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NextGen Fund: Maybe Just in Time For a Little Pump Priming

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Looking over the glareshield at the future of GA, I don’t get a good feeling about the FAA’s NextGen program and the 2020 ADS-B mandate. It’s not that I think the concept is flawed, although the agency seems to have done its best to complicate the deployment of this technology, which will eventually replace radar. And it’s not that I think it won’t work, even if the FAA is almost certainly oversold and overstated NextGen’s performance and benefits.

Based on questions I hear from readers, my worry is that the 2020 ADS-B mandate will be, for many owners, like the last exit before the toll booths on the GWB. It will catch many at just the right time in their flying lives to use it as an excuse to bolt from flying, resulting in two things we desperately don’t need: ever fewer active pilots and a glut of marginally equipped used airplanes driving down market values, but not far enough for them to find buyers.

One bright spot has just come into view in the form of a private industry/ government cooperative program to help finance aircraft NextGen upgrades. It’s called the NextGen Fund and we reported on it last week.

Normally, I’m skeptical of government programs that do what private industry really ought to be doing. Such initiatives tend to balloon into bloated, inefficient and expensive bureaucracies that are impossible to get rid of once they’ve shown how inept they really are. But the NexGen Fund is different.

First of all, it’s not a government program, nor does the government have much to do with it, other than providing treasury loan guarantees. I spoke with NextGen Fund’s Michael Dyment about the program earlier this week. Basically, the fund will seek capital in commercial markets which it will then loan to owners wishing to make NextGen-related upgrades including ADS-B, WAAS navigators, glass panels and so forth. Because the fund has made an agreement with the treasury to back the loans, it can offer them at a lower rate than an owner might get from commercial banks. How much lower and on what terms will be announced in the spring when the fund announces the structural details. My guess is the rates will knock a couple of points off commercial paper and since they’ll be unsecured, they may be easier to get.

I see this as win-win for owners and for the government. After all, in funding what is essentially the 21st-century aviation infrastructure, the FAA had no compunctions whatsoever in having users pay a substantial portion of the bill out of their own pockets. The same was true of GPS, so what’s the difference, you might ask? GPS had no mandate; you could take it or leave it. With ADS-B, you buy it or you don’t fly. So it’s perfectly appropriate for the government to protect its own interests—the $40 billion NextGen will cost—while helping owners shoulder what will be for many an investment they can just barely afford. Or perhaps one they don’t think is a good value. And really, those two are the same thing, so it doesn’t matter why you prime the pump as long as you get the water—equipage—flowing.  

If this sounds like government competing with private enterprise, there’s a whiff of that. On the other hand, there’s nothing wrong with a little competition and I suspect the commercial banks will find plenty of profitable business as the NextGen equipage wave builds to a crescendo in a couple of years, or a little longer. Given the safety aspects of ADS-B and the efficiency claims the FAA is making, I think there’s a compelling public interest to jolly owners along with this kind of pot sweetener and I’m happy to see it. We all know that government regs are at least one reason GA is foundering. What’s wrong with a little support for the industry for a change?

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Comments (22)

For me and many others like me, the issue isn't financing - it's cost. The same government that obsoleted my perfectly good Loran navigator by fiat, now is mandating that I spend a five-figure sum to keep my bird in the air. Please note well that this prospective expenditure will do NOTHING to enhance the capabilities of my aircraft. It will simply keep it legal.

Unless the FAA gets serious about rules changes that will lower the cost of avionics dramatically, January 1, 2020 will be the date when fully one half of the light GA fleet retires forever.

Posted by: Tom Yarsley | January 31, 2014 8:29 AM    Report this comment

Gee, I guess I should be joyously grateful for an opportunity to further my indebtedness? Low interest or not, this is akin to forcing people to pay for their own execution (but hey, it's such a great deal!).

Now, ADS-B may be the cat's meow, but if there was real value there people would WANT to pay for it (witness the GPS revolution, and Loran before that). I'm waiting for the day when real-time medical monitoring is incorporated into ADS-B so the FAA can monitor my cholesterol in flight and give me an electric jolt if I fall into sleep apnea on short final. I agree with Thomas; on January 1 2020 I may very well just hang it up as they have finally put the last nail in my coffin!

Posted by: A Richie | January 31, 2014 9:18 AM    Report this comment

Loan programs are just a waste of time in my opinion. There are certainly owners they may help, but overall, it's lipstick on a pig. Find the guys who came up with the loan program and reassign them to public relations and avionics sales if that's not where they came from. It seems to me that once again the decision was made without piston GA owners represented or valued. The FAA, when asked about piston GA, can now say they care because they fixed it so you could pay interest on what is pretty much a tax. And, do you think they will stop slamming you down to 3,000 ft 50 miles from your destination to keep you away from jet traffic that isn't even there? I doubt it. Will they send you their weather feed (which you pay for already)? Nope.

Much like accelerated depreciation, it's one of those things that will look good on the balance sheets of manufacturers while actually destroying the market long term. I suspect a lot of pre 1980 planes will get parked over this, and that is absolutely seen as a big benefit to the FAA and other major influencers.

Posted by: Eric Warren | January 31, 2014 9:34 AM    Report this comment

Oops, correction: Instead of "last nail in my coffin" that should have been "last AN20 bolt with castle nut and cotter pin in my coffin". Sorry for the confusion, I picked the wrong week to quit sniffing magic markers...roger, Roger!

Posted by: A Richie | January 31, 2014 9:50 AM    Report this comment

My wife and I fly a 2 seat tandem experimental that took many years and $$$ to build. This requirement will necessitate an entirely new instrument panel made in addition to the instrument(s) required to receive and transmit ADS-B. The expense will be enormous for little benefit and may be the reason to give up GA flying altogether.

Posted by: Ric Lee | January 31, 2014 10:29 AM    Report this comment

Ya know, we have a government problem here.

You can buy a very nice autopilot for an experimental aircraft for a few thousand dollars. For a certified aircraft? more like $30,000 or more.

So here we are with a nice digital communication idea, a box that should cost about $500 or so, but with certification and the government involved we need a loan to buy it?

Make a box that works great and costs $500 and we'll all get one. No problems then. The FAA engineering division is the problem here.

The purpose of certification is to make sure the plane doesn't crash. Not to make sure everything costs 40x as much. That's the problem here, and that's the problem that must be solved.

Posted by: Steve Waechter | January 31, 2014 10:31 AM    Report this comment

I agree with Steve on certification insanity. The parts cost of a WAAS 16 channel GPS capable of providing the required ADS-B out location data is now in the 10's of dollars. Trig already sells a mode-S transponder in the 2K range which is still a lot but less than the big G charges.

Couple a "cheap" mode-S transponder like Trig's with a dedicated GPS puck that meets the resolution, reliability, and reporting requirements (this is not rocket science), and every legacy aircraft in the fleet should be able to meet the requirement for that magic 2K number if the FAA could be made to see the light.

Though it flies in the face of competition, a single "blessed" provider for such a low cost GPS solution would have the advantage of a non-fragmented customer base and would provide strong incentive for the various transponder manufacturers to play nice with the "blessed" product's format. If the FAA and our alphabet groups could get behind a strategy like this we might actually get something cost effective before 2020.

Posted by: neil cormia | January 31, 2014 1:21 PM    Report this comment

I think the gloom prediction is a little premature. As I read it, you will not need ADS-B anywhere that a transponder is not required now. That covers a lot of territory; basically stay below 10,000' and avoid 30 mile Class B veils and don't go over the top of Class B or C airspace. That describes the operation of a large percentage of airplanes in the, shall I say, lower price bracket.

The financing come on will be a flop. If you can't afford the ADS-B equipment outright, you sure would be dumb to finance it and pay interest too; save up the money and buy it when you can. It's not like you're flat grounded. I suspect the transition will be similar to the Mode A and C transponder equipage that took place some years ago. A lot of upfront whining about the cost, but eventually everyone got on board and it has worked out. Probably many of the ADS-B installations will occur when the airplanes get sold and the new owners add the equipment.

Our shop is starting to see people lining up to get the installations. Primarily IFR types and those that base at airports under the local Class B veil. I'm saving the dimes for my VFR Pacer; there is still a lot of time to save up some bucks; if I quit buying that Snickers bar every day I'll get there easily.

Posted by: Stephen Phoenix | January 31, 2014 1:26 PM    Report this comment

Yes, the pilot population complained about a $2,000 Mode C transponder requirement. But I thought then that it was a relatively low expense that would increase safety margins. Now it is a $20,000 expense to meet 2020 ADS-B or otherwise plan on staying away from the Mode C veil or in or over Class C and limit flying below 10,000ft. The expense is just too much for the majority of training and personal use aircraft. I agree with Richie this adds to the industry's decline.

Posted by: Rafael Sierra | January 31, 2014 2:33 PM    Report this comment

Well, two things: 1. Back then $2,000 was worth more than it is now. 2. The $20,000 estimate is high by a factor of about 2. A compliant system should come in under $10K installed. A compliant system does not require an expensive MFD; you can display the FIS weather and TIS traffic on an iPad if you want or not at all if you don't.

Posted by: Stephen Phoenix | January 31, 2014 3:22 PM    Report this comment

@Phoenix: The estimate is an average as there are G1000s and Avidyne Entegra equipped aircraft where the expense would be more than $20,000. Further, other round dial aircraft without WAAS GPS receivers will have to be outfitted with WAAS receivers and compatible ADS-B out transponders, here is where the lesser expense impact you are probably contemplating. I called my avionics shop minutes ago and got a quote on a used GNS430W plus a new GTX330ES including installation and tax in California will run about $17,000, thus the estimated price tag of $20,000, not including downtime or interest.

Posted by: Rafael Sierra | January 31, 2014 4:29 PM    Report this comment

So, how would you feel if the FAA said out of the blue "OK, every small airplane owner must overhaul your engine this year or you're grounded" except that your engine is already zero-timed and blueprinted engine that you never expected to have to do it or required it before (i.e. it's a totally new expense). That's easily $20k on a good day. And your small piston single is barely worth that so it doubles your invested cost (if you can cough up the dough).

And we are supposed to feel good about this? And, next year there will be another "mandatory" item like ground proximity radar or ejection seats or sleep apnea treatment or monthly full-motion simulator training to just fly a C150. Anything less will be considered "unsafe" and irresponsible. I'm really tiring of losing this catch-up game, just want to fly around the patch and a few cross-countries occasionally.

Posted by: A Richie | January 31, 2014 5:27 PM    Report this comment

By Rick Darden: "With over 150,000 aircraft affected, the NextGen Fund will provide financing at competitive rates backed by loan guarantees and will use proven credit management practices that reduce cost and other barriers to retrofitting the general aviation fleet."

If I were to be an Avionics OEM or service shop I would be jumping with joy. I am neither, so I ain't jumpin...

Posted by: Rafael Sierra | January 31, 2014 5:50 PM    Report this comment

Actually, the requirement to have ADS-B in the current mode-C "veil" affects quite a number of light aircraft. There are a bunch of small airports just around Atlanta, for example; every aircraft at every one of those fields will have to have a compliant system in 2020.

Compliance wouldn't (and shouldn't) be an issue, except that the hoops the FAA requires what is essentially "bolt-on" equipment to go through are ridiculous. A transponder shouldn't require anything more than a simple electrical load analysis, examination of the installation for workmanship, and a functional check, and the GPS should just have to feed position, not be a panel-mount unit with approach databases. We don't need reams of paperwork and special approval for every single aircraft type. It should be possible to make an all-in-one ADS-B Out and transponder box (with remote GPS puck) for about $1500. Add a screen for traffic and weather for another $500-750, or feed it to another device for free. But that price goes up ten times by the time all the paperwork gets done.

Posted by: Bob Martin | January 31, 2014 7:30 PM    Report this comment

Paul and other "older" readers;

Lee Iacocca, in 1979, made a "deal with the devil (Fed) in what became known as the "Chrysler Bailout". As history recalls, the "loan" was paid BEFORE the due date, and the Treasury, allegedly, was $350M richer!

But then, 90% or so of the population "needs" a car; but who REALLY needs an airplane?

Perhaps if the DEMAND for airplanes is needed/wanted by the "masses"...................

Posted by: Rod Beck | January 31, 2014 9:21 PM    Report this comment

I understand that aircraft certified without an electrical system are exempt from the requirement. Just one more reason to love my Aeronca.

Posted by: jay Manor | January 31, 2014 9:22 PM    Report this comment

Jay; YES - until the insurance carriers under writers dis-allow "hand propping" (ZIP/no electrical system) do to possible mishaps in the future? MORAL OF THE STORY: If the "government " doesn't get you - your friendly "insurance agent" will! Of course, you could take up remote model flying in the alternative?

Posted by: Rod Beck | January 31, 2014 10:04 PM    Report this comment

How much would the ADS-B out requirement cost the airplane owners before 2020?

Let's see, 150 thousand aircraft multiplied by $20 thousand diollars = 3 billion dollars.

Posted by: Rafael Sierra | February 1, 2014 11:39 AM    Report this comment

"What's wrong with a little support for the industry for a change?" No support in my view - it's just a good business decision for avionics OEMs. At the end, the aircraft owners, flight schools and students pay for it one way or the other. 3 billion dollars would pay for 300,000 new private pilot training. New pilots is where we should be investing.

Posted by: Rafael Sierra | February 1, 2014 3:45 PM    Report this comment

Mr. Sierra; Couldn't agree with you MORE - providing more "pilots"= future aviation con$umer$!

Posted by: Rod Beck | February 1, 2014 4:20 PM    Report this comment

ADS-B Out, in addition to providing accurate AC location, will also enable easy, integration for billing FAA-mandated User Fees (which most likely are inevitable).

This is the part that the FAA is missing and probably why it hasn't already been implemented (too expensive).

ADS-B Out is a double-edged sword. BEWARE!

Posted by: Richard Freilich | February 2, 2014 10:11 AM    Report this comment

Paul, good article but we need a well researched article on other nextgen equipment which we will have to buy after the ADS-B stuff. I have heard of digital transceivers, touch screens for FAA messages, 8.33 VHF equipment. I would like to know what more I will need to continue IFR flying. I know this will come later but how much later?

Posted by: Walt Bell | February 4, 2014 4:48 PM    Report this comment

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