Eclipse Aviation, maker of very light jets, files for bankruptcy protection

Eclipse Aviation Corporation, the company that pioneered the market for very light jets, has filed for bankruptcy protection after failing to produce its very light jets  (VLJs) at “unprecedented volumes” that would have enabled the company to price its jets lower than its competitors.

The company, which manufactures the 6-seat Eclipse 500 corporate jets, said it took the step after if was forced to “take a loss on each aircraft it built.”

Eclipse had announced earlier in 2008 that it needed $200 million to $300 million in financing to stay afloat. Aviation analysts are of the opinion that, in the midst of a global economic crisis, the company was unlikely to get an investor, making restructuring necessary.

Eclipse Aviation’s filing of for the Chapter 11 bankruptcy protection in the United States Bankruptcy Court in Delaware comes after a year of troubles that included layoffs of over one-third of its workforce, the exit of its founder and former chief executive as well as lawsuits from about a dozen dissatisfied customers. Earlier in November 2008, the company had sent employees home for two days after it was late in paying their wages.

Eclipse Aviation Corporation, based in Albuquerque, New Mexico, the United Stats, maker of the Eclipse 500, is also in the process of developing the Eclipse 400 very light jets. The company, founded in 1998 by Vern Raburn, former employee of Microsoft Corporation, had stopped production of the Eclipse 500 jets in mid-2008 because of shortage of funding.

Eclipse Aviation pioneered the use of friction stir welding in aircraft structures, using it extensively in the primary structure of the Eclipse 500 jets. It also developed PhostrEx, a fire suppression agent for use in aviation applications to replace halon, a greenhouse-gas. The company developed PhostrEx for use aboard its Eclipse 500 jets, and is now being marketed to other aviation manufacturers.

Roel Pieper, acting chief executive of Eclipse Aviation, said in a statement: “In the face of unprecedented economic challenges, it is clear that the sale of the Eclipse business through the Chapter 11 process was the right course of action to maximise the value of the business, secure its future and protect the best interests of Eclipse’s stakeholders, including customers, suppliers, employees and creditors.”

Under Chapter 11, a company seeks an order from a bankruptcy judge that prevents creditors from immediately seizing the company’s assets. Most companies continue to operate in some form while seeking to reorganise and reduce their debt.

According to US media reports, court records show that Eclipse Aviation plans to sell nearly all its assets, valued at between $100 million and $500 million, at a public auction that would be held in January 2009.

Eclipse Aviation, the company statement said, was able to add 300 orders from Europe for its aircraft after the Eclipse 500 jet received certification from the European Aviation Safety Agency on November 21, 2008, which is similar to getting certification from the United States Federal Aviation Administration (FAA). The certification by the European Aviation Safety Agency allowed Eclipse to sell its aircraft in 37 European countries.

Roel Pieper explained: “Eclipse Aviation’s plant in Albuquerque, New Mexico, which employs 945 people, should see no major changes as a result of the bankruptcy proceedings. The goal is that the company should continue to operate and the employees should keep their jobs.”