It’s the economy – Stupid !

August 2, 2012 by Bruce Landsberg

This was a core campaign slogan developed by one of former President Bill Clinton’s advisers, James Carville. The same could apply to general aviation. As many of us have noted, the manufacturers haven’t been selling very many aircraft lately, particularly at the low end. I have a hard time with the so-called "value equation" of many of today’s newly manufactured machines. They’re nice—wish I could afford one—but they are beyond the reach of middle class and upper middle class folk unless they are prepared to make major lifestyle concessions.

This price issue isn’t a new problem. It’s been evolving over the last 30 years as the cost of aircraft has significantly outstripped inflation. Some of the dazzling new products that we saw last week at Oshkosh have equally dazzling price tags. As a result the number sold and production quantity goes down year to year. Economists call it "elastic demand." But the fixed costs remain, and so the price has to go up to cover the expense across fewer units. That doesn’t sound exactly like a robust business model to me! So where is the pony in this room full of manure?

Well, the industry and the FAA have also recognized that this is unsustainable. The first step in a 12-step process is to admit that there’s a problem. AOPA, FAA, and industry partners are actually in discussion. It’s too soon to tell how all this will shake out, but easier modifications and streamlining the process for newly certificated aircraft could lower costs substantially. Part of the problem is what’s called "proportionality." The same certification standards apply to light business jets and to the most basic of aircraft, such as the Piper Archer or Cessna 172, and yet they operate in vastly different flight environments.

As U.S. manufacturing capability starts to move offshore, there is real incentive to get this right and do it quickly! We could all probably agree that building affordable aircraft is as essential to the salvation of GA as growing the pilot population. Most people still aren’t able to fly without aircraft, and the average age of the fleet is approaching 40 years—well beyond the expected airframe lifespan. The old aircraft are not unsafe—the accident stats prove it—but, at some point, the economics of maintaining old aircraft become burdensome.

It’s time for a new paradigm. But the cost equation isn’t just dependent on certification expense; our legal system, creeping featurism, corporate structure, and perhaps manufacturing methods all play a part. It’s complex, and solutions are both needed and never easy.

I’ve had my eye on some really neat airplanes over the years but it’s unaffordable for me now—my wife says we are NOT going to live in a cardboard box. (Hey, that’s only a problem when it rains!)

Bruce Landsberg
President, AOPA Foundation

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22 Responses to “It’s the economy – Stupid !”

  1. Tony O'Brien Says:

    Let’s be real. When I look at a D40 and they want $450,000 I have to ask myself is this aircraft worth $110,000 per seat? Compare the price to either engine or seat, but once you make this analogy the reality sinks in. Why would I pay $700,000 for a single engine Cirrus? I am in the market for a twin engine fully loaded, known icing for instance, weather radar, garmin all for a most cost of $121,000. That comes to $21,000 per seat. Now that is more my style.

    We tend to take the romance out of flying. I want it back in. I currently fly a 1981 PA32/300. I spent $15,000 to refurbish the interior, I cruise at 140 knots burning 15 gal. per hour. Operating cost, $70 per hour. Joy of flying, Priceless.

  2. Cris Simmons Says:

    Bruce,
    Another GREAT article!! It IS the economy, AND the efforts of some, IMHO, to make our GA system perceived as a vilified elite group, that should go the way of GA in Europe; it’s (GA) all but extinct. It is very sad to see what’s happened over there with user fees, restrictions, etc, etc…I sure hope we can prevent it from happening here in the US.

  3. Lee Says:

    All phases of American aviation is putting itself into the ground.
    -Becoming an airline pilot seems ridiculous when you measure the cost of getting a job against the initial salary, chance for furlough, and chance of being stripped of retirement.
    -The cost of new American aircraft is unsustainable for the average pilot, the workmanship is deplorable, and customer service for American made products is a recorded message, “We’re too busy to respond within seven days”.
    -American maintenance shops are not well monitored by their own people.
    -American flight training is all over the place and largely poor.
    -The magic of flight because of all the above doesn’t seem to attract many of our young, can you blame them?

  4. Robert Says:

    Don’t forget the income side of the equation. When adjusted for inflation, middle class wage earners don’t make nearly what they made 30 years ago. The economic decline of the middle class has a lot to do with the decline of GA.

  5. Jim Accuntius Says:

    While the joy of flying may be pricless.
    The yearly cost of maintaining any airplane new or old now exceeds the budget of most income levels.
    Hangar, Insurance, maintenance, avionics, and other upgrades to maintain value do not too change much for any aircraft.
    I am glad that Mr Landesberg is pointing to the problem.
    Another is once one learns to fly then what? Many schools do not even have suitable aircraft for rental to graduates.nso how does one use the skills obtained.

  6. EJ Says:

    I have to agree with all of the above comments. I’m currently working towards my CFI but it’s taken me 10 years to get to this point. Part of it was trying to balance the cost of flying with also trying to enjoy other aspects of my life. And more than once I’ve questioned if it’s worth continuing. At one point I was considering a career change to the airlines once I had the hours, but now that the Colgan law will soon be going into affect, I feel as though the weekend flyers like me who were trying to avoid going into debt are not welcome. When people ask me if I would like to own an airplane, I tell them no without hesitation. It’s not only the purchase price, but also the upkeep. I’d rather rent 2 or 3 times a month and have the option of saving money by not flying when necessary. Throw in the fact that I live in the DC area where the cost of living is high and I don’t have a lot of extra money to fly.

  7. Paul Dobrovolskis Says:

    The price of new aircraft has marched steadily beyond the reach of the average pilot. At over half a million dollars one can purchase a new Ferrari, and a new home plus furnishings or a new Cessna 182. The math speaks for itself. The question remains that are we willing to offshore aircraft production to bring back affordable aircraft and essentially save North American general aviation or do we sacrifice that to save a few North American jobs.
    In every other industry the answer has been clear. Just look at the north American made televisions, stereos,computers or even clothing. Manufacturing is dead or at least in life support as we have lost the competitive edge in the costs of production and no matter what ideal or loyalty we express the fact is that this will dictate how we as a capitalist society do business. Is it time to call a spade a spade and concentrate on what we are good at, which is innovation, only if we can keep it up. The Chinese are now building German designed diesel aircraft engines, where were our boys when they figured out that this is what the world market wanted, asleep at the switch or trying to figure out how to keep the price of shares up to maximize profitability.
    This problem was created by our own system and there will be no salvation or good ole boy ingenuity to save the day. It’ s a world market and perhaps it’s time to accept that and leave our xenophobia behind and look to see what the other few billion of this world are doing.

  8. Keith Says:

    The government and the manufacturers have forgotten about the class of people that these airplanes, that were once affordable, were being manufactured for. An example is the new sales tax exemption in Florida. The state legislature gave an exemption for owners of planes weighing over 2000 lbs. That leaves out ONLY the working class who fly the small Cessnas, Pipers, etc. In this country, now, only the very rich, and the non working class are being catered to. The middle class has nowhere to turn.

  9. Tom A Says:

    From the above comments it is apparent the end user/s know and understand why American aviation is in a grave yard spiral. It’s good to talk about it and meet about it… however, action ‘NOW’ is required – not next year – NOW ! The FAA is an arm of the rest of government and the rest of government is in a quadriplegic state. Expecting an arm to move is mute when the body is paralyzed.

    A BIG shot in the arm of American aviation WOULD occur immediately “IF” the FAA would stop making it so hard for pilots with medical problems (big, small and maybe) to get back in the air. The pilots with medical problems are usually older and it is this exact group which has MORE disposable income ! Unless a medically grounded pilot is completely devoid of intelligence, the biggest priority is to live longer – not pilot a plane – but to live longer. The desire to live longer means making changes in one’s life to make this happen. Does that not equate into a healthier pilot who “Probably” won’t crash into a school bus and end the world… what does the FAA think can or will happen ? Fear of making a mistake has the FAA paralyzed too !

    I am one of those older pilots and I am healthy enough to fly – I fly over farmlands with my wife who can land the plane in an emergency. However, the plethora of FAA red tape keeps me grounded. Why not let local AME’s with the pilot’s PCP make the “Go/No Go decision to ground or not ? The way it is now some FAA doctor in the middle of the country who never sees me, examines me, touches me or knows the changes I made – makes his/her decision based on how well the FAA paper work is filled out ! This is a loose/loose for American aviation and as it is now, I CAN NOT tell a younger person to pursue a career in aviation – it’s too “IFY”.

    In closing AOPA – The CAPTCHA Code needs work. Try it from home, you’ll see what I mean.

  10. Jeff Cooper Says:

    Everyone seems to forget that what started the meteoric rise in both new aircraft and flight instruction costs were the enormous liability lawsuits that were all the rage starting in the late 70′s into the present.Some over-funded, under-instructed Type A puts too much airplane into the trees and everyone that flies or aspires to pays for that guy’s lack of personal ability and/or responsibility when the family sues everyone in sight and collects, though the evidence usually points to pilot error.

  11. Charles Seitz Says:

    Regulatory burden is likely one of the single largest contributors to the cost of a new airplane these days, like it is to most products made in the USA. When you ask business owners who are outsourcing manufacturing, or manufacturers who have the option of building a factory here or overseas, why they choose the outside-the-US option, the unanimous vote is that it is not because of tax burden but because of over-regulation. Look at how onerous the process is to certify a new airplane. Cessna has it down to a science, but for a real innovator to come in and try to certify a clean sheet design that doesn’t fit the mold of previous designs, it costs millions upon millions of dollars. Even if you build 1,000 airplanes of a given model, if it cost $10mil to certify it, you just added $10k to the price of the airframe. Do that for every piece of avionics, tires, brakes, lights, and other bits and pieces and you’ve added thousands more. Now multiply this by all of the regulatory burden of building a factory, hiring workers, environmental regulations regarding how you can spray paint, safety regulations on how much signage must be around warning people not to stick their hand into that machine that is stamping out sheet metal, etc. and it just becomes more than the consumer can handle. We’re at that tipping point in aircraft manufacturing.

  12. Randall Henderson Says:

    The same issue of E-pilot has an article about $millions in bonuses going to Hawker-Beechcraft executives while the company works through chapter 11. Crazy executive pay may not be the cause of high aircraft prices (or the economy in general), but it sure isn’t helping matters.

  13. Kess Blaswich Says:

    Yup, I have to agree. The reason I fly old Cessna’s and home-made experimental light sport airplanes is the sheer cost. And i don’t see the process of building airplanes overseas making them any cheaper. Go price a new Cessna 162 Skycatcher, or any of the European slick Rotax 912 powered planes. Also the engines of these planes are expensive, as the price of a new Rotax can equal that of a Lycoming or Continental. Planes have always been expensive releative to incomes, but todays prices are incredibily disproportionate.

  14. Nancy F Says:

    To expand on Charles Seitz’ comment, regulations today assume mass markets. AOPA needs to identify a regulatory model for small markets, and then INSIST that our regulators follow it. Frankly, I am losing faith in AOPA to fight for us. I see way too much acquiescence based on the “lesser evil” theory.

    If we in the light aircraft pilot community cannot win some big battles soon, middle-class GA will die. That’s because when the boomers stop flying, it is all over. Look at the photos of any aviation gathering. It’s almost all grey hair.

  15. Maynard McKillen Says:

    Bruce, etal:

    This is a refreshing set of observations and responses quite apart from the type I usually see from AOPA members and contributors. I suspected AOPA was a refuge for trickle-down economic dead enders, fat cats who forgot their wealth was acquired under a political, legal and economic system that allowed them to prosper, or, to describe them in other words, arrogant sociopaths who refuse to acknowledge what Adam Smith called, “the invisible hand” of the market.

    Not only has the cost of aircraft outstripped inflation, but wages have remained stagnant relative to inflation for that same thirty-year period Bruce mentioned (actually even longer), so most Americans, save for a select few, now have less buying power than they used to.

    Middle class and working class Americans are now saddled with a tax code that offers ridiculous loopholes for corporations and the wealthy (witness Ann Romney’s $77,000.00 deduction for dressage for her horse). The affluent have purchased the offices and the votes of far too many politicians, who introduce legislation crafted by lobbyists, also the puppets of the affluent. The result: tax codes and laws that indulge the affluent to a degree that makes the U.S. the laughing stock of the world. Plutocracy, ladies and gentlemen.

    Building more affordable aircraft is a no-brainer goal, but the FAA, industry leaders, AOPA, and all Americans connected to aviation, have to recognize that a government and an economy that only works to benefit a select few is never going to witness a rebirth of private aviation, and will never see domestic aircraft manufacturing rise above the status of a boutique industry.

  16. Sam Bousfield Says:

    Much of the above is the exact reason why we crafted our business plan the way we did. We see that aviation has a tremendous potential future – in fact when you look at futuristic movies like Fifth Element and Star Wars, you see transportation in the air, not on the ground. That is what people envision as the future, but we do have real barriers to that with the regulations, litigation, and decreasing middle income structure in the US. With more and more people seeing the problems, there is the possibility that Washington can be changed for the better.

    One way to deal with it is to make your airplane also your car, so you can combine vehicles for expense purposes. Not keeping it at the airport or paying hanger rent reduces cost. Using an engine that burns unleaded regular gasoline can lower cost. With a little attention placed on providing a reasonably low purchase price and maintenance cost engine that is still reliable, we could really turn things around. That is our intention at Samson, and by certifying outside the US, we feel it is feasible.

    The bottom line for me is not buying into the idea that ‘it can’t be done’. That is not what makes this country different, or what has worked for us in the past. The idea is to find a way it can work, and make it happen. The alternate is that we pilots disappear and general aviation becomes extinct. That is not the future I envision or wish to have.

  17. Mike Prevost Says:

    (clap, clap, clap) to all posters, particularly Maynard M. I can add nothing more of value, but as a small business owner I see the effects of government policies that favor the few and leave the rest of us to carry ever larger burdens.

    And as a business owner, it’s not the cost of *regulation* that pushes manufacturing off-shore, it’s the (hideously) low cost of ***labor*** primarily as well as the willingness of places like China to pollute their environment egregiously that attracts manufacturing.

    But how do we break the downward spiral?

  18. Tom Beiser Says:

    Bruce, I have to tell you your timing on this is impeccable, however AOPA should shoulder some of this blame.

    I was catching up on my reading the other day and opened the June issue of AOPA. Looking through the advertisements, I thought to myself “Just who is AOPA magazine for anyway?” It’s not for me, at least not any longer because I can’t afford anything you are advertising.

    $50,000-$100,000 flight schools
    $500,000 cirrus aircraft
    $30,000 efis/gps systems
    $10,000 watches
    $40,000 factory engines
    $10,000 engine monitors
    mulitmillion dollar business jets

    Just who are you advertising too? Certainly not to me and I’m a 22 year ATP rated former airline pilot. Just who is AOPA’s customer anyway?

    And to top it off, I receive the AOPA daily email. Two of the articles I really wanted to read were blocked because I’m not a member of the legal services plan.

    The truth is, for the vast majority of us, the only way forward is to build/buy an experimental for a fraction of the price. A new airplane with fancy avionics for $50,000-$100,000 seems to be the right move. Honestly, AOPA doesn’t speak my language anymore but EAA does.

    Just my $.02 worth.

  19. Bruce Landsberg Says:

    Well, It appears that I have struck something of a nerve here. There are several things going in Frederick that are beginning to address some of the anguish that is so well expressed here. You’ll hear much more in the coming months.

    Let me manage a few expectations – even if the medicine is consumed immediately ( which it won’t be) by all who need to drink it, it will take a little while to have an effect but there is finally a sense of urgency.

    Readers here may also want to set aside some time when the September AOPA Pilot hits the airwaves and your mailbox. The Landmark accident and Foundation Focus may resonate with you.

    Thanks to everyone for your thoughts.

  20. Glen Says:

    Tom B. has it right. I’m Commercial, Instrument, ASELS, I’ve been flying for 29 years and I’ve been an AOPA member for 27 years. I’m planning to retire from my regular job soon and I recently sold my last certified airplane – a Mooney Ovation3 that gave me 170 KTAS at 15 GPH – because it was simply too expensive to operate and maintain on a retirement income. I bought a new Glastar for about $70K from a poor guy who lost his medical and I love it! Yes, I gave up about 30 KTAS but with 200HP it has more power-to-weight than the Mooney and I can maintain it myself for a fraction of the cost of the Mooney without the risk of losing OEM support (I know how expensive that can be because I used to own a Lake amphibian). My Glastar also has avionics as good as my Mooney and will be getting even better – I just bought a new avionics package at Oshkosh for $12K that has much better capability than a G1000. When I retire, I may build an RV-10 or RV-14. So who speaks for me? Not AOPA anymore. I joined the EAA a few years ago and they’re speaking my language. Yes, I’m also seeing the EAA increase their catering to “big business” at Oshkosh but at least they’re still putting their (our) “money where their mouth is” with grass-roots programs like Young Eagles and I feel connected through my local chapter. I rarely miss Oshkosh or Sun N’ Fun. I used to attend AOPA’s wonderful HQ Fly-in every year but they cancelled that in favor of vendor events like the expensive Summit that I will never attend. I can also call EAA and get useful information when I need it. Try doing that with AOPA these days unless you pay extra for one of their “service” plans.

    In the interest of full disclosure, I guess I should also mention that I recently bought an airport. Of course, I make about as much out of that as I did the farm I used to own before I developed it but I’m putting my “money where my mouth is” to keep GA alive.

  21. John Says:

    Aviation is in a dire place. Building on Tom B.’s comments, I subscribe to Plane & Pilot magazine and enjoy their content. They cover other aspects of aviation the AOPA Pilot and other magazines miss. I love my Cessna 150M and tho I have thought over the years to “upgrade” the costs involved outweigh the benefits.
    I love doing owner-assisted annuals as a way to keep the costs down, as well as flying off a grass strip. Many of my aviation friends are Sport Pilots and EAA members as well. In one magazine that I was reading, they were forecasting a shortage of pilots & something like 180,000-200,000 pilots are going to be needed by 2020 ! If that figure is correct, just where are they going to come from as all things cost $$$$$$ ?

  22. Tom Beiser Says:

    Aviation needs people to recruit that can relate. We can’t have old guys in khakis and a polo telling young kids about the glory days. We need current young pilots who go out and recruit. AOPA needs to blow the dust off if they really want to make an impact.

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