Recessionary Paradox: GA Innovates As It Shrinks

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Last week, I was sitting in the press room at AOPA Expo pounding away at the laptop when an acquaintance wandered by with a perfectly dazed expression. "I'm having trouble wrapping my head around this," he said. "On the one hand, the economy is tanking, Cessna is laying off people and yet Garmin is rolling out a big new product. Maybe I should get this, but I don't."

Welcome to the rabbit hole of recessionary paradox. Economic downturns are difficult not just because of hardships they cause, but because the pain is not evenly distributed. And whether it is or it isn't, many companies continue to do what they always do, which is to think up new products and try to sell them or try to sell in more creative ways the products they already have. Today, for example, I got a press release from Diamond offering what it calls an "economic stimulus" package. Buy an airplane before the end of the year and get free maintenance, free insurance, free flight training and a $5,000 gas card. There's nothing new in any of this. It's how modern capitalism and marketing work.

In an earlier blog, my colleague Russ Niles opined as how he found the mood at AOPA Expo upbeat. That's not quite the word I'd use. I found it more subdued, but with an underlying determination to drive forward into 2009 with purpose because nothing quite focuses the mind like having no choice. This naturally led to another discussion in which I heard two opinions--one that the industry is dying, another that it's just "realigning."

Neither of these is correct, in my view. "Dying" suggests a terminal phase, implying that light airplanes will simply go away. The ramps and taxiways will empty and the pavement will be plowed up for condos. (Silver lining insertion: the real estate market is so flat that no one is building condos. Count your blessings.) We often hear the claim that user fees will "kill" GA, or that high gas prices will or new FAA regulation will. I don't buy any of it.

"Realignment" is just a kind a euphemism for what's really happening to the piston segment: It's simply shrinking, something that's been going on for the two decades I've been covering the industry. For clarity, I describe shrinking as there being fewer piston airplanes in the fleet, fewer pilots and fewer flight hours flown. All of these metrics have been in decline since 2000. These facts simply can't be disputed and there's no point in trying to put a happy face sticker on it.

Yet ... Cirrus, Diamond and others have found a way to prosper with new aircraft that are, arguably, the best and safest ever built. New models and features appear regularly and avionics have been kept on the cutting edge. Gadget companies continue to innovate and, despite the shrinkage, we see new startups all the time. An entire new market segment has emerged in the light sport arena.

In short, the piston segment of the industry moves forward even as participation in it shrinks. Worth noting is that in recent years, GA piston sales have increased and so have overall billings. Part of that is due to the fact that new airplanes cost more than they ever have and the manufacturers have found more buyer interest and profits in the premium segment of the market.

This is just one reflection of why the light aircraft segment is retracting. It's not that the industry as a whole doesn't sell itself, or that Cirrus, Diamond and Cessna are too rapacious to make cheaper airplanes, or that fuel costs are through the roof. The big driver is a demographic shift away from mass interest in learning to fly. Given all the other fun stuff people can spend discretionary dollars on, flying is just one more and the push the industry enjoyed from the aviation-literate World War II generation has long since evaporated.

AOPA, EAA and others are doing as well as they can with promotional programs such as Young Eagles and Let's Go Flying. These bring new people into the fold, but there is no magic bullet here. There's no missing link that the industry just can't figure out to return to the glory days of aviation. The market force away from flying and toward other interests is just enormous.

So the reality is, the GA piston segment will be smaller in five years than it is today. To which I reply, so what? There will continue to be opportunities for smart companies in the field, buyers will continue to find airplanes across a range of prices (new and used) and for those who don't want to progress beyond the entry level, the light sport market will continue to offer affordable alternatives.

This week, I got a note from a reader who picked up on incoming AOPA President Craig Fuller's remark that GA's best days are ahead of it. The reader's comment was to the effect, what's this guy smoking? But I agree with Fuller, actually, and no one has ever mistaken me for a Pollyanna. (Or maybe even for anything less than a hard-bitten, black-hearted cynic.) That's because I accept what my eyes and ears see and hear and I also accept that an industry doesn't have to be big or even growing to offer excellence across the board. True, vibrant growth may stimulate more innovation and new products, but lack of it doesn't choke things to a standstill. See Garmin. See Cirrus. See Diamond. See Cessna.

And that, as much as anything, explains why a company like Garmin launches one of its most ambitious products ever into the teeth of an economic slowdown. If there's money to be made up market or down market, competent companies will figure out how. The especially competent ones will do it by realizing that there's no short term prospect for growth even as the industry figures out what its next size will be.

So that's the slice of reality I'm chewing on post-Expo. If I'm delusional, I'm sure you'll let me know.

Comments (20)

Well, you're not delusional. You are correct that numbers have been shrinking for years.

However, we don't have to accept it. We can set our own path. We can set a growth path if we all get involved. What can you do to help?

- EAA Members, fly Young Eagles - Fly A Teacher, Reporter or Friend - Speak about aviation at your local school or civic group - Participate in AOPA's Project Pilot - If you're a CFI, teach! That sounds obvious, but only 20% of CFIs teach even ONE student per year. If each of us taught just 2 new students per year, we would double the U.S. pilot population in 10 years. - Read my article in the May 2006 issue of NAFI Mentor magazine for marketing ideas. - Flight Schools, we need LSAs for a lower cost entry point into aviation. Can you invest in just one to help bring in new students? At 3GPH, their operating cost can be much lower than standard certified aircraft. - Work together with all your groups and associations, whether aviation-related or not, to grow GA. Teams have better luck than individuals.

We can turn this thing around.....together.

- Tim Busch, CFII President, Iowa Aviation Promotion Group www.FlyIowa.org President, Iowa Flight Training www.IowaFlightTraining.com

Posted by: Tim Busch | November 18, 2008 9:53 PM    Report this comment

With respect to "glory days" of GA, my studies on the number of SEL, MEL pistons since 1954 show a direct relationship to the number of pilots produced for the Korean and Viet Nam wars. Basicly, tracking the pilot production curve and shifting it about 12 to 18 years will nearly match the production curves of GA airframes until the great fall-off of 1978-79.

So...number of pilots is directly related to number of aircraft - no rocket science there. Young Eagles has been tracking their efforts and they may be ready to show that from the time a teenage pilot takes a first flight to the time they decide to learn to fly is ??? 14 - 20 years on the early side and perhaps 30-35 years on the median side! As no YE's are at that point yet - it will take a few more years to see?

Posted by: David Newill | November 19, 2008 6:59 AM    Report this comment

If we are resting our hopes for GA on the LSA segment, then we are drinking some strange Kool Aid. The majority of current LSA aircraft are not tough enough to stand up to the rigors of flight training. Granted they burn less fuel than the current training aircraft. However, they cost more to maintain, have more AOG issues and are of limited value for business or long distance travel. Even the old Champs and Cubs were maintenance prone airplanes (owned one so I know about maintenance). LSA have a place in the market but are not a cure all. As the economy declines and the middle class sees more of their disposable income disappear to higher taxes and expenses, so will GA. Young Eagles, CAP, fly a teacher etc. are necessary and worthwhile programs but they can't overcome the basic economic reality.

I agree with Paul; some companies will be innovative and take advantage of the situation and find a niche, other less astute companies will fall by the wayside. Let's face it the 5 forces acting on an airplane; lift, gravity, drag, thrust and $ are not going to change.

Posted by: Leo LeBoeuf | November 19, 2008 8:06 AM    Report this comment

Paul is certainly right about the shrinkage in the piston markets and "for pleasure" flyers -- it's been going on for a while and is destined to continue. The notion that the LSA market will revive this segment is wishful thinking. Simple economics explain the decline. The cost of owning and operating a piston aircraft is prohibitive for all but top income people despite the joy and pleasure of flying. General aviation is an endeavor that you have to get pretty far into before you can make it a useful/reliable/safe form of transportation. Buying an airplane is the easy part. Then comes all the other costs and inevitable upgrades in equipment plus ruinously high fuel prices. If financing with after-tax dollars, it competes with other recreational opportunities and living expenses in today's world. Joyful aircraft owners end up with a "non-revenue producing asset" that constantly needs attention and money. A few simple calculations shows that if airplane money were invested for nominal returns, life might be better. Pilots can run the numbers in a hundred different ways, but it always comes out the same -- personal use GA is frightenly expensive. Manufacturers learned this long ago when products moved upscale to pressurized weather-capable turbine powered equipment for revenue generating business activities financed with pre-tax dollars. It's depressing if you want to fly for pleasure. Dramatically lower costs would help, but that appears unlikely. Cheers!

Posted by: Keith Bumsted | November 19, 2008 11:32 AM    Report this comment

We need to expand the market. Get older folks (with more free cash) interested. Get more women interested.

Posted by: Unknown | November 19, 2008 6:27 PM    Report this comment

Decline is no way inevitable. There is a huge market ($44 Billion last year) out there of people looking to powersports for recreation. To reverse the decline, GA must make a concerted effort to correct the misperception that flying for fun is far more expensive than say, boating or motorcycling or jet-skiing for fun. Our studies (http://theapa.com/apaweb/APA_Whitepaper.pdf)show that all these activities cost about the same--$100-$250 per hour on average. New, or relatively late model, attractive aircraft, when co-owned, are in the same cost range or even less.

If and when GA effectively and consistently ties the "Flying is wonderful!" message to the "Flying costs the same as traditional powersports" message, the market will stop shrinking.

David A. Kruger CEO The Aircraft Partnership Association www.TheAPA.com

Posted by: David Kruger | November 20, 2008 5:56 AM    Report this comment

There seems to be three aspects of general aviation flying that tend to deter many from getting involved: Cost of achieving a pilot certificate, cost of owning/renting an airplane and associated costs (fuel, insurance etc). I believe the operating cost issue is well documented and I won't comment on that. The issue that I feel is ripe for analysis and adjustment is the training aspect. And while FBOs might not like to hear this (less flying hours = less initial revenue), I believe the use of high fidelity simulator devices is an area that can be explored. In previous studies for the military that I have conducted, there are many areas of initial training that can be accomplished in the devices. It will definitely take a rule making adjustment to allow these devices to be more integrated and it will take an initial investment by the schools. But the reduction in cost to achieving a pilot certificate could probably be 25%-35%. And my experience is that the learning experience/curve is very steep in certain areas. This subject seems ripe for exploration.

Posted by: mark brightman | November 20, 2008 7:42 AM    Report this comment

The secret going forward is shared ownership. (We used to call them flying clubs.) That's how aviation survives (barely) in Europe. The manufacturers and FBO's need to offer a shared ownership SYSTEM for all aircraft and promote selling shares of planes, not planes themselves. Either that, or the manufacturers need to have Pilot Centers with rental aircraft from a $60,000 LSA to an SR22.

Posted by: Marc Coan | November 20, 2008 9:43 AM    Report this comment

Paul IS delusional if he thinks GA can thrive while its roots wither. The GA piston segment supports the small airports. Once they close, where are all those VLJs going to land? If your bizjet can't fly anywhere but large airports, where it lines up for takeoff between airliners going the same places you are, that corporate jet becomes hard to justify.

US airlines and corporate flight departments have always benefited from pilot training payed for by someone else, either the military or the pilots themselves, paying their own way up through the GA piston sector. The military won't be pumping out pilots anymore, unless you plan to count hours in a trailer guiding a UAV. If the GA piston pipeline closes down, are US airlines or corporate flight departments prepared to foot the bill for ab initio training?

Posted by: DAVE VANHORN | November 20, 2008 2:11 PM    Report this comment

Actually they already are in some respects. Check out the agreement between ERU, Cape Air and Delta.....maybe it is Continental...not sure. But the point is the airlines ARE adjusting to different pilot training sources.

Posted by: mark brightman | November 20, 2008 3:28 PM    Report this comment

I'm not as pesimistic as some about the future of Genav. Using my own experiance, I wanted to be a pilot from the time I was 4 yrs old. Farm boy, no money, but found a way, great career of 50 years.

Posted by: Jerry Arthur | November 20, 2008 6:03 PM    Report this comment

Go to any pilot meeting and almost everyone has grey hair. Add 15 years to each of those and there are hardly any pilots. THIS is what we had better correct. Beech used to have the first two inside pages of National Geographic in the 1970s, where they showed all their small airplanes and pilots having fun in them. I saw it every month in junior high. Now there is NO attempt to market flying to the non-flying public. It's not that they don't have the money: They just spend it on other motorsports.

Posted by: Marc Coan | November 21, 2008 7:21 AM    Report this comment

Yep, Paul isn’t anything close to a Pollyanna. What GA needs, no make that must have is what it has needed for decades-a far better (read: more accurate) public image. Like it or not, public perception is vital. Ask BMW how many Z3’s James Bond sold for them? GA also has to sell “safety”-which just got lots easier with GPS/MapComs etc. BTW, when was the last time you saw a GA aircraft in a movie that DID NOT feature a fiery crash? Given the non-existent marketing/advertising budget of GA (where are you GAMA?), it is no wonder the bulk of the populace has never considered flying…

For decades the motorcycle industry had a similar un-shakable image problem. That industry was turned upside-down forever when Honda put an attractive brunette in a sweater and skirt on a Honda with: “You meet the nicest people on a Honda…” How brilliant was that? Within a year or two, Honda single handedly changed the way Western civilization looked at two wheeled motorized transportation forever.

Think it is “cost” that is keeping us down? Check out the prices of RVs, boats, sports/collector cars, and the high end/custom Harley’s… Simply put, our target market only needs to be told/shown that flying opens lots of (long-distance) doors that their RV or boat can’t touch. Somebody within GA needs to take the lead here… Anybody listening? Coy Jacob, Senior Editor MOA Mooney Owners of America

Posted by: Coy Jacob | November 21, 2008 9:58 AM    Report this comment

I agree with Coy...it's all a marketing problem. Not a money problem, or even a "study/regulations" problem. We have to show how 1.) Fun, 2.) Safe, 3.) Easy, and 4.) Inexpensive flying is.

I still think the Light Sport thing helps as the best introduction. With an LSA, one can go out with a CFI for a week, for about $6,000, and come back home and take the Light Sport checkride. On their own, from home, they can do the private pilot solo X-C requirements. Then, when they get around to it, they can go out for a week and come back a private pilot. Then they're ready to upgrade to a 4-seat aircraft.

Posted by: Marc Coan | November 21, 2008 10:51 AM    Report this comment

I agree that the LSA is the answer to increasing the ranks of new pilots. A case in point is the Harley-Davidson Sportster. It's a low (relatively speaking) price entry level motorcycle. Some people buy them and stick with them, but most people end up moving up to a larger more capable model. Harley even had a program back in the mid eighties where they guarantied to give you the same price you paid for your Sportster on a trade up to a Big Twin for a two year period. It might be something for the aircraft manufacturers oe retailers to consider

Posted by: Robert Mortland | November 21, 2008 11:04 AM    Report this comment

Coy's comment about slick motorcycle ads reminds me of my personal favorite -- a large poster for Harleys back when AMR owned the company (and drip pans were placed under new Harleys sitting in dealer showrooms). The poster showed a georgeous model with a mane of blonde hair in her black leather (short) shorts astride an Electra-glide with the caption "You haven't lived 'til you've had 600 lbs. of hot steel between your legs!" As I recall, it didn't cause me to buy a new Harley, but I wouldn't have minded meeting up with the model. The point is that slick ads and denial of the current prohibitive cost structure of GA won't accomplish the objective of enlarging the number of participants. The Aircraft Partnership Association is on the right track, and regardless of the methods used, the costs have to come down significantly before many more student pilots will appear. If you doubt that GA airplanes are grossly overpriced, compare a new Bentley Arnage ($225,000) with a new C-172 ($283,000). A new C-172 should be priced at no more than $50-60,000. Even new 2-place Skycatchers are over $100,000. At these prices, success in luring large numbers of new participants will be difficult, despite the joys of flying.

Posted by: Keith Bumsted | November 21, 2008 2:03 PM    Report this comment

I think some of the comments above reflect a little of the wishful thinking that is so prevalent in GA these days. I have been flying since the age of 16 (many, many moons ago) and would love nothing better than to see GA returned to its former self. Unfortunately, there is no way that will ever happen and I fear that by the next generation, we are going to be no different than Europe. Once again, it is cost. We will never be able to sell flying unless we can sell utility. If someone wants to do no more than get their private certificate, rent a plane at the FBO for an hour here or there to punch holes in the sky on a nice day and that is it, then I agree that flying is no more expensive on an hourly basis than other motorsports. The problem is that to get to the level of experience and ratings that would allow someone to safely take regular trips and get the promised utility, it will take years and a significant investment of money. The universe of folks willing to commit to years of training and having the means to carry the cost of ownership in order to be that family of four on their way to a ski vacation in a late model Saratoga is very tiny indeed. You are really looking at people earning in excess of $250K a year and that makes up 1% of the population. In this day and age where aviation does not have the glamour that it did post-WWII, you have to be able to credibly sell some real utility and LSA does not do that.

Posted by: Ken Appleby | November 23, 2008 10:10 AM    Report this comment

I think some of the comments above reflect a little of the wishful thinking that is so prevalent in GA these days. I have been flying since the age of 16 (many, many moons ago) and would love nothing better than to see GA returned to its former self. Unfortunately, there is no way that will ever happen and I fear that by the next generation, we are going to be no different than Europe. Once again, it is cost. We will never be able to sell flying unless we can sell utility. If someone wants to do no more than get their private certificate, rent a plane at the FBO for an hour here or there to punch holes in the sky on a nice day and that is it, then I agree that flying is no more expensive on an hourly basis than other motorsports. The problem is that to get to the level of experience and ratings that would allow someone to safely take regular trips and get the promised utility, it will take years and a significant investment of money. The universe of folks willing to commit to years of training and having the means to carry the cost of ownership in order to be that family of four on their way to a ski vacation in a late model Saratoga is very tiny indeed. You are really looking at people earning in excess of $250K a year and that makes up 1% of the population. In this day and age where aviation does not have the glamour that it did post-WWII, you have to be able to credibly sell some real utility and LSA does not do that.

Posted by: Ken Appleby | November 23, 2008 10:10 AM    Report this comment

One of the worst parts of flying is the time it takes. Busy people don't really have the time to fly 3X a week for 4 mos. to get a private license. We have to remove that obtacle, and ADVERTISE that we have done so.

The LSA gives us the ability to do that...in one week away from home, flying from airport to airport, a person could get a light sport certificate for $5999. That sounds doable to most folks! About half the folks who take this course would stop there and not add additional ratings.

But for many, a few weeks later, with a little home-based experience under their belts, they could leave for another 7-day course...returning $6000 lighter, ready for their private checkride.

If they've been trained correctly in the previous two courses, checking out, and adding an instrument rating, in a 4-seat aircraft like a Diamond Star would take another week and about $8000.

So, yes, you're talking $20,000 to get through the instrument rating, but we're talking about 3 weeks of training...

The problem is, what to fly at home? Has to be a network of manufacturer-organized managed flying clubs around the country. SOMEONE has to spend the money to do what Air Shares Elite and OurPlane has done, but across the country, with a training system, for LSA's. It will cost millions, but it will work, IF it comes from the manufacturers.

Posted by: Marc Coan | November 23, 2008 10:30 AM    Report this comment

I wasn’t really talking about traditional “slick marketing” per se. as GA simply hasn’t gotten out of the mode of advertising to, and within itself-ever. Consequently most non-pilots have simply never considered flying their own or partnership/club aircraft that can almost magically provide a “pilot family unit” transportation capability to visit grandma, the kids in college, conduct/expand their business, and/or allow them to vacation or have second homes a measurable distance or climate away, that no other (non-flying) family unit can even dream about. This can be had for about the same cost of a significant boat or RV.

The other issue is that thanks to GPS/Map/Coms with live Wx etc, utilizing a personally flown aircraft has gotten tremendously more practical if not easier and safer. The current crop of “state of the art” GA aircraft has gown leaps and bounds utility-wise even for the non-hairy chested crowd. This has yet to be truly realized as well.

We enjoy more aviation infrastructure-airports than most any other country in the world. But, if we can’t bring the benefits home to the (current) non-pilots out there who are supporting them, we will eventually loose them.

Again, this is a public perception problem not helped by Hollywood, the media, or even the “powers to be” within GA that have not grasped the affect of GA’s sinful lack of funding anything close to intelligent instructional marketing… Coy Jacob, MOA

Posted by: Coy Jacob | November 24, 2008 4:24 AM    Report this comment

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