I know that's the excuse but I don't buy it. I think it has more to do with the Faa rules giving the engine makers essentially a monopoly.
Can Mooney and Cirrus save General Aviation?
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rbridges
En-Route
I agree about value. Just from talking to people around me, the majority thinks it's cool that I own a plane but have no serious interest in it for themselves.
hindsight2020
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hindsight2020
I think the market survey people miss the mark when it comes to the price elasticity differences between the sub-200K market and the supra 1MM market. Yes, it is fair to say 200 AMUs won't move the demand needle much when we're talking about a 1.5MM airplane. But it is well beyond facts not in evidence to suggest the airplane you seek to sell for 400K (let alone 700) won't have a substantive change in demand at 200K.
It's not just an excuse. When you start diving into the pricing for manufacturing cost goes up astronomically at low quantities. Without even going into automation vs manual operations as discussed earlier, cost goes down quickly with increased quantity.
For a manufacturer at low quantity, it doesn't make sense to have your own dedicated machines to produce things. You just can't keep them busy enough to justify the purchase cost. Further, you may not be able to justify keeping an engineer on staff to develop the manufacturing drawings. As a result you have to go to a machine shop and have them develop the processes and manufacture each component. You'll likely have to send the parts out for all plating operations too as setting up process tanks and waste water streams to meet EPA requirements is prohibitively expensive. Since you're purchasing all these services from other people, they need to add in their overhead + profit to the true manufacturing costs. Once the parts get to you, you need to inspect them to ensure that you got what you wanted. Especially in the aerospace industry. Then you need to assemble the parts. This is probably done at your facility (rent $$$) with your employees. Then once the product is built, you may need to test it before it goes out which means you (at low volume) are probably better off going to a test-house. More cost.
As production rates increase you may be able to justify purchasing manual machines. Now you may be able to do the majority of the machining operations but you need to hire an engineer to develop the manufacturing plans (or need to contract an engineering service to do it for you) and then you need to hire a machinist. You still need to send out complex machining ops or coatings, etc that you can't do in house.
As production rates further increase you may eventually be able to justify CNC machines that drastically cut down on manufacturing times, but now you need better manufacturing engineers/programmers/machinists/operators (very expensive). At this quantity manufacturing drawings, programming machines, and machine setup time may still dominate the manufacturing costs.
Eventually production rates will get high enough that all the NRE for each production run drops to essentially 0. Labor rates and material costs now become the main cost drivers. You may now be able to bring chemically processes in-house. Costs decrease further.
And so on and so forth. On and on we go, reducing costs as production rates go up.
Even at higher volumes and without FAA red tape and oversight engines can be costly to manufacture. I work for a diesel engine OEM and one of our "cheap" engines costs somewhere between $10-20k. When I heard that I didn't feel so bad about aircraft engine prices anymore, although they're still expensive for the typical piston aircraft owner.
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Aztec Flyer
so....maybe you need to produce more?
That's part of the mentality that allows companies like Mooney to repeatedly come back after their latest bankruptcy.
Some MBA whiz runs a multi-page spreadsheet financial model that shows "if they just did X" and thereby sold "Y" planes a year ("Y" being some figure much greater than anything the company has produced in a decade or two) it will all translate into a wonderfully self reinforcing growth and profit machine.
If you want to see a company trying to break out of "cottage industry" mode watch Tesla. A necessary, but not sufficient condition for it to survive in any form as an independent car maker is it has to produce the Model 3 in volume. Just watch how hard that is going to be for them (from 2 days ago - Tesla said it would produce 1,500 Model 3s in the third quarter — but it only made 260 https://www.recode.net/2017/10/2/16405030/tesla-model-3-production-goals-issues-deliveries)
And they have the advantage of a huge potential market at the price point they are trying to hit, with relatively high vehicle replacement turnover rates (10 years is a long time in the life of a car, but not an airplane). Something airplane manufacturers have never and will never enjoy.
Making airplanes is now a cottage industry. Right up there with making Morgan sports cars. I find it absurd that anybody lauds Cirrus for pushing out 300 or so airplanes a year and thinks that is some grand achievement on the way to resurrect the piston end of General Aviation. Fergawdsake, Ferrari sells more than twice that number of supercars every month.
Those that think Cessna should sell 172s at a loss and cross-subsidise them with Citation profits should ask themselves just how many 172 owners will ever graduate to a Citation so Cessna can recapture that initial loss. Maybe they can make it up on volume.
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Aztec Flyer
Further to this observation, I would ask how many of us on this board currently own cars or light trucks with engines that have ever been overhauled? And how many of us fly airplanes with engines that have never (yet) been overhauled? The market for new airplane engines is limited by more than just the low volumes of new airplanes being manufactured.
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steingar
Taxi to Parking
Engine in my convertible cost 8 AMUs to overhaul. That's everything, including getting it on and off the car, a new clutch, and everything else.
FloridaPilot
Pattern Altitude
I just spoke to a Cirrus sales Director and right now they are backlogged with Cirrus orders. It's going to take 9 Months to order a new Cirrus SR22 from start to finish. So Cirrus is in fact doing their part.
Mooney Fan
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Dav8or
Final Approach
And if they're smart, they'll keep it that way. The dumbest thing they could do right now is try to expand to keep up with demand because the demand is fleeting. GA has always been boom and bust. Let people wait for their new planes. Where else are they going to go? Honestly Cirrus really has no serious competitors at this point. The biggest competitor to Cirrus is Cirrus. They have to convince people to buy new instead of a used Cirrus.
Checkout_my_Six
Touchdown! Greaser!
well....if one wanted a new Mooney....bet they'd get one sooner.
vkhosid
Cleared for Takeoff
I got into this thread REALLLLLY late and haven't read the majority of it, BUT.....
If you have to use the word - Affordable - in quotes, it hardly ever is...affordable...
Dav8or
Final Approach
well....if one wanted a new Mooney....bet they'd get one sooner.
I'm sure they might, although the Mooney is hand built to order and so it takes a long time too. I would bet there almost zero people cross shopping Mooney and Cirrus though.
Dav8or
Final Approach
Yeah, it's the difference between impossibly expensive and insanely expensive in the case of airplanes.
Dav8or
Final Approach
FloridaPilot
Pattern Altitude
(IMO) I believe company expansion benefits the market as a whole. "Monkey see Monkey do" in business. If they see a company do well in any market then others want to copy. Company stagnation is a problem too. If Cirrus is on top for so long it will less likely want to innovate....why fix whats not broken? That is why I want the other GA companies to do well If Mooney starts to take away market share then Cirrus will be forced to innovate that is when the buyers benefit. Better options and lower prices until then Cirrus can charge 1mm for their airplanes....and get it too
hindsight2020
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hindsight2020
what percent of cirrus revenue is flight training fleet sales?
Dav8or
Final Approach
Sadly, the piston GA market is an anomaly in the world of consumer products due to the high level of government regulation and also liability. Ordinary market dynamics don't really apply. A company is foolish to try to expand just to look big, chase after faster build times. Another company can't just easily compete by bringing out a new model, or even an improved model. It just costs too damn much and takes too damn long. We might want fast action and reaction to market forces, but it's not reality.
Dav8or
Final Approach
I don't think it's that much. Maybe about 10% from what I've heard if you assume their trainers are SR20s. I suppose a few SR20s go to private ownership and maybe a few SR22s go to training, but I'm not sure how you can tell.
jspilot
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This times a thousand! I'm a teacher and teaching a class on economics this year and I've done a pretty good amount of research on this topic because I believe this to be one of the most important realizations that our next generation must understand. I have my students looking at lack of wage growth in this country compared to the cost of things. The lack of real wage growth in the United States is absurdly low compared to the ease of production! So for many years, the richest amoung us have been getting exceptionally more wealthy because the ease at which items are made has led to rapid production with much lower cost per good and the average United States worker has had stagnate real wage growth. Essentially the rich are getting far richer while the middle class is become further from reaching the upper class. The numbers are startling and the saddest part is, while we all are being brainwashed to look out for all sorts of social issues which usually benefit the smallest groups amoung us( which those groups do deserve looking out for) the vast majority are blissfully unaware of how the middle class in America is a simple myth that maybe for a few years was actually a thing so we don't do or say anything about an issue that has direct connection to everyone in the world( the amount of money in your pocket)! I'm not advocating for anything here and simply using this for a reason why affordability is a relative term. I'm reading a great book called "Economics in one Lesson." The book does an amazingly good job of explaining that want and demand are not the same in so much as demand requires capital to be shifted in one way or another. When it comes to airplanes, we all "want" one, but if we don't have the capital to spend on it, the demand seems low whe in reality demand would be higher if we had the capital to spend!!
The top 1 percent of the United States has more money than the combined income of the next 80+% of the United States and we wonder why people are not forking over 250,000 dollars for a new airplane at any rate? It's simple economics here people. Demand for airplanes is always high among pilots( a fairly obvious conclusion) but that demand has shifted into older used and cheaper airplanes to fly.
Take a look at this link for a scary visual of the wealth distribution..
https://visual.ly/community/videographic/economy/wealth-inequality-america
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tspear
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Cirrus used to have an engineering blog was was really fascinating to read.
It was always interesting to read how the company focused engineering resources on fixing three basic classes of issues. Now this could have been all PR; but it was still fun to read.
Anyway, based on warranty claims, they would spend time trying to determine how to reduce the cost of the claim. Everything from improving the initial design, getting a more robust third party supplier, or making it easier to replace. There were multiple examples, from wheel pants, alternators, antennas,,,
The second priority was changes to make customer ongoing maintenance cheaper for the owner. One of the examples, was the changes made between G1, G2 and finally G3 for access to the chute for the repack.
The last category on the site, which I am guessing was one of the higher priorities actually, was reducing production costs. It was kinda cool to read how to lower production costs, Cirrus built new autoclaves to allow for larger and single unit parts. And how Cirrus focused on a more precise application of resin for the fiberglass to ensure the correct strength, reduce weight, and I am guessing reduce wastage.
Based on the comments from mechanics that have worked on Cessna, Beech and Mooney; they do not seem to practice this level of continuous improvement in the piston products. However, Cessna does so in the jet line....
Tim
bflynn
Final Approach
Keep in mind that job salaries are just another price and are affected by the same things that all prices are - cost + supply + demand. Salaries for the middle class are being kept down because of competition, both overseas manufacturing and on shore immigrant competition. Increased supply equals lower prices. But these same people cannot compete (yet?) for the high level jobs. The gap stretching out is understandable and natural.
None of which is good news for aviation, but is very good for mega corporations.
geneseib
Line Up and Wait
At what point would you consider it saved?
Dav8or
Final Approach
Sobering for sure. In every era, in every country, throughout the ages, the rich have always gotten richer and have always controlled nearly all the wealth. Here in America we have tried an experiment to maybe not have it that way, but as your video shows, the experiment has failed and the wealthy run the world once more. Not sure if there is anything we can do about. Maybe give the wealthy a tax break? Isn't that the big plan now by the puppets we call elected officials? It's a great plan, that way we'll get trickled on.
tspear
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I find a lot of economics discussions where the middle class is being hurt to be interesting.
Try the following. Look at trade surplus and deduct against the growth or decline in the middle class. Try it for multiple countries in the past hundred or two hundred years.
Tim
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Try the following. Look at trade surplus and deduct against the growth or decline in the middle class. Try it for multiple countries in the past hundred or two hundred years.
Tim
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CC268
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Yep. It is a sad reality. I am not an economic expert, but it doesn't take much to see the many issues that my generation (I am 24 years old...) will likely face. I try not to get sucked into the "rich people are evil!" stereotype, but I have seen the ridiculousness and greed of some of these mega corporations first hand. Don't get me wrong, I am very thankful for my job, but the proverbial red tape and political aspect of these big corporations is unbelievable. These guys at the top are making tens of millions of dollars and have almost no regard for their employees. The only thing that matters are the shareholders. Meanwhile, much of the baby boomer engineers are retiring and the younger engineers aren't staying because of all the layoffs, decline in benefits, and the lack of vertical movement. The days of employee loyalty are gone because the days of company loyalty are largely gone. The reality is that it is all about doing MORE with LESS. Cut and cut and cut and cut. Meanwhile so many of our jobs are being outsourced to India, Malaysia, China, Europe, etc. Sure not all design work can be outsourced due to export control. But you better believe these business giants will continue to thin their American work force as much as they can. Americans are greedy. I can pay this fella in Malaysia to build my product for pennies on the dollar. Why in the world would I want to pay you tens of thousands?
With automation continuing to grab hold of so many industries and with the continuous outsourcing of jobs/manufacturing, I think we will begin to see a shrinking middle class and an increase in the uber wealthy. I don't know what the solution is or if there is one. There are businesses out there that seem to still take pride in taking care of and rewarding their employees. I guess that is the good news.
bflynn
Final Approach
http://blogs.reuters.com/chrystia-freeland/2011/04/15/capitalism-is-failing-the-middle-class/
What I would disagree with is that this is limited to the middle class. Competition is hitting salaries across the board in every situation where competition is allowed. If I could give advice to college kids today, it would be to study in careers that are least likely to be impacted by international competition. Business and medicine are two good ones, but law seems to be the most immune. Whatever happens overseas, you cannot practice law in the US unless you graduate from an accredited law school.
CC268
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The problem is the cost of education is out of control. Much of my family is in the medical field. My mom is a nurse (although she has been in the medical sales industry for a long time now), my dad is a dentist (who now teaches dental students at Midwestern University), my uncle is an orthopedic surgeon, etc...you get the point. Medical school is insanely expensive. My dad has students 500k in debt. It doesn't mean jack that your making 200k a year (most students are making about 120K a year out of school) when your paying $5,000+ a month in STUDENT LOANS. My dad basically says the only way to do medical school now a days is to have a scholarship that pays for it (quite unlikely to have one that pays for it all) or join the military and have them pay for it. If your lucky, you have wealthy parents who can pay for medical school.
Medicine can be a great career, but the stereotype that being a doctor = being very wealthy is utter BS. Quite frankly the same goes for lawyers. A lot of doctors end up in horrible financial situations despite their rather large income. Even if you do make good money as a doctor...you work work work (although my dad did have a nice schedule when in private practice). One thing I have learned in my short few years...do something you really ENJOY. Don't do something because you THINK it will make you wealthy.
YMMV.
jspilot
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I started watching a documentary called "inequality for all" that focuses on the recent trend of wage inequality. While the documentary is certainly biased towards large government spending and certainly more of a democratic approach to policy, it absolutely highlights how in America, during the time around the 1960's-the 1970's Americans had the smallest wage disparity between the wealthiest and the middle class of any time period in the past 60 years! It is no coincidence that airplane GA sales were also robust during this time and we consider this to be the time at which GA was at its peek! The documentary fixed blame for the current wage inequality to globalization and the requirement for companies to lower costs to become more competitive. Paradoxically though, it also highlights how the average American has far less purchasing power today than at any time since the Great Depression further highlighting that while we benefit tremendously from lower cost items than we would if production was not increased, the average worker still can't afford as much as we expect. It's a fascinating look into where we are as a nation and it seems like it is cyclical. Perhaps the answer is we wait out this cycle and then we may see major changes. That's being said, if we are talking about airplanes, it seems like we all here are doing pretty well for ourselves and should feel fortunate to be able to discus these types of issues as other people's problems.
bflynn
Final Approach
I know that I have the same salary today that I had when I left B-school 10 years ago. Then I was glad to get it. Today, I'm glad to be able to get it.
Contracting in my field is dead because of H1-B workers and Indian consulting firms bringing those workers to the US. They promise bill rates that are less than what I make for resources with no experience and customers buy it, frequently to their regret. Nothing like throwing a lot of really, really cheap bodies at a problem to make up for any skill. I was laid off from my last job for exactly this reason - I was replaced by cheaper workers here on H-1Bs because with an MBA and 20 years of experience, my cost was "too high".
Anyone want to start a business building airplanes?
Contracting in my field is dead because of H1-B workers and Indian consulting firms bringing those workers to the US. They promise bill rates that are less than what I make for resources with no experience and customers buy it, frequently to their regret. Nothing like throwing a lot of really, really cheap bodies at a problem to make up for any skill. I was laid off from my last job for exactly this reason - I was replaced by cheaper workers here on H-1Bs because with an MBA and 20 years of experience, my cost was "too high".
Anyone want to start a business building airplanes?
bflynn
Final Approach
It's one thing to do something you enjoy without caring if you get rich. It's another doing something that you know is going to make you poor.
Besides, how do you know before you do it?
CC268
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CC268
I guess I don't quite follow you here, but that is alright. Of course I wouldn't recommend taking a career path that is going to make you poor lol. I was just saying that being a doctor or a lawyer does not automatically make you wealthy.
bflynn
Final Approach
Nothing does. Strategically, choose something that requires you being here in person, for example, being a plumber. Nobody can fix a clogged pipe unless they are actually on the location. Of course, you still have to deal with others who come here and work for lower wages.
If I sound angry about this, I am a bit. People coming here and defying the laws is impacting my addiction to food, clothing, shelter and airplanes. Secondarily, it is hurting GA.
FloridaPilot
Pattern Altitude
That is a great question!
This is my opinion and it may be blasphemy but:
#1. When we have more BIG air shows to go to except SNF and OSH 4 Big ones. One in California and Texas 500K attendance
#2. When airports are being built for GA instead of taken away.
#3. When being able to fly becomes less expensive, with parts being easier to find.
#4. When the media can come up with something positive to say about GA for a change.
#5. When kids can ride their bikes and go check out the airplanes landing and taking off.
#6. When more pilots are wanting to fly just for the fun of it, not doing it for a job.
The list goes on and on....
CC268
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I'm pretty sure we are on the same side and share the same frustrations. I am an engineer and even as an engineer the outsourcing of manufacturing, production, and even design engineering is hurting us as well. And you know in the next 10 years it will be AI robots doing all the engineering and the human race will over taken anyways...so just enjoy the time we have now
Checkout_my_Six
Touchdown! Greaser!
no....additive manufacturing...or 3-D printing .....is the next new buzz....we will just print the parts as we need them.I'm pretty sure we are on the same side and share the same frustrations. I am an engineer and even as an engineer the outsourcing of manufacturing, production, and even design engineering is hurting us as well. And you know in the next 10 years it will be AI robots doing all the engineering and the human race will over taken anyways...so just enjoy the time we have now
CC268
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no....additive manufacturing...or 3-D printing .....is the next new buzz....we will just print the parts as we need them.
haha I am actually involved a little bit with additive manufacturing. Additive is a cool technology though.
Checkout_my_Six
Touchdown! Greaser!
see.....