There are few bright spots in the aviation world. Cirrus, Cessna, Piper, Diamond, and the rest of the mainstream, standard category airplane makers are all announcing production and job cuts.
But not the LSA sector. True, the LSA industry is a patch-work of family run companies that have revenue in line with the local deli. But Dan Johnson is right to say Sebring and the LSA sector is a “welcome gift to the global aviation industry.
There are many economic metricks that make the business work- for now. The development of the aircraft is far less than certified planes. They remain on the lower end of price-points for new planes. And the category continues to generate buzz.
But, like any fast growth business, the bell curve is steep on the upswing, and then flattens quickly. My concern is that LSA sales have never really been steep at all. Can companies survive by selling one or two planes a month? Maybe.
The strongest LSA contenders will be the companies that act most like the aviation companies pilots know. Ok, let me re-phrase that. They should take the good parts of those companies and leave the bad ones behind.
Here are my key points:
1. Strong sales record. This is important. While there are some people who will buy high-ticket items that do not have a long, established track record, most like comfort in numbers. Has the company been around for a while? Do they originate from a relatively stable country? How does financing and insurance compare?
2. Warranties. See point one. A warranty is only as good as the company that stands behind it. Question this? Ask any Eclipse jet owner. Or ask the auto industry, which fears bankrupcty will sapp its ability to sell cars.
3. Safety. What is the safety record of the model you’re buying? These are self-certified aircraft. Don’t count on the BRS to pull you out of a jam if the wing falls off. So far, the LSA safety record is mixed– but largely because of pilot error, not neccesarily aircraft malfunction.
4. Beware the shakeout. A shakeout is coming. The market cannot support 100 LSA manufacturers when only a thousand or so are sold a year. Anyone who says a shakeout isn’t coming has no historical perspective. Let’s see— internet bubble, housing bubble, tulip bubble.
Finally, if you’re in the market for an LSA, consider the ‘vulture investing’ approach. I suspect the economy will soften prices, especially on used aircraft. Find the brand you want and wait. There will be owners looking to unload them. Maybe repossessed ones too.