Struggling plane-maker Adam Aircraft has suspended operations and sent its 500 employees home, a potential death blow for what was once a promising industry in Colorado.
The Arapahoe County-based company pinned the problems on an unsuccessful attempt "to come to terms with (its) lenders for funding necessary to maintain business operations."
Adam Aircraft previously said it needed .5 million in short-term funding by the end of January, adding that it would have to liquidate some "shareholder value" if it wasn´t successful.
It had hoped those funds would help carry it to another round of long-term financing of about $ 100 million.
The company announced its decision to suspend operations Monday afternoon, less than two weeks after saying the hunt for financing was "progressing well."
It´s unclear what will become of Adam Aircraft.
The company said it is exploring all options, but officials declined to comment beyond a short statement.
"We will make a further formal statement later on in the week," said Adam Aircraft spokeswoman Shelly Simi. "At that time we´ll announce what our options are."
Observers said the company could try a last-ditch effort to raise more money, or it could look to sell the business or some of its key assets.
Its latest move, though, could mark the end of a fledgling industry here built around developing super-lightweight jets.
Adam Aircraft, which recently started selling a piston-driven plane, was developing one of these jets for business executives and wealthy individuals. The jet weighs about as much as an SUV and features two engines on its fuselage and space for up to six passengers.
Adam was working toward receiving federal approval of the jet and had recently made some key progress toward certification. It has about $ 1 billion in back orders for both of its planes.
Adam Aircraft was flying high last summer, when it announced a $ 105 million infusion of capital in a round of financing led by Morgan Stanley Senior Funding. That came on top of more than $ 90 million in capital it secured the previous year.
Another promising local plane manufacturer - Aviation Technology Group - was growing a year ago but ran into funding issues. ATG, as it´s known, recently ceased development of its high-performance, two-seat jet. The Arapahoe County-based company laid off all but a handful of its workers in December and is still trying to salvage the business.
Industry watchers say both Adam and ATG ran into similar problems, including a rise in the cost of fuel that might have scared away some potential customers and investors. It´s also become harder to secure capital - particularly for businesses with enormous startup costs - amid economic concerns.
"I think it really reflects the difficulty of getting these airplanes designed and certified," said Henry Harteveldt, a travel analyst at Forrester Research in San Francisco. "The reality is that profitably building airplanes is a very tough business."
Combined, Adam Aircraft and ATG cut nearly 800 local jobs. Economists said the job losses are small in the big picture, but they´ll still ripple through the economy.
"Most of those jobs are probably classified as manufacturing and airplane assembly, and generally speaking those are high-wage jobs," said Rich Wobbekind, associate professor of business at the University of Colorado´s Leeds School of Business.
"In the big picture it´s not a huge number of jobs, but they are important jobs. It´s an industry that Colorado is really trying to grow and develop. So from that sense it´s definitely a setback."
A look at two airplane companies
Aviation Technology Group
Headquarters in Centennial; manufacturing, assembly and testing at Front Range Airport in Watkins
Headquarters and final assembly plant at Centennial Airport; engineering facility in Pueblo; five smaller operations at Centennial and in Ogden, Utah
Arapahoe County-based Aviation Technology Group, which shut its doors and laid off workers in December because of funding problems, employs a skeleton crew and is trying to revive the company or sell its assets.
Financial troubles forced Adam Aircraft to suspend operations Monday and send its 500 workers home.