The dreams of a new, single-engine business jet continue to burn brightly for VisionAire after recently ending a hiatus from both capital raising and development. The US company stopped design development of its Vantage aircraft one year ago after a design review that revealed aerodynamic and weight issues.
Now the company needs an additional $150 million to deliver their aircraft.
The delay brought new headaches to VisionAire chairman Jim Rice as his young company ran dangerously short of cash. At one point the company's copiers were even held hostage for payment and president Don Koslowski resigned from the stress. But few in the industry are betting against the persistent Rice, who chatted with AeroWorldNet in a private interview at last week's NBAA show in Atlanta.
Bad News/New Blood
Pointing with pride at Joe Furnish, an industry veteran who joined the company in March, Rice described his head of engineering as a man who has been there before. Furnish was involved in the certification for the Beech Starship as well as several other business aircraft.
Rice had an inkling at last year's NBAA show that they needed a design audit. Burt Rutan had responsibility for the flight test but his crew had never certified an aircraft. During the technical week, Ollie Boileau and Jim Kinnu, two veterans of Boeing and Northrop Grumman, discovered that the Vantage exceeded the FAA requirement of no more than 15 degrees roll-off at stall. The aircraft was also coming in at 700 to 800 pounds overweight. Compounding the problems were the lack of delivery of parts for VT1, which were being made but not showing up.
When the report came in from Boileau and Kinnu, Rice felt he had no choice but to announce that he was putting everything on hold until things got ironed out. That meant stopping sales, fund-raising and development. "I was scared to death on December 11th, when we sent out our delay letter," said Rice. The company had historically lost eight orders per year as part of a normal attrition from its backlog but Rice worried that this news would spook Vantage buyers who are generally moving up from turboprop aircraft. Remarkably, the net loss was only 13 orders, giving VisionAire reason to believe that its aircraft really filled a longstanding need in the market.
Rice believes that one strength of his market comes from selling direct to aircraft owners, rather than through dealers, gently suggesting that other new jet manufacturers aren't quite as fortunate. "When you sell to a dealer you stand a good chance of getting the aircraft back if they're unable to sell it," according to Rice, a position he didn't want his company in.
As for competitors in the brave world of new, light biz jets, Rice wishes them well. "All our competitors have to raise money, too, and it's very tough to raise money out there," acknowledging his own challenge.
Back To The Capital Markets
Rice also is going back out on the fund-raising trail, looking for an additional $150 million to carry the company through. To help, VisionAire has signed the first-ever outside capital consultant, contracting with Tunstall Associates of Florida to secure new investment capital. According to Rice, Tunstall is a financial strategist firm, successful in 70 out of 72 deals last year. "We talked to a number of investment firms but this one fits," said Rice. Tunstall is approaching large institutional investors instead of the smaller, individual investors that have been VisionAire's mainstay. Do they have plans to go public? Rice quickly responds, "Yes, but we won't look at that until 2002. We've certainly had the opportunity to consider it, but want to wait until we have the revenues to support it."
As for now, Rice and company plan a roadshow to help support fund-raising efforts.
"We also had a company approach us to buy us about three years ago but we didn't believe they were funded any better than we were," added Rice.
How has the delay affected them versus the competition? Rice and Furnish are confident they're building a solid business jet. As for the fact that the company is building a single-engine jet when new, light twins are also on the drawing boards at competitor companies, Rice responds that the Vantage is using certified engines, the Pratt & Whitney JT15-5D, which has an exceptional reliability track record. "We looked at the FJ33 (Williams) engines but we would have needed a much smaller fuselage," said Rice. "And we decided long ago that turboprops weren't the way to go."
"Whatever you do, don't start with a new engine and a single-engine design at the same time," adds Furnish. "Safety is paramount. Lears and Falcons have to land at higher speeds. Our aircraft can land at 70 to 75 knots. That cuts the risk down dramatically." From 30,000 feet the aircraft can glide around 70 knots to a safe landing spot in the event of engine failure.
The new design will use newer, LCD avionics displays, saving 60 pounds.
80 percent of VisionAire suppliers are risksharing partners. All are hanging in there. VisionAire recently raised the price of the aircraft to $2.195 million, with an escalator clause of a maximum of 3% per year, and the company feels there is enough price elasticity to support an even greater increase. The price raise will help offset non-recurring expenses in the redesign efforts.
Any concerns about bringing in enough money to finish the job? "Not really," says Rice. First, most industry observers acknowledge that he's a consummate salesman. "We raised just $5 million from late 1994 to December 1996. Then we raised $18 million in 1997. During 10 months of 1998 we raised $26 million," said Rice, recounting the capital efforts to-date.
New Iowa Facility
The company's facility in Ames, Iowa, was supposed to be bustling with activity by now. Instead, there are just a few VisionAire staff there. "We're storing ball jars and genetically altered soybeans in our facility now. When we right that chapter of the book we're going to call it bottles, beans and planes," quipped Rice.
Out of 450 investors, 130 are in Ames. "We have between $14 million and $15 million in equity from Ames. Fortunately, they're patient. In fact, when we asked local farmers if we could fly our aircraft over their farms at 500 feet we expected them to be concerned about their livestock. Instead, they wanted to know when we planned to fly over so they could make sure they had their cameras ready in order to snap pictures."
Rice plans to deliver his new Vantage aircraft beginning in September 2002 from the 115,000, $7 million Ames facility. If Ames, Iowa, is any indication of the market, they'll be ready and waiting.