail, and those who do succeed will become very
rich, which gets to the very heart of capitalism and the reason why mousetraps are being improved in the
first place.
One of the most interesting experiments now in process is the Eclipse airplane being put together by
Vern Raburn. Spurred by an understandable desire to bring jet travel to the masses, Raburn has built a
very cheap, very small airplane. He has raised a prodigious amount of money and has overcome many
obstacles. Now, even with certification in hand, red flags are popping up all over the place as he seeks a
production certificate: reports of high altitude instability when fully loaded; design flaws in the windshield;
and avionics problems, to name a few. Also, it doesn't help when reputable companies like United
Airlines (pilot training) and Avidyne (avionics) have been replaced – or quit - as key suppliers.
Raburn has a long way to go if Eclipse is to become a credible manufacturer. However, if he can get
through his troubles, his price point is going to make the Eclipse tough to beat for very short haul,
regional flying of the kind that many air taxi companies are proposing and hoping to finance. Better
airplanes will undoubtedly be available for other types of air taxi missions, but it will be very difficult for
another manufacturer to approach Eclipse price and cost points. Success, however, is dependent, on
getting the plane fully built and subsequently, proving that it can support the high utilization rates on
which air taxi economics are dependent.
It is premature to predict the demise of Eclipse since there is no other aircraft that has the potential to
lower the price point for private aviation as dramatically as it can. Moreover, as of yet, no VLJ
manufacturer other than Eclipse has shown an understanding of the parts and support requirements of
air taxi companies.
Embraer has an aircraft that may prove to be the default choice for air taxi use, even though it is heavier,
more expensive and costs more to operate. The good news for Eclipse is that the Phenom 100 will not
be ready until late 2008. The bad news for Eclipse is that the Phenom 100 is designed for comfort and
robust utilization, with a cabin and baggage volume twice that of the Eclipse. More importantly perhaps,
the Phenom 100 is designed for 35,000 cycles, which is 3.5 times that of the Eclipse, meaning that
resale and residual values will be significantly lower for the Eclipse after a few years of heavy use unless
it proves more durable than is now anticipated.
AirlineForecasts has examined the business plans of many of the new upstarts that will use the new,
low-cost VLJs. Most are based on unrealistic assumptions of consumer demand and have significantly
understated the true cost of providing on-demand air taxi service. Most should not be financed.
Several of the air taxi aspirants may actually get launched, but their success will depend on choosing
aircraft that appropriately match demand in the markets they wish to serve, on good management skills,
and on the ability to raise sufficient capital.
JetBird and Pogo are two examples of new VLJ air-taxi operators that have the right management
capabilities. Moreover, both potentially have the kind of financial capability that will be required for survival
of the “surge and shakeout” that AirlineForecasts expect to occur over the next several years.
Mao Tse Tung once described our attempts to innovate by saying “A hundred flowers will bloom,”
pointing out that our potential is great but only if conditions are just right. Low cost and abundant capital,
combined with a demand for low cost and hassle-free air transportation, results in a market ripe for
innovation and entrepreneurship. However, only a lucky few will blossom fully, while others quickly wilt
under the searing heat of competition and market realities. It is too soon to tell which type of flower
Eclipse will be, but it is certain that Raburn’s ingenuity and doggedness will be sorely tested in the
months to come.
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