Can Mooney and Cirrus save General Aviation?

Discussion in 'Flight Following' started by FloridaPilot, Apr 9, 2017.

  1. rbridges

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    I just googled average household income. It's CNN so it has to be accurate. lol. Anyway, in 2015 it was 56K. So basically, a Cirrus or Mooney will cost 15 years of a family's entire pre-tax income. If the family goes cheap and gets a 172, maybe they can get by with only 8 years worth of income. The problem is simply cost. Market all you want, but you're not getting the average American family to buy a new certified plane. They simply can't afford it. You're now trying to sell planes to the 1%ers that actually have an interest in flying themselves.

    I just picked a year (1969) A cessna 172 cost $12.5k, and average household income was $7,330. That's less than 2 years income. Still a lot, but far more realistic. I realize there is a lot more to the newer planes, but I assume regulations, lawsuits and manufacturing costs have contributed to this unbalanced increase. Aviation is simply outpacing the average Joe's wallet.
     
  2. Tantalum

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    I agree*

    *I put the asterisk because I do believe the Cirrus, and esp the transition course, made me a better pilot, primarily with better energy management and "staying ahead of the plane" management. The Cirrus mindset carries over when I am in the Skyhawk and Archer. I also hate how dumpy and loose Skyhawks feel, but I don't think it's a bad place to start for a student, and is very forgiving of a sloppy landing whereas a Cirrus is less so. Much of this also depends on instruction too though.. I would hope competent instructors don't sign their students off if they're bouncing planes down the runway and not able to manage their energy well
     
  3. GLMS_NC

    GLMS_NC Pre-takeoff checklist

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    No way Mooney and Cirrus can save GA. In addition to costs of the units with the required maintenance, the cost, time, and requirements to stay proficient with your license are too much for family folks today.

    Good luck convincing the technology proficient generation to buy a plane with steam gauges and then spend 30k to upgrade. Oh, and engine technology that is 40 years old too. Sure can't afford a 700k plane when they have daycare, house, and two car payments.

    The average pilot takes a ppl check ride at 60 hours? Add in another 40 for instrument training? All at likely $105/hour? Then you add in the time required if you have small kids - Mom isn't going to let husband go do this. If you don't have good experience and proficiency don't load your entire family for a road trip. Check AOPA, FAA and other license stats - there are fewer and fewer of us.

    I like Ciri but the costs are out of the reach for all but companies or those who own their own company.
     
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  4. FloridaPilot

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    (IMO) I never really agreed when people complain about cost. There are a lot of airplanes out there that you can fly for very cheap or rent...(100 bucks an hr to rent...wet). I agree with the time constraints part of it because we only have 24 hours in a day and so much of it is being used with work, school, kids, spouse..etc more now than ever before. Text messaging is a good thing but all too often used as a distraction to what you really want to do, the person that has your number knows that you are available 24 hours a day 7 days a week.
     
  5. CC268

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    Well said...it doesn't help that the cost of certified avionics is absolutely insane. My dad and I have already decided - if we move up to "more" airplane it will be an Experimental (Vans RV without a doubt). Sure it seems like avionics have slowly been moving in the right direction in regards to cost, but it is still cost prohibitive for the average Joe like me. A G5 is still $2200 + cost of install, which is absolutely insane in my mind. Of course the Experimental version is $1200. It is incredibly frustrating.

    Sadly, the more I get into aviation the more I realize the only way I will likely ever be able to fly anything nicer than a 172 or Cherokee is to do it for a living. I'm working on my ratings and I really hope I can make it there someday. Unfortunately life frequently gets in the way.

    New GA aircraft are incredibly impressive, but at costs of 500k+ it truly is catering to the 1% now.
     
  6. Tantalum

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    I still don't understand why new entry level Cessna and Piper Aircraft are so expensive... the planes are old tech, the engines have been around for decades... there is no real new innovation to pay off R&D costs, etc. Seems like highway robbery to me that they're so expensive
     
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  7. tspear

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    Look at Beechcrafts and Textron's published financials. Or Mooney's...
    You will see the profit is not very much. So either they are super inefficient, or there is more to the story than we know.

    Tim
     
  8. Datadriver

    Datadriver Line Up and Wait

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    Agreed. Could the cost be due to almost everything being done by hand? IOW, there is no robotic assembly line to make airplanes. So much of the car industry is automated.
     
  9. jsstevens

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    For one thing, imagine the facility costs of maintaining the square footage required, plus machine maintenance etc. Now divide that number by the number of aircraft sold. Ugly. Where I work (central Florida) climate controlled manufacturing space is in the $20/square foot range. So their Kerrville facility (scaled off of google maps) is ~240,000 sq. ft. That's over $4,000,000 per year in just facility costs. No salaries, no parts, no maintenance. If they built 8 planes that's $500,000 per plane.

    John
     
  10. skier

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    Expensive means not many are built. Not many built means that it's low volume production. Low volume production costs more and is harder to justify automation. Lack of automation and low volume leads to expensive.

    Throw in liability insurance and certification costs...

    Piston singles really are a terrible market to try to make any money in.
     
  11. bnt83

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    Its the payment plan for all the lawsuits they have lost, 3000+/- man hours, facility costs, extreemly low volume parts, and of course shiny new engines (another manufacturer with all the same problems), and the expensive avionics.

    Hell a sprayable gallon of Jetglow paint is around $350. Proseal is around $80 a pint.
     
  12. skier

    skier Pre-takeoff checklist

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    Even look at Vans aircraft. Many people spend >$100,000 to build one. Throw in 2000+ hours to build at $100/hr and you've already reached $300,000.

    Add in the cost for manufacturing space mentioned by @jsstevens and you're darn near the price of a new Cessna, Mooney, Cirrus, etc.
     
  13. deonb

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    A new C172/SR20 is ~$400k. If we assume your 2 year income ratio, people who make $200k can afford it. That's top 5% - or about 15 million people who live in households that can afford GA. If even 0.1% of those people join GA a year it would represent 50x the current Cirrus sales.

    The problem isn't strictly affordability. If you have a product that people find value in, it should be no problem growing your market penetration from 0.003% to 0.1% in your target demographic. But if your product has the perceived value of a Jet Ski, $400k becomes a very high price to pay.
     
    Last edited: Oct 4, 2017
  14. Tantalum

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    I get that, but... there could be more to it
    -without getting into tinfoil hat territory, don't companies have a vested interest to have no real profit? At least on their published docs
    -charging 8 years worth of income (per the post above) for a (barely) 4 person plane that does realistically an average of 100 KTAS.. that's ridiculous. If your desire is to create a step-into-GA and then step up buyer I would almost figure you could sell your bottom tier planes at a loss... make up the difference on the Citation X, etc. Cirrus has it figured out right... there is a fairly large price delta between the SR20 and SR22, for what is otherwise a very similar plane. Surely the SR22 must have higher profits while the SR20 gets people into their planes (I think there was a thread on this actually)

    I still don't see $500K price tag though.. a 3,000 lb composite boat, many of which are built by hand and sell in low-ish numbers, are not $500K. A new Grady White 180 weighs about 2,150 lbs empty, without the engine... so it is comparable in overall materials weight. Sure, boats are built in molds... but I am sure Cessna and Cirrus also use molds to form the fuselage, wings, etc... a new Grady White 180 is nowhere near $500K.. more like less than one tenth of that. And yes, Marine Electronics and outboards are not cheap. My point is, these planes don't have to be expensive to build. The operation must not be very lean. PS. I chose Grady White because they're a quality builder, maybe not into Regulator or Everglades territory, but definitely a higher notch than many others. And there are Coast Guard cert costs as well, and the marine industry is no stranger to lawsuits, etc.

    It seems inefficient. If a relatively average income person can build a Vans (or another experimental) then I don't see why effectively the same (or less actually) of a plane should be that much more expensive. Yes, the legal certs are all different, but most of the production planes are 1950s designs.. there is no way those costs still have a bearing on the actual selling price

    **If you only sell 8 planes a year then size yourself appropriately. My thinking is these companies grew a lot in the 60s and 70s... then plateaued and slowed down.. so rather than size themselves appropriately for the market they've stayed heavy and bloated and get by selling a handful of planes at insane prices. Someone will pay it... but most will not, and the cycle continues

    I'm not surprised Cirrus outsells the competition so dramatically.. an SR20 is, let's be honest, is a better plane than a 172 or Archer. It's faster, more comfortable, and modern... and the price new, or slightly used, is comparable. Someone is going to come out and say "but the 172 is a great trainer, and it can land on gravel, look at the max payload capability, yada yada yada" (queue Seinfield). But most of today's buyers aren't doing bushflying, etc. Look at today's cars, and overall culture, the Cirrus is a much closer shoe in to the current 30 something demographic then is an Archer
     
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  15. Tantalum

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    Why so expensive? Does the average skilled laborer really make $200K+ in a year?

    ..and therein lies the real tragedy. Somewhere in the start of this thread I mentioned that the romance of flying is gone. There is still some novelty to it... but other than the people I meet at flying clubs and events no one seems that interested in aviation or flying planes. To my horror, it almost seems like the tide has turned against GA "because those little planes are so dangerous"

    My point is, at @rbridges said above, these planes at one point where much closer to being affordable... Now they're not. And that's what I don't get. Shouldn't the cost have come done, instead of gone up 4 fold?
     
  16. skier

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    And I've heard of at least one company that does just that. You can also makeup some of the losses in aftermarket sales. Pricing that way also serves to make it harder for competition to enter the marketplace.

    When you add in benefits, Unions, and other things covered by G&A (finance, accounting, lawyers, manufacturing engineering, MRB, electricity, purchasing, marketing, maintenance), it likely approaches something in that vicinity.

    I'm not a finance or accounting guy, so I may not have used the right terms, but I've heard of companies charging at $100/hr for an employee making <$50/hr
     
    Last edited: Oct 4, 2017
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  17. jsstevens

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    In our business, our multiplier is ~ 2x. If I pay somebody $50/hour the actual cost to me (FICA, administrative costs of complying with labor laws and reporting, vacation & medical leave, insurance, etc.) is right at $100/hour. Admittedly we have a good benefits package. But because somebody costs you $100/hour does not mean that they get paid $200,000/year. In our case that would be $100,000/year. And we're more efficient than a lot of our competitors.

    As to the facility cost, there is probably some bloating from the 60's and 70's, but there is a minimum space you can build and paint planes in. And it's probably pretty large. Also, there's a lot of machinery and fixtures that you have to have and maintain even if the non-recurring costs (design, build and test the fixtures, for example) are all recouped. If you want to "right size" for the reduced volume, now you have to move equipment and fixtures around for the smaller space. (And maybe re-certify some of your processes to satisfy the FAA. I'm not sure on that one.) So there's more non-recurring costs that you have to recapture somewhere along the line.

    And you need all the skilled people (more in this case because the non-recurring cost of automating would never come close to being recovered) required to build a plane. And they probably won't stick around and work either part time or piecework.

    The low volume kills you. By my math above, the $4,000,000 annual facility fixed cost is only $40,000 per plane if you can build 100 planes per year (which Mooney could and did out of that facility).

    So yes, most of the air frame and engine non-recurring costs have been covered. (Not avionics installation design and certification costs though.) But the low volume is what kills the cost.

    John
     
  18. Tantalum

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    @jsstevens thanks for a thoughtful response. Makes sense, but still disappointing. I know a lot of people balk at Lean Initiatives and the Kaizen culture... but I wonder how many aviation manufacturers have embraced it
     
  19. tspear

    tspear Cleared for Takeoff

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    Pretty much every publicly traded company has a vested interest in a profit. If they did not, not only would they go bankrupt, but also the board members and officers of the company would likely be in violation of the fiduciary duties. Can companies shift profit around, sure. I used to do that for tax reasons, however that just delays the taxes by a year or two. As such, look over a few years and you see minimal variation which implies they are not doing any special manipulation for tax reasons.

    As for step up or loss leaders, the answer is a there is a good used market. Use that.

    Tim
     
  20. jsstevens

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    All the lean initiatives (and I am 6 Sigma certified, albeit long ago) only work at certain scales. All quality programs I've ever been exposed to say "Quality isn't free but it pays." There is a cost to implement which is only recovered if you then apply the savings over enough units. It's a similar problem to automation. There is s significant investment to automate.

    For discussion sake, let's suppose your labor costs on a C-172 are $100,000 for labor (which is roughly 1/2 to 3/4 of a person-year, let's call it 9 months for math's sake) And your waste costs (bad parts and simply excess things like short pieces of wire and scraps of aluminum that are not usable) are $5000 per airplane. (Which I would think be high). Lean initiatives could save us (lets be wildly generous) 1/2 of our waste and 1/3 of our labor. So for each airplane we build we will save $28,500. That's really great, right? But to implement the lean initiative will take 3 people a year. Plus 1/2 person a year to maintain. So now we've spent $375,000 to implement and continue to spend $67,500 per year to maintain. To just recover the initial cost we have to manufacture between 13 & 14 planes which we have to sell at the old price. And these figures are generous. Plus we have to sell 3 planes a year at the old price just to break even on maintaining the quality system.

    Automation is much worse because the initial investment to automate is much higher.

    John
     
  21. Checkout_my_Six

    Checkout_my_Six Final Approach

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    so....maybe you need to produce more? o_O
     
  22. jsstevens

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    Clearly. But you also need to be able to sell them. And you have to have the money to invest up front.

    Suppose some fabulously wealthy investor showed up and built a new facility and all the process and automation improvements allowing Mooney to cut their price in half. Now the new 2 door Acclaim is $500,000 each. How many do you think they'd sell? (This is assuming the investor is a Mooney loving philanthropist and never wants a penny of the money back.)

    John
     
  23. Checkout_my_Six

    Checkout_my_Six Final Approach

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    well....I do know a thing or two bout amortization and NRE it's more than most think. :D
     
  24. jsstevens

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    Oh yeah. I'm pretty much making up numbers above. As I'm sure you're aware. But many people don't even bather to do the easy math.
     
  25. Tantalum

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    Build 500 of them and sell them at $100K
    500 X $100,000 = $50,000,000
    that beats 8 X $800,000 = $6,400,000
    **if the issue really is volume

    Any new, modern plane offered at $100K would take GA by storm.. esp if it came from someone with a long history and reputation (read: not Icon)

    **I know it's not that simple... but @Checkout_my_Six got me thinking
     
  26. bflynn

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    I don't dispute that some people spend over 100k and over 2000 hours to build their first one. But if the process were industrialized, that could probably be closer to 60k worth of material...and most of that is the engine and instruments ... plus maybe 500 hours. That's still $110k and that's getting it down to the minimums.\ to do better, you'd have to build your own engine (does anyone do that?)

    I'm not convinced at the $100/hour cost...as a consultant with an MBA, my cost was assigned at that level. I didn't make anywhere near 200k. But maybe I'm just getting screwed, after 25 years of working, they're still paying me in peanuts.
     
  27. Checkout_my_Six

    Checkout_my_Six Final Approach

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    you all realize....the cost of products coming from China are dominated by material costs....not labor.
     
  28. tspear

    tspear Cleared for Takeoff

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    The point was 200K was loaded cost based on an employee salary of 100K.

    Tim
     
  29. CC268

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    The thing with Vans is there are quite a few builders out there who build these Vans full time and then sell them - you pick your paint and panel. Not a bad way to go...and no where near 300k. You could have a very very nice Vans, built by a reputable builder, have it painted, choose your panel for ~125k. This is no including the RV10 as that is quite a bit more expensive.
     
  30. Checkout_my_Six

    Checkout_my_Six Final Approach

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    not gonna be an RV-10....
     
  31. CC268

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    Yea thats why i said, "not including the RV10".
     
  32. jsstevens

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    But remember there is a per unit cost which has to be covered as well. How much aluminum? What's an engine cost? How much wire? How much paint? Avionics, leather for seats, etc. How many hours of labor? At low volumes the fixed costs dominate and at higher volumes the per unit (aka variable) costs dominate. It's a similar looking curve to the parasitic drag vs induced drag graph for an airplane.

    That $100K per doesn't look so good if it costs you $200K per to build.
     
  33. Checkout_my_Six

    Checkout_my_Six Final Approach

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    .....and what's the price point the market will bare? I bet even at $100K or $150K it won't be all that much more than $250K.

    The economies of scale are a difficult proposition....
     
  34. Salty

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    I'm so stupid, I can't fathom how building an airplane that's essentially the same as it was in 1960 can possibly cost $800,000. Hell, I can't understand how building a 172 can cost $200,000.

    I mean even without economies of scale, how do you rack up that much money?

    Let's say half of it is labor @$100 an hour. That's 4000 man hours of skilled labor. That's nuts.
     
  35. jsstevens

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    How much is a G1000 setup and a Continental 180HP injected engine cost? Plus all the other aluminum and etc, parts. What're you at? $100K? Add in 2000 hours of labor at a burdened cost of $100/hour. There's your $200K.
     
  36. Grum.Man

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    800,000 is a bit ridiculous but I could easily see 400,000. Most people report spending around 200,000 on a nice completed RV-10. That doesn't include anything for their 2-3000 hours of labor to build it. Most planes built now have 120k just in the engine, propeller, and panel.
     
  37. CC268

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    I think the sad reality is that new aircraft will only be affordable for the 1%-5%. Even used, it seems like it is really hard to find a nice solid IFR platform in good shape with reasonably new avionics for less than 100K.
     
  38. Salty

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    Yeah, but how does building an engine that's barely changed since the 30s cost so much? That is part of the insanity. A brand new Io-360 can't possibly cost more to build than an entire brand new pickup truck with a bigger engine in it does. At least in my reality.
     
  39. Grum.Man

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    Most middle class families could afford a new airplane but it's not going to be ifr rated and be capable of carrying 4 people. Even in the 40's only the 1-5% could afford a Bonanza while all the middle class could afford was a Luscombe. I think our expectations have just grown too much. As many new trucks and boats I see on the lake every summer there could be just as many new airplanes if people wanted.
     
  40. Grum.Man

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    Economy of scale. In manufacturing volume is everything. There were a lot more of those engines made in the 40's. In a truck you are spreading the cost of a 85,000.00 injection mold out over a million + trucks of it's life span. That same casting for an airplane engine will be divided up over 20k engines in it's life time (total guess on that last number).