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Continental Diesels: Crunching the Numbers

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Continentalís purchase this week of the assets of Thielert Aircraft Engine GmbH didnít exactly come out of left field. Continental already declared its interest in diesel in 2010, when it announced the TD300 diesel. And that was before China-based AVIC International came into the picture with a necessarily global view, but not one that Continental hadnít already adopted.

The question is, does the purchase make sense? Is it a natural fit? Itís hard to argue otherwise if you believe diesel propulsion is the coming thing in light general aviation. Itís delusional to look out toward the marketing horizon and conclude that 100-octane avgas is going to spontaneously come roaring back into the market as a forceful player or that mogas will suddenly bloom as a major factor. So that leaves Jet A, the world fuel of choice, some form of which is available everywhere.

Both Lycoming and Continental became vocal about this three years ago and in return, the FAA and industry gave us a plodding, cumbersome regulatory framework to certify a new aviation gasoline to a timeline thatís uncertain enough to barely sustain itself, much less ignite growth. Faced with this, Continental voted with its dollars and started the investment in diesel. I suspect weíll see something from Lycoming before long; the trend is just unavoidable.

In my view, Continentalís Thielert purchase is about as vivid an example of a company making its own reality as Iíve seen in awhile. Overnight, Continental has a market-dominating product line in the traditional three power rangesóabout 150-hp, 230-hp and 350-hp. Despite Thielertís stumbles, the lower horsepower variants are largely proven, with some 1800 or so flying. There are some issues with them, which Continental knows it has to fix. Specifically, the TBRs are too short and owners are still stuck with the nuisance of replacing a gearbox every 300 hours.

The 230-hp TD300, which Continental developed from the SMA SR305 base, hasnít been fielded in large numbers. From what Iíve seen of its performance and durability, it looks promising. The 350-hp Centurion 4.0 that Thielert developed and certified is an unknown and it may take some millions to find out what it has. STCs exist for the Cirrus SR22 and Cessna 206, so there may be a nascent retrofit market. But Continental has no small risk in proving that engine realistically marketable.

With avgas at $6 to $7 in the U.S., youíd think that diesel would have flowered more than it has. But Diamond never pushed its diesel aircraft in the U.S. because it felt the service network wasnít in placeóthey were rightóand Thielertís flawed business plan caused the diesel revolution Diamond started to fizzle even before the world economic downturn damaged it more. Further, in the U.S., we donít resonate with diesel the way buyers do in Europe.

My gut feel is that the world pendulum is swinging back and Continentalís timing may be perfect, if not a little early. Uncertainty over avgas may push things along toward diesel faster than some of us think.†We have no idea what Continental paid for the Thielert assets so a value assessment on the purchase is difficult to make. But itís fair to say that in Thielert, Continental will have a sound technical foundation upon which to build potential diesel market dominance.

Thielert tanked because it got the engine economics wrong. It assumed the engines would need longer to prove than they did and its cradle-to-grave warranty coverage was unsustainable. It probably underestimated production costs, too. You can readily see how some tweaking turns the whole thing around.

For six years, Iíve been following Stan Fetterís diesel conversions in a pair of Cessna 172s, which he uses in a traffic reporting business in the Washington, D.C. area. Heís been through all the typical Thielert travails and then some. His conversions cost about $50,000 for the engines and $60,000, all in. Initial TBRs on those engines was 1200 hours or so for the engine alone. Thatís $42 an hour. Fuel, at 4 GPH, was another $23 or so. But the engine required a $3250 gearbox every 300 hours, so that brought the total hourly on paper closer to $75. (This doesnít include the one-time conversion cost.) Although he couldnít dodge the gearbox requirement, Fetter did extend past the stated TBR, knocking that $42 back some.

Compare that to the Lycoming the Thielert replaced. With new cylinders, overhauls on the O-320 cost about $20,000 or $10 per hour for the engine and another $48 for fuel. But Fetter found that magneto maintenance and cylinder replacements nudged the Lycomingís hourly a bit higher and the diesels had better dispatch reliability. But at the stated TBR, the diesels still had higher operating cost or, at best, parity with the Lycomings. (There are other replaceables on the way to TBR, but I'm brushing past them here.)

But look what happens when the gearbox inspection is eliminated and the engineís TBR is increased to 2400 hours, which Fetter thinks is doable because he ran one to 2600 hours. Continental hasnít given us engine prices yet, so Iím using about $50,000; what Fetter paid. Then the hourly for the base engine drops to $21 and with fuel, the total engine operating costs are something like $45, exclusive of airframe maintenance. It looks better yet if the engine can reach a 3000-hour TBR and/or Continental can reduce the cost of the TBR, say by developing a less expensive overhaul program.†

But to be blunt about it, U.S. economics donít matter much here: global ones do. If you plug European fuel prices into the cost model, the numbers show a larger Delta. Even using mogas in Europe, fuel costs for a 172 are $68 to $75 an hour, versus $41 for the diesel. Thatís real money and over the life of an engine, it will pay for the diesel with a nice surplus to defray other costs.

By the way, Continentalís estimate for a Cessna 172 conversion is about $56,000 for the engine and hardware and another 160 to 180 hours of labor. Call that around $70,000 all in, 16 percent more than Stan Fetter paid six years ago. Those initial numbers might shift some.

While these developments wonít usher in the age of dirt cheap flying, if Continental sweetens up TBR and eliminates the gearbox replacements, it at least takes operational costs in a positive directionódownward--which can only encourage market expansion, or whatever passes for that these days. Moreover, Continental is injecting a pulse of energy into the moribund state of Thielertócapital, engineering focus, developmental determination, customer service and market sense. The more of that these engines get and the more they fly, the better they are likely to get.

My numbers are based on historical data, but if the company stays in range of those numbers, the economics work but, more important, the directionality is encouraging. And thatís why Continentalís big initial push will be longer TBRs and life-of-engine gearboxes. Even so, itís important to understand that diesels are not going to suddenly show us half-price flying. What they will do is reduce costs measurably and reduce worries about fuel availability; more on the global field, less in the U.S.†

While Iím convinced that weíre on the cusp of wider diesel acceptance, I think Continental is gearing up for what will be a long game on a global pitch. My guess is weíll see a steady, robust ramp up in diesel and if thatís true, Continental will be well positioned to profit from it.

Join the conversation. †Read others' comments and add your own.

Comments (17)

Avgas in the UK is about pound2 per litre which works out at about $11.5 per US gallon (compare $6 - $7 in the US as stated in the article). Much of this is tax. You can see why in Europe many private pilots are eagerly anticipating the availability of a reliable aviation diesel engine running on tax-free A1 jet fuel. Ian D

Posted by: Ian Davidson | July 24, 2013 5:26 PM    Report this comment

Given the fuel consumption, isn't it a major advantage that your range has significantly increased or your payload has improved? That has to be worth something...

Posted by: Terry Johnson | July 25, 2013 5:28 AM    Report this comment

I think diesel will find a market in the US, as will 93 octane mogas (for the acft that can use it). Anything that lowers the cost of flying here is good for the industry.

Posted by: Will Alibrandi | July 25, 2013 9:14 AM    Report this comment

It's an interesting idea, but I'll never own one, and neither will the vast majority of American GA operators. When you get away from Superslab International Airport, with its King Airs and Gulfstreams, you see an awful lot of older aircraft. The idea that a guy with a $25,000 Skyhawk is going to hang a $50,000 engine is not very well thought out. The guy building his RV or Zenith is also unlikely to spend that kind of money on an engine -- they'll simply put on a car engine for a tenth the cost.

There are other questions to answer, such as fuel availability, and where to find an A&P or IA qualified to work on Diesels, but these are moot if there's no demand.

I predict that autogas will become more and more popular.

In areas where oxygenated gasoline is sold for cars, the tanker trucks load up with gas, then alcohol is added, to mix enroute to the gas stations. This means that non-oxygenated autogas is far more available than most people think (we see a lot of gas trailers in hangers around here). Engines which can run 80/87 avgas can run non-oxygenated autogas, and higher-compression engines can run it with water injection.

A simple, relatively inexpensive water injection system which can be added to existing engines will kill American adoption of Diesels for aircraft.

Continental's money isn't being wasted, however. The heavy taxes on gasoline in most of the rest of the world will give them a strong market for a good Diesel engine.

Posted by: Keith Wood | July 25, 2013 11:11 AM    Report this comment

Diesels, sexy digital engine control methods, and other futuristic developments for aircraft engine are very interesting, but when are we going to get real about MOGAS? There seems to be an ongoing, overwhelming, and seemingly irrational bias against the use of auto fuel unleaded auto fuel in aircraft engines, despite the fact that many older aircraft have been running these fuels very successfully for over 20 years. First we ran leaded regular automotive fuels in our STC'ed low compression aircraft engines until these fuels became no longer available due to the ban on automotive tetraethyl lead. STC'ed use of alcohol free, unleaded regular automotive fuel then replaced leaded regular automotive fuel as the fuel of choice for those choosing auto fuel. To my knowledge, this has been very successful. I know of no aircraft owners who have had issues with their engines or airframes when properly using this fuel. Quite frankly, I have found more water contamination in avgas I have purchased than I have ever found in auto fuel. Simple, free, quick, field testing for the presence of ethyl alcohol at the point of sale for EACH fuel purchase before fueling the aircraft eliminates the only other significant hazard I am aware of. What's not to like?

What is the source of this bias? It seems to be a tribal knowledge thing. I have heard A&P mechanics and flight instructors wax eloquent on the subject claiming everything from unknown additives to excess valve guide wear and exhaust valve and seat failure due to due to lack of lead oxide lubrication of these surfaces, but never producing credible evidence of the same. Folks. all of the major cylinder manufacturers and rebuilders have been producing cylinders capable of operating without lead oxide high temperature lubrication for years now. If you have ancient cylinders, you can occasionally mix in a little 100LL a gas. A little dab 'll do ya...

If there's evidence out there that proper STC'ed use of alcohol free, unleaded regular automotive fuel of the appropriate ASTM spec is bad for our low compression aircraft engines, let's put it on the table in unbiased form in a public forum, such as our magazines so we can decide for ourselves. There's plenty of data out there for many many years; if these negative impacts are significant, they will be obvious. But I am tired of emotional opinion; I want impartial data and conclusions. Higher compression engines offer more challenges, but water injection, larger displacements, and digital engine controls can fix that. You have an obvious, well tested solution staring you in the face. Based the path forward on that solid foundation.

Posted by: George Rodrigues | July 25, 2013 2:27 PM    Report this comment

In addition to Continentals' good timing, one should also note that Cessna has apparently decided that Jet-A is the wave of the future; and they can drive the market a long way. I would have to wonder if the tax free status of diesel/Jet-A won't change sometime in Europe though; that should just be too tempting for the taxman.

Posted by: Stephen Phoenix | July 25, 2013 2:37 PM    Report this comment

Two important points always overlooked in the US: It seems natural to say that an aero diesel engine costs much more in purchasing price and maintenance than a good old Lycoming O-320 or 360. Wrong! It is the Lycoming or the Continental which are dirt cheap, due to fully amortized conception and tooling, huge sales volume coming from spare parts and TBO, and minimal marketing costs thanks to market share. Continentals and Lycoming went through that amortization phase at a time (1945-75) when piston-engined aircraft were the mainstream of a big, healthy GA market. Any engine of radically new design must amortize such costs, beginning with a development & certification costs well over $ 100 million. A lead free, fit-all Avgaz was always doomed for a simple reason: An engine is designed to fit a specific fuel. It is impossible to go the other way round, i. e. formulate a specific fuel that would fit a large population of airplanes conceived sometimes recently, sometimes 30 years ago and sometimes much more, and equipped with various generations of engines.

Posted by: Andre Teissier-duCros | July 26, 2013 7:23 AM    Report this comment

Diesels are probably good for x-country airplanes but not for sport flying. Mogas is a good alternative to avgas but ethanol has to be eliminated. By the way, a simple signature but the President would eliminate ethanol.

Posted by: DANA NICKERSON | July 26, 2013 8:12 AM    Report this comment

100LL is doomed due to the lead, and any high octane avgas replacement will be terribly expensive due to the tiny volumes. Jet-A (for diesel) and Mogas are high volume fuels, and therefore the only viable fuel options for the tiny GA market. New diesel engines will be far too expensive for most owners, although there may be a small market for the wealthy. That leaves mogas for "the rest of us". I have been flying on mogas for 29 years now. I started with a Cherokee 140 for 400 hours, then an old Bonanza for 1,000 hours, and now a Debonair for 700 hours. Assuming 10 gph and a $1/gal savings, I have saved $21,000 in fuel costs so far. All we need is better mogas availability. Let's get non-ethanol mogas at more GA airports!

Posted by: Dan MacDonald | July 26, 2013 8:40 AM    Report this comment

Continental already has diesel technology that they bought from SMA, as represented by their 230 hp offerings. While the 230 hp is a sweet spot for the likes of the Cessna 182, what Continental will wind up with is two completely different engine lines that will complicate support and training for maintenance technicians. Today you can hardly find a diesel engine mechanic in the US who can work on a certified aircraft with such an engine. Thus the completely proprietary knowledge necessary for support will be vested in Continental's in-house network for a long time to come. This will give them the monopoly ability to control hourly costs for service ($high$), and ironically compound the problem of service availability that has dogged the diesel options to date. I doubt if diesel can be hailed as a savior for GA. The time-line to wide-spread adoption is too long. The downward curve of GA is much steeper than the upward curve of adoption of diesel, regardless of any merits. The installations are vastly more complex than the stone-simple avgas engines that have been the tradition in today's airframes. Forget retro-fits. If people do not buy the new diesel-powered aircraft in great enough numbers, the manufacturers (Cessna et al) will delay developments and the technology will remain a niche rather than a game-changer. And then there is Lycoming....

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