Business & GA

Editor’s Note: Light Jets Burdened

By Bill Carey | November 1, 2008
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One of the interesting subplots of this year’s National Business Aviation Association (NBAA) convention in Orlando was the state of the light-to-Very Light Jet (VLJ) sectors. A year ago, we were quoting forecasts in the thousands of VLJs, but recent events have belied those numbers and raised doubts not only about small jets but about the air-taxi business model that depends on them.

The lead-up to NBAA 2008 was less than stellar for the lower end of the business jet category. In February, Adam Aircraft filed for Chapter 7 liquidation, grounding its A700 VLJ in development as well as the A500 piston twin. In August, Zurich-based Grob Aerospace, manufacturer of the spn light jet, declared its German manufacturing arm insolvent. A month later, Bombardier dismissed Grob as developer of the composite structure of the new Learjet 85. Eclipse Aviation soldiered through myriad problems in producing the Eclipse 500 VLJ, including hundreds of layoffs, a management shakeup, an emergency airworthiness directive by FAA and congressional scrutiny of the aircraft’s certification. In September, DayJet, the largest customer for the Eclipse 500, ceased operations. The pioneering air-taxi operator cited both an inability to obtain financing and Eclipse’s failure to install missing equipment and make needed repairs.

With the stock market and 401(k) plans in freefall without, the state of the United States economy itself, much less the aviation industry, was the main plot in humid Orlando. For business aviation manufacturers and their suppliers, at least, the prevailing wisdom was that solid order books will sustain the industry through this very rough patch. There was some excitement — Gulfstream launched the super-midsize G250; Hawker Beechcraft the improved Hawker 450XP and King Air 350i — and the usual stories of late-night revelry. But as one colleague aptly noted, the overall mood of the convention was "subdued."

The major players in business aviation — Gulfstream, Dassault, Bombardier, Cessna, Embraer, Hawker Beechcraft — likely will prevail. (Although Hawker Beechcraft, the former Raytheon Aircraft Co. acquired last year by investment firm Onex Corp. and Goldman Sachs, may be sweating more than others.) But smaller, more entrepreneurial aircraft makers face uncertainty. Some of these companies in the United States have gone offshore in spirit if not in body.

In June, Emirates Investment & Development Co. (Emivest) of Dubai acquired an 80 percent stake in Sino Swearingen Aircraft Corp., of San Antonio. At this year’s NBAA, the new majority owner unveiled Emivest Aerospace Corp., the entity tasked with advancing Sino Swearingen’s SJ30 light jet. Albuquerque-based Eclipse Aviation this year took on European Technology and Investment Research Center (ETIRC) of Luxembourg, its main European distributor, as an equity investor and largest shareholder. In September, Eclipse secured a $205 million lifeline, via ETIRC, from Russia’s Bank for Development and Foreign Economic Affairs. The quid pro quo: build an assembly and support facility for the Eclipse 500 at Ulyanovsk-Vostochny airport.

Which brings us to the twin-tailboom A700 VLJ, once the apple of Adam Aircraft’s eye, but now the property of AAI Acquisition Inc., a company peopled by former Adam executives and owned by Industrial Investors Group and Kaskol, both Russian investment firms. AAI presented an update on the A700 program that, while optimistic, was devoid of the bravado and marketing hype that normally attends such events. "Obviously, we’ve got several jobs to do," said President and CEO Jack Braly, who formerly headed Sino Swearingen. "First we’ve got to build the company, then we’ve got to certify an airplane and then we’ve got to get it into production."

Braly said the carbon-composite A700 had completed 30 percent of the flight tests required for FAA Part 23 certification. AAI is staying with the current Williams International FJ33-4A engines, but as of NBAA had not selected an avionics supplier. In addition to making that choice, its priorities were to arrange tooling and begin production planning. Certification is targeted for the first half of 2010.

In money terms, AAI is "about halfway" toward the milestone of type certification, and will need about $200 million more to get there, Braly said. It won’t be easy money.

"Did someone give us a sack of gold as big as the program to start with? The answer is no," he said. "We are being funded as we go."

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