Avionics Outlook: Competition, Lower Costs

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If the Part 23 rewrite doesn’t lower costs, the struggling market might have to rely on increased competition and simpler products to get it done.

What will it take to stimulate a flat avionics retrofit market? There are buyers, by the way. It’s just that fewer of them are willing to slap $40,000 on the counter at the avionics shop like they did 10 years ago. Today, $20,000 is the new sweet spot for a modest up- grade. For many, that’s a stretch.

Any shop is happy to close a $20,000 deal but you can bet they’ll work hard to do so. That’s because it’s difficult to convince skeptical buyers to drop that kind of dough on certified avionics when they’re already sold on a $300 iPad that’s loaded with a variety of flight planning, navigation and flight instrument apps.

As we look into our crystal ball for the upcoming new year, we spoke with the management from Garmin, Bendix King and Aspen Avionics to get a feel for how the FAA’s Part 23 rewrite, increased competition and low-cost consumer tablets might change an avionics market that’s tired of the high prices and the complexity of certified equipment.

Relaxing Part 23

While a rewrite of Part 23, the FAA design and certification standard for light aircraft, might not be the pot of gold at the end of the financial rainbow, every manufacturer we spoke with agreed that it can lower costs while also reducing the amount of time it takes to certify new products. While it’s tough to say just how much prices could drop, we’ve heard speculation from as little as 10 percent to as much as 25 percent.

In a nutshell, the Part 23 revisions are aimed at making the certification process easier while allowing easier incorporation of new technologies in certified aircraft (read uncertified avionics). The standard sets up a system of compliance through consensus-based standards.

GAMA President Pete Bunce told AVweb.com something that everyone can agree on: Changes to Part 23 are needed.

“When you can go and put modern equipment into an amateur-built aircraft and have it perform just tremendously well, but then it costs 10 times as much to be able to put that into a certified airplane, our regulatory process is defeating the purpose for which it was set up, and that’s to enhance safety,” said Bunce.

The key here is to lower certification costs by reducing the amount of time a product sits in the development and certification process.

But will manufacturers pass along these savings to the end user? That’s exactly what we asked Garmin’s Jim Alpiser, who assured us that his company will pass along the savings.

“The customer is going to get that savings. The less time it takes to get a product to market, the less it costs to develop it. That translates into savings for customers. The other aspect is that our competitors are out there keeping us honest. The competitive nature of the market is the self-policing part of this,” said Alpiser.

Worried about a slip in quality? According to Alpiser, even with a relaxed Part 23 standard, Garmin is committed to a high level of product testing. The company made a multi- million-dollar investment in environmental test equipment to ensure that its certified products exceed FAA requirements.

Alpiser acknowledged that if Part 23 rules relax enough, competitors with non-certified equipment will make a serious run at certified aircraft. In our view, that alone is enough to keep a company honest, from a price and feature standpoint.

Despite the high cost of certified equipment, it’s important to acknowledge that avionics equipment prices haven’t, in general, been increasing, given the down market. That can’t be said of the costs of new aircraft, which continue to increase.

Open Architecture

Aspen Avionics’ Jon Uczekaj believes that competition and systems with open architecture (basically, cross-brand compatibility) is the biggest factor in lowering prices. According to Uczekaj, firms with both innovative products and innovative approaches to marketing cast a level of confidence in the consumer that she or he doesn’t have to buy one brand of product to get a complete interface. In the consumer’s mind, a product’s inability to play in a cross- brand interface becomes a question of ethics, in our view.

“The media plays a big role in drawing this issue into the public because it creates dialogue, reaction and makes for a smarter consumer. As a result, companies will ultimately take the steps to create an open architecture,” said Uczekaj.

Fingers have recently been pointed at Garmin—a company that once excelled in building open interfaces—for not playing well with others. Garmin’s Alpiser says the company is careful about being tied to a third- party interface and its potential for stifling future product enhancements.

“Our competition and some people in the industry are saying that Garmin is locking everyone out. That’s not the case. We don’t want tooffer customers the disservice of offering a public interface that changes a year down the road,” explained Alpiser. Garmin isn’t always to blame.

In the past, companies have reversed/backdoor-engineered some of Garmin’s GNS430 and GNS530 interface potential (including Garmin’s popular RS232 data crossfill interface) to add un- approved enhancements and compatibility. While this is no fault of Garmin, the blame ultimately falls on Garmin for not recognizing—or killing—the interface with new soft- ware and hardware updates.

We predict that this problem could get worse as new ADS-B products come to market. It will be up to the shops to advise owners of the risks associated with unapproved interfaces. In some cases, it could alter the airworthiness of a system.

It would appear that Bendix King embraces the open architecture concept, evident by the flexible interconnect capability of the new KSN770 navigator (we evaluated the KSN770 in the October 2013 issue of Aviation Consumer).

On the topic of the KSN770, an interesting aspect of its final development was a partnership between Bendix King and Aspen Avionics. While Bendix King designed the hardware, it was Aspen that completed the user interface. According to Bendix King’s Roger Jollis, expect to see more of this collaboration moving forward.

“This industry is too small to do everything alone. We’re identifying partners where we can add synergy while bringing products to the market more quickly and less expensively. We think this approach is healthy for the industry,” said Jollis.

Bendix King recently introduced the KT74 ADS-B transponder—a unit with a Trig Avionics back end.

The Next Mega-System

While products like Garmin’s G1000 have a major presence in OEM applications, it’s not a system that evolved into a widespread retrofit platform, given the level of required airframe interfacing and installation costs. The way we see it, there’s a need for a significantly less expensive replacements for legacy products found in older aircraft. By this, we’re talking about a replacement for the G1000 that’s easier and more affordable to retrofit. Perhaps a single box that can do it all—everything from VHF radios, MFD, ADS-B and engine display. Garmin’s Alpiser doesn’t think it’s practical from an engineering standpoint.

“There’s so much going on in that kind of single box that overcoming the challenges of separating harmful interferences, for example, can be a hurdle,” noted Alpiser.

On the other hand, Alpiser thinks the market for such a box exists, but  questions the value of older airframes for such a product. Still, it’s an area of focus for Garmin, moving forward. In fact, we don’t believe for a second that Garmin isn’t working on such a box.

Don’t count on a mega system from Bendix King in the near future. It has its sights on legacy upgrades. Remember, when Bendix King announced its return to the market, it vowed to bring to market products that were simple to use and afford- able—something we haven’t seen from them yet. The way we see it, there’s a huge number of aircraft that sport digital KX155 and even mechanical KX170B radios that might benefit from modern replacements. Many of these owners want a simple installation that requires a small investment.

“We have taken the decision to focus on the retrofit panel market because the volume coming out of the OEM market is substantially low. There are lots of aircraft that need to be retrofitted, and owners might not be able to spend tens of thousands of dollars to do so. Plus, it might not even be feasible to install an integrated system in some of these aircraft,” said Bendix King’s Roger Jollis.

“One of our brand promises is to make our products the most intuitive to use. You shouldn’t need to read a manual,” added Jollis.

Jollis noted that the average demographic of the Bendix King customer is 57 years old and aging rapidly, noting that small flickering text, the complexity of the interface and operating a FMS may not be safe to fly if you don’t operate them all the time.

On the other hand, we wonder if any company can compete with a simple system. Tablet apps compete on the notion of advanced functionality because buyers love gadgets.

Aspen’s Uczekaj believes there is still a demand for a retrofit mega- box—the next G1000, perhaps—if it meets the sweet spot on price and installation complexity. As for the time frame, Uczekaj believes that five years isn’t an unreasonable expectation to see such a product. He also stressed that customers should be given the option to buy into an entry-level system that has an easy upgrade platform—something the Aspen Evolution PFD does. The current entry-level system from Aspen is a single PFD that can be upgraded to a three-screen suite with synthetic vision, charts and satellite weather. Aspen has reached 6000-plus installations.

Even with the presence of the next mega system, whatever it may be, the industry buzz word is “federated.” These are modern but individual components to replace aged ones (navcomms and transponders, for example).

Trickle-Down Savings

It’s easy to say that consumer tablets, particularly ones that connect with portable AHARS systems, will take over the IFR cockpit with some level of certification, but we’re not buying it. The iPad, for example, continues to prove that it has sizable limitations when it comes to heat, screen glare and the potential for program lock- up. The same can be said for portable GPS navigators, for different reasons, even in a world with a relaxed Part 23.

What they will do, in our estimation, is supplement and complement panel avionics on a higher level. Expect to see more advances in Aspen’s Connected Panel—a wireless connection between the tablet and panel-mounted equipment. Garmin makes it clear that as capable as its flagship portable—the aera796— is, this product has not been built to the standards that it thinks is necessary for IFR flying. These kinds of tests include vibration, lightning suppression and high-energy interference testing, to name a few.

On the other hand, products like the uncertified Garmin G3X, including its ADAHRS, have undergone a higher level of testing.

As we reported in the May 2013 issue of Aviation Consumer, the redesigned G3X is aimed at LSA and experimental aircraft applications and is available with an advanced digital autopilot. In our estimation, we see few if any reasons why a platform like the G3X—or systems like the Dynon Skyview integrated avionics suite—wouldn’t have enough built-in failsafe functionality for IFR flying in Part 23 aircraft. It’s this concept and products like these that can be a game-changer in a relaxed Part 23 environment.

Still, don’t underestimate the role of consumer electronics in reducing product costs. Whether it’s processors or glass display technology, variants of these components are starting to appear in certified products and are reducing the build costs.

“While we use a different class of component in certified avionics than what’s found in most consumer electronics, there is a drive downward on the costs of components used in consumer electronics. This helps to reduce the cost of certified components,” said Bendix King’s Jollis.

Aspen’s Uczekaj echoed the consumer product trickle-down cost savings.

“It used to be that glass was the most expensive component in a glass cockpit suite. It’s no longer the case,” he said.

Another way to reduce equipment costs is to offer products with lesser capability. It can be argued that the $17,995 Garmin GTN750 is, based on its features, a good value. But for the buyer who doesn’t want all of its features, not so much. This is a niche that Bendix King’s $12,995 KSN770 might fill. We like Aspen’s philosophy of offering scaled-back products that can be added to as the budget permits and missions change.

A Willing Market

Moving forward, expect avionics manufacturers to be bullish, no matter what niche they pursue. You can also expect more competition on the shop level, with high-volume shops dominating. It’s clear that Garmin, Aspen and Bendix King believe that the market is robust enough to support increased competition.

According to Bendix King, there are somewhere between 250,000 and 300,000 general aviation fixed-wing aircraft in the world. About one-third of these aircraft have hull values less than $50,000, while another one-third of them have hull values between $50,000 and $100,000. These two price-sensitive segments think twice about the large invest- ment of major avionics upgrades. While this segment has recently been served by Garmin, we think Bendix King—with the right products—can dominate that market as they once did with their Silver Crown line.

Looking into our crystal ball, we see growth and increased competition in the avionics market—which is good for the consumer. But even with increased competition, we still see a market that will continue to be dominated by a remarkably innovative Garmin. We’re not alone.

As Aspen’s Uczekaj put it: “Is Garmin still a big player? Absolutely. That’s why it’s important to develop a niche market because if a smaller company like Aspen tries to go head to head with Garmin, it’ll lose.”

This article appeared in the November 2013 issue of the Aviation Consumer