Built for speed
Richard Tracy wants to produce the world's first supersonic executive jet. He's got clever technology and backing from a billionaire. But can Aerion succeed where many others have failed?
by Robert F. Howe, Business 2.0 Magazine

(Business 2.0) -- The aspiring entrepreneur was all wound up. At a commuter airport outside Orlando in late 2003, Richard Tracy stood waiting to greet the man who held the purse strings to his future: Texas billionaire Robert M. Bass.

Time was tight when Bass landed in his private Falcon 900, so the group gathered in the unassuming lobby of a company that services executive jets. After nearly three years of negotiations and painstaking technical scrutiny, the deal was finalized in less than an hour. With a last stroke of his pen, Bass created Aerion, a company dedicated to building the world's first supersonic executive jet. "That's when we made the transition from being just a bunch of hopefuls to being in a position to make things happen," Tracy says. "Now it's up to us to make this thing fly."

He means that quite literally. With its Pinocchioesque nose and slender fuselage, Aerion's supersonic business jet (SBJ) bears some resemblance to the iconic Concorde. In truth, however, there are few similarities - the SBJ's stubby wings and side-mounted engines are strikingly different. And where the Concorde ferried as many as 100 passengers on a limited number of routes, Aerion's SBJ will carry no more than 12, is capable of landing almost anywhere, and will fly at Mach 1.5 - almost twice as fast as existing corporate jets. That would cut the 2.5-hour flight from New York to Miami in a conventional business jet to a mere 1.5 hours. Likewise, the 14.5-hour subsonic haul from New York to Tokyo could be trimmed to 9.5 hours - even factoring in a stop in Anchorage to refuel.

Two decades of design

At least that's the idea. Tracy, who is now 75, has spent almost two decades refining the SBJ, and models of his designs have proven themselves in wind tunnels and computer simulations. But the aircraft is still several years from rolling down the runway - if, in truth, it ever does. With just five full-time employees, Aerion must now assemble an international consortium to provide the estimated $1.4 billion needed for further development and to create the manufacturing facilities required to build an aircraft. The SBJ must also survive rigorous regulatory reviews by international certification boards. Then there's the price tag: Aerion anticipates that the plane will cost $80 million - roughly 70 percent more than current high-end business jets like the Gulfstream G550. If all goes according to plan, the SBJ will enter service by 2011.

The price is particularly conspicuous as a new generation of inexpensive jets - like the $1.5 million Eclipse 500 and the $2.5 million Cessna Citation Mustang - will begin flying later this year. Demand for these cheaper planes has been strong: Eclipse's order book for the 500 already exceeds 2,400 aircraft. Yet the market for high-end private jets has also been healthy: Between 2003 and 2005, unit sales of business jets costing $40 million or more grew by 21 percent. In a study commissioned by Aerion, StrategyOne Consulting, an aviation-industry research firm in Wichita, Kan., estimated a market for about 250 SBJs over a 10-year period.

"The bottom end of the market is flooded," says Michael Henderson, Aerion's COO, who headed Boeing's stalled effort to develop a supersonic jetliner during the 1990s. "At the top end there are fewer competitors, and in the supersonic market there are none. The need for speed is manifest." Aerion's biggest challenge now is to convince potential partners that if they build the SBJ, enough multi-multimillionaires will line up - checkbooks in hand - to order their very own.

75-year old CTO

As Aerion's founding visionary and chief technology officer, Tracy occupies a corner office in the corporate headquarters, but the space itself is humble. Tracy looks out over a freeway that bisects Reno, Nev., fluorescent lights cast a pale glow over his metal desk, and a lone cardigan hangs limply from a coatrack. One of the few decorative items, a framed photo behind his desk, depicts an odd-looking business aircraft soaring over snow-topped mountains.

"That's a Lear Fan," he explains.

An aerodynamicist with a Ph.D. from Caltech, Tracy led the team that created the Lear Fan for business jet pioneer Bill Lear during the 1970s. With a single "pusher" propeller mounted at the back of a Y-shaped tail section, carbon-composite construction, a top speed of 400 mph, and the ability to carry eight people, the Lear Fan was designed to set new standards for speed, economy, and comfort. When a prototype took flight on Jan. 1, 1981, Tracy's hopes soared as well. "It could have been a big deal," he says wistfully.

Yet despite an eight-year gestation, the Lear Fan never went into commercial production. Bill Lear died in 1978, and his successors couldn't amass sufficient financing to complete the development and flight certification process. But instead of losing his affection for the aircraft business, Tracy embraced an even more ambitious dream: designing a supersonic business jet. "The world," he says with renewed enthusiasm, "has been waiting for an efficient supersonic aircraft - one that has reasonable range, with operating costs that are competitive with subsonic airplanes."

Tracy's solution to those problems is rooted in an aerodynamic phenomenon called natural laminar flow. In simplified terms, natural laminar flow is a layer of smooth air generated by a precision-shaped wing as it rips through the atmosphere. On conventional wings, airflow becomes turbulent at supersonic speeds, creating greater aerodynamic resistance, or drag. The only way to overcome the drag is by increasing engine power, which explains why supersonic aircraft have a reputation for being both heavy and fuel-hungry. Natural laminar flow reduces those power requirements by significantly reducing drag.

Applied to a supersonic business jet, the technology dazzles for two very marketable reasons: The straight-edged wings of the Aerion SBJ will slice through the air with such efficiency that the craft can be powered by the same Pratt & Whitney engines that drive today's subsonic MD-80 airliners. So rather than investing untold millions to design a new engine, Aerion can outfit the SBJ with an off-the-shelf workhorse. Second, the plane is so light that it can use the smaller, less crowded commuter airports preferred by harried business execs, as well as by companies that lease corporate jets.

The idea of exploiting natural laminar flow has been around for some time and has been tested successfully on modified F-16 fighter jets. Charles Eastlake, a professor of aerospace engineering at Embry-Riddle Aeronautical University, agrees that the theory is solid but adds that "going from a successful experimental test airplane to a successful production airplane is a step that many technologies fail to make." One possible glitch: Natural laminar flow requires a plane's wings to be perfectly polished and smooth; in the real world, it may be hard for aircraft owners to keep the wings so spotlessly clean.

Seeking financing

Regardless, after forming his own aerospace research and consulting company in the late 1980s, Tracy refined his natural laminar flow designs to the point that he felt confident enough to approach aircraft manufacturers about collaborating on a supersonic corporate jet. Executives at Boeing, Cessna, Gulfstream, Lockheed, and other companies expressed interest, but in the end, nothing came of their talks.

Tracy was on the verge of giving up when an acquaintance introduced him to Bass, who was instantly intrigued. A low-key but high-stakes corporate financier who earned some of his early millions through investments in oil and real estate, Bass has also taken positions in such companies as Taft Broadcasting, Washington Mutual, and Westin Hotels. After meeting Tracy, Bass hired Henderson, the former Boeing exec, to study his work. For two years, Bass's team scrutinized Tracy's engineering, while also analyzing the market potential of a supersonic business jet. In the end, both Bass and Henderson became admirers. "Unlike many of the projects I've looked at," Henderson says, "this one seems to have a real chance."

Henderson became Aerion's chief operating officer, and Brian Barents, a former Air Force general and Learjet CEO, signed on as the company's vice chairman. Today, Barents is leading the charge to assemble a team of investors, aerospace subcontractors, and manufacturing experts who can bring the SBJ to fruition. The breadth of the search is less a function of Aerion's small size, he says, than of the high capital costs associated with building airplanes. "It's not unlike the business model that [Airbus and Boeing] use today," Barents says of the decision to finance the project through a consortium. Moreover, because the airplane will require certification in many countries, international partners will be essential. "It certainly helps if you have a major partner with influence at local agencies," he says.

Barents says the team will likely be assembled before the year is out. "There's substantial interest," he says, while declining to reveal any names. Some observers say the key for Aerion may be to find partners who are determined to be the first to market - a feat the company might well accomplish, if only because it uses an off-the-shelf engine. "If you believe in seizing the opportunity, Aerion could get you there relatively quickly," says Richard Aboulafia of aerospace consultancy the Teal Group.

Still, in a production consortium, it's difficult to predict precisely what role Aerion itself would play. It might license the technology to a major manufacturer, or it could become a risk-sharing partner that would take a prominent role in convincing regulators that the design works and the aircraft should be certified to fly. "We're the ones who understand the wing design, and the wing is the enabling technology," Barents says. "Somebody's going to do this. Why shouldn't it be us?"

Breaking the sound barrier

Even beyond the financial challenges, anyone hoping to commercialize supersonic flight faces a formidable speed bump: the sonic boom. In the United States, the Federal Aviation Administration forbids commercial jets to fly faster than the speed of sound over land. Period. The reason is simple: People on the ground refuse to suffer the thunderous cracks created when aircraft push through the sound barrier.

Various companies have tried to solve this riddle, but so far to no avail. Working in partnership with Boeing, NASA even spent $1.5 billion between 1988 and 1999 as part of an effort to develop a 300-passenger airliner that could fly at Mach 2.4. But in the end, the inability to suppress the big plane's sonic boom helped drive the supersonic airliner to an early grave. On such a large aircraft, "the problem proved too tough a nut to crack," says Peter Coen, the head of NASA's ongoing supersonic research effort. But, he notes, "technical progress made on that project found its way into more recent efforts."

Some other nations have similar concerns, but their regulations offer a crucial loophole: They merely forbid aircraft to create a sonic boom loud enough to disturb people on the ground. The distinction may seem trivial, but in practice it allows jets to fly faster at high altitudes because the speed of sound varies with the temperature of the surrounding air. Sound travels at 761 mph at sea level and at roughly 660 mph at 51,000 feet (the Aerion jet's projected cruising altitude).

Under FAA rules, the SBJ could fly no faster than Mach 1 over U.S. territory - meaning that, even at 51,000 feet, the plane would have to remain below 660 mph. Over Europe, however, it could go well past 700 mph, because even though the aircraft would create a sonic boom at that altitude, the shock waves wouldn't be audible on the ground. Instead, under the right conditions, the sound would be neutralized as the warmer air below increased the effective speed of sound, muting any shock waves cascading down.

Aerospace firms have intensified efforts to persuade U.S. regulators to reconsider the zero-tolerance policy on supersonic flight, and the FAA has commissioned research to determine how much noise the public might be willing to accept. Carl Burleson, director of the FAA's Office of Environment and Energy, declines to predict whether the FAA might soften its stance, but he notes that technological advances have dramatically reduced the noise levels of conventional aircraft. Even so, he draws a line in the sand: No matter how precise the simulations of new aircraft might be, he says, "I'm not going to change the regulations until I have at least one real plane to test."

That means the industry has a serious chicken-and-egg problem: "Nobody will spend billions to develop a supersonic aircraft only to have someone say, 'Oh, you can't fly that over my land,'" says Robert Baugniet, a spokesman for Gulfstream, the executive jet manufacturer based in Savannah, Ga. "And who's going to buy an $80 million plane that's not allowed to do the very thing it was designed to do?"

The logic is cruel and absolute. Aerion's response: Over U.S. territory, the SBJ will fly just under the speed of sound. Where there are no restrictions, the pilot can open up the throttles. Critics scoff at such a seemingly evasive solution, but Aerion says its market research was conducted under such assumptions, and the studies still identified 250 to 300 likely customers for the SBJ.

Those are essentially the same figures cited by Aerion's biggest potential competitor, an entrepreneurial venture called Supersonic Aerospace International. Based in Las Vegas, SAI was founded in 2000 by Michael Paulson as an homage to his late father, Allen Paulson, the colorful former owner of Gulfstream. "Literally, one of the last conversations I had with my father before he passed away was that I would take on this project and get it done," Paulson says. SAI has released specs and renderings of a proposed business jet called the Quiet Supersonic Transport (QSST).

Alternative design considerations

Paulson takes issue with Aerion's devotion to natural laminar flow, in part because it does nothing to reduce the magnitude of sonic booms. (Aerion responds that the SBJ's relatively light weight will lower its boom signature, which is theoretically true.) SAI, however, has chosen to configure the QSST in a way that could actively reduce the amount of noise the plane creates at supersonic speeds.

The QSST was designed under contract by engineers from Lockheed Martin's famous Skunk Works advanced-technology facility. With an undulating fuselage, gulled wings, and bridges that connect the wings with the tail, the QSST disrupts the flow of the supersonic shock wave as it travels the length of the plane. If regulations change, the quieter QSST may be certified for supersonic overland flight in the United States. But what Paulson doesn't have - at least not yet -is an engine capable of powering his QSST, which is a great deal heavier than Aerion's SBJ.

One of the industry's most established names is also eyeing the market. During the early 1990s, Gulfstream tried to partner with Russia's Sukhoi to create a supersonic business jet, but the project stalled when Gulfstream was sold to an investment group with other priorities. Now owned by General Dynamics, Gulfstream has an effort under way to examine how a sonic boom might someday be reduced to a whimper - a solution involving a patented telescopic nose that would extend during supersonic flight to effectively dampen sonic waves. In March the company hired Gerard Schkolnik, a veteran engineer from NASA's Dryden Flight Research Center, to lead its sonic boom suppression research.

For the moment, however, Aerion seems closest to wheeling a supersonic business jet out of the hangar. "The market changed in the 1960s when Bill Lear took us from 250-mph prop-driven aircraft to jets that go twice that speed," says James Chase, Tracy's chief engineer. "This is the most exciting project in the business. This is revolutionary." Yet sitting beneath the photo of the ill-fated Lear Fan back in his office, Tracy himself is more philosophical. "The entrepreneurial success level in aviation is very low," he says. "Only a few survive." He nods toward a rendering of his SBJ, then adds, "I think this one might." In an industry where failed visionaries litter the tarmac, that almost passes for giddy optimism. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.