Associated Press

Owners, businesses hope to acquire Eclipse assets

By HEATHER CLARK , 03.09.09, 09:55 AM EDT

The fight is on for what's left of Eclipse Aviation.

Two groups have announced they hope to acquire the assets of the Albuquerque jet manufacturer and former Eclipse employees have filed a lawsuit seeking 60 days' worth of back wages and benefits because they were furloughed without notice, a violation of federal law.

A federal bankruptcy judge signed an order Thursday for the struggling Eclipse Aviation to proceed to Chapter 7 bankruptcy liquidation after the manufacturer's largest shareholder failed to procure financing to purchase the company under restructuring.

Those considering buying Eclipse's assets say there is a third party, which they declined to name, that also is interested in Eclipse.

The two groups that have publicly announced plans to buy the company's assets are at odds over Eclipse's future.

New Eclipse Acquisition LLC wants to relaunch production of the Eclipse 500 in 2011, but will charge current customers for upgrades to their jets.

The other group, Eclipse Owners Group, called New Eclipse's and the unnamed party's plans "predatory" because they would charge owners too much money to upgrade the jets.

Before closing its doors, Eclipse Aviation had delivered 259 jets with promises of IOUs for free upgrades that would bring the planes up to their Federal Aviation Administration type certification.

"The idea in both of these plans is to exploit the captive market that the Eclipse customers represent," said Randall Sanada, of Jet Alliance, Inc. of Westlake Village, Calif., and a member of the Ad Hoc Customer Committee's steering committee.

Eclipse Owners Group hopes to buy the those assets that would allow them to upgrade and service their jets or to partner with an entity that would maintain the long-term reliability of the aircraft.

While the owners realize they will have to pay for upgrades the company had formerly promised to do for free, Sanada said they want to pay reasonable costs for them.

Phil Friedman, chief officer of Kansas-based Harlow Aerostructures who has formed New Eclipse, said he had put in a tentative bid for Eclipse ahead of a January auction that was won by Eclipse's largest shareholder. He said he did not formally bid on Eclipse after a disagreement over how certain assets were valued.

Friedman's plan follows what aviation industry analysts have been saying Eclipse should do to remain financially viable. He proposes to sell new jets for around $2.4 million and produce around 100 jets a year, not the 1,000 jets per year Eclipse had proposed in its early years.

"Once the price goes up, the demand will fall," Friedman said. "They thought the high volume would drive the price down. My experience is the economies of scale are not that large."

Friedman says he has experience turning around aviation companies, including Nasco Aircraft Brake in Gardena, Calif., which he eventually sold, and Harlow Aerostructures, which employs about 200 people in Wichita.

Friedman declined to say how much he would pay for Eclipse, but he said: "We do feel we have a significant portion of the financing raised."

Friedman says he plans to bring another proposal to the Owners Group that he hopes will encourage them to join forces, but he said New Eclipse cannot honor promises from the previous company.

If the jet goes back into production in 2011, the suppliers will be more inclined to work with Eclipse and key employees will remain with the company long-term. Friedman has said he could employ 600 people by 2011.

His company also would finish and sell seven aircraft on the production line that are about 95 percent complete, sell 28 jets owned by bankrupt DayJet to new owners, open several small service centers nationwide and provide pilot training in Albuquerque.

More than 800 former Eclipse employees also hope to get money from Eclipse in the liquidation. They have filed what attorneys hope will be a class-action lawsuit in federal court in Delaware that would seek back wages for workers furloughed Feb. 18 in Albuquerque, Albany, N.Y., and Gainesville, Fla.

The lawsuit said workers are entitled to 60 days' worth of bank wages and benefits because Eclipse failed to give them notice of their termination as required by the federal Worker Adjustment and Retraining Notification Act.

Businesses with 100 or more full-time workers that lay off at least 50 people at a single site are required to warn employees 60 days ahead of the terminations, according to a Labor Department Web site.

Annette Varela, a configuration analyst in Eclipse's engineering department since 2005, said since Eclipse filed for Chapter 11 in November, managers continued to tell workers that funding would save the company.

"We heard nothing about letting us go," she said. "They said the sale's pending, nothing about that it wasn't going to go through."

Varela, a mother of three young children, said getting no notice has made her job loss a lot rougher than if she would have had time to plan, which would have given her a chance to work on her resume and get reference letters from her co-workers and managers.

Varela said she wants other people facing layoffs to realize they have a right to be forewarned about the possibility of job loss or business closure.

"They should have just followed the law," she said of Eclipse. "Hopefully the next company will think twice about how they treat their employees."

A former Eclipse spokesman said he could not speak for the company since Eclipse no longer employs him.

The former employees' attorney, Jack Raisner, said the WARN Act is underutilized, mainly because workers are unaware of it.

His firm, Outten & Golden LLP in New York City, has 30 ongoing WARN Act cases and has been seeking back wages under such cases for the past six years.

"We rarely come back empty handed," Raisner said. "We don't have optimism of getting 100 percent in a Chapter 7, that would probably be unrealistic."

Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed


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