Cirrus Chief Pushing Light Jet Program
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By Frances Fiorino
Cirrus Design Chairman and co-founder Alan Klapmeier is a man on a special mission. He is seeking $120 million in new equity to "reaccelerate" his Vision SJ50 single-engine light jet program.
Armed with a mockup of the jet, a Cirrus team headed by Klapmeier, in June completed a five-week tour of capital investors, trying to generate interest in the program - no easy task in this current market.
According to Klapmeir, the Duluth, Minn.-based manufacturer is seeking $60 million over the next several months in the first round of financing. A second round, to be completed in the next 24 months, is to raise another $60 million. A final, more traditional, round of financing, in an as yet undetermined amount, will follow the initial effort.
Make no mistake. "This is not a 'program-for-sale' issue," emphasizes Klapmeier. "Cirrus is not looking to sell the jet program. Rather, this effort is an alternate way for Cirrus to fund its jet program."
He explains that it would be easier for Cirrus to raise additional capital for a specific standalone group focused on building the Vision SJ50. The move would enable Cirrus to focus on its core business, that is, profitably producing SR20-and SR22 piston-powered, single-engine aircraft.
Klapmeier notes that the two would operate as separate entities, with the Vision program likely keeping its engineering team and maintaining its facilities at Duluth. In addition, the two businesses would maintain some kind of relationship, given their commonality. The arrangement could include shared ownership and various cost-sharing agreements such as IT services. "Just about everything is on the table right now."
The original Vision plan assumed Cirrus would supply a combination of cash generated out of its SR20/SR22 core business, and outside financing. While Cirrus has weathered the economic storm fairly well, Klapmeier says, deliveries and cash are down. "So the company had less ability to fund the jet program than originally planned. And this led to longer time lines," says Klapmeier.
The Vision standalone idea has been under discussion by management for some time, says the Cirrus chairman. It was an effort to overcome the program's slowdown linked to economically driven company cutbacks (In November 2008, production had slowed to 3-4 weekly. In December, Cirrus temporarily halted SR20/SR22 production and furloughed workers. By April, production had picked up to six weekly and by June, had increased to eight weekly.)
Why attempt to raise capital in this market? Klapmeier, who oversees the strategic direction of the company, recognizes the economy is tough. But he also believes the economy is turning around. And he adamantly believes there is a market for the Vision.
Vision SJ50 certification process, which began in December 2008, as well as R&D, "are coming along very well. But it [the program] is not progressing as fast as I would like, as it has funding constraints," says Klapmeier. "The flight test airplane flies regularly and continues to gather data, and small design changes continue to be made."
Cirrus President and CEO Brent Wouters, who took over day-to-day operations in February, told Aviation Week's William Garvey in May (AWIN, May 7) that the program was "moving along," and that the prototype had logged about 150 hours in flight test and had validated the external design, now with a modified "X" tail for improved stability. At the time, he predicted that customer deliveries would begin in 2012.
Klapmeier noted that Cirrus has never announced a final price tag on the single-engine jet [the initial goal was to produce a $1.3 million aircraft] or a date for first delivery, because "both are dependent on funding."
He believes the Vision program "does not carry a lot of risk." Cirrus understands the airplane and is pleased with the jet's basic configuration. Also, the company well understands the certification and production processes. "We have built about 4,500 aircraft ... It's not about risk, it's a matter of a lot of work ... And the important part in front of us is to raise the financing so we can fund the work."
Klapmeier is unwavering in his belief there is a market niche for the Vision, based on what he sees is a growing need for more economical transportation.
Cirrus sees the aircraft as replacement for pressurized piston twins, says Klapmeier. Operators of higher performance bizjets could find that the single-engine jet "provides valuable transportation but does it at lower operating costs ... And I think we'll see more businesses that need that kind of transportation in the future. Not less."
In the months ahead, the Cirrus team will be seeking money, negotiating terms, talking to the board of directors and main investor Arcapita, Inc. "determining how it all will get done, getting it together," says Klapmeier, who clearly enjoys the challenges of aircraft building. "There are a lot of moving pieces. It's a little like aircraft design."
Photo of Vision prototype in flight: Cirrus Design
