Former Microsoft employee Vern Reborn founded Eclipse Aviation in 1998. The idea was to solve a problem in the aviation industry: although private jet service is safe and convenient, it is also very expensive.
To remedy this problem, Eclipse, headquartered in Albuquerque, New Mexico, set out to design and build a six-passenger jet that could be produced in high volume and at a substantially lower price than existing private jets. In fact, Eclipse’s goal was to create a new segment in the private jet industry called very light jets. The pitch Eclipse made to investors is that its jet would be so small and inexpensive to build and operate, that not only would private individuals buy it, but a new class of air taxi service would emerge to make private jet travel more accessible to middle-class individuals and smaller companies.
Eclipse set out to accomplish its ambitious goals by revolutionizing how airplanes are made. The conventional way of making airplanes does not deliver substantial economies of scale. Planes built by Boeing, Airbus, Cessna, and similar companies are largely hand-built, meaning that increasing the number of units produced only slightly decreases the cost per unit. Eclipse endeavored to change the way airplanes are built by introducing ultra-efficient manufacturing techniques that reduce costs and allow for high-volume manufacturing. The result, Eclipse promised, is that it would be able to sell a jet for around $1 million, which was roughly one-fourth the cost of the least expensive corporate jet on the market.
Eclipse worked toward its ambitious goal for almost 10 years. The firm designed and produced 260 copies of its Eclipse 500 very light twin-engine jet, and developed and sold a handful of copies of its Eclipse 400 single engine jet. Its vision of helping create an air-taxi industry came to fruition, at least for a short period of time.
Dayjet, an air taxi service, was founded in 2002 largely on the premise of utilizing very light jets to ferry passengers to and from midsized cities. Dayjet was Eclipse’s biggest customer, and had purchased 28 Eclipse 500 jets with plans to purchase 1,400 more when it went out of business in late 2008. Investors, suppliers, and state governments (through tax subsidies) invested over $1 billion in Eclipse. In the end, it wasn’t enough. In November 2008, Eclipse filed for bankruptcy. What went wrong?
There are lots of things that went wrong with Eclipse.
However, two factors are paramount among these and represent the essence of why Eclipse failed.
First, a number of people including investors, pilots, local governments (where Eclipse facilities were located), aviation experts, and others desperately wanted Eclipse’s story and vision to be true. The idea of producing airplanes in high numbers, rather than essentially one-by-one, is one that had it came true would have revolutionized the industry. Ultimately Eclipse, like other aviation industry failures before it, couldn’t make it work.
According to aviation writer J. Mac McClellan, it cost Eclipse twice as much to build an Eclipse 500 aircraft than the company was selling it for. Particularly striking is how many people and companies bought into Eclipse’s vision, even though it may have been unrealistic from the start. For example, there were over 5,000 creditors in the Eclipse bankruptcy filing alone. The fact that Eclipse was a start-up may have added to its allure. It wasn’t trapped by the conventional thinking that characterized executives at established manufacturers such as Embracer, Cessna, and Boeing. But in the end, it turned out that the conventional thinking was true—at least for the time Eclipse Aviation was in business. As J. Mac McClellan has noted, building airplanes is like building houses.
Whether a contractor builds one house or an entire subdivision, the houses still have to go up one at a time and each board has to be nailed separately. Similarly, airplanes are built one at a time and their parts are riveted or glued together piece by piece.
The second thing that sunk Eclipse, which is related to the first, is that its ambitions, which were integral to its business plan, were spectacular. Its plan called for deliveries of one thousand very light jets per year. To put that number in perspective, in 2007 about 4,000 corporate jets were built in the entire world. So Eclipse, which was a start-up with no production experience, set out to implement a plan that would increase the worldwide production of small jets by 25 percent. Eclipse’s path to success then became predicated on price and not only production savvy but production breakthroughs. The only way to sell 1,000 jets per year was to dramatically lower the product’s price. The only way to dramatically lower the price was to dramatically lower production costs. When that didn’t happen, the company had no path forward.
Ultimately, Eclipse’s investors, customers, suppliers, and state governments that supported it lost over $1 billion—the largest financial failure in the history of general aviation.

Questions for Critical Thinking
1. What lessons does Eclipse’s failure have for entrepreneurs who are studying the industry or industries they are about to enter?
2. Why do you think more people, including Eclipse employees, suppliers, and customers, weren’t more skeptical of Eclipse’s ability to implement its ambitious plans? Do you think Eclipse’s failure will slow down or accelerate new innovation in the airplane industry?

3. Interestingly, no current manufacturer of corporate jets is using the term very light jets. Embraer calls its Phenom 100 an “entry-level jet” and Stratos describes its jet as a “very light personal jet.” Do you think these companies are deliberately avoiding the term very light jet to avoid conjuring up memories of Eclipse? If so, can you think of another term or name that been tainted by the failure of the firm that first started using it?
4. Eclipse Aviation has been revitalized as Eclipse Aerospace by new owners and a new management team. Spend some time studying Eclipse Aerospace.
How is Eclipse Aerospace positioning itself in the airplane industry differently than Eclipse Aviation did?