Guest Blog: Retrofit Avionics Up 28 Percent
Some financial analysts predict that the tax reform recently enacted will see corporate earnings grow in the 8 to 12 percent range in 2018.
As all of us in the general aviation industry know, this projected growth could have a positive trickle-down effect for our market.
In my segment of the industry – avionics manufacturing, distributing and repair – where we are still recovering from the Great Recession of the 2008-2009 era, avionics sales are already trending upward over the last several months, and it appears the increase is partially due to the ADS-B Out mandate for Jan. 1, 2020.
As everyone should be aware by this late date, the Federal Aviation Administration is requiring all aircraft flying in controlled airspace to be equipped with ADS-B technology to modernize the U.S. national airspace system. The FAA predicts this mandate will apply to 120,000 to 160,000 aircraft, of which nearly 100,000 aircraft still need to equip within the next 24 months.
Five years ago, my organization – the Aircraft Electronics Association – created a quarterly avionics sales report to assess the true dollar size of the business and general aviation avionics market. The AEA is an international trade association whose membership roster is compiled of avionics manufacturers and distributors and government-certified repair stations that service, install and maintain the general and business aviation fleet.
Today, 23 avionics manufacturers submit their quarterly sales to the AEA. The sales report provides valuable information to the industry, as well as promotes the business and general aviation avionics industry to investors and informs elected officials of its global economic value.
The dollar amount reported includes: all business and general aviation aircraft electronic sales – including all component and accessories in cockpit/cabin/software upgrades/portables/certified and noncertified aircraft electronics; all hardware (tip to tail); batteries; and chargeable product upgrades from the participating manufacturers. The amount does not include repairs and overhauls, extended warranty or subscription services.
In the first nine months of 2017, total worldwide business and general aviation avionics sales amounted to more than $1.73 billion as reported by the participating companies. The figure represented a 4.1 percent increase in year-over-year sales compared to the first nine months of 2016 amount of more than $1.66 billion.
Even better, sales during the third-quarter months of 2017 had a 7.1 percent increase compared to the 2016 third-quarter sales of more than $548 million.
These are significant increases in a cautious general aviation economy. Interestingly, of the more than $1.73 billion in sales during the first nine months of 2017, 57.7 percent came from the retrofit market, while forward-fit sales amounted to 42.3 percent of sales.
The third-quarter report indicates that the retrofit market appears to be thriving, as those sales have increased more than 28 percent in the past year. Why the surge in retrofit sales? While the AEA Avionics Market Report should not be considered a predictive indicator of future industry sales activity, the results in the third quarter may be attributed to an increase in ADS-B installations in existing aircraft.
The retrofit surge also could be partially attributed to the possibility that aircraft owners are choosing to have additional avionics work done while simultaneously coming into ADS-B compliance. Many avionics shops are telling us that aircraft owners are electing to order full-panel avionics upgrades rather than just the ADS-B equipment.
Whatever the reason, retrofit sales increased more than 32 percent during the third-quarter months alone. This is consistent with what shop owners in the U.S. have been telling me during our AEA Connect Conferences last fall, as many have a backlog of work ranging anywhere from two to six months.
With such a short time span left to comply with the ADS-B Out mandate, aircraft owners and operators may now realize time is getting short, and the supply of authorized avionics shops performing these installations will be in great demand throughout 2018 and 2019.
Although the mandate was first introduced in 2010, with a 10-year compliance calendar, owners have been slow to react. Suspecting the FAA may extend the mandate beyond 2020, owners procrastinated, and demands for lower equipment prices were heard throughout the industry. The manufacturers responded positively, and today, there are several lower-priced options available, as well as more offerings for the Part 25 market.
Who knows how long it will take corporate tax cuts to trickle down to our industry segment or what the new year may bring; in the meantime, the avionics industry, as usual, will march on, work hard and do our part in modernizing the nation’s airspace.
ABOUT THE AUTHOR
As president of the Aircraft Electronics Association, Paula Derks presides over the international trade organization that provides regulatory representation, training and member services to nearly 1,300 general aviation electronics entities in 43 countries around the globe.
In coordination with the AEA board of directors, Derks’ position includes long-range planning and budgeting, representing the AEA at industry events, and ensuring the strategic objectives of the association are realized. She is the publisher of Avionics News, the association’s monthly magazine.