Read the mail addressed to the editor-in-chief of the world's largest aviation magazine; answer the faxes, E-mails, and telephone calls for a while — you soon develop a unique perspective of this enigma we call general aviation. In the pilot community, opinions are like hangar tales — everyone has one and is quite willing to share it. Often times the person on the receiving end is the magazine editor, or Ed., as we call him around here.
It is this flow of information and the constant churning of new and sometimes not-so-new ideas through this office that makes this job so interesting. Whenever the telephone rings, the E- mail beeps, or the mailman arrives, I never know whether I'm going to be psychologist, counselor, teacher, or student. Some just want to vent their frustrations, others seek advice or specific information; still others want to instruct by sharing their own experiences.
Since Cessna announced its long-awaited prices of the new single-engine products, the number of comments about the cost of new airplanes has predictably soared. Not surprisingly, many of the commenters grumble about a new Skyhawk's selling for $125,000. However, I have been surprised by the number of writers and callers who suggest that the prices aren't so bad and that the complainers ought to stop whining. Most disturbing, though, are the comments from those who ridicule anyone who shells out the dough for a new airplane. These writers and callers suggest that it's better to buy an older airplane and fix it up than to buy a new "overpriced" model that has the same performance, as if it's their own money at stake.
Instead of suffering ridicule, the new buyers ought to be praised. It is they who are creating the used airplanes that the complainers will be able to afford later.
While I can understand the frustration of those who believe that new airplanes cost too much, I fail to agree with the often-proffered theory that the manufacturers are somehow in collusion to keep the prices high.
I admit to nodding off occasionally in Economics 101. It was one of those 7-to-10 p.m. classes conducted once a week in a dark, stuffy auditorium. Nonetheless, I aced the course, so I doubt I napped through any of the discussion of the significant laws of economics. So enlighten me, if you will, about the economic behavior of an entire industry that purposely prices itself out of business.
If it were possible for the Cessnas, Pipers, Mooneys, and Raytheons (nee Beech) of the world to sell their wares for significantly less and, as a result, to sell significantly more of them — enough to earn more revenue for their shareholders and owners — then, why don't they?
At their current production rates, the airframe factories are woefully underutilized and terribly inefficient. Remember, fewer than 20 years ago these companies turned out some 17,000 aircraft a year. They'll deliver little more than 1,000 units this year.
Reasons for the decline of the industry abound. Among them: overpricing and overproduction in the 1970s, leaving a glut of good used aircraft (one that is dwindling quickly); product liability costs; elimination of the investment tax credit and other tax law changes; eroding of the flight school and FBO infrastructure; competition for pilots' and potential pilots' disposable income and time; and an increasingly complex airspace and regulatory environment, to name a few. The depressed market has made it impossible for the manufacturers to invest in new products. The lack of new products has itself caused a further reduction in the number of aircraft sold — a vicious cycle.
People often contrast airplanes with automobiles when it comes to discussions of technology and product improvements. Piper, for example, has attempted over the last few years to update many of its products. The goal is to differentiate them from the older models without busting the bank on new product development. Automobile manufacturers, meanwhile, change their designs every year; and every 4 years or so each model gets a dramatic facelift. Knowing that it can amortize the cost of the development over tens of thousands or millions of units easily justifies the automaker's decisions. Aircraft manufacturers can spread those costs over only a handful of units a year.
Why haven't aircraft manufacturers taken advantage of new engine technology to improve their products?
What new technology? Some pilots have suggested putting automotive engines in airplanes in order to take advantage of their new technology. However, no one has yet shown that such engines can put up with the beatings that airplane engines must take: reliably fly at 65- to 75- percent power, hour after hour. Your Subaru engine, used to loafing along the highway at 5- to 10- percent power, may not like that much.
There is one car/airplane analogy that works, as long as the car is a Rolls-Royce. Those cars, like all airplanes, are hand built. The difference is that even Rolls-Royce has introduced some automation into its production line. You will find virtually no automation along the assembly lines of most light general aviation airplanes. Again, production rates just don't warrant the expenditure of much money on robotics. Manpower is cheaper when you're building only 100 units a year. And when it takes some 3,000 man-hours to build a Mooney, for example, there are plenty of efficiencies to be gained, but only if you can afford the front-end costs of acquiring the right equipment. Most GA manufacturers cannot. If you haven't visited a GA airframe or engine plant, you should. It's an insightful lesson into manufacturing economics.
Fixing up an older airplane seems like a good alternative to buying new, and in some cases it is. But there is no escaping the calendar. Old is still old, no matter how nice the paint or interior looks. Airplanes are built to last, and they do — but not forever.
With the quickly increasing costs of some models of used airplanes, such as the Cessna Skylane, you can scarcely compete with the factory, even when the new aircraft cost nearly $200,000. Buy a late model 182, which is now 10 to 15 years old, and if it's been used much, it will need an engine overhaul, new paint, and interior. And if you want to bring it up to like-new status, you'll add a GPS, a moving map, and maybe an autopilot. When you're finished, you'll be within 20 percent of the price of a new airplane. Is it worth it to spend another 20 percent for new? That depends on the individual. Larry Bardon, director of marketing and sales at The New Piper, characterizes those who buy new airplanes as people who buy everything new. "They can afford new and they want new."
Part of the attraction of having new is the warranty, typically a 2-year deal these days. With the warranty you'll know almost to the penny what your operating costs will be for the first 2 years. From there on out, the new airplane is likely to require less maintenance than the older one.
As Dirk Vander Zee, vice president of sales and marketing at Mooney, notes, when you buy a used airplane, you either get a good one or a bad one and often times even an expert can't tell the difference until you've lived with it for a while. In his opinion, at least, a new one is always a good one. "You can buy yourself into a false economy if you think an older airplane won't be any more expensive to maintain than a new one."
All of the manufacturers agree that the big driver in costs these days is the avionics; in fact, 50 percent of the cost of the airplane is from the panel forward, according to Mooney. Avionics alone represent 25 to 33 percent of the cost of the average Mooney, says Vander Zee. Avionics have always represented a big investment, but in the bad old days they just didn't provide much utility compared to those available today.
Some pilots were disappointed that new aircraft prices didn't plummet after the statute of repose legislation was passed in 1994. Manufacturers, however, have said that they have seen little or no relief in their product liability insurance premiums and they probably won't until the law is tested in court. What the legislation did was to convince lenders that small general aviation manufacturers could indeed survive with the right infusions of cash. As a result of those assurances, Piper was able to arrange financing and emerge from bankruptcy; Mooney was able to invest in its product line; and Cessna returned to the piston-engine market as it said it would if the legislation passed. While premiums have not decreased, they have leveled off, allowing the companies to at least budget realistically and to manage their costs.
As a result, we still have a few (too few) new airplanes being built at prices many of us think are too high. But the good news is that we're able to have this debate at all. A few years ago the debate would not have been about costs, but about whether you could buy a new airplane at any price.
