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IN BUSINESS JET PLANES

Presenter: Peter Day


TRANSMISSION 25th SEPT 2003 2030-2100 RADIO 4

THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST. THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE THE ACCURACY OF THE INFORMATION PRINTED HERE.

Tape Transcript by JANE TEMPLE

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ANNOUNCER: More now on BBC Radio 4 – it’s time for IN BUSINESS and this week Peter Day goes in quest of the jet plane that costs under a million pounds, or is that a million dollars? Whatever the price, these are jets so cheap that they might just revolutionise the art of travel:


DAY: In one hundred years of flying one barrier remains to be conquered: it’s the creation of the really cheap jet plane and now like London buses here come at least two of them perhaps.


MAN: Nobody has built an aeroplane that didn’t cost enough that’s jet powered. There are plenty of four million dollar aeroplanes and up. There are none today less than four million dollars. We want to do it for less than 1.5. That will open up a market that does not exist today.


DAY: The personal jet that costs less than 1.5 million dollars, less than one million pounds still sounds like a dream to many people, but not to Michael Margeritoff, founder of Safire Aircraft.


MARGERITOFF: It is a twin engine six seat metal aircraft, has a conventional straight wing, a cruciform tail. The maximum cruising speed will be 380 knots and so that’s about 704 kilometres an hour, two pilot seats and four passenger seats and it will be certified for single pilot operation so it can be used for five passengers and one pilot. And it’ll have a spacious cabin and yet have a small maximum take-off weight of only 6250 pounds allowing it to go high and fast and just a fantastic little aeroplane with great specifications at a very, very low price.


DAY: Mr. Margeritoff thinks the plane he is planning will do nothing less than revolutionise people travel:


MARGERITOFF: The travel market which is world-wide is a trillion dollar market and there’s no doubt in my mind that these small personal jets will have their part in the huge travel industry and with that there will be a deluge of needs for this aircraft once it’s up and flying.


DAY: Many aviation experts such as the commentator Richard Aboulafia have profound doubts about the viability of the point to point jet taxi service which the one million pound jet makes theoretically possible:


ABOULAFIA: This is a hideously expensive and risky proposition. You have to build a thousand or so jets. You have to hire hundred of pilots and establish scores of bases and then you have to establish the elaborate ticketing and marketing apparatus necessary and then you of course you have to reach regulatory agreements with people and come up with acceptable air traffic control procedures and then you start up flying people around between these scores of bases. That world is conceivable but it’s almost a parallel universe where money is no real object and risk is not really a factor.


DAY: But let’s start with an entrepreneur who admits to few doubts about the risks he’s taking with his small jet – the eclipse 500, designed to sell at under one million dollars – that’s less than £630,000. Vern Raburn is planning to begin rolling out the eclipse fairly soon at a plant at the airport in Albuquerque in New Mexico where some of the rigs for the body are already in place and this is mass production – he wants to build hundreds a year. Vern Raburn has been obsessed with flying since his school days, but he made his fortune selling computers in California when the personal computer began and then joined the Microsoft founders Bill Gates and Paul Alan as employer number 17. He went on to work with the by now billionaire Paul Alan on his less than sparkling investments, but now in his 50s Vern Raburn is pioneering again, marshalling hundreds of millions of dollars to back his vision of this million dollar jet plane made by the Eclipse Aviation Corporation of which he’s chief executive and president. Vern Raburn puts his new plans for a jet revolution into the context of a great evolution in not just flying but travel as a whole:


RABURN: Today most transportation throughout the world continues to move towards individuals from mass to personal, from large numbers to small numbers – whether it’s a Segway scooter or whether it’s a car or whether it’s a bicycle, we continue to move and I would say this is true throughout the hundred plus years, we continue to move towards personal transportation. That has not been true in aviation. Today, we’re at the other end of the spectrum- Airbus A…? which are you know 600 of your newest closest friends that you’re going to fly half way around the world in.


DAY: To a place you maybe don’t really want to go to so that you can then take another leg somewhere else?


RABURN: Precisely, a place almost inevitably you do not want to go to so that you then can go to where you finally want to go to. And so what we’re trying to do is by changing the value of proposition, by changing the price point but keeping all those great attributes like speed and comfort and safety of a turban aircraft – we can make this much more broadly available to people through a different business model because even our business model of our customers, this is not hub spoke, this is not schedules, this is not aggregated meaning all those 600 of your newest friends – this is about point to point, going where you want to go, not where the airline wants to go, this is about on demand. When you want to go, not when the airline’s scheduled to do and non aggregated meaning it’s you and an airplane and a pilot. And so it’s the very, very similar concept we had PCs in the beginning, very similar concept to cars versus buses


DAY; And of course when you say desktop computers you recognised what was going to happen with desktop computers pretty early in the game didn’t you?


RABURN: Well yeah I guess I can claim that. The reality is anybody including my friend Mr Gates who said you know we wanted to put a PC on every desktop and that’s one of those claims that’s sort of made in hindsight. What we understood is that if you could bring the technology, if you could bring the computing power to an individual level, wondrous, marvellous, unpredictable things would happen. This is not about an airplane in every garage or a PC on every desktop but it’s about just increasing the accessibility.


DAY; This says Vern Raburn is changing the way aviation works, at least general aviation – flying by individuals:


RABURN: The general aviation sector has become to the first order irrelevant – irrelevant in this sense: the aircraft that are wonderful, Citation 10s, G4s, Hawker 800s – I mean the list goes on – they’re wonderful wonderful and wonderful aircraft.


DAY: Business jets?


RABURN: Business jets, and they’re available only to the extremely wealthy and the very, very large and successful corporations. I mean once you’ve flown in a business jet it’s really hard to go back to South-West Airlines or Easy Jet or any of the other discount carriers or for that matter even any of the mainline carriers, but the simple fact of the matter is they’re extraordinarily unbelievably expensive. At the lower end of the general aviation market really all those aircraft afford today is recreation because if you want just transportation – I got to get from A to B in the least amount of time for the least amount of dollars – it’s very difficult to compete with 50 year old technology against brand new airliners. So what we’re trying to do and why a lot of people in the industry don’t understand this is in the context of what is today they are correct. You will not fly on a general aviation airplane for transportation. It’s great fun for recreation. It’s great fun for going and see grandmother on Christmas or Thanksgiving. It’s a great personal endeavour, but it’s not a form of transportation unless you have the wealth to afford a business jet. We’re trying to change that equation. We think if you can change that equation that in turn will create whole new markets and in fact the numbers we project are going to be probably low for this size of the market potential.


DAY; Some 1700 miles south east of Vern Raburn in Albuquerque is the headquarters of the rival personal jet company Safire, based at Opelika airport close to Miami in Florida. The company is in formation stage but it already has a head of human resources – Dave Drugman. He’s another keen flyer who thinks that jets which go above the weather and go faster than cheaper propeller models are the way that people really long to fly. He agrees with Vern Raburn’s vision of an affordable air taxi service speeding ordinary travellers, not just the super rich, across those vast spaces of America and maybe the rest of the world too:


DRUGMAN: If you look at the cost today to rent a charter aircraft, a business jet, to go to Cleveland, to have them wait on the ground for you for two hours or more and to fly back here and let’s not forget the catering, they don’t things from Burgur king on those planes okay so they get some good food. But when you put all of that together and you look at how much it costs you to rent that airplane for that period of time I believe their costs – I know they’re in the thousands of dollars but I think they’re in the multiple thousands of dollars operating costs, when you figure that out – we’re going to be talking about the low one hundreds of dollars in operating costs, so now it’s really more like the air tax concept truly is being based on one way. I can go to Cleveland – when I get out they’re gone. The other thing is if I’m going on my own or I need to go, I can also bring some software …to go to auction the other seats on my airplane to people – very similar to an Ebay type of concept except specialising only in the seats on the plane. They don’t do that with the big boys when they – when they charter the airplanes. You charter the whole airplane but in this case I can say I want to go to Cleveland tomorrow morning and they say how many people are going with you? – and I say just me and I say well there are four other seats do you mind if we sell ‘em? - no you can sell them. And now they’ll try and auction those seats to people within 25 miles of where I am because they will fly to those small airports and pick ‘em up on the way out. And if they sell those seats on the aircraft the cost of me of my tax cab price just went down. Very similar if somebody splits a cost with you in a taxi.


DAY; These people are trying to start a revolution in travel in very spartan surroundings – a few doors down the corridor from Dave Drugman is the office of the founder of Safire Michael Margeritoff, quite convinced that within a year or two he’ll have a plane that will satisfy the agencies who regulate flying and then go on to attract the people who want to fly cheap jets. If it’s such a good idea why I ask has it taken him 30 years to get this company together?


MARGERITOFF: It took 30 years because one of the vital ingredients was never manufactured, mainly the engines and everything else was always there so this programme was initiated when – in 95 I first heard of an engine that was a probable contender for the job of the low cost twin engine jet and it then turned out that that engine would not materialise so we had to redesign and now we have an exciting, excellent aircraft with very, very sturdy, reliable engines.


DAY: Why has it taken so long to get there because nobody saw the need for the thing or technology wasn’t ready – what’s the –what’s the difficulty with an engine?


MARGERITOFF: I think both – in fact when you look at the comparison between the piston engines and the turbine engines, there was a huge growing industry on the planet for piston engines and they’ve now matured over a century whereas the turbine engines have only matured over a much, much shorter period of time and have had blooming and blossoming industry in the military and in the airlines and in the very expensive business jets and now I think it’s a logical consequence that they’re coming down in price and will be available for much, much larger number of people.


DAY: Michael Margeritoff, founder and chairman of Safire Aircraft in Miami. Back in Albuquerque, Vern Raburn was another wood be aircraft manufacturer who created his whole plane the Eclipse around the launch of a new, small jet engine by the Williams corporation – an…..?.based company keen to diversify from their cruise missile engines. The new engine was a beautiful design but there was just one snag: when they fitted the engines to the Eclipse in the harsh summer climate a mile above sea level in Albuquerque they didn’t work properly. This was August last year.


MARGERITOFF: The engine was a disaster.


DAY: You’ve bet the ranch on this – this thing and it doesn’t work – what on earth was it like?


MARGERITOFF: What was it that the Queen said in l992? – it was her ….?..this was probably our 1992 – 2002 was like that for us. It was a bad, bad time and there’s just no


DAY: Did you feel wretched yourself?


MARGERITOFF: Oh terribly – I mean just terrible. It was – probably in my 30 year career it was the worst time I’d ever experienced in my life.


DAY: What do you do in those circumstances? – here’s the whole thing, you’ve erected everything around – whatever else you say, that’s basically the foundation stone and it’s gone – what do you do?


MARGERITOFF: You do one of two things: either give up or you go and solve the problem and in our case we put Williams behind us, we reached a settlement with them corporately and we went forward with our story, with our proposition, with our vision and it’s very difficult, it’s very tough because you don’t know from almost literally day to day whether or not there’s a tomorrow but you can’t do anything other than keep going. Test pilots are interesting creatures in one aspect in that if you listen – and pilots in general, but test pilots specifically, if you listen to any of the cockpit voice recording tapes of an accident what you find is rarely do you hear someone scream, shout – you know oh my God, I’m going to die or anything like that. What you normally hear them say is we’ve tried A it didn’t work – we’re trying B – that didn’t work. We’re going to try C – that didn’t work. We’re going to try D –splat. In aviation, and in this is part of my training as a pilot, I’m not a test pilot I want to emphasis that but part of my training as a pilot is that you don’t give up. You don’t just stop, you don’t panic, you don’t throw your hands up and I think the more you have involved, the more’s at risk whether it’s investor dollars, whether it’s peoples’ lives, whether it’s deposits from customers, whether it’s vendors who are hiring in people – cos there are lot of stakeholders in this process.


DAY: So you turned to plan B?


MARGERITOFF: And if plan B doesn’t work you go to plan C and if plan C doesn’t work you go to plan D.


DAY; Mis steps such as betting on the wrong engine are an absolutely huge setback to a start-up company trying to change the aviation world – a blow to reputation, finances and morale. The leader of the Eclipse design team is the British born Oliver Masefield who told me why until now small jets have been so expensive that only plutocrats could afford to use them:


MASEFIELD: It’s a vicious circle – in the private jet arena or even turbo props each aircraft is basically custom made. You offer your customer a whole variety of options and if you’re offering an aircraft which is let’s say five million dollars, they expect to be able to choose. Now you’ve got this vicious circle – this expectation you have to meet. Now you’re customising the aircraft and the interior of an aircraft can take weeks or in the sort of 30 million dollar aircraft can take months to produce so we’re trying to break that vicious circle and spiral down to something which is much improved value proposition.


DAY; And that takes us back to mass production which is what this plane has been devised around from the very start – and that’s the thing that differentiates it from conventional business jets?


MASEFIELD: Absolutely. Like the formula that Henry Ford invented a hundred years ago, if you can produce in volume you can produce at drastically lower costs and that’s the card which we’ve betted on right from the beginning. We’ve managed to convince investors to invest quite a substantial amount of money for this size of programme but utilising that to develop the processes which will take us to mass production and the company which will take us to mass production.


DAY: Oliver Masefield, chief designer of the sleek little Eclipse jet plane in Albuquerque. These start-up companies appear to have little fear about challenging established aviation corporations with the established market for corporate jets. But the newcomers need hundreds of millions of dollars to get their production lines rolling and much of the money still has to be found. Raising money from investors is a prime job for the chief executive of Safire aircraft Camilo Solomon and his difficulties have been compounded by the bursting of the dot com entrepreneurial bubble:


SOLOMON: There’s absolutely no appetite for aircraft companies in their financial market. It’s a huge challenge – yes, but I think that we’re proving our concept and each day that passes and that we achieve important milestones and that we prove our concept we’re starting to be of the appetite of you know even institutional investors. Once we get into our revenue stage the value will be there for the investors.


DAY: But you’ve got to spend quite a lot of money before the revenue stage –you’ve got to ground break on the factory, you’ve got to hire people for the factory so there’s a lot of spending to go?


SOLOMON: Yes, there’s a lot of money we still need over a hundred million to be ….?..we’re counting with the huge cash infusion that we expect to have after first flight – you know which is another standard in the industry. Most of these ventures think that like getting to first flight and triggering a lot of orders and generating cash flow the project will be self sustainable from that point on. My approach is different. I think that we need cash infusion, equity investors until we go way beyond into the manufacturing phase. So, that’s my funding strategy for the company.


DAY; Creating a completely new aircraft is a series of milestones, some of them unhappy ones such as the decision of Vern Raburn at Eclipse to abandon those original Williams engines around which he’d designed the plane and go for new and untried ones from Prett and Whitney in Canada – engines which still have to be proved. Next year is when Vern Raburn will know that plan B is actually working:


RABURN: The next really big event that the world will see is when we fly the first airplane with the Prett and Whitney engine in it which will be late next year so about fifteen months from now.


DAY: Then you’ve got a year of accreditation?


RABURN: It’s slightly more than a year – it’s about sixteen months and during that period we will be flying a fleet of five aircraft plus we’ll have two ground test aircraft and one too that will be destroyed in the testing. The other which will be a fatigue aircraft which we shake until it has multiple lives. We expect to get approximately 3500 flight test hours on a fleet of aircraft which compares interesting – the all time test fleet was the Concorde which had about 5200 hours of flight test time prior to its entry into commercial service. The Boeing 777 has been right up there and it had about 4000 hours so we’re going to be almost as well tested as the Boeing 777 which had one of the best entries into service in the history of – of the airline industry.


DAY: First customer takes delivery when?


RABURN: In early 2006 and we expect to deliver the first customer’s aircraft almost coincidentally with when we get certification from the FAA.


DAY; And you really have to do that? – there’s no much room for another bit of slippage is there?


RABURN; Well you never say never. But yeah we’ve probably used up most of our margin in most of our pad(?) I mean let’s face it, if we get down to 90 days away from certification and we have a 30 day or a 60 day delay we’ll be able to survive that. But if we have another major failure like the Williams engine then yeah that would be a very difficult thing to survive.


DAY: With teams of specialists and money and factory plans plus deposits coming in from real orders, it’s easy to get carried away with these ideas for revolutionary jets which have yet to fly. One observer who’s certainly not carried away with the idea of a sub million pound jet is Richard Aboulafia, influential analyst for the aviation consultancy the Teal group, close to Washington DC. Vern Raburn’s Eclipse has to produce more than a 1000 planes a year to make its economics work and that is a big problem for Richard Aboulafia:


ABOULAFIA: The biggest risk for the price tag is not so much the – the growth of weight and cost and complexity which are certainly factors but rather the market. If you look at their planes for what was originally an 845,000 dollar plane and it’s still hovering around there I think notionally, it calls for something like four digits per year to be produced which has never really been achieved since World War II and then under entirely different circumstances. Basically if they don’t do that I have a feeling that cost will probably migrate heavily upwards.


DAY; So you think there’s something of a fantasy even about Vern’s very well worked out plans? – I mean he’s been thinking about this for years and years?


ABOULAFIA; Oh I think there’s a real breakthrough if someone provides a huge amount of money. Basically what you have to do is produce a vertical taxi service where you provide both the plane and the service for the simple reason that if you don’t attack this market all at once you’re going to have the problem of dead head flights – that is to say you’re going to have people being ferried somewhere and then you’re not going to be picking anybody up at the place so you fly back empty which is terrible because you’re not creating any money. So basically you have to have something like the Nimis Group plan, - Nimis Group being the first enterprise that was interested in the Eclipse – a thousand planes in scores of bases with hundreds of pilots and basically everybody moving through the air all at once. And this is a hideously expensive and risky proposition. If you could do it though it’s undoubtedly the best chance to get the sort of volumes they’re talking about.


DAY: What is it that drives people to do things like this? – I mean taking on the most enormous odds – this is a fantastic risk to take isn’t it?


ABOULAFIA; Well it’s aviation. Aviation has always made strong men tremble with dreams of greatness and rightly so. It’s the same factor that produced in the 90s myriad planes to build an airplane factory in the jungle of developing countries like Indonesia. You know why not? – why shouldn’t we have a national plane? It would be symbolic of our nation’s maturity and power. Most of these dreams pretty much died or are in the process of dying even as we speak. Nevertheless, aviation has a magic to it.


DAY; And in Albuquerque, Vern Raburn is certainly caught up in the magic in the intense concentration of his Eclipse headquarters, full of people pouring over plans. This remember is a man who took part in Bill Gates’ computer software revolution and Bill Gates’ is one of his backers now. Vern Raburn is used to sceptics:


RABURN; Well I think there’s some of our critics will never be convinced. We could probably build 10,000 airplanes and they’ll still say oh it’s a flash in the pan. This isn’t real. What we need to do is a couple of things: the first and most important is we have to get he aircraft certified. We have to deliver the first airplane and it has to do what we say it’s going to do and I’m highly confident that that’ll occur. The second step is we have to build a few of these things and people have to decide you know it’s a pretty nice airplane. It does what I’d like for it to do – it meets my mission needs. It meets my needs in the market place. And then third and this is the part we don’t truly control –we have to have some customers who go out and solve the hundreds, the thousands of problems that there will be in implementing an air taxi business, so I’m sort of like Donald Douglas building the DC3. I got to depend on Jack Fry at TWA and CR Smith at American Airlines and Bill Paterson at United Airlines to take my airplane which today the world looks back and says this is one of the airplanes that changed the world. I got to have the same CR Smiths and Bill Patersons and Eddie Richenbakers of Eastern Airlines – I’ve got to have those kinds of folks – guys and gals who are going to take he Eclipse 500 and build a whole new transportation network about it.


DAY: But you don’t know they’re out there at the moment? You just hope they’re out there?


RABURN; Oh no, I know some of ‘em. I have extreme faith that some of the ones that we’ve sold aircraft to are going to do precisely that.


DAY; And they can do all that work working with local councils who want to stop the noise and all those local rules and regulations about this sort of thing. I mean this is taking on thousands and thousands of people isn’t it?


RABURN: Yeah but keep in mind – most of those rules, most of those regulations are devoted towards aircraft that aren’t like this aircraft. This is the quietest jet that’s ever been made. This is a jet that will be able to go in and out of a small local airport and within 30 seconds of take-off people won’t be able to hear it because it’s got extremely quiet engines, these are stage four plus engines so these are quieter than any other engine that’s out there today. The aircraft climbs very, very, very rapidly so it’s get up high where people can’t hear it so you start with the quietest engines available –you have an aircraft with this extraordinary performance and suddenly the objections, the traffic that’s created by unloading 50 or 100 people suddenly the objections of we’ve got to have the runways be a mile and a half long, suddenly the objections of this is polluting the atmosphere – all those objections completely and totally disappear. There’s an old adage in aviation that the way to make a small fortune in aviation is to start with a large fortune. I’m very aware of that adage and I would not have turned down many of the opportunities I had particularly in the dot com world which at the time I started Eclipse was roaring at full throat….?to even working somewhere else in the technology business if I didn’t think we had an opportunity to fundamentally change things here – taking technology, taking a new way of thinking about business and coming into a very staid, a very obsolete, a very sort of lack of innovation industry and applying innovation, applying a lot of the rules out of the technology world and come at it with a new – new form of transportation.


DAY; What adventures they embark on, these American entrepreneurs – surfing the setbacks and the failures and waiting for the dawn when thousands of tiny airports across America will be woken by the roar of the engines of the jet that cost less than a million pounds – or is that dollars?


BACK ANNO: Peter Day. The producer of that million dollar IN BUSINESS was Neil Koenig. Next week’s programme looks forward to the era when every single object has its own phone number.


 

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