cost changes in general aviation

[larryb]

This morning I came across a 1982 issue of Flying magazine. The ad's were fascinating. Here are some 1982 prices:

Mooney 201 $67,000

Mooney 231 $74,000

KX165 $4,080

TI9100 Loran $7,995

KNS80 $7,600

Then I find an on-line inflation calculator and find the inflation in the last 30 years is 2.5x. So translating those 1982 prices above to 2012 prices gives us:

Mooney 201 $167,500

Mooney 231 $185,000

KX165 $10,200

TI9100 Loran $19,987

KNS80 $19,000

We may gripe about those high Garmin GPS prices, but they certainly are attractive compared to the inflation adjust prices of 30 year old equipment. On the other hand, wouldn't it be nice to buy a new 231 today, at a base price of $185K?

Larry

[scottfromiowa]

Yes it sure would.

[timpercarpio]

I never did understand why the cost of new airplanes far out stripped inflation. I hope it's not all due to liability. If so, lawyers should hang their heads in shame.

[KSMooniac]

It is primarily due to liability throughout the supply chain, so there is a real cascade of liability "costs" for every fastener, engine accessory, gyro, etc. in addition to the direct liability cost for Mooney or Cessna or whoever.  The other primary reason is the dramatically lower volume of production compared to the high water mark of the late 70s or early 80s.  All of that overhead (and liability exposure) is now spread over much fewer units in any given year compared to 30+ years ago.  I personally think the spread of lotto jury trials (fueled by trial lawyers primarily) started the decline of GA and the increase of costs.  We're still seeing it today, even after "reform", when you look at the Precision carburetors and Airborne vacuum pump product lines going away.  It is a very real problem, and I fear we won't ever see lower costs in our industry until that problem is solved.... with something like a "loser pays" legal system. 

[danb35]

I personally think the spread of lotto jury trials (fueled by trial lawyers primarily) started the decline of GA and the increase of costs.

How is it any more the lawyers' fault than the plaintiffs' or the juries'?  Lawyers take the cases (usually on a contingency basis, which gives them a strong disincentive to take losing cases) that clients bring to them; they don't invent cases out of thin air.  The juries decide the cases, not the lawyers.

[sreid]

Certainly the plaintiffs are the cause, the same as the psycho pulling the trigger commits a mass murder, not the gun. But unlike a gun which has no ability to stop an evil person who is pulling the trigger, the lawyers do have some ability to not bring these lotto liability cases to court.

[aviatoreb]

How is it any more the lawyers' fault than the plaintiffs' or the juries'?  Lawyers take the cases (usually on a contingency basis, which gives them a strong disincentive to take losing cases) that clients bring to them; they don't invent cases out of thin air.  The juries decide the cases, not the lawyers.

Quite true - fault the entirety of the litigious society.  Lawyers are easy to point at.

 

Separate note - I don't understand why a Cessna 172 isn't much cheaper compared to say a similarly equipped Diamond DA40.

DA40 was certified not too long ago and that great certification cost is still being spread across a not so big fleet, but the Cessna 172 was certified back when dinosaurs roamed the Eath and the Pterodactyl was still being certified under an experimental cert - so that part of the cost should be long since covered.  So by this logic 172s should be much cheaper than DA40s.  Where is my logic wrong?

[KSMooniac]

Certainly our litigious society and the trend to always assume an accident is someone else's fault and that they should pay a punitive amount is the reason...but the trial lawyers are the instruments of this trend.  The 80s case that faulted Piper for not installing a shoulder harness in a 30s Cub is a prime example, and the more recent case with the Carnahan crash and verdict against Parker Hannafin is another.  Lawyers twisted the cases around enough to convince a jury full of idiots to award them an enormous sum of money.  

 

A 172 is so expensive because the market will bear it (somewhat, anyway) and Cessna incurred a lot of expense in building a new factory and complete new tooling to put it "back" into production.  I also suspect their liability insurance costs are much higher than Diamond's because they have a larger fleet, and much deeper pockets with Textron as a parent company, so they're more likely to get sued.  Liability insurance is in the ballpark of 15% of gross sales, so a 300k 172 would be ~260k without the huge liability problem.  And much cheaper still if that burden were removed from the Garmin components, Lycoming, Cleveland wheels and brakes, etc. etc. etc.  It is sickening.

[peter]

Here's another measure:

 

Median home price October 1982 --> $69,700k

Median home price October 2011 --> $212,300

 

I'm not sure the lawyers deserve all the blame (and no, I am not a lawyer).  The FAA is part of the problem too. A manufacturer can buy insurance to manage the litigation risk, but managing the certification risk is not so easy. 

 

Today's requirements for certification and production are more time consuming and labor intensive than ever. This drives up the non-recurring and recurring costs as engineers spend hundreds and thousands of hours working on reports, analysis and tests.  

 

Higher costs means higher prices, and ultimately it means fewer aircraft owners and pilots, which further drives up aircraft prices.

 

I am optimistic that the FAA's current part 23 rule making review will directly take on these challenges and implement meaningful rule changes that reduce the cost of certification while improving safety. If we can make flying an airplane as safe and easy as driving a car, and as affordable as owning a home, I think we would be amazed by how many people would take up flying. 

 

Peter

82 M20k 231

 

 

[aaronk25]

Very good comments, I agree with most of the points. Certification costs were touched on and as much as I love my "certified" mooney, I find it rediculas that I can't install a Dynon glass dual panels like are in the flight design I just helped purchase for the flying club I'm in.

With battery back ups on both I could eliminate all the gyros for a fraction of the cost of certified aspen garmin or what ever.

Wouldn't it be nice to install a new tru track auto pilot for under 10k!!!! Instead if a 30k plus certified one.

I'm seriously considering selling my great mooney aircraft for a experimental and be freed from this expensive regulation.

[aaronk25]

One other thought is the fuel we burn and the government getting in the way. IO360 run just fine on 91 octane no-ethenal. Sure detonation margins are less but with proper cht engine info it can be monitored closely or if the FAA didn't make certification requirements so difficult we could have variable timing that retards ignition upon detecting detonation.

There is lots of rvs running mogas with injected lycomings. I don't buy the whole deal that because our planes "suck" gas out of the tanks instead of "pump" it that its going to develop vapor lock and quit at altitude or on a hot day. I bet it just got to expensive for Peterson to get it though the FAA.

Why is it LSA and experimental groups get the better, lower cost stuff.

Aaron

[Alan Fox]

How is it any more the lawyers' fault than the plaintiffs' or the juries'?  Lawyers take the cases (usually on a contingency basis, which gives them a strong disincentive to take losing cases) that clients bring to them; they don't invent cases out of thin air.  The juries decide the cases, not the lawyers.

Here is why its the lawers fault , They write the laws and interpret them.....And the legal "cause " is very rerely common sense....

[BorealOne]

Here is why its the lawers fault , They write the laws and interpret them.....And the legal "cause " is very rerely common sense....

Actually, instead of blaming lawyers, let's blame teachers! Teachers educate lawyers, who apparently then go on to do all kinds of terrible things. Or why not parents? After all, parents have children, some of whom then grow up to be lawyers.

 

More seriously, there's no doubt that product liability litigation in the US is problematic. But I suspect this has far more to do with the way the rules of the game are structured, not with the actions of the players within that system. Canada has far less litigation for one simple reason - we have a 'loser pay' rule in which the loser pays not only their legal costs, but a significant portion of the winning side's legal costs as well. This operates as a significant disincentive to bring dodgy cases forward. We also conduct most civil litigation cases before a judge alone, instead of a jury, which avoids some of the excesses of jury-driven damages awards.

[aviatoreb]

Here's another measure:

 

Median home price October 1982 --> $69,700k

Median home price October 2011 --> $212,300

 

I'm not sure the lawyers deserve all the blame (and no, I am not a lawyer).  The FAA is part of the problem too. A manufacturer can buy insurance to manage the litigation risk, but managing the certification risk is not so easy. 

 

Today's requirements for certification and production are more time consuming and labor intensive than ever. This drives up the non-recurring and recurring costs as engineers spend hundreds and thousands of hours working on reports, analysis and tests.  

 

Higher costs means higher prices, and ultimately it means fewer aircraft owners and pilots, which further drives up aircraft prices.

 

I am optimistic that the FAA's current part 23 rule making review will directly take on these challenges and implement meaningful rule changes that reduce the cost of certification while improving safety. If we can make flying an airplane as safe and easy as driving a car, and as affordable as owning a home, I think we would be amazed by how many people would take up flying. 

 

Peter

82 M20k 231

 

I applaud the effort to make new part 23 rules.  That the FAA seems to be aware of its own difficult rules being a hindrance and that it is interested in streamlining the process is a surprise to me.

 

If what has been said here, that the certification process is only a small part of the problem, and that liability is a more major part of the problem - thus the discussion of the similar costs between the recently certified DA40 versus the ancient certification of the 172, then that argument would suggest that prices would still be high.  I like to think that they would not.  And for all the little goodies especially.  

 

A company like a Dynon which already has a large collection of experimental goodies would be the big winner ready to step in and certify their well tested (in the experimental) robust avionics in a cheaper streamlined process.  And then we would all benefit from lower priced avionics and other stuff.  But then that would upset the business makeup of companies that already invested to certify under the present system.  What then of the Aspen for example which had to pay a great deal to certify its avionics in the current system and that great cost is built into its current selling price.  How could they compete against a Dynon which presumably would then cost half as much?  Or what if a company can certify a whole airplane, say a certified Vans RV10 - what will happen to the Cirrus, and Diamond's of the world where the current greater cert price is built into their products?  I wonder if they could adjust.  I guess it would be sad collateral damage of welcome change.

[tony]

One other thought is the fuel we burn and the government getting in the way. IO360 run just fine on 91 octane no-ethenal. Sure detonation margins are less but with proper cht engine info it can be monitored closely or if the FAA didn't make certification requirements so difficult we could have variable timing that retards ignition upon detecting detonation.

 

 

Its not just an engine issue, its the installed engine in the airframe.  This is an aircraft level test, not only an engine test.

 

I could be mistaken but I think I remember reading somewhere that the M20 airframe (plumbing) caused the mogas to vaporize under certain conditions.  Hence, no STC for a Mooney. 

 

 

If you look here you will not see a Mooney listed.

 

http://www.autofuelstc.com/approved_engines_airfames.phtml

[danb35]

Canada has far less litigation for one simple reason - we have a 'loser pay' rule in which the loser pays not only their legal costs, but a significant portion of the winning side's legal costs as well. This operates as a significant disincentive to bring dodgy cases forward.

It also operates as a significant disincentive to bring valid cases forward, particularly against a large and/or wealthy defendant.  When lawyers take cases on a contingency basis (as is very common in personal injury cases), they already have a strong disincentive to bring a dodgy case--if they lose, they don't get paid, and they're even out of pocket for whatever expenses they've incurred.

[Z W]

Be careful what you wish for in "loser pays.". It encourages defense lawyers, large corporations, and insurance companies to run up huge legal fees and use that as leverage in settlement. They have unlimited funds, for all practical purposes, for fees.

 

Unless you are one of them, you may walk into some dirty, reprehensible money-grubbing trial lawyer's office one day (maybe mine). After you have been fired for being the black guy, lost your job because you were injured, or had your insurance company refuse to pay for a surgery you already had, I'm going to tell you your trial is going to cost you $50,000.00 for my fees, and that you better have a reserve of another $75,000.00 to pay their fees if we lose. I will also tell you I can't take the case on contingency any more, because we can't count on getting a big enough recovery after damage cap legislation and because we got rid of jury trials for this and the insurance companies contributed thousands to the judge's re-election fund last year. So you are going to need to bring me most of that up front to get started. You do have plenty of savings and no money issues that brought you in to see me, right?

 

In all seriousness, the insurance companies and big corporations have spent millions on PR campaigns and election contributions to get you all to think this way. Do some research of your own. Read the 7th amendment, and think about whether our founders knew what they were doing when they wrote it. If it wasn't in our bill of rights we would have lost our jury rights already in a lot of places. Im all for making GA more affordable but this is not the way to do it. This stuff, if passed, will financially ruin a lot of people who didnt have a lot to begin with. Loser pays means bankruptcy after a loss for most people. And if that does not concern you, you have not seen our judicial system in action.

 

Edit: By the way, in a true loser pays system, lawyers like me would actually make more money, since I would get fees added to my successful cases, and pass the costs of losing on to my clients. My concern is solely for my clients, and my position is against my own best financial interests.

 

End of rant. Happy new year, clear skies, and tailwinds to my fellow pilots.

[aaronk25]

Well if motogas really does vaporize or cause vapor lock, boil or whatever then it's still the expensive certification process to blame because all it would take is a tank fuel pump to pressures the fuel ever so slightly at the tank to give a positive charge to the mechanical suction pump. But take a guess why this hasn't happened, because it would cost a bundle to certify!!!!!!!!

Why don't we have liquid cooled heads like rotax? On our lsa the rotax dosent even need any oil between 50 hour oil changes and the oil looks great at 50 hours not black like our 40k dollar antiquated engines. The fuel milleage is great to! Oh ya and now rotax has direct injection too!

This is damn joke where certified aviation is right now.

I agree with the other post to that cirrus and tge other companies who really spent big bucks to certify there equipment but haven't had time to recover there cost would really get screwed if other company's could more easily certify there equipment.

[Alan Fox]

It appears to me  that we all lose , and we all pay....... Go figure...........

[jetdriven]

Well if motogas really does vaporize or cause vapor lock, boil or whatever then it's still the expensive certification process to blame because all it would take is a tank fuel pump to pressures the fuel ever so slightly at the tank to give a positive charge to the mechanical suction pump. But take a guess why this hasn't happened, because it would cost a bundle to certify!!!!!!!!

Why don't we have liquid cooled heads like rotax? On our lsa the rotax dosent even need any oil between 50 hour oil changes and the oil looks great at 50 hours not black like our 40k dollar antiquated engines. The fuel milleage is great to! Oh ya and now rotax has direct injection too!

This is damn joke where certified aviation is right now.

I agree with the other post to that cirrus and tge other companies who really spent big bucks to certify there equipment but haven't had time to recover there cost would really get screwed if other company's could more easily certify there equipment.

 

You would need in-tank fuel pumps running full time to pressurize the entire fuel system to run autofuel in a Mooney, and in the case of the IO-360-A series, lower compression pistons to run safely on 91 octane autofuel.  They are 8.7:1 engines.  The IO-470 in the Debonair is STC'd to run autogas but it takes 470 cubic inches to make 225 horsepower, and burns 12 GPH or more in cruise. In effect, a less efficient larger engine, burning more fuel to do what an IO-360 Lycoming does on 100LL.  No significant savings there.

 

Regarding the Rotax, that is a great engine, but not significantly cheaper than a Lycoming or Continental of the same horsepower.  It only has enough power to propel a LSA size airplane.  There are liquid cooled TSIO-520s in Cessna 414s and the like,  but the added expense and complexity of systems on these engines has caused many of the owners to convert back to air-cooled engines.

Then you would still need ethanol-free autogas to put in your airplane, which has extremely limited availibility.

[Alan Fox]

I hear about vapor lock , but I believe the reason mooneys are not covered under the Mogas stc is because of the wet wings.......

[peter]

A company like a Dynon which already has a large collection of experimental goodies would be the big winner ready to step in and certify their well tested (in the experimental) robust avionics in a cheaper streamlined process.  And then we would all benefit from lower priced avionics and other stuff.  But then that would upset the business makeup of companies that already invested to certify under the present system.  What then of the Aspen for example which had to pay a great deal to certify its avionics in the current system and that great cost is built into its current selling price.  How could they compete against a Dynon which presumably would then cost half as much?  Or what if a company can certify a whole airplane, say a certified Vans RV10 - what will happen to the Cirrus, and Diamond's of the world where the current greater cert price is built into their products?  I wonder if they could adjust.  I guess it would be sad collateral damage of welcome change.

 

If it were only so straightforward .... 

 

Unfortunately, past certification costs rarely get "built in" to the price of a product in some effort to recoup those costs - those costs are "sunk", and were either funded by investors or from retained earnings.

 

On a go forward basis products get sold at a price that is sufficient to cover the cost of manufacturing, the cost of distribution, the cost of marketing and sales, the cost of customer support, the cost of warranty claims, the cost of overhead, interest, and taxes, the cost of R&D for new product development, and then hopefully there is enough left over to produce a small profit and a reasonable return for the shareholders. 

 

If a company like Dynon were to enter the certified market their business model would change as they would start to incur costs that are not part of their current business.  For example:

• They would have higher manufacturing and engineering costs related to the FAA overhead of certifying their designs, and developing new designs.
• They would need to have more people in production to handle the FAA independence and quality requirements. 
• They would need to change their distribution model since owners can't legally install avionics in their airplane, so they would need to build a large dealer network and include a dealer mark up in their MSRP, typically 15-40%. 
• They would need a bigger technical and field support organization to handle questions from all these new dealers. 
• They would need to start advertising in new places and attending more shows to drive customers to the dealers.
• They would need a direct sales force to go out and visit with the dealers to get them to promote their products over Garmin's, etc. 
• They would need a bigger customer support organization to handle all the questions they would get from pilots and aircraft owners unfamiliar with their company and its products.
• They would need bigger buildings to host all these new folks, more desks, more computers, more more servers, etc., all driving up their fixed costs.

 

Perhaps their existing gross margins would be sufficient to fund all of these new costs, but I suspect not - otherwise they would be selling their current products at an even lower price. 

 

What is more likely is that they would need to raise their prices to cover their new cost structure, at which point, they will be competing head to head with established players with large, loyal, customer bases that have little incentive to switch brands.

 

Unless the FAA decides to get rid of certification requirements on design, manufacturing, operations and maintenance, then the foregoing scenario is unlikely to change.

[aaronk25]

Byron,

Understand what your saying about the theory of why we would need full time fuel pumps in the tank but don't of older vehicles and machinery lack fuel pumps in the tanks?

If I understand it the less the pressure (higher altitude) will lower the boiling point of any liquid, which could cause vapor lock? It would be interesting if some one had a chart or data on gasoline where it showed altitude, temp, with amount of lift required to show how much margin there would be left. I hear what your saying but I just can't believe the engine would quit on climb out or in cruise do to vapor lock. I'm guessing and only a guess it might be harder to restart on the ground once hot with gas "boiling" in the injector lines.

One other thought isn't vapor lock only a concern due to how much elevation there is between the fuel level and where the mechanical/electric pump is? I know the electric pump is on the bottom of the pilot side of the cowl by my left foot, which is only a maybe 6" above the height of the gas in the tank. How would that be enough of a elevation above the fuel level to cause the gas to boil?

I also know some folks with the 200hp that fly rvs that run MoGas, with the higher compression pistons, but they watch there engine monitors like a hawk and use lower climb out rates ECT to keep head temps as low as possible to put stay as far away from detonation as possible.

The rotax has 10.5 to one compression but with liquid cooled heads that run 150-200somthing in flight there is more of a detonation margins built in I guess.

[wwrick]

Does anyone out there really know how much the FAA cert costs and liability costs add to the price of an airplane?   Seems to me if we were better informed, we could figure out which issue needs action.  We could lobby AOPA, EAA, and GAMA to work harder on these issues.

 

thanks

[DonMuncy]

If we can make flying an airplane as safe and easy as driving a car, and as affordable as owning a home, I think we would be amazed by how many people would take up flying. 

 

Peter

82 M20k 231

I appreciate your interest in getting more people to take up flying, but I believe that one of the big problems with our transportation system is that we have made cars "so easy to drive" that a large number of people think that it takes no effort (and therefore on attention) to drive. They think anyone can climb into a car and begin talking on the phone, texting, putting on make-up etc, and let the car take them where they want to go.

IMHO it takes attention and care to fly or drive, and when you forget that, it gets dangerous quickly. The sad part of this is that we, as a society, have allowed this to become commonplace in cars and just ignore the fact that people are dying in cars at a horrible rate. They don't think the same way about airplane fatalities. They jump on that like it is the nature of flying that "kills so many people in planes".   How many folks do you know that worriy that it might be you when they hear on the news about a plane crash, but never worry that it might be you when they hear of a car wreck.

Sorry; rant off.