Eclipse Holds On To Customer Loyalty Despite Challenges
Friday, Sept. 19, 2008
by: Kevin Robinson-Avila
After attending the
first annual gathering of Eclipse Aviation customers in Oregon on
Sept. 14, Randall Sanada was upbeat about the future of the Eclipse
500 very light jets.
Sanada is chairman
of Jet-Alliance Inc. in West Lake, Calif. — a wealth management
business for moderately wealthy families and businesses. The company
manages three Eclipse jets for its clients, and it has two more
planes on order.
Sanada said about
70 to 80 jet owners — as well as buyers awaiting delivery of their
planes — attended the event. Eclipse executives were on hand to
update participants about efforts to reorganize the company and
increase jet production.
“Optimism carried
the day,” Sanada said. “Everyone there was extremely pleased and
excited about the aircraft. People are anxious about when they will
get their jets, but everyone is confident they will get them despite
the challenges facing the company.”
Many Eclipse
owners, including the heads of jet-taxi companies that rely on
Eclipse planes to run their businesses, say they remain optimistic
about the future of Eclipse Aviation, despite serious financial and
production-related problems confronting the Albuquerque firm.
Eclipse booted its
founder and former CEO, Vern Raburn, in July. The new CEO, Roel
Pieper, has launched a major overhaul of the company, reorganizing
its corporate structure and re-tooling the assembly line to increase
production.
It laid off 840
employees in August, or nearly 40 percent of the work force, to cut
costs and pave the way to a leaner, more-efficient operation.
Such dramatic
changes have fed rumors that Eclipse is in serious trouble, in part
because the company has withdrawn into stealth mode, providing only
snippets of information in vague news releases.
Still, Eclipse
executives are making concerted efforts to keep buyers informed of
company developments. That reinforces confidence among customers,
many of whom praise Pieper’s personal financial commitment to
Eclipse and his extensive business experience.
Pieper is chairman
and founder of the Dutch aviation company ETIRC, which invested $100
million in Eclipse last January. According to some customers, Pieper
and other investors pumped another $50 million into Eclipse in
August, although the company is trying to raise $200 million more.
“We have confidence
in Roel Pieper because this isn’t his first experience turning a
company around,” Sanada said. “Apart from his business acumen,
Pieper brings his own money to Eclipse, and that gives him ample
motivation to make it work.”
Graham Casson,
owner and CEO of OurPlane Fractional Aircraft in Virginia, said
Pieper has set much more realistic goals for Eclipse than Raburn,
who had promised to eventually produce five jets per day. OurPlane
has received only one Eclipse jet to date, although it has ordered
21 more with a $1 million deposit.
“We are still
deeply concerned, but I’ve had conversations directly with Pieper
and I’m enthusiastic that they will get through this turnaround,”
Casson said. “The steps Pieper is taking are severe, but they’re
necessary to survive.”
Casson said Eclipse
management is now focused on producing only two jets per day in
2009.
“That seems very
obtainable,” Casson said. “I never believed Raburn’s ridiculous
promises of five planes per day.”
Other customers say
the quality of the Eclipse jet makes them willing to wait for the
company to resolve its problems.
Massachusettes-based
Pogo Jet Inc., for example, has postponed the start- up of its
planned jet taxi service in the Northeast from early 2009 to 2010 in
part because of delays in getting Eclipse planes. But Executive Vice
President Cameron Burr said it’s worth the wait.
“The plane is
fantastic,” Burr said. “It’s a beautifully engineered, wonderful jet
for the 300-mile charter flights we plan to offer.”
Bill Herp, CEO of
Linear Air LLC in Concord, Mass., said his taxi service will
continue to rely on Eclipse jets because at $2.15 million, the
Eclipse is still about $1 million less than its closest competitor,
the Cessna Mustang. Linear Air currently operates four Eclipse jets
that it leased on secondary markets.
“The plane has so
much value I think it’s inconceivable that Eclipse would disappear,”
Herp said. “It’s a proven product with a proven market. It would
just be bought out by a bigger company if Eclipse were to fail.”
Still, if Eclipse
raises its price any more, it could turn some customers away.
“The cost gap
between the Eclipse 500 and the Mustang is shrinking,” Burr said.
“We’re closely monitoring that.”
In addition, there
are limits on how long some customers will wait for Eclipse to turn
things around.
“Our business has
been dramatically affected by the problems at Eclipse,” Casson said.
“If they don’t come out from this turnaround, there will be some
very messy problems with people pursuing litigation. If Pieper’s
team doesn’t deliver on the promised improvements in the next three
or four months, we will pull all our support from the company.”
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