Eclipse news from Vern Raburn

ECLIPSE 500 UPDATE: July 6th, 2007 Update:By CEO, Vern Raburn
Things are busy at Eclipse as we continue to accelerate our manufacturing ramp and gear up for another exciting EAA AirVenture show. As always, I look forward to seeing many of you in person in Oshkosh, and to sharing the highlights of what is sure to be a very productive summer with the rest of you in the weeks ahead.
As I reflect on the first half of this year, I think about both the significant problems and very significant progress we have made. In particular I'd like to highlight the aircraft deliveries and improvements that Eclipse Aviation has made in the second quarter of 2007. I would also like to give you an update on how we are progressing on a number of other Eclipse 500 fronts.
Aircraft Manufacturing & Deliveries Since our first aircraft delivery on December 31, 2006, our primary objective has been a ramp-up to our production goals. As I have previously discussed this process proved to be far more difficult then we estimated it to be. Following the receipt of our production certificate early in the second quarter, we have spent the past few months focusing on our successful transition into a production company.
I'd like to provide a quick snapshot of our delivery progress. In the first quarter of this year, we received certificates of airworthiness and delivered four Eclipse 500s. In the second quarter we certified 26 aircraft, bringing our total for the first half of the year to 30 aircraft, and our overall total to 31. If you review the quarterly production numbers released by GAMA (General Aviation Manufactures Association) you will see that we have only reported 17 aircraft for the second quarter. GAMA uses as a measurement point the actual sale of the aircraft, not the certification of the individual aircraft. Internally we measure the final delivery and sale of the aircraft, but from a manufacturing standpoint we consider the aircraft complete when the Certificate of Airworthiness is issued. As our processes continue to improve the difference between the two points will decrease. In fact, we expect to deliver over 20 aircraft during July.
As does any manufacturer that strives for greatness, we have established internal monthly performance targets to guide our efforts. Based on the track record of deliveries highlighted above, I am happy to report that we met our target for the last two months of the second quarter.
The ramp in production throughput is a result of the tremendous improvement we have seen in our production flow. Our new vice president of manufacturing Todd Fierro - who came to us from Ford Motor Company - was instrumental in leading significant process improvements and industrial engineering efforts. That work and more has enabled increases in both production rates and quality. In fact, we are now consistently breaking our own records for cycle times and quality.
In terms of our manufacturing staff, we continue to aggressively build our team. Our manufacturing training classes at Central New Mexico Community College (CNM) are filled to maximum capacity. We have the capability to train up to 90 people in three separate classes every 12 weeks. This increase in employees has helped us boost our production hours, and we now have night shifts throughout all manufacturing plants.
We will continue to notify customers of their expected delivery dates six months prior to delivery, and update all customers on deliveries by quarter. The delivery numbers outlined in this quarterly report will also be provided to GAMA (www.gama.aero), but I wanted you - our loyal customers - to see them first.
Pitot/AOA SystemWe completed certification flight testing on the improvements to the pitot/AOA system earlier this week. The FAA testing was conducted in a humid/rainy environment in actual Instrument Meteorological Conditions (IMC) and cold soaking at altitude. Nine of the 10 test flights were conducted after subjecting the probes to a humid mist on the ground for at least one hour. All 10 flights were successfully completed without any anomalies. We have submitted the final report to the FAA and certification will follow shortly. The AD will be revised to include the installation of the modifications as a terminating action to lift the day/VFR and two pilot restrictions. Our expectation is that we will have approval to start modifications of the aircraft very shortly. The service bulletin that will allow us to begin retrofitting the fleet is written and we have the initial ship sets of parts in stock. At this time, we anticipate the in position production line cut in will begin at aircraft 65, with earlier aircraft receiving the new pitot/AOA system before delivery.
Although I'm glad to report that this problem is behind us there are lessons to be learned. The Eclipse 500 was one of the most tested aircraft to be certified in the last 20 years. We accumulated over 3,400 hours including typical operational flights using a marketing aircraft. There was extensive and thorough FAA involvement including approval of the test plans for the airdata/pitot/AOA system that resulted in an unrestricted Type Certification of the aircraft. Yet this problem was caused by fairly unique meteorological conditions that went undetected even though we did numerous tests in Texas, Florida and even the Climate Test Chamber at Eglin Air Force Base. Perhaps the fact that we live and work in a high desert environment contributed to the problem. So the fact that the problem went undetected is not the lesson, but how we as a company have responded to the problem is.
The early Citation CJs have had well over 100 service bulletins issued to correct design and reliability issues. These included very serious issues such as runaway pitch trim that caused the loss of a CJ and generated three different ADs. The point is not that CJs are bad aircraft. They are in fact great aircraft. But virtually all newly certified aircraft have had problems inherent in the design that were not discovered in the certification testing. How the company supports those aircraft when the problem is discovered is the important issue. From the time we discovered this problem to having the fix certified will be less then 3 months. In addition, we will have the fleet retrofitted in another 60 days and I have kept all of you fully informed of the problem and progress. Thus this process is part and parcel of the growth and maturing of Eclipse Aviation. And I'm proud of the company's response to this difficult issue.
Performance ImprovementsCertification flight testing is on track to be completed this week, and we are expecting certification of the performance improvements within the next couple of weeks. The final certification date will be dependent on the FAA's approval of the AFM changes and other certification documents. We have submitted 44 of the 56 documents requiring FAA approval, and 41 of these are already FAA approved. The remaining 12 documents will be submitted in the next few days. As previously announced, the new performance numbers have been met and will be reflected in an updated AFM. The FAA is required to amend the Type Certification Data Sheet within 30 days of certification completion. A service bulletin will be issued shortly after certification and aircraft retrofitting will begin. We are still on track to cut the performance modifications into the production line at aircraft 39. In fact, aircraft 39 is currently in final assembly with all of the performance modifications incorporated.
Registration Number SizeLastly, I want to update you on the change in the size of the registration number on all Eclipse 500s. As part of our type certificate data sheet that we received on September 30th of last year, the FAA approved six-inch registration numbers via note 8 on the TCDS. However, the FAA reversed that decision and is now requiring registration numbers that are as large as practical on all Eclipse 500s. Working with the FAA we have defined a maximum sized area on the tail for the placement of the N numbers. If your N number is something like N1K then the numbers will be 12 inches in height. But if your N number is something like N777WW then the height will be closer to 9.5 inches. Our plan is to paint the larger registration number on your plane when you return for the performance modifications. Beginning with aircraft #29, all Eclipse 500s are being delivered with the larger N numbers. Sincerely,
Vern RaburnPresident and CEOJuly 10th, 2007 Update:By CEO, Vern Raburn
Business
Eclipse 500 in EuropeI want to start with a quick update on our recent travels in Europe. We essentially launched the Eclipse 500 in Europe with a three month marketing tour flying N505EA across the Atlantic in April. This aircraft went to Europe with all the performance improvement modifications and has consistently demonstrated all of our projected performance in every flight regime. This trip confirmed our expectations, there is unprecedented interest the Eclipse 500 in other parts of the world. We have now introduced N505EA to audiences in Germany, France, Switzerland, and the UK - and the response has been overwhelmingly positive. Most recently at EBACE, we announced that we have successfully closed Europe's largest VLJ aircraft order for 180 aircraft. The next stop for the Eclipse 500 is Italy before returning home to re-enter the flight test program to support Avio NG efforts. I look forward to sharing a more comprehensive review of our European tour in the coming weeks,
TrainingThe first Flight Training Device (FTD) has been certified by the FAA and we are currently planning its installation in Albuquerque to start customer training in simulators. This training will begin with the opening of our new training facility at Double Eagle II Airport which is scheduled for late July. This nearly 42,000 square-foot facility will be the first building on our campus on the West Side of Albuquerque, which will become our permanent home within the next few years.
Rightfully so, our early customers are very concerned with the wait between aircraft delivery and the start of their training - so are we! Unfortunately, we did not adequately plan our staffing levels and have thus fallen behind schedule. Frankly, the miscalculation occurred in the number of FAA employees and company pilots that have been required to obtain type ratings. The much larger number has resulted in an unplanned utilization of training slots that would have been used for customer training. There was no choice in the order of who was trained since all the FAA and company pilots needed to be trained before we could start the customer training program. In an effort to accelerate pilot training and make up for this delay, we are aggressively hiring more instructors and finding ways to increase throughput. We have recently contracted with an experienced ground school training partner (Global Jet Services, our maintenance training partner) to assist this portion of the training course. This in turn has freed up our ground school instructors to handle additional flight training. We expect that by the end of summer our capacity will be at the levels required and the backlog will be eliminated. So customers taking delivery in late summer and beyond will not see any delay between the delivery of their airplane and the start of their training.
Service & MaintenanceOur first Eclipse Service Center (ESC) outside of Albuquerque, in Gainesville, FL, recently received its FAR Part 145 certificate and will hold a grand opening ceremony on June 15th. This ESC will serve the Southeast region of the country and will be able to service up to 12 Eclipse 500 aircraft at a time. The technicians in this facility will be equipped to perform both scheduled and unscheduled Eclipse 500 maintenance, as well as work on the Pratt & Whitney Canada PW610F engines. This also marks a significant achievement for Eclipse because we have been granted FAA approval to certify all of our Part 145 repair stations through a single FAA Flight Standards District Office (FSDO) based in Albuquerque, which is unique for an airframe company. This office will be responsible for monitoring all repair station activity, including the application and certification processes for future repair stations. With our plans for service center expansion in 2007, this streamlined process will allow us to efficiently place new facilities quickly into operation. Albany, New York and Van Nuys, California are next and they are scheduled to be ready for occupancy and operational in the 3rd and 4th quarters of 2007.
I have found it very interesting that one of the common "faults" that Cessna loves to point out about Eclipse is that we will not be able to support our customers after they receive their aircraft. That led me to research the truth about Cessna's entry into service of the Citation. The facts are very revealing. The first Citation entered service in 1972. It took Cessna nearly four years before they had three Citation Service Centers operational. It was another five years before the 4th Citation Service Center came on line. Cessna required nine years and over 700 Citations delivered before they had four Citation Service Centers operational. Eclipse will have four Eclipse Service Centers operational within nine months of the entry into service of the E500. I think the facts speak for themselves as to which company is truly committed to world class customer support. Model DifferencesSome customers continue to refer to "A" and "B" models of the Eclipse. I am totally puzzled by this continued misperception. I have committed Eclipse Aviation to a path of not only continual improvement of the Eclipse 500 but to retrofitting existing Eclipse 500s to the same level as aircraft currently coming off the production line. The reason for this commitment is due in no small part to the comments I have received from you. Frankly, this is going to be a difficult strategy to follow. Not only will it be expensive for the company, especially as the installed base grows, but there will inevitably come a day when an improvement will be such that we simply cannot retrofit every aircraft in the field. But in the near term, I can assure you that there are no and will be no "A" or "B" models of the Eclipse 500. They will all be one model.
Technical
Avio NG Avio NG is progressing but continues to be slightly behind the original schedule I informed you of earlier this year. A significant milestone was reached recently when one of our flight test jets was successfully modified with Avio NG equipment and powered up for the first time. Within the next week, we will begin installing Avio NG in a second flight test aircraft, with plans to begin flight testing Avio NG in this jet later this month. Once safely home from Europe, N505EA will become the 3rd aircraft modified with AvioNG and will join the first two as part of the FAA and EASA certification test fleet. With these three planes modified as planned, the revised schedule should hold steady but recovery to the end of July target is unlikely. I'll provide you with a more accurate certification and in service date next month.
Performance ImprovementsOne of the flight test aircraft with all of the performance improvements installed recently departed for Texas to test performance at sea level in hot conditions. We anticipate certification of the modifications soon. The first production aircraft to incorporate all the performance improvement package is serial #39, which is currently in primary assembly and will be moved to final assembly later this month. We will start scheduling the retrofitting of aircraft serial #1 through #38 in July. Customer Care is the contact group for scheduling, but please do not call now as they will not be able to begin scheduling for some time. I will send out another letter specifically on this topic in early July giving specific instructions to those affected.
Pitot/AOA SystemAs we informed you in early April, the Eclipse 500 experienced three in-flight events in which pitot pressure was lost on both the left and right primary flight displays (PFDs), with the MFD still functioning with the 3rd source. We found that internal condensation was collecting and freezing in the pitot tubing due to the aircraft's departure from a highly humid environment. In testing we were able to simulate the condition by injecting steam into the lines on the ground and reproducing the failure in flight. We have completed a new design that has been submitted to the FAA for certification this month. We expect this change to be available for production and via a retrofit in July and will communicate the retrofit plan to those customers affected when ready. This modification will remove the VMC only and dual pilot limitations.
Windshield and Cockpit Side WindowsWe also informed you a few months ago about an initial fix to the fatigue cracks in the outer layer of the acrylic of the windshield and cockpit side window. Extensive coupon testing has now been conducted on the new design. While further testing is needed on the full-scaled fatigue test article, the inspection and replacement intervals have increased dramatically and the certification process on the new design will begin this month. When the new windshield and side windows are installed, the inspection interval for these windows increases from every 50 flights to a new inspection every 300 flights. We have also approved a procedure that allows the inspection to be conducted with a prism, eliminating the need for the removal of the windshield. The replacement interval has also increased from 100 flights for the windshield and 250 flights for the cockpit side windows, to 1,500 flights and 600 flights respectively. Customers that are affected by these changes and updates will be notified with an updated Aircraft Maintenance Manual revision. These retrofits will be performed at the time of scheduled replacement intervals, starting in mid-July.
Customer Technical Communications (CTC)The discussions above covering the Pitot/AOA and Windshield issues will be communicated in much technical depth through a CTC. The CTC for each item will be distributed to the customers for whom their aircraft serial number is actually affected by the problem and change. As a company policy we will not send the CTC to customers whose aircraft have the change implemented in production and are therefore not affected. However, all of our customers will continue to receive summary letters like this one, as we are committed to providing all of our customer's insight and understanding of the maturing of the Eclipse 500 aircraft and our determination to provide you with the very best product possible.
Moving forward, I will continue with the increased communication pledge I made early this year, and as we continue to move into a more predictable and repeatable pace of operations the frequency of these communications will also become more predictable. Of course, if something significant comes up in the interim, I will send out a special communication. Naturally, the celebration of an occasional significant delivery milestone will also be communicated.
As is I sit and look at the delivery hangar and production flight test ramp in front of my office every day, I see significant progress at Eclipse Aviation. We are getting better on many fronts. With our Production Certificate in hand, we are steadily increasing the production ramp and the number of aircraft delivered. Someone commented recently that the day I don't know the serial number of a new airplane taxing by my office for its' first flight will be a good day. The inference being that I will not be able to keep up with the production rate. Of course, they don't realize we'll have to be at production rate of a Toyota before that could possibly occur!
We are not where I know this company can be by any stretch but I believe that in the second half of 2007, you will also see this progress and I look forward to sharing it with each of you.
Sincerely,
Vern RaburnPresident and CEO