Very light jet shared ownership and management company Jet-Alliance aims to accelerate its expansion by acquiring the 28 Eclipse 500s previously operated by defunct air taxi operator DayJet.
Jet-Alliance chairman Randall Sanada says the California-based company aims to conclude by the end of May the acquisition of the VLJs on behalf of some of the owners who were left holding unfulfilled orders when Eclipse Aviation filed for bankruptcy in November.
Sanada says these owners stand to receive nothing for their 60% downpayments, given their unsecured creditor status in Eclipse Aviation's bankruptcy proceedings, but under the proposed deal would receive an ex-DayJet aircraft after paying the final 40% to United Technologies through Jet-Alliance.
Sanada says Jet-Alliance worked with United Technologies, which was DayJet's primary lender and holds a lien on the 28 aircraft, to structure the complex deal and has already secured the necessary approvals from DayJet's trustee. DayJet ceased operations in September. Sanada says Jet-Alliance is now seeking approval from Eclipse Aviation's lender and is confident the deal will close in 30-60 days.
Sanada concedes this is not a perfect solution for the owners as they will have to pay the full new aircraft price for a used aircraft that will require upgrades. In addition, some owners will receive only a half share for an additional 20% payment or a one-quarter share for an extra 10% payment, but Sanada claims this is better than receiving nothing for the 60% already paid.
"We have got a substantial group of individual deposit holders who aren't getting aircraft because of the bankruptcy," he says. "Jet-Alliance isn't able to deliver on the failed promise of Eclipse Aviation, but we've come up with a partial solution for them to come up with something."
If the deal is concluded it will result in an instant expansion of Jet-Alliance's fleet from six to 34 VLJs. Sanada says Jet-Alliance manages four Eclipse 500s and one Cessna Mustang. Its first Embraer Phenom 100 is scheduled for delivery in mid-April. Its Phenom 100 is the 23rd to roll off the production line and was purchased early last year from two owners who originally acquired the aircraft from Eagle Creek Aviation.
Sanada says Jet-Alliance also has commitments to add a Mustang and acquire one of the first HondaJets. He adds that Jet-Alliance is discussing acquiring aircraft from several Eclipse 500 owners. He says there is a "substantial secondary market" for the more than 259 Eclipse 500s that were delivered before the New Mexico-based manufacturer's bankruptcy. Jet-Alliance is also talking to several owners who have ordered Phenom 100s.
Jet-Alliance specialises in acquiring VLJs from up to four owners and chartering them when they are not in use. For each VLJ it partners with an air carrier who is fully responsible for operating the aircraft and helps with selling charters. Jet-Alliance is also partnered with jetAVIVA, which helps with aircraft sales and marketing charters along with other duties including handling deliveries.
"We endeavour to double or triple the time the aircraft is operated and generate charter revenues to offset some of the fixed costs," Sanada says. He adds that demand to own and charter VLJs continues to increase despite the downturn in the economy as users of larger jets look to trade down to more economical and environmentally friendly VLJs.
"Look at the stigma private jets have had since the big three automakers showed up in Congress with their Gulfstreams," he says. "It should have been a VLJ they showed up in."
Jet-Alliance was established in 2000 and took delivery of its first aircraft, the very first Eclipse 500 to roll of the production line, at the end of 2006. Sanada says charters began as recently as July. "We're now just bringing up our marketing efforts to let customers know about availability of aircraft," he says.
Jet-Alliance offers only charters from six airports in southern California, but has been looking at expanding into northern California and eventually eastward. Sanada says if the acquisition of the 28 ex-DayJet Eclipse 500s is concluded, this expansion will be accelerated and Jet-Alliance will quickly have nationwide coverage as the new owners are based throughout the USA.
He says Jet-Alliance is ready to add several air carriers based throughout the country as new partners. "There are others that have made bids on the aircraft, but they're pretty much partnering with us," he says.
Jet-Alliance has a lot at stake in the deal as it had deposits on three unfulfilled Eclipse 500 orders. Sanada, who personally owns a stake in the very first Eclipse 500, has been actively involved in the drawn-out process of trying to secure a new investor in Eclipse Aviation's assets as he sits on the bankruptcy committee that represents Eclipse owners. "That's been my full-time job since November, entertaining all the proposals, and I'm not even chairman," he says.
Sanada confirms a group of owners have set aside funds to bid for the assets should other offers fall through. But he says restarting production is not likely in the near future and the focus for now is on supporting the existing fleet.
"We don't believe now is the time to restart production," Sanada says. He adds that while the owners have not found a "formula" for restarting production if they assume ownership of the assets, resuming production could be pursued later if a new investor, in particular an experienced manufacturer, can be secured.