Cheers,
Who buys new airplanes?
(1) the flight mills (think training of large numbers of aspiring airline pilots from many countries). Buy a new C-172 ($379K MSRP), use 5-yr accelerated depreciation, rent it out for 1000 hr/yr (after all, this IS a flight mill), and at the end of five years sell it for $140K. OK, assuming the 35% Fed + State tax bracket, your business paid only $246K after tax. After selling, the airplane cost you $106K for 1000 hr, or $106/hr. Add about $50/hr for gas and required maintenance, and the aircraft cost is ~$160/hr. Guess what, this is about what they rent for. So it would seem the Piper (Archer), Cessna (C-172), and Diamond (DA-40) manufacturers have priced their products to perfection; i.e., for themselves. The flight mills will either REALLY have to fly that airplane or make their money in instruction, room & board, etc. That is what they do, of course,
(2) someone with more money than time: How long to fix up an older airplane? Let's see. Engine overhaul: 1 mo. Paint: 2 mo. Interior: 1 mo. Avionics replacement/upgrade: 1 mo. Annual inspection: 2 wk for a beater. Add it all up, since these occur nearly serially: 5.5 mo? That's the minimum real downtime to fix up a beater. A new airplane is faster, and maybe there are some tax benefits too, so the high price doesn't seem too out of line IFF you have the money. New airplanes bought in this category include the C-182 and the SR-20,
(3) someone who made lots of money and is sensitive to image and advertising. Why, what better way to impress everyone (except the insurance underwriter) is there than to buy a new SR-22T or A-36, maybe even a Baron, right?,
(4) someone with a legitimate business need and lots of cash flow. Tax comments above apply. The purchaser may be an avid and experienced pilot. Aircraft in this category can include the Baron (again), the C-206, and the lighter turbine aircraft: the Meridian, the TBM, the Eclipse Jet, and
(4) for the rest of us, there are used airplanes. As we all know, it is much cheaper to fix up a used airplane than to buy new. Similar tax benefits are available BUT, per above, don't expect instant gratification (that comes later). We also know we'll never get our money back out, so we fly our antiques for years for much pleasure and, of course, to avoid to the extent possible the odious airline passenger experience.
So you see, the manufacturers have optimized their prices for the market ... no surprise there. As for the $93K Skyhawk of yore, adjusting the price of course for better avionics and product liability, where are the buyers? We retreads are not enough of a market. In fact, the US pilot population has dropped from ~350,000 in the early 1980s to (I believe, roughly) ~240,000. All of that loss and then some has been in the GA pilot population, not the airline pilots. Not only that, we GA pilots are aging, on average, nearing (or in) retirement, and less likely to trade up. I feel fortunate I am alive at a time when I can still buy a relatively inexpensive used airplane, fix it up, and fly it for years.
'Couple of more thoughts. First, our GA fleet is aging. I understand the mean airplane age is now greater than 40 years old. Neglect, accidents, and overseas sales have and will continue to take their toll, and this will slowly drive up prices of good, well-maintained, used airplanes. Second, the trend since WWII has been for the airplane market to move upscale. We see this today in TBMs, Meridians, Eclipse Jets, the Cirrus Jet, and more. This class of airplane has become the entry level alternative transportation modality-of-choice for the very rich, as opposed to the scheduled airline experience. The FBOs at our major hub airports, and increasingly at the larger regional airports (can anyone say "Teterboro," "Oakland," or "Santa Barbara," to name three infamous examples) are becoming terminals for the very rich, and the rest us coexist, sometimes for high fees, only as a result of FAA and local ordnance-driven fiat. Or maybe the jet set suffers the rest of us for our political support, which I think may be misplaced?
I wonder if the days of a comfortable but not extremely wealthy individual pilot/owner are slowly coming to an end? Comments?
Happy landings always,
Don
