Niches Within Niches
If youíve been paying attention to our news columns, youíve noticed that new aircraft sales have rebounded in late 2013 and early 2014, although they remain a far cry from the last spike in volume in 2007. For example, Cirrus was happy to report 276 aircraft sold in 2013, a nice bump from 2012, but just over a third of the 710 airplanes it sold in 2007. Piper and Diamond are also seeing an uptick. Thatís all good news.
But prices of new aircraft remain in the stratosphere, so the universe of buyers who can afford new is vanishingly small. On a planet with 7.2 billion people, the entire GA industry found 933 buyers to write a check for a new piston airplane in 2013. Tall cotton we ainít. Piston GA continues its devolution deeper into being a niche within niche, even if some of us imagine there is some sure-fire thing we need to do to reverse this to return to the salad days of 2007, if not 1978. In my increasingly grim view, demographics and wealth trends define this fantasy as utter futility. Even narrowly potent marketing efforts are shoveling thimbles full of sand against a tsunami of disinterest in spending large portions of ever-more-distressed disposable income on airplanes and flying. Iím not the guy to pretend the romance is still there.
So, as markets always do, GA is beginning to embrace its nichedom in the form of modest refurb projects that offer better value than new airplanes do. I reported on this last fall†and this trend continues to trickleónot torrentóalong, with this weekís announcement of a Cessna 172 diesel project from Premier Aircraft in Fort Lauderdale. Premier can best be described as an all-purpose professional sales and mod house run by people whose sales experience dates to when 172s had straight tails. Iíve known the principals there for years.
Premierís diesel conversion idea is similar to the Redbird Redhawk.†Theyíre converting used 172s (Rs and Ss) to the Continental Centurion 2.0 diesel and offering upgraded avionics packages. The two programs vary in detail and focus, but only by degree. The overarching point is that theyíre refurbing existing airframes and bringing them up to new standards for a price about two thirds of new. Redbird hasnít set a final price yet, but Jerry Gregoire told me it wonít be any more than $249,000. My current guess would be about $230,000. In this news story and accompanying podcast, Premierís Art Spengler predicted a $289,000 fly away price or theyíll convert an ownerís existing 172 to the Centurion diesel for about $95,000. Just in case youíre wondering, in another example of how the industry abuses its customers, thereís currently no way to convert a G1000 Skyhawk to diesel.†
Coincidentally, the evening before Premier made its announcement, I was giving a presentation on dieselnomics to the local airport association. A 172 owner told me he was interested in the diesel conversion and asked what I thought it would cost. When I said around $100,000, he drew a sharp breathóa perfectly understandable response. He could re-engine his Skyhawk with a Lycoming for a quarter the cost. But this is where niche psychology kicks in. Because owning an airplane is an economically irrational act at any level, some owners will go with the diesel anyway for the novelty, for the economy, for curiosity.
There wonít be hundreds of such buyers, but there will be dozens and any business plying this nicheóPremier or anyone elseócan probably make acceptable profits on dozens of sales, not multiple dozens. Redbird envisions larger volume, but the core of its approach is the flight training market, with a tilt toward leasing and power by the hour--yet another niche. Looking at this globally, I think Continental is going to need more than the sum of these niches to make the Centurion truly viable. They need OEM business. But re-engining is a start.
While the Centurion diesel promises lower operating costs, albeit at a higher initial investment, Iím not sure thereís anything magical about its appeal in a refurb market. I see another opportunity in early G1000 Skyhawks which are selling used in the mid-$150,000 range. And there are a lot of them. I can see a niche there in refurbing them with a fresh Lycoming, new upholstery, distinctive paint and an ADS-B unit like Garminís GDL 88 with internal WAAS or perhaps a yet-to-appear ADS-B Out solution. Figuring out a mogas STC for these aircraft wouldnít hurt. (Lycoming already approves the engine for 93 AKI.)
For what itís worth, such an airplane would probably sell in the $225,000 to $250,000 range, which is where the other refurbs are priced. Coincidentally, when Cessna was enjoying the fat part of the Skyhawk market in 2006 and 2007, those airplanes went out the door for between $200,000 and $250,000. That was a different economic era, to be sure, but I wonder if thereís a price/value departure at a quarter of a million? Does the buyer curve drop off sharply at that point? Could be.
Even if thatís true, I donít imagine Cessna will ever reduce Skyhawk prices to under $300,000 if it even could, which I doubt. A loaded 2014 Cirrus SR22 is well into the mid-$600,000 range. In 2007, the typical SR22 cost $371,000. Thereís no chance weíll see that kind of price again, so thereís probably a budding Cirrus refurb opportunity, too, especially on the early SR22s.
As for the 172 archetype, it remains popular as a basic airplane. Is it because itís an easy-to-fly and cheap-to-operate high-wing or because itís a Cessna? Probably a little of both, even if Cessna isnít doing much these days to burnish its brand. There are a couple of test cases out there to challenge the Hawk. The Tecnam P-2010 is a high-wing, four-place airplane thatís faster than the 172 and has a third door to the backseat. But at $365,000 for a G1000 version, itís as expensive as a Skyhawk. Then thereís the Flight Design C4, which is similarly a four-place high-wing, but one that is at least initially priced, with glass, at $250,000, that imaginary magic number. Both of these would-be Skyhawk challengers have traditional gasoline engines; the P-2010 has a Lycoming IO-360-M1A, the C4 a six-cylinder Continental IO-360AF. Significantly, both of these engines are mogas approved which has sales appeal everywhere in the world except, it seems, in the U.S. Here. we like to bitch about high fuel prices without doing much about demanding mogas as a cheaper alternative.
How about the Centurion for these airplanes? Maybe, maybe not. Iíd be surprised if Continental hasnít discussed this with Flight Design. In Europe and Asia, mogas appears to be more of a player than it is in the U.S., at least for now. On a strictly operating-cost basis, mogas competes favorably with diesel, without giving up either payload or speed, both of which the diesel choice may force. On the other hand, in some parts of the world, diesel is more widely available than mogas, both on and off airports.
As interested bystanders, we make great sport in bashing engine and airframe companies for their idiotic marketing decisions. But when you consider the variables, the marketís mile-wide shallowness and the fickle nature of buyers, Iím sometimes surprised the industry sells as much as it does.