Skycatcher's Big Price Hike
Cessna's decision to raise the price of its Skycatcher light sport aircraft by $35,000 is likely to have some ripple effects in the market. For one, in a single leap, Cessna goes from being middle of the pack pricewise, to very near the top, at least on base price. For another, its competitors, worried about being buried in a onslaught of not-that-expensive Skycatchers, are probably dancing in the streets. A 30 percent price hike is an attention getter and I wonder what impact this is going to have on Cessna's long list of position holders. I have to think some of them are going to say no thanks and take a second look at a Flight Design, a Remos, a Legend or any of a dozen other choices.
That Cessna made this decision is not particularly surprising. They've done it before. About a year ago, I got an e-mail from an engineer working in the GA industry. He was trying to understand why new airplane prices have so outstripped the rate of inflation. For instance, in 1976, a new Skyhawk cost $27,667 typically equipped. Plug that number into an inflation calculator and it's about $105,000 in 2011 dollars. But a new Skyhawk sells for a little more than $300,000. What gives?
Part of the answer lies in plotting new aircraft prices against the inflation curve. Throughout the 1960s and early 1970s, the two curves tracked nearly parallel. But beginning in 1978, the new aircraft price began a steeper climb that continues yet today. Recall that 1978 marked the leading edge of the great GA downturn, when production plunged from more than 17,000 airplanes to under 3000. As the leading producer at the time, Cessna remained profitable through both volume and a realistic margin. When the market soured, it appears to have simply raised its prices to hold a profitable margin, even if it wasn't making quite as much money. It seems to have simply divided its overhead by fewer units and arrived at a higher price. I think it has done exactly the same thing with the Skycatcher.
You can complain about the price increase and argue that the industry will never prosper trying to sell $150,000 LSAs. And that might be true, but the fact that Cessna has always been profitable means that it has kept its dealer and support network in place without interruption while other airplane companies have come and gone. High prices or not, if you own a Cessna, it's in your interest that the company remain profitable.
For as long as I can remember, Cessna's marketing ethos was to produce a model for every conceivable buyer on the brand loyalty theory. If you got the buyer with a Skyhawk, you could step him right up to a 182, a 206 and maybe even a Citation. I don't know how true this was, if it was at all, but I wonder if it still guides Cessna's decisionmaking. Or has the market become so fragmented and competitive and disposable income so stretched that brand loyalty is but an illusion? Either way, Cessna never seemed to be a proponent of loss leader marketing and it appears as if it still isn't.
Only one thing mystifies me about this decision. Cessna is the only LSA manufacturer well established with manufacturing in China. If a company with Cessna's economy of scale and marketing acumen can't make an LSA more affordable by building it in China, the notion of low-cost aircraft may very well be the myth that many people think it is.