AVweb

« Back to Full Story

Aero Vlog: Where's the U.S. Capital for Building Airplanes

  • E-Mail this Article
  • View Printable Article
  • Text size:

    • A
    • A
    • A
Don't see a video screen?
Try disabling ad blockers and refreshing this page.
If that doesn't work, click here to download the video directly.

There's a ton of U.S. capital on the sidelines looking for growth opportunities. In Europe, some of it goes into aircraft manufacturing. Why not in the U.S.?


Comments (50)

Great observations from the most thoughtful aviation writer in the business! Your reports from Europe were fascinating.

Posted by: William Corwin | April 30, 2012 6:18 AM    Report this comment

Paul,

Insightful. Your observations are spot on. Regulations are not what is stifling the US, it's the rigged system that has been securely put into place (power) that favors the 1%.

The nail in the coffin was the Citizen's United decision by the [judicially active] Supreme Court that unleashed the, now, flood of money into politics. Frankly, I see little chance to turn the tide.

The results are oblivious: 1) increased concentration of wealth 2) inability of government to do anything except cut taxes on the 1% 3) the consumer marketplace drying up as the middle class shrinks 4) lack of demand equals lack of innovation 5) continued decline of US economic synergies

GA depends upon a robust middle class. Except for jet sales, and usage, GA is moribund. The niche that caters to the 1% will continue to do OK for awhile, but the whole GA system is in danger...from manufacturing, to airports, to innovation.

The lessons from the (contining) financial crisis have not been learned. The financial sector and 1% continue to fund the perpetuation of the rigged system that got us here. Their narrow self-interests will continue the cycle we find ourselves. Stagnating (even shrinking) wages, shrinking consumer demand, and capital reserved for [rigged] unrealistic returns.

I did not intend for this response to be a screed on the economy of the US, but no discussion of the plight of the GA sector in the US can be complete without an inquiry into your question as to: why?

Jeff

Posted by: JEFFERY DARNALL | April 30, 2012 7:54 AM    Report this comment

It is nice to see a different take on a continuously deterioriating situation in US GA. While I will not be calling FAA regs "heaven" anytime soon, Paul's video and Jeff's interesting comment do beg the question: Where is US capital? In my research conducted as part of my role in a US GA startup, I have found under-capitalized small ventures gallore, but none able to do what it takes on the marketing sales end do get the ball rolling. Combined with a parts channel choked up by low numbers produced at each step, nothing happens. To paraphrase Paul: where's the (US) money? If he's right as to the answer, he and Jeff will be seems as profits of doom. Meanwhile the innovation moves east with the money following it. What a business!

Posted by: LEONARD ASSANTE | April 30, 2012 8:11 AM    Report this comment

Interesting. I like the points on ROI. There may be more to that than just expectations, but certainly the US investor hunts the fast buck. I wonder if the EU guys have become experts with dealing with regulators while we are still fighting them? I see great support for good regulations and acceptance of proper penalties here, but one stupid fine or hold up gets everyone mad enough to quit. Also, comparing the US to Canada, I found it easier to deal with the Canadian bureaucrats than the US. The Canadians seemed to be much better at responding to exceptions. Our customs guys do well, but not so much some other groups. Our guys aren't as good at discerning the soft lines and the hard ones.

Anyway, if Christian is so fond of the FAA, he can move himself and his company here. I love the guy, but actions speak louder than words!

Posted by: Eric Warren | April 30, 2012 8:52 AM    Report this comment

Shame on those stupid American fast buck artists who put their money into companies that create the majority of intellectual property in the world, instead of in an industry with a shrinking customer base, a regulatory horror show, and no possibility of reasonable returns. To steal a joke about the wine business; "Do you know how to make a small fortune in GA? . . . Start with a large fortune."

Would you put your 401(k) money in a GA company?

Posted by: PHIL RYDER | April 30, 2012 9:14 AM    Report this comment

I do not buy the theory that the middle class in the U.S. is dead and all the claptrap talk about the mythical 1%. The answer is not so simple, and do not forget that it was European banks who received a large junk of the TARP bailout when they jumped on the derivative market and lost big time. The entire Icelandic economy was wrecked by Europeans speculating in an artificial real estate boom created by U.S. politicians.

There are a few reasons though that one finds so many innovations in Europe, my second home:

1. Tough laws against frivolous lawsuits - Europeans all know about the famous coffee-cup-in-a-lap lawsuit in the US and simply choose not to do business in our country as a result. My German lawyer years ago showed me the limits to tort law there, which made frivolous lawsuits unattractive.

2. Education - the general level of technology education is quite high in Europe, and vocational training is just as well respected as college educations. Thus many in Europe have the skills to design and build sophisticated engines and airplanes. In the U.S., many college graduates have at best a middle-school understanding of math, mechanical system, engines, etc. and are generally steered away from a vocational career.

Posted by: Kent Misegades | April 30, 2012 9:20 AM    Report this comment

cont'd

3. Flying clubs - unlike the US, a larger percentage of European private pilots are members of flying clubs which offer everything from modeling to soaring, ULs to spam cans and even aerobatics. This lowers the cost to fly greatly. Those not in clubs typically form partnerships with a few friends to lower costs. Many flying clubs own their own airfields, lowering costs.

4. Eastern Europe - Much of what one saw at AERO either originated in eastern European countries or is manufactured there based on designs from Germany, for instance FK Lightplanes in Poland and Flight Design planes from Ukraine. Austria, home to Diamond, Austro engine and Rotax, was occupied by the Soviets until the 1950s and can be considered somewhere between east and west in post-WWII history. Many refer to these countries as 'the wild East' due to low regulations and lower costs, plus eager young designers out to recover from 50 years of Soviet oppression.

5. Taxes - Are much lower on corporations than in the US, so innovative business owners who can make a profit are not punished as they are in the U.S. these days.

Posted by: Kent Misegades | April 30, 2012 9:21 AM    Report this comment

cont'd

6. Freedom - Many Americans still refuse to believe it, but in some ways pilots in Europe enjoy more freedom. You won't find massive zones of restricted military airspace or an ADIZ as the one that now blocks so much of light aircraft traffic in the mid-Atlantic states. You can take off from most airports in Europe, without a flight plan, and fly to any one of two dozen countries without the need for customs or immigration. You can't even do that when flying to Canada from the US!

7. Small business owners - the strength of the Germany economy is in manufacturing, and most of these companies are small- to mid-sized. They are typically owned by the company founder, who is more likely to have apprenticed in a trade than to have attended some MBA school. These companies are not run by bean-counters or lawyers, but people who use their hands and minds to build world-class businesses. They are spread all of the country which makes aircraft ownership for business attractive. Look into many European aircraft manufacturers and you will find an owner/backer that manufactures other products.

Paul, thank you for your reports on AERO - I hope I never have to read again someone's claim that "General Aviation in Europe is dead."

Posted by: Kent Misegades | April 30, 2012 9:21 AM    Report this comment

There is probably no single reason why fantastic things are happening in Europe and pretty much nothing besides Cirrus/Icon are happening stateside.

America seems to be addicted to aluminum. I know I am - the Europeans pretty much jettisoned that material. Also, there are a LOT of good-enough airplanes (even at $5.50/gallon) available holding demand in check.

Posted by: Peter Kuhns | April 30, 2012 9:22 AM    Report this comment

I might take issue with the tax claim.

For the EU in general, Bloomberg BF reports an average corporate tax load of 23 percent, which is lower than the U.S's stated rate. But U.S. corporations don't pay the stated rate because of credits and loopholes, hence we read stories of Apple's effective tax rate being 9.8 percent and GE managed a zero percent rate recently.

As for overall tax load, the World Bank reports that Germany is three or four, depending on the indice used, while the U.S. is about 23rd. For the developed world, the U.S. has very low taxes.

The tort environment might be a bigger player, however. It's much more rational in Europe.

As for investing 401K money in an aircraft company, the point is well taken. But there is the capital in the world willing to fund aircraft development--from Europe, from Asia, from South America. Even Russia. Is that just stupid money? Do they not know something that U.S. investors do? Or vice versa?

Beats me.

Posted by: Paul Bertorelli | April 30, 2012 9:44 AM    Report this comment

I think the issue may be deeper than money, returns, and regulation. I'm in my 30's and consider myself an oddity in many aspects. I am a software developer by day, but my hobbies include building cars, designing electronics, and when I can afford it flying. Family time and work time leaves little for these hobbies lately but I'm good with that. I have 2 other friends that fit into this each lives in other areas of the US. Non of my other friends or anyone younger than I am I know of tinkers in mechanical and electrical engineering.

Now hop across the pond and teenagers and college age people are building and flying drones, hectocoptors, etc. I'm afraid the pioneering spirit required for GA is dying in the US. Now is that due to low investment returns and regulation, maybe in part. The biggest question is how to make people realize how much more fun designing and building something is compared to pressing up down left left right on a joystick for 5 hours a day.

Except for large gov't contracts innovation comes from people with hands on skills and we are just not producing those. College degrees are great but...

Posted by: Joseph Chambers | April 30, 2012 11:08 AM    Report this comment

Actually, there is nothing irrational about spending money on either a hobby (why we have such wonderful vintages available), or for prestige, provided it's your own money. All the hobby money here evaporated after Eclipse, Adam Aircraft, and a dozen other GA startups failed. Go back and review your reports from any Airventure prior to 2008. There was a lot of US investment in this market with almost all of it lost. Large investment funds watch their money just as closely as one should watch their own 401(k), or at least I would hope they do because you probably indirectly have some of your 401(k) money in those funds.

Also, how about just a little bit of skepticism on some of these claims? Pipistrel has never certified a four place complex aircraft. We'll see how wonderful and affordable the plane is after $100 million is spent and countless design changes are made in order to get certification (even in Europe).

Posted by: PHIL RYDER | April 30, 2012 11:25 AM    Report this comment

Phil, I don't think it will be quite $100M. When we were in Slovenia, I asked about the budgeted cert costs and was told 7M Euros or about $10M. My guess would be about twice that.

But you're right. Talk is cheap. Put the airplane out there and we'll see.

Posted by: Paul Bertorelli | April 30, 2012 11:41 AM    Report this comment

As a Canadian ex-pat living in Switzerland and having flown both in Europe and North America I would say the biggest driver over here is the tremendous cost of flying. The last time I rented an aircraft in Canada last December I paid nearly a third of what I pay here to rent per hour.

I think one of the biggest factors in the cost is the price of fuel. This drives demand for innovation for more fuel efficient modern aircraft.

That is why the Europeans are developing engines to run on Jet A and Mogas and composite fuselages which are easy to shape with very low drag to minimise fuel burn while the Americans are still happy to fly 50 year old technology that guzzles fuel.

Posted by: Geoff Engelbrecht | April 30, 2012 11:44 AM    Report this comment

"The entire Icelandic economy was wrecked by Europeans speculating in an artificial real estate boom created by U.S. politicians."

I wanted to comment on this and to suggest two excellent books on the subject, Michael Lewis's Boomerang and The Big Short. These are excellent, readable summaries of the credit and financial meltdown. A third, The Foreclosure of America: The Inside Story of the Rise and Fall of Countrywide Home Loans, the Mortgage Crisis, and the Default of the American Dream, delves into the subprime bubble.

As Lewis tells it, the Icelanders did it all to themselves. In the late 1990s, they turned the country's subsistence fishing industry from a broad based activity into a structure that licensed only certain businesses. These generated enormous wealth in a small economy at a time when the U.S. commercial banks were developing mortgage bonds based on subprime risk and looking for placed to unload these products.

Almost overnight, says Lewis, Icelandic fishermen became investment bankers. Literally. They knew nothing about the industry, but were making huge bets on mortgage bonds, CDOs and other insanely high risk assets that even the people selling them didn't understand. Credit was cheap, so they kept buying and buying.

When the market turned--in fact, it didn't have to turn but just grow a little slower--they had unrecoverable risk and the house of cards crumbled. He goes into that quality of the Icelandic character that aggravated this.

Posted by: Paul Bertorelli | April 30, 2012 11:55 AM    Report this comment

PS Kent, as a North American trained engineer I take offence at your statement that Europeans are better trained than North Americans. There are some good engineers here but there are also good engineers in North America. Raise the price of Avgas and I am certain Cessna and Piper will get off their asses and start to work on new GA designs.

Posted by: Geoff Engelbrecht | April 30, 2012 11:55 AM    Report this comment

In Germany, the story was different. By predilection and law, German banks didn't engage in subprime lending or bonds directly. But, improbably, the German commercial banks bought huge volumes of subprime-based bonds from the U.S. markets, again without the slightest clue of the risk pool.

At Goldman Sachs, a trader was quoted as saying "who can we get to buy this s&^%" and the answer turned out to be "the idiots in Dusseldorf." As a result, German commercial banks still have high debt to assets and won't be at all resilient if there's another major downturn. U.S. banks have exposure in Europe so when you hear talk of "the European debt crisis," that's a piece of it.

However, unlike in the U.S., the German domestic housing market didn't crash and drag down the larger economy. That's one reason, despite high taxation and regulation, that Germany is doing better than the U.S. economically.

As for U.S. politicians creating the mess, maybe a part of it, but not the driver. The commercial banks invented the sub-prime market and mortgage bonds. You could blame Clinton for signing the bill that gutted Glass-Steagall or the Democratic congress for forcing Fannie Mae to make 50 percent of its risk in subprime, but in the end, the commercial banks built the bubble evidently, says Lewis, without even understanding what they were doing until it was too late.

I recommend these three books to anyone interested in this. It's a good education.

Posted by: Paul Bertorelli | April 30, 2012 12:13 PM    Report this comment

Housing in Germany is completely different than the U.S. People build once, for life, tend to pay much higher deposits as they traditionally eschew debt. Germany also has a tiny defense budget and much, much smaller dependent/non-working class than the U.S. Illegal aliens are also few and far between. Former East Germany remains a drag, but as the population continues dropping there, this is not as big an issue. Hard to draw comparisons to the fairly homogenous German society to the U.S.

Posted by: Kent Misegades | April 30, 2012 12:43 PM    Report this comment

Geoff - you misunderstand - I am referring to most US High School graduates whose knowledge of technology is laughable. Non-engineering graduates of U.S. colleges are no better, nor are their teachers/professors. A root cause is the demise of vocational education in our schools, quite the opposite in Germany with a vibrant 2nd rail of trade schools leading to 'Meister' and the ability to open one's own manufacturing business. I have engineering degrees from the U.S. and Europe, have hired engineers in the U.S. and Europe and have developed a vocational training program for a network of private schools I direct in central NC, based on the best one finds in Europe and Asia. Our government schools have completely failed in this regard, but the private sector will succeed. Gerald Yagen of the Fighter Factory (VA Beach, VA)has made a fortune with his private vocational schools.

Posted by: Kent Misegades | April 30, 2012 12:52 PM    Report this comment

"As for U.S. politicians creating the mess, maybe a part of it, but not the driver. The commercial banks invented the sub-prime market and mortgage bonds."

Look at the heads of the these banks though. There has been a revolving door between their headquarters and the White House in recent years. Look also who benefits most from campaign contributions from Wall Street.

Let's get back to talking airplanes, more fun. I flew in a 1960 Klemm 107C last week after AERO - now that was real fun. It's owner, a friend of mine, designs satellites for a living. He only burns mogas in its Lyc O-320. The designs from Hans Klemm are superb examples of German sport aircraft of the 20s-50s.

Posted by: Kent Misegades | April 30, 2012 12:57 PM    Report this comment

Paul, the politicians should share at least equal blame with the so called "bankers"(actually the banks are no longer banks but houses of financial ill-repute). The "bankers" were doing what they do and doing it well. The regulators were not doing their jobs primarily because the politicians were listening to the bank lobbyists rather than economists. As a result the financial lemmings took us all over the cliff once again.

Posted by: Richard Montague | April 30, 2012 1:09 PM    Report this comment

Kent, frivolous lawsuits may be part of the equation here, but the "hot coffee cup in the lap" is not a good example of one despite the seeming universal acceptance of this alleged poster child for the evils of an individual getting their day in court. There is plenty of documentation of the real story available, so don’t take my word for it, but here is a short summary. 79 year old grandma gets 3rd degree burns over 6% of her body. 8 days in the hospital for skin grafts and 2 more years of medical treatment. The family sought 20K from McDonalds to cover medical expenses. McDonalds offers $800 and resists all pre-trial attempts at a mediated settlement. During the trial it becomes known that McDonalds’ policy at the time was to serve coffee at 180-190 degrees – hot enough to cause said 3rd degree burns, and that they had over 700 reports of people being burned by their coffee. Jury awards 2 days of McDonalds’ coffee sales (2.7M). Judge calls McDonalds’ conduct reckless, callous, and willful. Private settlement between the parties eventually reached.

Posted by: Robert Carl Young | April 30, 2012 1:13 PM    Report this comment

"Raise the price of Avgas and I am certain Cessna and Piper will get off their asses and start to work on new GA designs" - Geoff Englebrecht

Geoff: My personal memories of the aviation industry cover the period from the 1950s through today. Maybe I'm just unobservant, but I've never seen any evidence of what you suggest.

Posted by: Tom Yarsley | April 30, 2012 1:23 PM    Report this comment

Paul, completely agree. American investors all too often seem to be in it for the quick payback. If you want to read an interesting analysis, check out an article in Forbes called "Maximizing Shareholder Value - The Dumbest Idea In The World". The author argues that the focus on quarterly profits and "meeting" or "beating" analyst expectations creates an environment that is ultimately really bad for business.

http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/

Posted by: MICHAEL KOBB | April 30, 2012 1:56 PM    Report this comment

"The regulators were not doing their jobs primarily because the politicians were listening to the bank lobbyists rather than economists."

That is exactly right, Richard, especially for the derivatives market, which no one understood much less could regulate. The degree of ignorance inside institutions like AIG, Citi and Deutschebank to name just three is astonishing. All that lobbying money surely helped rig the system to implode. But it's important to understand the bank economists had no clue what was going on until it was too late.

All of this probably has a more direct bearing on lack of capital generation for airplanes and everything else than we may be willing to admit.

Posted by: Paul Bertorelli | April 30, 2012 1:58 PM    Report this comment

Thomas, when you are paying more than $300 an hour to rent a Cessna 172 like we are you might see it.

Posted by: Geoff Engelbrecht | April 30, 2012 2:03 PM    Report this comment

Find that Forbes article here:

www.dot.snipurl.com/23az3au

Posted by: Paul Bertorelli | April 30, 2012 3:21 PM    Report this comment

One of the most important points made in your video is that investors in America are looking for a quick return on investment. There aren't as many who will invest with a view to the next decade. So, who is going to invest in building an economical four-seater plane if they have to deal with the many years it will take them to get the FAA to certify innovation, or have to fear they won't get approval when someone else will?

From the GAO report at http://www.gao.gov/products/GAO-11-14 it obvious that the certification standards are so complex that FAA employees cannot apply them consistently. This is a hostile environment to attract venture capital - short term or long term.

The bright spot, relatively speaking (that's relatively speaking) is that the FAA is responsive and interested in the industry. It will make changes in response to the pilot community but only if you can get the progressives and reactionaries in the agency to all understand how the system is failing and put pressure to make changes now rather than generations from now.

Posted by: RICHARD MILES | April 30, 2012 3:48 PM    Report this comment

On finance, the regulators should have been able to see it coming, and certainly there should have been wholesale dismissals in corporations, regulators, congress, and boards. The fact that there hasn't been us the real problem. Most of those people take more care of their suits than they did their missions. There were people buying pigs on poke wholesale for Pete's sake. The non mortgage derivatives were obviously contrary to existing insurance regulation. They were selling insurance on things that the buyer had no stake in.

Back to planes. I may be a Diamond fanboy, but to me, their/our failure to outsell Cessna tells me what I need to know about aviation in the US. It's the schools and the airports. As long as they are penalty boxes for everyone concerned, things won't really change. Make them into places all our friends want to visit and everything changes. It's really that simple.

Posted by: Eric Warren | April 30, 2012 4:04 PM    Report this comment

There were many warnings from financial regulators, but they were shouted down or otherwise silenced. Everybody that mattered was along for the ride of, what seemed like, a great party.

After the collapse: Since virtually everybody was guilty, no one is being held accountable, and we are not very much better off from a regulatory perspective. In fact, the US economy has been moving from bubble to bubble (hide the stone) in order to camouflage the wealth transfer from the middle-class to the 1%.

The current bubble is "Education". The country is being sold on the idea that an expensive college education is the path to financial security. The reality is that the 1% are getting richer off investing in "educational opportunities", fees and interest charged to those going into debt to fund the false promise of a good job.

Half the US college graduates today are jobless. Contrary to the hype, there are not millions of high-paying jobs begging for the "educated" to fill. A new generation is being hamstrung by educational debt at an alarming rate.

Wishful thinking and outdated hyperbole regarding education is creating a new generation of debt-burdened drones. For when you are yoked to debt, your choices and opportunities are now dictated by the constraints of re-paying same.

This is an important subject for GA. The next generation will be less wealthy than the last one, and will have less disposable income to support a broad-based and dynamic pilot centric GA sector.

Jeff

Posted by: JEFFERY DARNALL | April 30, 2012 6:52 PM    Report this comment

I'd bet there's an order of magnitude more capital in ga projects right now in north america than europe, and the innovation to go with it. And they all have decade plus return on investment. It's just not happening in the segment we can afford.

Posted by: BYRON WARD | April 30, 2012 7:18 PM    Report this comment

According to a neighbor who is one of those evil bankers, Paul is correct on the banking and housing issues. The bank he managed was in the Chicago area. He says his bank was coerced (and forced) by various government agencies into creating mortgages for people who had no business getting a mortgage. The bank knew people could not pay off the mortgages but they had to make the loans to stay in business. The mortgages had to be sold to Fannie May or the 3rd party market. Thank you Barney Frank.

Posted by: DANA NICKERSON | April 30, 2012 8:50 PM    Report this comment

According to a neighbor who is one of those evil bankers, Paul is correct on the banking and housing issues. The bank he managed was in the Chicago area. He says his bank was coerced (and forced) by various government agencies into creating mortgages for people who had no business getting a mortgage. The bank knew people could not pay off the mortgages but they had to make the loans to stay in business. The mortgages had to be sold to Fannie May or the 3rd party market. Thank you Barney Frank.

I gotta call BS on this myth. I'm not going to get into the complexity of the sub-prime mortgage business, but the facts do not support the argument that Barney Frank was the cause of the financial meltdown.

Paul's comments were about the derivatives and CDO markets that were flooded by toxic financial and mortgage instruments. Those markets were primarily gamed by the US financial sector...and they knew it.

Jeff

Posted by: JEFFERY DARNALL | April 30, 2012 9:00 PM    Report this comment

I don't know about the Barney Frank allegation, but I do know that as early as 1996, HUD instructed Fannie Mae to increase its exposure in sub-prime. By 2000, it's exposure was 50 percent.

If Fannie hadn't done this, it wouldn't have made a whiff of difference, given the size of the bubble the commercial banks and consumer lenders had created.

The foundation of the toxicity was the loans themselves. Mortgage bonds and CDOs worked as force multipliers to build a bubble built on air.

Posted by: Paul Bertorelli | May 1, 2012 6:13 AM    Report this comment

Paul:

Amen brother. How come you're so sensible?

Posted by: William Corwin | May 1, 2012 6:28 AM    Report this comment

Geoff:

Not likely. The last innovation we saw from Piper at the low end was the Tomahawk – in 1977. It included the pre-WW2 Lycoming O-235. It used less fuel per hour than the Cherokee’s O-320. The Traumahawk was and is a wonderful trainer – I still teach in one. But it hardly was an innovative response to the doubling of avgas prices that took place in the immediate aftermath of the Arab oil embargos of the 1970s. Ancient Cubs burn less fuel, but they lack the advantage of being able to see your student’s face as s/he lies to you.

From Cessna, we saw the C-152 as the amazing alternative to the C-150. Its main increase in thrust actually was a decrease in drag – they eliminated the 40-degree flap setting, which took some of the drama out of screwed-up go-arounds. Very innovative. When Cessna bought the Columbia, I guess you could say that they acquired (rather than developed) an innovative product. Fair enough. But the Corvallis arrived just in time to all but terminate its production, due to lack of demand.

I enjoy flying Piper and Cessna spam-cans – really, I do. But I stopped expecting innovation from either breed not long after they retired their rag-and-tube designs, and nailed nosewheels onto their aluminum taildragers.

Posted by: Tom Yarsley | May 1, 2012 7:01 AM    Report this comment

(Continued)

Innovation happens – it just doesn’t happen much at the old “big three.” Cirrus stunned the industry. They not only brought a certificated plastic airplane to the market, they became the biggest fish in what admittedly became a puddle-sized pond. The Europeans' recent offerings absolutely inspire hope in us all.

Now that Cirrus has tapped some offshore money (for their personal jet), I would love to see them offer an LSA-qualified trainer. If it burned Jet-A, all the better. They’ve already characterized the SF-50 as being “THE step-up aircraft for SR-20/22 owners.” That doesn’t leave much space for a Cirrus Saratoga or Malibu. A more-capable-jet project certainly would require both technical and marketplace success of the SF-50. If they’re serious about “expanding the product line,” that leaves them looking “down-market.” But they’ve developed a culture of selling premium products at premium prices. Somebody would have to change the flavor of the Kool-Aid in Duluth, to get them to see a path to offering a compelling $150k trainer. But that’s the logical product point at which to do so, and success there would emulate Cessna’s approach of selling Citations to the employers of pilots who learned to fly in C-150s, and “worked their way up” through their (too) vast product lineup.

Posted by: Tom Yarsley | May 1, 2012 7:02 AM    Report this comment

"How come you're so sensible?"

I drink a lot. It rounds the edges on the stupider urges. (Although not always...)

But thanks...

Posted by: Paul Bertorelli | May 1, 2012 8:05 AM    Report this comment

Thomas, I'll be surprised if you see a diesel LSA. I went over the numbers on this with Remos.

To contain higher combustion pressures, diesels are always heavier than gasoline engines by a little or a lot. LSAs are almost up to their empty weight limits and can't afford the additional weight.

Second, diesels are all about economy and fuel availability. Fuel burns in an LSA are already low and a diesel might improve that by 20 percent--20 percent of 3.6 GPH is .7 gallons. Hardly enough to offset the cost and weight.

Rotax's new 912iS approaches diesel economics--or claims to--and is also approved for up to E10 autogas, so it solves the fuel availability problem.

As you know, the challenge in LSA continues to be volume economics and the lack of margin in small, less expensive airplanes. I think this is why you haven't seen Cirrus stay in it (they announced an LSA, if you recall) and Cessna struggles with it.

Hirth has developed a little UAV engine that uses a mechanical compressor and common rail to allow Jet-A to be burned in what is essentially a gasoline engine. I could see that working, but only in areas where mogas isn't available.

Posted by: Paul Bertorelli | May 1, 2012 8:16 AM    Report this comment

Paul:

You're spot on with the diesel vs gasoline-engine numbers; weight, BSFC, etc. I've concluded that aviation gasoline products are going to become extinct. The EPA intends to replace E-10 with E-15, in the very near term. Ehanol packs only about 70% of the energy of gasoline, so range and payload are affected as the composition of mogas approaches pure ethanol. As soon as planes can’t burn whatever the EPA mandates this year, we’re back to "boutique fuel" status. Thus, I accept the likely inevitability of diesels, and try to comfort myself with their potential for longer TBOs. But the Hirth product is interesting.

I also expect the LSA rules (GW, among others) to be relaxed, or to be incorporated into a sensible new "Part 23-like" FAR. (I must be in an optimistic mood, but re-spinning Part 23 has been a goal of mine for 40 years.) The agency’s antediluvian clinging to weight-based standards has become indefensible. They need to toss them, in favor of standards based upon occupant-seating. A stratification based upon Personal, Professional, and Common Carrier use would go a long way toward re-imposing some sanity to the certification process. I’ve suggested 8 seats or fewer, 9-to-19 seats, and 20 seats or more, as the respective standards. Would we still need a 2-seat LSA-like standard? I don’t know.

Thanks for the terrific Vlog, BTW. Your command of this industry is unchallenged.

Posted by: Tom Yarsley | May 1, 2012 10:23 AM    Report this comment

Is US GA dying because of a pervasive culture of "fast money"? Because disposable income is growing thin? Because of the enormous liability overhang that still shadows every part of the GA ecosystem? Because pilots are aging out of cockpits faster than new ones are stepping in? Take your pick. Venture capital won't touch a project that can't demonstrate a "runway" to a monster ROI. And GA has always been a sort-of-boom and definite bust proposition. Every major airframer has either been through bankruptcy, forced merger (sometimes called "strategic") or has had to lock the factory doors and barricade the boardroom against creditors. Every one. Now add rising costs, a declining market, an aging pilot population, and really, what would you expect to happen? Innovation is going on in Europe because builders there (and dreamers) can tap patient government finances (thanks to their having an industrial policy- something that's anathema here), a ready supply of highly-skilled engineering and manufacturing labor (see note on "policy" above), and the Darwinian effects of making things that must survive in a high-fuel-cost environment. Relatively cheap fuel. Tons of old airplanes sitting in hangars. VC firms that expect a 100% ROI. No industrial policy that emphasizes engineering and manufacture. And a legal system that allows manufacturers to be eviscerated for mistakes made by the people who use their products. As they say. Do the math. Robin White

Posted by: ROBIN WHITE | May 1, 2012 11:23 AM    Report this comment

Paul left out the HUGE number of experimental aircraft in the USA. The number of U.S. experimentals is staggering when compared to Euro aircraft production. Here, people fly their own advanced planes that are BETTER than production planes.

Wake up and smell the 100LL. Airports near me are too once again becoming too crowded. People ARE FLYING a lot these days without a care for Cessna or Beech.

Posted by: Mark Fraser | May 2, 2012 7:58 AM    Report this comment

WOW Paul, Great observations and a this is becoming a great thread. Fantastic discussion. If you are so sensible due to the drinking, then no wonder you are so sensible after visiting southern Germany!!!

Posted by: Kevin Gruener | May 2, 2012 9:55 AM    Report this comment

Actually, I don't drink that much. But in a restaurant after the show one evening, I ordered a beer. As with gasoline, they seem to sell it in liters, which I can hardly lift much less drink.

Posted by: Paul Bertorelli | May 2, 2012 10:28 AM    Report this comment

It is my opinion that General Aviation aircraft will never be built in this country on any scale resembling the past. The lawyers have killed the industry...if someone crashes a 1947 Beechcraft Bonanza, Beechcraft will be sued and some jury of well meaning but ignorant people will grant a huge award against Beechcraft. Never mind that the aircraft has been out of Beechcraft's control for 65 years and may have lived in a highly corrosive environment may have never received proper or appropriate maintenance...forget it....Beech will pay. Then add the regulations that the bureaucrats are so eager dream up and it is a miracle that anything gets built here at all. And with all this there are those willing to sit around and carp about the 1% who are smart enough NOT to put any money into something like general aviation. I lament that we have given over all of the production of the intermediate class of airliners to the French, Canadians and Brazilians. We have this amazing brain tank (NASA) sitting on its hands doing nothing except make work "stuff" like sending toy cars to Mars...they could be designing the next commuter airliner, they could be working on light weight batteries or lightweight aircraft diesel engines...but no. None of the demise of the General Aviation industry in the United States is the fault of the 1%...in the current regulatory and business climate, investment in General Aviation is simply not prudent.

Posted by: william laatsch | May 2, 2012 11:23 AM    Report this comment

I have wondered about this because it does seem like there is more new stuff coming out of Europe. On the other hand have you ever flown a Diamond? What a piece... Can't fly with full tanks, can't fly burn too much fuel (CG considerations), Can't fly above 55C, Can't fly in IMC, guages never work right, constant static in the radios... you'd be better off buying a 1985 152 for the money for a new DA20.

Posted by: Michael Pettinger | May 2, 2012 5:33 PM    Report this comment

Paul, you missed the point; the USA is way AHEAD of Europe for GA production. The EU is still stuck in the old paradigm of manufacturing GA planes. The USA is not only out producing Europe for new GA planes, the planes are better and more people own them privately.

Posted by: Mark Fraser | May 2, 2012 8:29 PM    Report this comment

Michael P. you obviously rented a plane from someone who cared for neither you or the plane. While they will sell you a heavy config, they don't recommend it. I have flown dozens of diamonds with full fuel, never had a fuel related CG issue, never seen a human being able to close the lid in a plane with a 55 degree spar, never failed to dispatch due to hot spar ( it cools when you open the glass). Never met anyone who bought a VFR only plane who wanted to fly IMC. I had less gauge and radio issues with Diamonds than Cessnas but that's not due to the planes, it's the owners and the ages.

If your priorities are safety or enjoyable flying then you are better off with a DA20 than almost anything else ever certified. If you want to legally fly IMC then sure, get the Cessna.

Posted by: Eric Warren | May 2, 2012 10:14 PM    Report this comment

Thomas:

You may be right. Cessna and Piper may have decided to permanently stop developing new small planes and may also stop selling them again sometime in the future. I am not as pessimistic. Cessna did develop the Skycatcher recently and both companies do continue to develop bigger planes. Especially Cessna with its business jets. And Piper now verbally has expressed an interest in remaining competitive in training aircraft.

Yes oil prices have risen in the past but it is an issue of the price of oil versus the cost of living and I think it is only in recent times that this has really become a big issue. In Europe people drive small fuel efficient cars because petrol is expensive compared to their cost of living. In North America people still drive a lot of gas guzzling trucks because the cost of gasoline has not been a big factor in their cost of living. But I hear from relatives and friends over there that there is a shift with the current price of gasoline towards a greater thinking of fuel economy. So I don't agree with you that the cost of oil isn't a factor in what drives innovation. I see a huge push here in Europe in GA to innovate to reduce fuel burn and fuel cost. And I am sure when the cost rises enough it will motivate the Americans to innovate on this as well. You are already starting in the automotive industry.

Posted by: Geoff Engelbrecht | May 3, 2012 4:14 AM    Report this comment

It is very difficult to apply macro-economic analyses to the light airplane industry, which is so thin and scattered, so capital intensive, and so given to deep bust cycles that it's impossible to find anything else like it. Most particularly, it is unfortunate but true that so many (most?) of the highly publicized new airplane projects end in bankruptcy or long, painful declines.

Nothing scares away thoughtful investors more than the string of blue-sky, high-tech airplane failures that we've seen over the last 30 years from OMAC to Eclipse. The Eclipse has pretty well driven off American investors for a few years, just like the Starship convinced other business aircraft companies to avoid all-new technologies for a few decades. It isn't just the low returns that scares away investors so much as the unusually high risk of failure.

Consequently, most new airplane developments seem to be the result of the personal drive of well-heeled individuals. There's no formula for that -- you find them wherever they happen to be. "The scourge of he MBA" seems like a more relevant issue than the housing bubble.

Posted by: S. Lanchester | May 3, 2012 3:15 PM    Report this comment

Add your comments

Log In

You must be logged in to comment

Forgot password?

Register

Enter your information below to begin your FREE registration

« Back to Full Story