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The business cycle and general aviation

Aviation Thoughts 53 Comments

How is the economy?  There are so many sources available, each putting more weight on one category over the other.  Nonetheless, as far as general aviation aircraft deliveries go, according to GAMA figures it was down approximately 4.5% in the first half of the year.  Most of these deliveries involved the larger global fleet that has satisfied demand for growth in the world…needing to get places that are flights of long distance.  Now that demand has slowed for the global jet market, what is the future for general aviation in the next 18 months?  We can look at recreational flying and conclude that it will be relatively flat, which is a good news/bad news scenario, but the real big number I want to focus on is this –  Corporate spending on equipment, structures and intellectual property decreased an annualized 2.2% after a 3.4% fall in the first quarter.  How does this affect general aviation? Read more to find out how business use of the airplane is what drives this industry.

Here is my take on the general aviation forecast.  Since airplane sales lag the economy, I don’t see anything on the uptick for 2017, even if the economy starts moving again. There is a truth about airplanes, and that is the truth it isn’t only aerodynamics that make an airplane fly, in reality MONEY makes an airplane fly – just like I heard it from John King of the King’s ground school classes many years ago!  And for corporate aviation to grow, it needs to show the airplane will actually increase productivity and revenue, and at that point, the airplane purchase can be justified.  If the economy isn’t presenting new opportunities to a company to expand, whether purchasing an existing business, or just finding a new place to manufacture/distribute the product, you just don’t see much need for buying an airplane.

But what about smaller airplanes in the piston segment?  Recreational flying seems to be stable, and there are two reasons I see why this is.  The first reason is that fuel prices are relatively cheap.  Since fuel has always had that psychological barrier for many, it sort of fuels demand if I can say that, in that people start to look at a lower cost flying for what is considered to be 1/3 of the cost of ownership.  The second reason recreational flying seems to be doing OK, is the price of many used airplanes in the market.  You can buy a lot of airplane relatively cheap, especially when considering what a new vehicle cost, and what you can buy in a four place fixed gear airplane…the airplane is a relative bargain!  What is really cheap, has been the piston twin market, when you purchase one of these on the used market, you almost have to check that you won’t be arrested for stealing!

To get the light plane industry going, those airplanes that are single engine with two to six seats, there is something that is going to have to take something to take place that motivates the market.  Going along with a new airplane that has the same powerplant system designed in the late 1930’s is the problem, along with more efficient manufacturing.  With 3d printers able to turn out precise custom built to specification type of tooling from a software program, there has to be some form of innovation in this industry to take advantage of modern processes.  Isn’t there a better method to build an airplane that is more efficient, more consistent, and more automated than the current method of manufacture?  I know the Cirrus is built from a fiberglass layup, which is hand built, but many components and structures could be designed with automation in mind to lower cost of production.

But, I believe the aviation frontier will be paved using a different propulsion system, such as an electric motor that has battery technology that will allow more than just an hour or two on one charge.  What we are looking for is an invention…and invention with substance to drive this industry into the future. Aviation used to be the venue for challenging technology and advancement, and while true in the avionics and turbine industry, the piston and light aircraft side is far behind where they should be.  Part of this is liability, while the other issue is the cost of certification, which the Experimental Aircraft Association is the one who is spearheading the change in this type of approach.  Wonder why they keep growing in membership?  Substance to the cause perhaps????

Truly the bottom line to new aircraft sales, is what type of utility value can they bring to the owner/operator.  Sure, there are a few recreational buyers of new airplanes, but most don’t have $650,000 to $900,000 to spend on a single engine piston airplane.  The very practical aspects of buying a new single engine airplane, is the small company that is looking to expand their business.  Not only does the airplane make it more efficient to get the president/owner/managers to the location, but there are tax advantages to purchase of a fixed asset that can be deprecated in business.  Using this logic, it is easier to justify the ownership of a new airplane.

Which is my point to the cycle of airplane sales….it is very much attached to the economy.  Disposable income is one category that drives a lot of recreational type flying, but also the business use of the airplane is a huge part of selling new airplanes.  Utility value is what makes aviation move, and you can’t deny that.  The earliest airplane developments evolved because of the transportation of the mail, with an ever increase in the number of routes.  As typically happens, making the business model more efficient, faster, more economical resulted in the continued growth of general aviation.  And this is still true today, a need that is looking for a solution, and if the airplane can deliver it, you will find the product being in development, production, and being improved. Competition does this to a market, and explains why most products that offer value for the money, continue to sell in the marketplace.

So use the old axiom – if you want to know why someone is doing something, or an industry is going in a certain direction, FOLLOW THE MONEY!  Following the money will always explain why most things work the way they do.  Can’t figure out why more piston airplanes aren’t being brought to the market, follow the money.  Not much demand, and not a big need at the time for this product.  Back when the Beechcraft Model 35 was such a huge success, and sold over 1,500 copies the first two years of production, it was because compared to the radial engine airplanes of the time, the Model 35 was much more efficient, economical, and the price of the airplane looked good as well.  Shortly thereafter, Piper and Cessna developed products that were similar…because there were buyers looking for a fast cross country business airplane, so they “followed the money”.

I believe with some innovation, small general aviation airplanes will once again be in demand.  The innovation has to go with a lower cost of operation, more reliability, less maintenance, and safer.  Bring any of these elements to the table, and the money will come out and purchase the product. As I see more small airplane designs entering the market, I ask why this is?  There is very little performance increase, useful load, etc. while there is relatively little demand for these airplanes. There seems to be a lot of capital going towards another airplane design, when the money would be better spent on setting up the sales and marketing department to increase production.  You won’t be able to increase demand, but you most likely would double in sales if you took an existing design, and learned how to target market the product and sell the airplane.

But lets get back to reality, and how we can’t make the world conform to our own thoughts.  I like to use the analogy of the Ford Model T, and the competition for horse drawn buggies.  Now I KNOW all the woman who read this will think the horse if better value, after all they are gentle large lovable animals, but what did the Model T do that the horse couldn’t?  The practical aspects were that although priced relatively close to each other, a horse going for about $150-$200 in that era, while a Model T was going for around $250-$300.  With the horse, you would need to buy a carriage, feed the horse in the morning, afternoon, and the evening.  The Model T? Put some gasoline in it and run it hard if you want.

The truth is – the Model T made more sense, and the automotive industry replaced the horse drawn carriage as a form of transportation.  Follow the money, one made more sense economically, and also had the less maintenance, etc.  When we look at general aviation, specifically the millennial generation, they see the world as a technological structure.  Instead of flying somewhere, you connect to your computer via the web either as an e-mail, or live chat with video.  Along with that, they see the world as instant gratification and learning to fly…well, takes a long time to do.  I can get a video game, the computer, joystick, and a set up that makes me feel like I am flying for very little money.

 

 

53 Responses to “The business cycle and general aviation”

  1. steve Says:

    I think everyone agrees that innovation is needed in the propulsion department, but given the costs associated with developing a new aviation specific engine who would want to tackle this?

    EPS has started. Delta hawk started 10 years ago.

    I doubt that the demand is there to justify the enormous expense.

    If the firewall forward drop in replacement was on par with regular car engines then perhaps it might be a game changer. We all know that is wishful thinking.

  2. admin Says:

    Steve,

    The point is that real progress for the piston airplane, is going to be someone developing a powerplant that is more efficient, less maintenance, lower cost, and can make TBO. Instead of a child like mental game of designing another flying car or developing an LSA amphibian that has limited market demand and limited sales potential, why isn’t someone taking a look at real progress? If that was the approach, not only would the idea have merit and demand in the marketplace, but the company would be very successful and profitable.

    There are a few companies working on an all electric airplane that is practical, one of these larger companies happens to be Airbus Industries. They have developed the E-Fan airplane, and they have the capital to invest in the technology to make this a practical aircraft down the road. I really believe that we are not that far away from an all electric powered training airplane, that would fit the requirements of a one hour flight lesson plus a generous reserve. Once you start seeing the utility value of this airplane, the profitability not only to the flight school, but the demand from the manufacturer, continued development will bring about a four place with real cross country capability.

  3. steve Says:

    Mike,

    “The point is that real progress for the piston airplane, is going to be someone developing a powerplant that is more efficient, less maintenance, lower cost, and can make TBO”.

    Sounds great! Who do you suggest tackles this? If there was so much pent up demand then it would be a no brainer to get it started. Lycoming has there IE2 technology for a mere $120K. Sounds reasonable to me.

    The reason few tackle the engine issues is there is not enough demand for the product. The costs paperwork are huge to get it to market. Lycoming and Contintental sell maybe 1200 engines per year between them. Ford makes that many in a hour across their multiple plants.

    For electric motors the bottle neck is the energy density in the batteries, not the motors (you cannot challenge the laws of physics, only demonstrate them). Until this is solved an all electric x-country plane is not attainable. A trainer is doable perhaps: time will tell if the Pipistrel electric trainer will do well (hopefully so).

    My 2 cents.

  4. admin Says:

    Steve,

    If you have been around corporations, especially legacy type such as Lycoming and Continental, they just don’t care to make a move. Most management is only concerned with one thing – what is the short term profits. I have spoken to many people in the industry that approach business like this, venturing out into development isn’t in their thought process at all.

    There is so much demand if you would develop a new engine technology that incorporated a lot of automation, not only in manufacturing BUT also in the components surrounding the engine. Piston aircraft engines are still hand built, original castings for the engine blocks, and the only thing that can be claimed is the tolerances are tighter. Granted…aircraft engines develop their power output at a percentage of power that makes a typical automotive engine very unreliable. That being said, who says that you don’t develop a new piston aircraft engine around a big bore engine that can sustain 75% power over a long period of time? The air cooled engine is terribly outdated and is susceptible to damage both on the rapid cooling side and the heat associated with long climbs to altitude with high power and lower airflow.

    The question is – why hasn’t anyone done this? Well….Porsche tried with the opposed engine in the 911 series of cars, and had the timing had been better, you would have seen a lot of these engines being used on many more airplanes. You should read about the engine, reliability was very good, ease of operation was excellent, and the TBO was going to be raised significantly before they ended development. The engine easily could run on premium unleaded fuels from an automotive fuel depot, and the fuel specifics were better than any other piston engine being built. It was a very smooth engine, cost was estimated to be a $10,000 engine with reduction drive, it just needed the complex propeller system…which would have been cheaper had the development continued.

    Why someone doesn’t do this, is it has been passed over for the child approach to – we just need a new design in an airframe. The VTOL aircraft, the flying car, and a lot of other designs that have had hundreds of millions put into the concept, but haven’t delivered more than ten airplanes total!

    We don’t necessarily need a diesel engine for an airplane, we need an engine that operates on regular pump gas, that has reliability and the use of technology for long engine life.

    End of discussion!

  5. steve Says:

    Mike,

    “We don’t necessarily need a diesel engine for an airplane, we need an engine that operates on regular pump gas, that has reliability and the use of technology for long engine life.” We all agree on this. Again, who is going to step up and do it?

    I have seen efforts converting auto engines using a PSRU since it is low hanging fruit. The engine is already there, tested, known and, I might add, cheap. Sales are double digits at best.

    I read on the EPS site about the number of engines they hope to build each year. “http://eps.aero/manufacturing/facilities/” The number is 500. That is not exactly a huge demand and I will bet they cost $80K. Most sales will go overseas where avgas is limited or not available.

  6. admin Says:

    Steve,

    Well reality is that a practical solution exists, but the focus has been on another airframe design…because aerodynamics have changed???

    I know there would be huge development costs associated with a new powerplant, and I know Toyota at one time looked into this, but decided to stay out of the aviation market to focus on Formula 1…which was sucking capital out of the company like no tomorrow.

    Anytime aviation has advanced, it has been due to the powerplant development such as the P-51, the turbine engine, etc. Instead of the child like approach to the new sandbox toy, someone out there will eventually get the fact they can make a lot of money by building a piston engine for the GA market. It seems everyone skips over this segment, wanting to go with the new turbine to power the airframe, because the rest of the world does not have 100LL available. In practical terms, designing an engine that operates on regular pump gas, and doesn’t require much between 100 hour inspections other than a data download and fresh oil, would have a very interesting market.

    You don’t know how the business really works, because you are working in another industry perhaps, but reality is – when I talk to people about their business plans and developing a product in the market, they all would rather spend $100,000,000 on a new composite airframe, than to put the development and manufacturing into a powerplant. It is what it is!

  7. Ben Says:

    All good points and we need a low cost revolution in single piston engines. I can fly cheap drone for dirt cheap in comparison to take aerial photography for example.

  8. admin Says:

    Yeah….some type of innovation to excite the crowd, lower the cost of owning and operating a piston airplane – sounds like a win/win!

  9. Steve Says:

    Mike,

    “Well reality is that a practical solution exists”. What is this practical solution that you speak of?

    I recall bombardier making an aircraft specific engine. A V-6 liquid cooled motor. Plenty of money and intellectual muscle behind that endevour and it came to not. We have other tech visionaries in Elon Musk and Jeff Bezos, but they set their sites on bigger toys than aircraft engines. Are they lacking vision or otherwise missing something?

    What do you estimate the annual demand is for these revolutionary engines, should they ever appear? Where would this demand be? New planes or retros?

    Why do you think Delta hawk has not taken off (pardon the pun)?

  10. admin Says:

    Steve,

    I think the problem is that Delta Hawk is probably underfunded. That being said, I know they have a lot less money they have put into the development, then they have around the I-Con 5 project. I have read about the engine, sounds like an intriguing approach, very simple motor and if they can get through the certification stage, they probably can sell quite a few of them.

    I am not a diesel proponent, just because they weigh so much more than a gasoline powered engine. Because a converted automotive engine doesn’t quite have the reliability, I think figuring out a platform that has the large displacement and lower rpm torque and horsepower, while being able to operate on regular pump gas would be the key. I think the Porsche attempt was so close to being a real solution, it would have been interesting to see what could have developed if the timing was better. When Porsche partnered with Mooney, Mooney was very cash poor and declining sales was on a serious trend downward, they had to pull the plug.

    I have made contact with one of the few designer/engineers on this aircraft engine, and the future was certainly bright. It used an internal fan to cool the engine, so that you could full throttle to idle, and the CHT’s stayed very consistent. Reliability was great, they were using regular automotive synthetic engine oils, and they were going to double the TBO just before they pulled the plug. The engine was completely modernized as far as ignition and fuel mapping, it just didn’t offer enough benefits to the M20J airframe to merit not going with the Lycoming IO-360. Had it been refined over time, I think it would be the #1 choice for aircraft owners. If I recall correctly, a price of around $10,000 was what it would cost to exchange out the engine, because it wouldn’t require the gearbox and electrical components that were necessary when installing a new system.

    I would think taking a look at something along the same lines would be in order…you have to keep things simple, lightweight, and reliable. I have gone to Oshkosh over the years and looked at automotive conversions, including putting sprint car engines on an airframe, but what you end up with is a lot of stress, and twisting an engine to produce 75% power over a long duration isn’t what the automotive engine is known for. Just go down the highway at 75 and look at where your tach is on your car, very low…perhaps producing 20% of it’s rated horsepower.

  11. Ben Says:

    Now if we could get Mercedes, BMW, Porsche and Honda together to build a basic low cost reliable single piston aircraft engine that would be awesome for the consumer who wants to fly on a budget! BMW used to make German aircraft engines before cars in Germany so they have the engineering talent.

  12. admin Says:

    All it would really take is one company that had a vision, understood the technology, and had the manufacturing knowledge and that company would put Lycoming and Continental engines out of business. It truly is insane to pop the cowling off a Cirrus SR22 and look into the engine compartment…wires going everywhere, tubes blocking airflow around the cylinder cooling fins, and everything tie wrapped and held together. When I go out to Oshkosh, I look at the homebuilders and at least they tidy up the area, whereby smooth airflow through the engine is considered.

    I don’t have the answers on how I would draw up a platform to start engine development, but I am sure there are enough smart people out there that can. The Rolls-Royce Merlin engine was an innovative engine, liquid cooled and could put out some serious horsepower, as well as the Mercedes Benz engines used in the ME-109. Engine technology, specifically computer controlled systems are available relatively cheap, it is a wonder why there hasn’t been more development. You would think at minimum, someone would have designed a cowl flap system that maintains even temperatures regardless of in a climb, cruise, or rapid decent with idle power.

    It is amazing by how little development has taken place with regards to engine innovation and technology, when EVERY advancement in aviation performance has ALWAYS been in the engine development side!

  13. Ben Says:

    With low cost CNC and 3D printer technology available, it really just takes brain power to design the engine at lower cost and mass produce it. Get private investment lined up, marketing and produce a base model that blows away bloated engine companies.

  14. admin Says:

    I would agree 100%! The technology and development/engineering should be more precise and all the elements of reliability and operational economy should be able to be put into the design of a new engine. If you read about Lycoming and Continental…they don’t really employ any engineers, they have craftsman that hand build the airplane, but zero forward development process in place. I am serious when I say, WHAT IS A MAGNETO being used on an aircraft engine for! That dinosaur should have been long gone from the planet!

  15. steve Says:

    If the Porsche engine was all that and a bag of chips does it not makes sense that either Lycoming and Continental would pick up the pieces and perfect it? Most of the work is done!

    I wonder why they don’t pounce on it. Competition with their current product line? Not enough sales to justify the expense?
    Who knows but they have their reasons.

  16. admin Says:

    Steve,

    I am sure they looked at the Porsche…but why come up with anything new when you can sell X amount of engines per year and be profitable? The price of a new Continental IO-550 is $40,000 +, so that is the business model they choose to follow.

    My question is – if you would come up with a new technology piston engine, that would use regular 86/87 octane pump gas…you have solved the distribution network problem for fuels, while lowering the hourly cost of operation. There are technical ways to put out a lot of horsepower AND use a lower octane fuel based on combustion chamber dynamics. I am not sure how old you are, but back in the 70’s automobiles used compression ratio’s lower than todays automobile, yet these engines in the 70’s pinged like crazy! The manufacturers solved the problem…heck, I have a Mazda SkyActive engine that has 13 to 1 compression…and the fuel recommendation is 86 octane.

    Anyway, consider the legacy aircraft that are out there that could be retrofitted as engines are replaced. Instead of replacing a Skyhawk engine with a Lycoming 0-320, a new engine for $10,000 – $12,000 plus a new propeller…how many could you sell? Especially if you could put 86 octane fuels to power the aircraft, AND the engine used existing off the shelf automotive style spark plugs, automotive style air filters, and automotive engine oils? You could keep the horizontally opposed architecture to fit existing airframe cowlings, and put technology that works.

    Your comment is what all normal people should be scratching their heads about…just doesn’t make sense to develop a $249,000 LSA amphibian when the real need is a better powerplant!

  17. Ben Says:

    Indeed a few decent mechanical engineers plus marketing and development to mass produce a low cost power plant that runs on normal octane fuel would make aviation affordable to millions. It would generate a new boom in aviation as well as creating new jobs in America.

  18. admin Says:

    Agreed 100%!

  19. Steve Says:

    This is exactly what the EPS story is all about only with a diesel. It is geared for the larger 6 cylinder market since there seems to be more money with them. I doubt that the price will be even remotely reasonable.

    Deltahawk is trying that out with their diesel geared toward the retrofit market with the large fleet of Lycomming 320/360 engines. 10 + years and counting.

    There are lots of engineers and lots of money but few want to wade into the GA engine market. I can only conclude they do not see that value in it.

  20. admin Says:

    Steve,

    It seems as if A) they are all severely underfunded, and B) perhaps they are using the wrong platform. The development of an engine takes a lot of money. I am not sure if you are familiar with the Elio car (https://www.eliomotors.com/), but they went through the same development of an engine. They were going to use an off the shelf 3 cylinder GM motor, but had to start from scratch. I think they used the same platform, just updated it with newer technology to obtain the fuel economy specs they were looking for. The difference? They had a lot of investor money to use to design, engineer, and set up the manufacturing to do so. It has held the car from production, and in my mind they will not ever make it due to losing money on every car they sell.

    With crowd funding and other sources of investment capital, these engine manufacturers need to get business oriented and get the capital and provide a business plan on how they will be profitable at the end of the day. I am sure the product is great, has a lot of benefits, but you need to figure out how to get it to the market in a reasonable amount of time, AND the product has to have enough tangible benefits that the market will purchase the engines.

  21. Ben Says:

    Why should a single new engine cost over 40k for a turbo charged 30 year old plane? That’s ridiculous and one reason why GA is dying. It’s too expensive!

  22. admin Says:

    Ben,

    It’s even worse than that…I was looking at pricing of new engines in Trade-A-Plane a few weeks ago! Exchange on a new Lycoming IO-540 is showing something like $85,000. If you don’t have a core to exchange, price is something around $107,009!!!!

  23. Ben Says:

    Holy cow! Need to avoid any planes that use the expensive Lycoming IO-540. Sad thing is that many of my favorite used single piston aircraft namely the Socata TB20/21, Commander 114 and Mooney TLS/Bravo use this crazy engine. I think experimental is way to go for the only known way currently to afford this hobby. Or keep renting.

  24. admin Says:

    Not only that, but the HIO-360 Lycoming was priced at $57,567…and they were all about that same price. I don’t think this was any accessories, so you have to add the muffler system, alternator, and on and on!

    You can buy a nice car for the price of one engine, realistically trying to find a replacement engine without the huge expense would be how I would spend money in aviation developing a product..

  25. Ben Says:

    So true and the massive extra costs like hangar/tie down fees, mx costs, insurance it all really adds up to super expensive ownership experience in addition to the major cost of engine and avionics. I think that GA has turned into a sport only for the 0.1% versus the rest of us.

  26. admin Says:

    Ben,

    It will just be a matter of time I believe, whereby someone will see the opportunity and build an aircraft engine that meets all the specifications, with modern technology, and at a price that is more in line with reality. I wouldn’t mind the price of a new Lycoming, if it had all the new technology available to lower the operating cost and guarantee I will make TBO every time. I understand they keep improving the materials used in current air cooled engines, but it doesn’t result in a lower cost of operation that I have seen.

    That is my point to the subject of aviation, why are there 121 LSA manufacturers that sell about 300 in the United States every year, when someone should be taking that capital, and developing a powerplant? Is there something I am missing here? Practical solutions are available, demand for a low cost alternative certified engine would be very profitable in my opinion.

  27. Ben Says:

    Completely agree! In fact, if I could buy a new single piston aircraft that was IFR capable and had a range of 500 nm for under 200k that would run years at budget, I’d be in line to buy one! I think we need a revolution in engine production as you mention.

  28. Steve Says:

    A lot of the The LSA’s use the Rotax engines and thy are state of the art. Rumors abound that they are working on larger versions. Cost will still be an issue though.

  29. Steve Says:

    Mike,

    You and Rod maintain that cost is irrelevant in GA, as long as people have a NEED and the financial means then they will pay. You have blog after blog that mentions this. Why the need for cheaper engines if cost is immaterial?

  30. admin Says:

    Steve,

    You have to understand what DEMAND is, as you are looking at two different “methods” here. When Cessna was heavily involved in the flight training process, they taught the flight schools how to use national advertising, and develop the brand of Cessna. That involved knowing that most people can’t afford an airplane, therefore the people who can afford an airplane probably have a need for an airplane IE small business, professionals, etc.

    See…aviation has always been expensive, and if you have ever sold airplanes, you get tired of the “rudder kickers” who don’t need an airplane, but only “want” an airplane. These guys will drive you nuts, as in reality, they can’t really afford an airplane, so if you really want to sell airplanes, you need to find the people who have a NEED for one. These are the movers and shakers who are willing to pay for an airplane based on the value, not the skin flints who don’t see or realize the value of an airplane. It’s like me, I don’t own an airplane, because I don’t need one and if I owned one, I don’t see the value in it, so I buy boats and motorcycles instead. Both are going to cost about the same, but in my mind, I find more value in the motorcycles.

    Why the need for cheaper engines? It’s because technology needs to be incorporated in the piston airplane market, because reliability, better fuel economy, better overall operating economy, less environmental impact all can be realized. That is a reason to buy a new airplane or new engine, it offers something that you currently don’t have on the market, therefore the product would sell.

    If you had a choice of two new G-36 Bonanza’s, one with an old school IO-550 Continental that required 100LL and a 1,700 hour TBO, the other with an advanced aircraft engine that burns 30% less fuel and is guaranteed to make TBO AND can run on regular pump gas, which Bonanza would you buy? The problem the manufacturers have right now, is to ask the question – why should I buy a new King Air 250, when for 60% less I can upgrade an airframe with a G1000 avionics suite, the -61 Pratt and Whitney PT-6, new interior and new paint…tell me why I should buy a new airplane?

    Bang for buck, right? That is how/why people buy things. However, if you are offering real innovation into the product, of course you are going to spend more money to buy the new airplane. The piston engine is no different, and I think the example of the G-36 would be that you could buy the new piston engine for less money. My thoughts are that the technology in today’s piston airplanes engines, is so outdated, it is relevant to consider what are the possibilities for moving forward? What really throws me off, is that everyone keeps thinking if they just make an airplane that goes five miles per hour faster on the same fuel flow, that people are going to line up and buy it??? They spend tens of millions if not significantly more, and end up with a flat demand for the product!!!

    So, it is opportunity cost that has to be evaluated, and significant improvements can be made that fit something more that looks as if we are in the 20th century when it comes to the piston engine!

  31. admin Says:

    Steve,

    To continue with the discussion, regarding what is a want vs what is a need. I was talking to Rod Beck recently, on how I was at the airport and I noted a pilot who owned a nice Mooney M20E in the hanger. The M20E is the short fuselage similar to the M20C, but has the 200 horsepower fuel injected engines. It is fast, light, and offers good performance with good operating economy. Anyway, at best the airplane in the hanger could be purchased for $60,000, and I had talked to the pilot about partnerships with the airplane.

    As I drove home, I realized I don’t really need an airplane, as I don’t have anywhere to go, so although I could have a 180 miles per hour airplane for my share at $30,000, I didn’t need the airplane, it was merely a want. In the same conversation with Rod, I told him about the 2017 Harley Davidson Ultra Classic Limited I had been looking at, which as close to the $30,000 price I could buy half an airplane with. I decided to buy the new Harley Davidson, because it represents value to me…I enjoy them AND I will use them as I have a place to go with a nice motorcycle.

    So instead of trying to justify an airplane, although I can afford it, I really don’t need it. I represent what the general aviation market is really about, people don’t need an airplane, so they are waiting for that Mooney M20E to be had for at a discount. I still am not interested in the airplane, because I have owned airplanes and know the purchase price isn’t the expensive part of ownership, the airplane ownership going forward is what really costs money.

    Getting back to the aircraft engine concept, let me demonstrate how the market needs improvement in the product. IF I could purchase that same M20E, and put a new technology engine that would say…make the airplane value $100,000 with the new engine, would I buy it? Perhaps. My share of the $50,000 for the airplane BUT an engine that would only require an oil change every 50 hours, with an annual inspection to the engine nothing but an oil change and a download of computer data for analysis…now you are talking! For me, that engine would last 20 years and not having to really touch it other than oil changes and super low maintenance procedures, THAT means value to me.

    I used to cringe when I would get a call from the mechanic with an update on how the annual was going. A cylinder replacement here, compression not looking good on this one, etc., took the fun out of owning the airplane. I enjoyed the airplanes, so my budget for a $1,500 annual often left the shop with a $4,000 annual. No bitching or complaining, I had a lot of fun flying around but now that I don’t need an airplane, I am not going to act as if I do, I just spend the money on boats and motorcycles. Because they are affordable brand new AND they keep getting better technology. Boats are fuel injected, offer better hull design, and other amenities that make it enjoyable to own. Quite honestly I could do the airplane trick and buy an old used up boat, update everything and save money, but I am not that excited about going that direction. The 2017 Harley Davidson has a new engine, the “Milawaukee Eight”, which is the new 107 cu.in. air cooled motor and makes it interesting and fun to own.

    I would agree that FAA certification is egregious to any aviation manufacturer, but in reality if someone would design a propulsion system that could be adapted by a large majority of singe engine airframes, AND lower the cost of ownership and be trouble free, it would be a very profitable endeavor. Instead of spending the tens of millions + on the Icon-5 that has a VERY LIMITED market, and will never make it to full production, I ask that question – why? The objective is to identify a need, and build a product that will have demand!

  32. Ben Says:

    Totally agree! I’m in the same boat and don’t have an actual business need so it’s a hyper expensive toy and hobby.

  33. Steve Says:

    Mike,

    I will go to my original comment about the new engines development: if demand was overwhelming then someone with money and expertise would be building them already and we have few players entering this sphere. The only reasonable conclusion that can be drawn is that the market is simply not there relative to the investment needed. Who would invest tens of millions and a ton of red tape to sell a few hundred engines a year?

    Rotax comes closest with a top notch car gas engine, but they are still at $20K and limited to the LAS segment. The larger engines that they are purported to have in development will cost a lot too.

    On a different note, after a 25 year absence I am going to get back into motorcycling. It is a way cheaper alternative to flying and equally enjoyable IMHO.

    Happy two wheeling!!

  34. admin Says:

    Steve,

    Unfortunately it goes into a much deeper psychological problem, and that is – developing an airplane soothes the ego, and has an excitement and fun factor, so lets forgo profitability. Anyone with any sense, would NEVER develop an LSA at this time, yet I have numerous individuals contact me because they have an airplane design they are going to build to manufacture. I ask why? Mine goes 5 miles per hour faster and is easy to fly! THAT is the answer.

    There is not a lot of glory developing an engine, ALTHOUGH the outcome would be a much higher return on investment AND establishing oneself as an industry maverick!

  35. Ben Says:

    I was going to buy a plane but now looking into a boat instead. I can live, work, eat, sleep and sail on it. Things not possible in a plane.

  36. admin Says:

    Ben,

    Sounds like you have solved the riddle of cost Vs. benefit! That is the entire point of this web site, in that if you don’t feel the benefits are worth the cost, do something else. Aviation is like the big bands of the 50’s. Very popular and had an audience that really enjoyed the music. However, not that many people today enjoy that type of music, no matter how cheap you make it available. Aviation is feeling that same type of atmosphere, it just doesn’t have the charm it once did, so it gets down the practical use as the main purpose of owning an airplane. Which is the SECOND point to this web site!

  37. Ben Says:

    As much as I love flying, it’s just too expensive to own one without a business need. Yingling aviation wants 250k for a recycled Cessna 172 and the new made in China Glasair LSA costs 150k new to fly 90 knots which is what my car can cruise at.

  38. Steve Says:

    I suggest it is too expensive to own one WITH a business need. I wonder how well new GA sales would do without the huge depreciation tax breaks.

  39. admin Says:

    Steve,

    I don’t have a problem whatsoever with the tax code for depreciation of a business tool such as an airplane. Bonus depreciation has almost continued to be a mainstay in the industry, and the reason is that a profitable company that is expanding IE creating jobs, opportunities, and a better product for the consumer, it just makes sense to be able to depreciate this piece of equipment.

    If you have ever dealt with the IRS rules for business airplanes, you would understand that anytime a guest or the airplane is used for personal non-entertainment flights, depreciation is affected. The airplane can only be depreciated anytime the airplane is being used for business transport.

    My question to you is – why can you depreciate a business office, copiers, and other expenses, but you can’t depreciate an airplane?

  40. Ben Says:

    Even then you really need to be generating serious business revenue to justify the cost. The sweet spot of single piston aircraft is regional 500nm travel radius such as west coast clients. Then it’s better than commercial flights in time.

  41. admin Says:

    Ben,

    The average business trip in the United States is less than 300 miles!

    That being said, a single engine piston can be a good airplane for business, even on longer flights that you would think wouldn’t make sense. An example is Sioux Falls SD to Dallas TX. It is VERY difficult to make this a one day trip by airline, yet it is probably a 4.5 hour flight in a Bonanza. Now consider you could take off early in the a.m. with three other people, go to a meeting, and be home by 7:00 p.m. easily in a day. I don’t think you can match that by the airlines, and price was you are probably even up!

    This is what I talk about – find a company that NEEDS an airplane, and show the benefits of business travel by private aviation means. You won’t find these people by advertising in Flying magazine, you have to target market these companies.

  42. Steve Says:

    Mike,

    I have ZERO issues with depreciation on planes. My comment was a rhetorical one: Would new GA sales do as well if the depreciation was not there? I have no way to really prove it but I suspect that sales would not be as good without the special status.

    Special provisions were provided by the government for new GA planes that are usually not available in other industries, which, again, I have no issues with.

  43. admin Says:

    Steve,

    Without getting into the tax code, the reason behind depreciation schedules, bonus depreciation, IRS rules for business, and the class envy question, the fact is you probably wouldn’t see that much of a drop off in GA deliveries if bonus depreciation was not available. Fewer and fewer companies own airplanes, if you would take up how many businesses in the United States own an airplane, you are talking less than .001% so you would not make much of an effect on airplane deliveries. It really gets down to this – do you need an airplane for your business? In Professional Pilot magazine, they often feature a business that expanded and did quite well, because the owner realized the convenience of getting to each work site and getting the right people in place.

    Most business aircraft purchases in 2016 did not qualify for bonus depreciation, as the method for accelerated depreciation as written, is very complicated. I am sure some of the $50 million dollar airplane purchases may have applied the accelerated depreciation format, these are highly profitable companies that can absorb any recapture penalties should they sell the airplane or trade into another one in less than a 7.5 year time span.

  44. Ben Says:

    Agree! If I ever get back into freelance work that requires me to travel weekly to client sites on the west coast then I’ll consider buying an older Bonanza. Instead of slogging a 12 hour drive each way, flying a Bonanza for 2-3 hours each way to me would make the cost worthwhile and I would be able to deduct fuel and mx costs for business use. Right now, I don’t have a critical need to justify the purchase cost.

  45. admin Says:

    Ben,

    Which is the answer to General Aviation. The story goes – airplanes have always been expensive to operate, business can justify it, so why aren’t the manufacturers dialing in the marketing and sales toward small business? They all seem to want to cater to the social atmosphere regarding the purchase of an airplane, when in reality, this is not the target audience. Now, that being said, the recreational and social aspects of flying ARE important, it is just the industry is totally geared toward the people who do not need an airplane. I have worked with a few Beechcraft salesman over the past few years, and you want to talk about terrible sales techniques and approaches! Someone in high school could do at least as well, they just didn’t get how to present the airplane and to show how it worked for the buyer. They didn’t have any guts, and they didn’t have ANY go get it attitude!

    A lackadaisical attitude toward selling, and finding the customers to buy a new airplane is what it looks like to me. You really have to be motivated and enjoy the challenge of setting sales records, and if your main reason for selling airplanes is to get to fly around in a neat airplane…well, that explains the problem. The types I would be looking for, are people who don’t care whether it is gum, cars, insurance, etc., I want them motivated and have an edge to them.

    Regarding the marketing aspects, why aren’t the small business growth companies targeted for aircraft ownership? They seem to be quite content to find the captured audience, and hope that this group will want to upgrade into a new airplane…and this makes sense, but that is only about 25% of where the opportunity really exists. This is where I think General Aviation needs to rethink it’s business model, and start putting into place more marketing and sales types, because I see a real loser here the way we have it structured now.

  46. Ben Says:

    Correct. For me, if I do business say in Northern California or Phoenix, then the cost of buying and owning a plane makes sense. Otherwise I’ll continue to fly with pilot friends and split the costs. For example, when I fly with friends, it only costs me $75 for a day of flying to Catalina versus $200 if I fly by myself.

  47. admin Says:

    Sounds good to me!

    I think you are missing the point with regards to sales and marketing of GA in my last response.

    No worries, flying with friends is a fun method of defraying the cost.

  48. Ben Says:

    Point taken and correct. I considered an older Bonanza and made offer which broker seller accepted but then I never heard back from them! This nonsense happens a lot. I see poor sales marketing even more so on used aircraft almost a passive aggressive arrogance on the part of brokers and sellers. So who is rushing out to pay over 100k on a 50 year old Bonanza?

  49. admin Says:

    Ben,

    Sometimes you almost have to force a sale. If it were a good deal, I would have stayed on this and ended up with the airplane. No different than automotive sales, sometimes the salesperson thinks you are not really in the market, and they will talk you out of the purchase.

  50. Ben Says:

    Working on it! I’m patient and keep on the broker. Eventually I’ll have my traveling machine. I’m a fan of the rare E33C and F33C acrobatic Bonanzas that were made unfortunately in limited quantities as well as acrobatic warbirds like the T34 and Yak 52.

  51. admin Says:

    Ben,

    I am a little familiar with the F33C, a friend of mine owns one. The airframe isn’t beefed up any more than a regular Debonair airframe, just the parachute fitting seats, and a door that you can eject off to escape. He doesn’t fly much for aerobatics, it messes up the gyros after a short time, and he flies a lot of IFR, so it isn’t good. I recommended he put the Garmin G600 system which uses accelerometers and other electronic means to self erect and stabilize, and that wouldn’t bang the gimbles in a gyro and cause them to tumble.

    Personally I would go for a nice V35B..preferably one built in the early 1970’s as I have about 1,200 hours in a 1972 that I flew freight in. If I wanted to do aerobatics, I would own a V35B and a Bellanca Citabria Vs the aerobatic Beech. The V35B I flew, was a true 165 knot airplane, all day every day. I recall flying it in the middle of the summer, it would be 100 degrees out, and I would take the airplane to 11,000 feet where it was approximately 70 degrees…somewhat close to a standard temperature lapse rate.

    It is a great airplane, wish they would have kept the V35B in the lineup as a hot rod. I know there were some Smith mods to add 15 knots to the airframe, if Beech would have put a turbo-normallized IO-550 in the airframe, and priced it significantly better than the A36, it probably would have been an interesting option, especially for any Cirrus SR-22 buyers and the Cessna 400 TTx!

  52. Ben Says:

    Agree or buy a nice Debonair and a Yak 52 for aerobatics.

  53. Airport Supervision Services in Sri Lanka Says:

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