Aviation industry carnage: Eclipse bankrupt; Cirrus slows down for 2008

When the economy gets a cold the aviation industry gets pneumonia.  Here are a couple of news stories…

Cirrus is slowing down production until January 2009, furloughing many production workers (story).  This follows layoffs of 205 people earlier this year.  After Cessna, Cirrus should be the strongest piston airplane manufacturer.  They make the world’s best selling piston-engine airplane, the SR22.  Following their acquisition in 2001 by First Islamic Investment Bank they’ve had ample access to capital from the Arab Gulf states.

Eclipse is demonstrating the worst that can happen when you buy an aircraft from a new company.  They have filed for Chapter 11 reorganization, but only plan to operate in Chapter 11 for a couple of months until all of their assets can be sold to an affiliated European/Russian company.  People who paid $1.5 million for jets that never quite worked now have no warranty.  If they want to get the planes certified for flight into known icing, they’ll have to pay for the work themselves.  Folks who put down deposits of $100,000 and more have lost everything.  (full story)  What about investors?  According to a February 18, 2008 article in the Albuquerque Journal, the company had raised more than $1 billion in capital.  The stockholders presumably have suffered a 100% loss.

2008 has not been kind to new airplane companies.  Adam Aircraft, founded in 1998, went bankrupt (Chapter 7 liquidation) in April.  They had a weird-looking piston twin featured in the movie Miami Vice and also a jet for which they had made a lot of claims.  (wikipedia)  Customers who were unfortunate enough to take delivery of the $1.25M piston twin are grounded due to lack of support (story).

I only hope that Icon Aircraft (WSJ story; company Web site requires somewhat destructive Flash upgrade) survives long enough that we can fly their little amphibian.

12 Comments

  1. Alan Wilensky

    November 26, 2008 @ 11:40 am

    1

    I would rather see, by far, a ‘bailout’ or organized federal incentives for the domestic aircraft industry (GA), than a penny going to the Big 3 automotive OEM’s.

  2. Colin Summers

    November 26, 2008 @ 11:57 am

    2

    There were only about five purchasers of the Adam Aircraft piston twin. I mean, it was sad for them, but it wasn’t a big club.

  3. Dave

    November 26, 2008 @ 12:08 pm

    3

    Just means fewer people flying around spraying greenhouse gases into the atmosphere. Kinda like GM no longer making those out-of-date and useless giant SUVs, except few people formed clubs to simply drive their SUVs all over the place for fun, which seems to be why most of these little planes exist (outside of Alaska).

    At least we won’t have to bail out these companies for their bad ideas.

  4. thrill

    November 26, 2008 @ 12:13 pm

    4

    Aviation Technology Group ( http://www.avtechgroup.com ) hs been in “suspension” since March. Their beautiful 500-knot Javelin 2-seat fighter-looking jet is not to be, unless someone buys the assets, including the flying prototype, and completes the development.

  5. thrill

    November 26, 2008 @ 12:28 pm

    5

    Also, FWIW, the development effort highlighted at http://www.popsci.com/military-aviation-amp-space/article/2008-10/personal-tilt-rotor looks really cool.

  6. philg

    November 26, 2008 @ 12:29 pm

    6

    Dave: Yours is a common perception about small airplanes, but most of the Eclipse orders were from air taxi companies that were offering point-to-point service at smaller airports in smaller towns. Presumably most of their customers were business folks going to meetings (arguably something better done with videoconferencing). A surprising number of Cirrus airplanes are being used by micro air taxi firms, though most are owned by small business owners or people who use them for personal travel.

    It certainly is better for the environment when a Cirrus stays on the ground, but it is definitely not better for the economy. When a private airplane flies, it means jobs for air traffic controllers, airport ground staff, refuelers, mechanics, rental car agents, car manufacturers who built the rental car, hotel staff, restaurant staff, etc.

    Zimbabwe has experienced a big reduction in private airplane flights, but I don’t think that is a sign of economic progress for them.

  7. Chris C

    November 26, 2008 @ 12:50 pm

    7

    Another interesting one: I have heard that the two rental Diamond Twinstars at our local airport (KPAO) have been effectively grounded. Not because they have Theilert engines (although they do) — but because Chevron and Exxon have just started to refuse to sell Jet-A for Diamond planes, since they fear liability if the unsupported engines fail.

  8. cthrall

    November 26, 2008 @ 1:48 pm

    8

    I really really hope they make the Icon. What a neat idea.

    How much of this is due to the liability issues associated with making airplanes? Would addressing that help at all?

  9. philg

    November 26, 2008 @ 5:59 pm

    9

    cthrall: For piston-powered airplanes, such as the Cirrus and the Icon, our lottery-style product liability system results in hugely increased costs, maybe 30 percent or more of the airplane’s retail price. It probably also discourages investors who reasonably worry if their investment will evaporate with a lawsuit. Jets, however, tend to be flown by professional pilots, the accident rate is much lower, and, I think, accidents are less likely to result in a product liability suit. So I don’t think that we can blame Eclipse’s failure on our legal system.

  10. Joel N. Weber II

    November 27, 2008 @ 10:44 pm

    10

    This seems to say that railroads use about 3.5 billion gallons of diesel fuel every year. This seems to say that US avgas usage is somewhere roughly around 1% of that. If you care about the environment and/or how much petroleum we import, getting all the freight tracks electrified (which is no technical challenge, just an economic one) ought to be about 100 times more effective than convincing all piston airplane owners to not fly.

    Avgas usage is also about 1/400th of jet fuel usage. If you can figure out how to build enough high speed track to eliminate 1/400th of scheduled jet flights, that would also do just as much as convincing every piston airplane owner to stop flying. (I have to wonder how much of that 1/400th could come simply from giving Amtrak more rolling stock so they’d have enough seats to kill all the New York City to DC flights, etc.)

    Of course, that assumes that the environmental and economic damage from a gallon of each of those fuels is equivalent, which isn’t quite the case, especially since avgas is still leaded, and GAMI is still working on certification for the technology that will remove the need for lead.

    I’m a little skeptical that the Icon is going to have good insurance rates. Like the Cirrus, it seems likely to attract those who may be less inclined to really thoroughly study how to be a safe pilot. Plus, it looks like it may be vulnerable to the failure mode where leaving the landing gear down when landing on the water will kill everyone in the plane.

  11. Roger W

    November 29, 2008 @ 7:08 am

    11

    The planes build nowaday use stoneage technology and cost a lot. Cirrus last high end single engine sells for 600.000 $. For that amount of money I can buy 10 upper class Mercedes based on the latest digital and engine technology.
    Building single engine plane for 600.000$, friven by an old fashionned engine is an absolute non-sense.
    Furthermore, technically, it is much more difficult to build a car. There are much more parts on a car. Much more moving parts, than in a plane. Much more electronics.
    As long as planes wont be constructed like cars, they will never sell well. They will always be too expensive. We need a real “renaissance” in aviation, and especially in general aviation. May be it will come with the help of electric driven powerplants. In any case I strongly hope so.

  12. Greg Coladonato

    November 29, 2008 @ 11:36 am

    12

    Roger,

    If any plane manufacturer is likely to take advantage of the lessons learned from the automotive industry, it would be Honda for their upcoming HondaJet. (http://hondajet.honda.com/)

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