Aircraft Refurbs: To Get the Price Right, Control the Wish List
Last month, I spent a solid week on the phone talking to flight schools about their operations, their marketing and, especially AOPA's idea to refurbish older Cessna 150s and 152s and feed them into the training and flying club market.
While they were intrigued by the idea, almost all of the schools were put off by the numbers. Why spend $99,000 for a nicely restored 30-year-old 152, asked one operator, when I can make more money with one that costs a third as much but isn't quite perfect. In fact, "not perfect" is a polite euphemism for just on the acceptable side of ratty. Most of these schools told me they do enough repair and refurb on these old airframes to keep them airworthy, but not enough to make them what anyone would consider good as new.
This highlights what may be a sticky challenge in the burgeoning refurb business, especially at the low end of the market. It's well-established that when presented with options, aircraft buyers will tend to load up an airplane with everything that can be stuffed into it. Buyers aren't particularly warm toward stripped down airplanes, but for refurbs at the trainer end of the spectrum, they'd better get that way.
In bringing the 152 it showed at AirVenture in July up to near-new standards, AOPA discovered that just as building new airplanes is expensive, so is refurbing them to near-new standards. Redbird has learned the same thing with its Redhawk diesel conversion project. It hoped to bring these airplanes in for around $200,000, but the price has escalated to $249,000. Why? Because anything to do with airplanes—buying them, fixing them, upgrading them—is always more expensive than even the most conservative estimate imagines.
AOPA's Woody Cahall, who oversaw the 152 Reimagined project with Aviat, told me that the original plan envisioned replacing everything in the airplane with new and bringing the airframe to essentially new standards, perhaps with some upgrades. "We put together a wish list at the start, and all of that added up to about $135,000," he said. Curiously, that's about the price of a new, lavishly equipped LSA with a glass panel and probably a ballistic parachute system. And clearly, it wasn't going to work for trainers in the refurb market. AOPA, rightly I think, kept the airplane refurb modest and the price below $100,000.
Another thing anyone dabbling in this market may have to realize is that the margins on such projects won't be anything like margins on new airplanes. There's profit there, probably, but I doubt if anyone is going to get rich on the idea. "One of our efforts on this airplane was to set a duplicable model that other people could follow and come up with a good airplane. You could easily get the airplane to a ridiculous price," Cahall said.
As with new airplanes, there will be fatter margins at the top tier of the market, the refurbed cabin-class twins, for example, or expensive singles like 36 Bonanzas and Piper Saratogas, which are much in demand on the used market. Those buyers will want every bit of bling they can get into the panel and will understand they'll have to pay for it. But in the two-place market? Not quite.
And that's why the AOPA 150s and 152s are modestly equipped. No glass, no expensive STC mods and certainly no autopilots. "The cost to repair that stuff and the expense of databases is just outside the scope of the kind of airplane we wanted to provide," Cahall said. As you may have seen at AirVenture, the interiors have nice new metal panels with a basic Garmin GTR 225 digital navcomm and a portable aera GPS. But no ADS-B of any kind and no upgrades like LED lighting.
I continue to believe that this refurb idea is a good one and it'll have legs. But it's going to take a year or two to confirm that, by which time AOPA expects they will have completed as many as 20 refurbs. That's a sizable enough fleet to determine if the expense of restoring an airplane to near-new standards will reduce maintenance and operating costs enough to make it worth the investment. And if buyers, renters and students will really respond to like-new airplanes instead of being put off, as AOPA says its surveys insist they are, by worn out ones with old radios, crappy upholstery and faded paint.
The flight schools I spoke to had mixed reactions to the question of presentable airplanes. Some said spiffy interiors mattered, some said not so much. Price does matter, though. Several schools told me they had new Skycatchers on the line renting for $110 or $115, but students preferred the old 152s at $90. AOPA's real target for these refurbs is newly formed flying clubs, which have their own economics and preferences. Cahall said AOPA got surprising interest from the private owner segment, too.
The industry got to this state because new airplane prices, even in the training market, have become prohibitively expensive with no prospect of them retreating. (There are other, larger forces at work, too.) If these organized refurb ideas don't make a meaningful dent in the cost of owning airplanes and learning to fly them, we all know which way the trend line is going. It's going there anyway, but the first step is to try to wrench it flat and worry about pointing it upward later. We're so far from that that I don't expect to see it while I'm still healthy enough to fly.