Pilots Buy Dreams, but Not Airplanes

In the late 1970s, Tony Fox, a waste compactor manufacturer in Minneapolis, began to develop the Foxjet 600 in an effort to lower the cost of private jet travel and open it up to smaller airports including grass runways. Courtesy: Richard Anderson

Human economic behavior is perverse. We buy expensive items such as houses and stocks when prices are high, but sell them, or don’t buy, when prices go down. And we spend millions on dream airplanes, but when an airplane becomes real, is in production, and is available, we object to the price and don’t buy or invest.

I thought about this while following the saga of Cirrus, one of the most successful general aviation startups ever. I can’t think of a general aviation company in the U.S.that was launched after World War II that lasted long enough to build more than a handful of airplanes. Internationally there are examples of more recently founded successful airplane manufacturers with Airbus and Embraer being the leading examples, but they focused from the beginning on transport airplanes, not GA.

By any measure Cirrus is a general aviation success. The company has delivered 5,000 airplanes, a milestone that was reached last week. And Cirrus accomplished the feat at a time when piston airplane production numbers were a fraction of what we saw 30 years ago.

The Cirrus SR22. Courtesy: Cirrus

Despite its success, Cirrus found it to be impossible to raise new capital investment in the U.S. to continue operations and build new models. The big majority investor in Cirrus for its productive life was a company based in the Middle East because no U.S. investors would pony up enough dough. Many smaller investors helped get Cirrus started but lacked the funds to carry it to full production, and that’s when the Middle Eastern investors came through.

When the Middle Eastern investors wanted to exit the Cirrus business, nobody in the U.S.stepped forward with the necessary money. Finally, a huge Chinese company made the capital investment Cirrus so urgently needed and now owns the company.

Compare the Cirrus experience with some “dream” airplane projects. At the top of the list is, of course, Eclipse, which was reportedly able to raise and spend at least $1 billion worth of capital, nearly all of it from U.S. investors. For that massive amount of money about 250 airplanes were built, none of them totally complete, and the company went bankrupt, costing investors and deposit holders essentially everything.

Adam Aircraft didn’t raise and spend $1 billion, but it did burn through many millions, probably more than $100 million, trying to create a “dream” airplane.

A BD-5 at the Arlington Fly-In in Washington state. The BD-5 was a dream of many but then, like the rest, fell apart due to money troubles. Courtesy: Pat Panzera

After so many years in this business I can’t remember even a fraction of the dream airplane projects that have raised and lost so many millions of dollars, but on the list are things like the Omac, JetCruiser, VisionairVantage, and on and on. The millions invested and lost on those and many other airplane dreams by individuals and local governments was real and it came from Americans.

Many kit airplane dreamers have not fared much better. It’s been about 35 years but most of us remember the BD-5 scandal. The tiny airplane would have been a dream come true at the claimed price and performance, but it remained a bad dream for the thousands who sent in deposits for complete kits that were never delivered.

Even Cirrus started as a dream with an impossibly low price for the SR20. The too-low price for the first batch of airplanes created a close call for the company’s survival, but development of the more expensive and more capable SR22, and a big capital infusion from the Middle East, saved the day.

But now that Cirrus is doing the really, really hard work of manufacturing, selling, and supporting real airplanes – good airplanes – investor enthusiasm has dried up. An airplane company that succeeded against almost impossible odds couldn’t find the money it needed to continue except from the Chinese.

In 1993, Jim Rice and Tom Stark of the fledgling VisionAire Corporation visited Scaled with conceptual designs for a new single-engine business jet. Scaled was given the go-ahead to build a proof-of-concept prototype in March 1996; it first flew later that year. Courtesy: Scaled Composites

We humans are strange beings, and pilots are no different. Now that we can buy the house we wanted for half the price of three years ago, we don’t. When a stock is cheap we sell. And when an airplane is a dream we throw money at it, but when it becomes real, we wish for more and don’t buy.

To Chinese investors Cirrus is a dream, a dream come true, and they want to be a part of it. For us the airplane that has unlimited range, a huge payload, and costs nothing to buy and fly is just around the corner, and that’s the one we are going to invest in.

This entry was posted in Aircraft, Industry & Government, Mac Clellan's Left Seat Blog. Bookmark the permalink.

50 Responses to Pilots Buy Dreams, but Not Airplanes

  1. Pingback: Cirrus Changing Hands (Again) | High Altitude Flying Club

  2. Fred says:

    Thanks Mike! I almost forgot the Tony Fox story brought a smile to my face it still amazes me what the passion of flying can make people do!

  3. George says:

    Mac,

    You say that “Cirrus found it to be impossible to raise new capital investment in the U.S.” and that the company previously had to accept ownership by somebody in the Middle East “because no U.S. investors would pony up enough dough” and “when the Middle Estern investors wanted to exit the Cirrus business nobody in the U.S. stepped forward with the necessary money.” With all due respect, I highly doubt that any of those statements are really true. I think it if far more likely that Cirrus could have raised investment capital from U.S. sources or sold the company to U.S.-based investors (the first time and the second time), but evidently they found that the first time they were able to find somebody in the Middle East who was willing to provide the desired amount of capital on better terms than they could get from anybody here at home; and the second time they found that their best offer came from somebody in China. The fact that the highest bidders were foreign entities does not mean that there were no other options available.

  4. Mac says:

    Well, George, all I can say is that both Alan and Dale Klapmeier told me over several years that the company was not able to find enough investment to fund new development or even to continue to operate. If you don’t want to believe them, all I can do is report what they told me, and also observe what happened which is exactly nothing in terms of new investment until the Chinese came along. So, believe what you wish or what you must about available capital for general aviation companies in the U.S.

    Mac Mc

  5. Jeff Boatright says:

    Mac,

    Did the Klapmeier’s have any ideas/guesses as to why US investors showed little to no interest? My (admittedly limited) experience with many investors is that they want a 31% return inside of 6 quarters. They happily invest with groups that SAY they’ll meet those numbers and simply ignore groups that have more realistic business models. Needless to say, their “win/loss” ratios are abysmal, yet they’re still considered Masters of the Universe.

    That the Chinese are willing to invest in Cirrus and other long-term successes and US investors are not should tell us something about the rote and rot being taught at US business schools since, oh, about 1982.

    Jeff

    PS: If we “humans” are “strange beings” that won’t invest in successes like Cirrus, but the Chinese will, does that mean the Chinese are not human? Maybe you should instead say the US investors are “strange beings” and that Chinese investors are rational actors. Both human, though. ;)

  6. Jerry Graf says:

    Don’t forget the Wheeler Express – remember it was the hit of Oshkosh when it came to town in the 80′s. It was and still is a great performing 4 place, fixed gear airplane. At the time it came to Oshkosh, the Klapmeiers had there 4 place pusher and were having trouble breaking drive shafts. Then they changed their whole game plan – ever seen a Cirrus sitting next to an Express – gee I wonder where they got their idea for the Cirrus from………………..

    • DenverD says:

      The thought that they stole the idea from Wheeler is ridiculous. Wheeler was the first to conceive a 4 place low wing? Or a 4 place low wing composite? Both ridiculous. Check out the Windecker Eagle (FAA certified in 1969!). Or how about the Bellanca Skyrocket II (6 seats, flew in 1975).

      If you want intrigue, more interesting was the Lancair prepregs vs Glasair vinylester ads from the early 1990′s and its relation to Cirrus. The Klapmeiers built a Glasair before they built their VK-30 prototype out of vinylester. There was palpable dislike for Lancair in Baraboo, and when the kit was discarded for a production airplane, the plane Cirrus wanted to emulate was the Lancair ES kitplane (later, under very significant aerodynamic, structural, and systems changes to become the Lancair Columbia/Cessna Corvalis). At first iteration, the planes had the same wing area, span, engine, etc. Lancair was smart and certified the big IO-550 first rather than the little 360, the direction Cirrus later followed on their much more successful SR22.

  7. RHalstead says:

    First, most investors are amateurs and second most investors base their investments on emotion. IE dreams, or ideas of “get rich quick”. They think when something is high priced in indicates a good value which it does for those who bought when it was low. They ignore the speculation and risk that goes with it in venture capital investments. They do remember the “risk” when the stock price goes down and rather than riding it out, they get out. During the “dot come bust” I saw accounts that were less than their maintenance fees, but two years later were worth close to what they had been at their peak and I saw some that just folded their tent and are no more.

    US investors have not gotten used to seeing earnings or growth of only 3 to 5 % or even stagnation. They still expect to see double digits and that may be a long way off.

    OTOH if I had that kind of spare money laying around I’d purchase a Bonanza rather than a Cirrus. (I have nothing against advanced composite airplanes. I’m building a Glasair III…If I ever get it finished)

    Like Jerry, when I first saw the Cirrus I thought it looked like a copy of the Wheeler at least from the outside.

  8. Pingback: Pilots Buy Dreams, but Not Airplanes | Left Seat | Share My Aircraft News

  9. Bill Berson says:

    A properly run company would be started slowly with the founders money and grow from the profits, without investors.
    If a company needs money after 10 years of operation, that is proof of operating at a loss. It would be foolish to ‘invest’ in such a ponzi like scheme.
    Unfortunately, this is common in aviation, as mentioned.
    Bill

    • D Dever says:

      I disagree cash flow and profit are different animals and not necessarily related. I speak from experience. I started a company years ago and was too successful. Sales were not a problem…Profits were not a problem, but cashflow was. I did not want to give up control of the company so it folded. Cashflow=profit+depreciation-increase in assets. In some cases to keep up with poroduction an continue growth and competitiveness an infusion of cash is necessary.

      • yogi says:

        D, I am sorry you lost your company. cash flow is king, as they say. paper profits unfortunately don’t pay the bills. I am sure Bill was speaking on a cash basis. Cirrus has a fundamental problem, it costs more to roll one out the door than they can sell it for. all the depreciation in the world cant fix that. but cheaper Chinese labor can. (sorry my fellow Americans)…

        • Dan Winkelman says:

          At the rate labor costs in China have been rising, and with the rise of the Yuan, it won’t be cheaper for long… in a couple decades they will join the “rich world” and inherit all the same problems the OECD now experiences. For all the balking we do here in the US about jobs being outsourced, what few realise is that China is just starting the outsource cycle as their native production costs rise. Notice how more and more clothes and shoes are made in Indonesia and Vietnam? Yep.

          Unfortunately for us, aviation is the business where outside of mass or executive transport, there is no rational business case. Why do people buy airplanes? Irrational decisions. We’re madly in love with them, whether we realise it or not. We’ll rationalize it to the nth degree (“It’ll save me time” or “I just can’t stand the TSA anymore”), but it’s almost never the most economical decision. Ultimately, these things are toys. Very expensive toys. This is part of the reason why the only companies that can afford to stick around in (certified) GA are conglomerates (Textron, Teledyne, CAIGA, EADS, Bombardier, etc). One big problem with certified GA airplanes is that they’re not economical to purchase and use (reducing demand), yet the cost of certifying an airplane is very high. Then there’s the cost of insuring the company. It’s all overhead, and those expenses take time and careful budgeting to successfully manage.

          Kitplanes are another matter… Van’s is a prime example of building a relatively simple kit that the homebuilder can actually finish, and continuously improving on it. No delusions of certified aircraft grandeur, they just build nice little airplanes. Hence why they’re still around, with 7000-odd airplanes completed and flying.

  10. John Patson says:

    When a company like Cirrus reaches a certain size, it needs serious money, and in the US and Europe, moneymen do not like companies making things you can actually touch.
    I suppose if you invest from behind a computer screen in sliced and diced mortgages and share options, or no-factory companies like Apple or Microsoft, the reality of a physical aeroplane is too much to contemplate.

    • yogi says:

      gosh John there is plenty of investment in manufactured goods. actually more stuff you can touch than not…. your Iphone took $150 million to develop. which is small potatoes compared to an aircraft. and Apple sold 6 million of the little buggers, by 2008!. i doubt there have been 6 million planes sold in the history of aviation.

  11. Richard Bradberry says:

    A wise old head at Beech Aircraft told me once, “As much money has been lost as has been made in general aviation and that will always be the case.” That was more than 40 years ago and I would bet that it is still true.

  12. Tim says:

    I can think of a couple of US aircraft manufacturerers Maule, Cubcrafters. I probably missed a few since most of these niche type manufacturers keep expenses tight; not much of an advertising budget. The price question should be looked at in two catgories very basic and go anywere almost any time. Boats come to mind when making this comparison. A basic day sailor is cheaper that an ocean cruiser. You usually get what you pay for.

    • yogi says:

      Dave, you are right on I think. the pilots in the market only want to pay X, but to develop and certify, it costs X times 2. so companies announce their design will only cost X, lots of money flows in, prototypes developed, and poof, now it is 1.5 X. or the creative ‘in 1996 dollars’ LOL. but 1.5X is a lose lose, because less people buy, and the company is still losing .5 on every plane. the trick, ALA Cirrus, is to sell more expensive versions of the same plane later to make up the gap. which is why an SR22 is 2X as expensive now (coincidence?) of course you sell even fewer at 2X, so then you need to strap on a jet engine so you can sell at 4X, but then you need more $ to design and certify that, and…..this starts to sound like a B17 death spiral…..

    • yogi says:

      great examples! somehow my reply to another post got stuck here. likely user error. Sorry!!

  13. mike says:

    Its also important to note that failed companies, especially ones that looked fairly promising, like Eclipse, have scared most investors to death. I can imagine just how quiet the investment banker’s conference room gets when the question is asked regarding why this project will go when Vern Rayburn lost billions.

  14. Dave Schwartz says:

    A big part of the reason this doesn’t seem to make sense is that Mac is confusing and mixing two different groups of people: investors and customers. The investors are the ones buying the dream, and the dream is of big returns on their investment. Very few of them ever really intend to own an airplane. They buy into the hype put out by these companies, shell out big money, and often in the end find out the hard way just how unrealistic the hype was. Customers, those who might actually buy an airplane, couldn’t care less, nor should they, about the investors’ profits. They want to know how much airplane they really get for their hard earned dollars. And they want to know that their purchase won’t turn into an albatross is a few years when the investors figure out they’re not going to get rich quick, the company goes under, and there’s no longer any product support. There’s nothing new in this. It should be no surprise to anyone. The only way it’s ever going to be different is if those trying to start a company can make and present a honest business case, free from hype, that is still a compelling investment proposition to at least some more thoughtful and realistic investors.

    • yogi says:

      Dave, you are right on I think. the pilots in the market only want to pay X, but to develop and certify, it costs X times 2. so companies announce their design will only cost X, lots of money flows in, prototypes developed, and poof, now it is 1.5 X. or the creative ‘in 1996 dollars’ LOL. but 1.5X is a lose lose, because less people buy, and the company is still losing .5 on every plane. the trick, ALA Cirrus, is to sell more expensive versions of the same plane later to make up the gap. which is why an SR22 is 2X as expensive now (coincidence?) of course you sell even fewer at 2X, so then you need to strap on a jet engine so you can sell at 4X, but then you need more $ to design and certify that, and…..this starts to sound like a B17 death spiral…..

  15. Rae Willis says:

    “I can’t think of a general aviation company in the U.S. that was launched after World War II that lasted long enough to build more than a handful of airplanes.”
    Say what?

  16. Rod Rakic says:

    Thanks for the post Mac. After reading the comments here… one question comes to mind:

    Where can the Angel Investors and Venture Capitalist interested in investing in aviation be found domestically?

    • yogi says:

      unfortunately it is likely all offshore I am afraid. there is a long line of failed airplane companies to keep investors wary. Eclipse was a bitter pill particularly. aviation is a very small market, highly regulated, and labor intensive. most GA are built the way cars were in the 60′s, by hand. that’s REALLY expensive, unless maybe you are in… China… if Detroit did it that way still, a Chevy suburban would cost 200,000. of course GM sells more cars in a month than cirrus has sold planes in it’s entire existence… so the plane makers have no margin to buy the expensive robots – they are somewhat stuck doing it the old way…. and charging 500,000 to offset the enormous start up and certification costs.

    • Mac says:

      Hi Rod,

      Finding people to invest in airframe builders is very difficult and there is no mystery there because of the track record of new, and established, manufacturers. But the picture is brighter for aviation components and electronics makers. Aspen comes to mind as a startup that is gaining market share and continues to expand its line and capabilities of retrofit primary flight displays and multifunction displays. And Aspen is funded by VCs.

      Heck, even Garmin was a startup by a few guys who came from the old King Radio. And look at Garmin now. The big difference is that Garmin was founded to build the then new GPS equipment and was able to grow with that technology. But basic aircraft technology is very mature so improvements can only be small and largely depend on new engine technology.

      The greatest recent success in new airplanes has come from using proven technology in a new combination. The Cessna Caravan is a good example of a proven type of airframe put together with a proven engine in a combination not done the same way before. The single-engine turboprops from Socata, Pilatus and Piper are also examples. Will a single-engine jet also create a new and successful category? I hope so, but too soon to know.

      Bests,

      Mac Mc

  17. It would help if our own government would support our US owned companies before they have to sell out to foreign interest. It is my understanding, that after the China buy-out, our US Air Force placed an order for around 26 aircraft for about six million. With an order like that, Cirrus could have stayed afloat, and all the money would have stayed here. I am not sure sales are going to stay all that strong when customers find out how much the 10 year parachute repack is going to cost them. That item is just now getting timed out, and my understanding it is a little over $20,000. Makes it an expensive airplane to own. But then if you can afford a half-million dollar airplane, you might have the funds for a mire 20 grand repack.

    • yogi says:

      Steve,

      if you were in the market for a cirrus, would you put down your hard earned cash while the company was saying that it wasn’t sure it could keep the doors open, or after the company announced receiving money that would guarantee they stay afloat a bit longer? I’d bet you’d take door number 2 like the USAF.

  18. yogi says:

    Mac,

    as usual, great piece.! you are well versed in all things aviation. but you make some comments in here regarding investment finance, so I had to jump in. initial or seed investors absolutely look to the “dream” for their decision basis, because the prospectus laying out that dream is all they have to judge by. but second and third traunch finance is a bit different, because now the subsequent investors look at how the company has executed to the prospectus – i.e. does it look like the dream CAN come true. if the company is close to ‘on plan’ , then the light at the end of the tunnel is potentially daylight, not the proverbial oncoming train. if the company is far off plan, the market prices in this risk, and many companies fold for lack of acceptably priced offers. expecting investors to ignore the facts and continue to follow a fading dream is a bit unrealistic. The SR22 is an awesome aircraft, but I am sure Cirrus’s plan didn’t say that after selling 5,000 and being the best selling SEL aircraft for several years in a row, they’d need even more capital just to continue operations. i.e. they lose money on every plane they sell. that doesn’t work for cirrus, or the corner donut shop for that matter. this is a gross over simplification no doubt, and i am sure the blog will light up with passionate pilots defending cirrus and all manner of aviation, because if owning and flying an airplane was based solely upon economics, few of us would do it. but most investors aren’t us, as they say…. I really enjoy your work. best regards!

  19. Jay Castle says:

    You don’t have far to look for a comparison. The yacht business, both sail and power. That history,too, is, littered with companies, some legendary, gone bankrupt. Just a tiny handful that you could call an ongoing success. The answer is that it’s easy for people who love airplanes or boats to get hooked by their dreams and plunge into the business, thinking somehow their venture would be different. In the end both industries are dependent on people buying toys..nothing like putting money into a house or an investment vehicle like securities. There is just not that big a market, especially in hard times.

    • Mac says:

      Hi Jay,

      My other passion is racing sailboats, and you’re right about the boat building business. In the late 1980s and early ’90s most boat builders went out of business, even those that had been building boats for 20 or more years. We bought our Tartan sailboat in 1988 and it had a 10 year warranty. About a year later Tartan was out of business and the warranty went with it. The Tartan brand is back and doing well under new ownership but is succeeding by focusing on high priced and high margin boats. By building fewer than in the hayday they make more money on each one. An essential element in boats, and airplanes.

      A big difference between boats and airplanes is that boats have almost no certification or national standards to meet so a new boat design can be in production quickly. As we know, a new airplane manufacturing project takes many years to complete.

      Bests,

      Mac Mc

      • Tim says:

        Mac, the boat manufacturers still have to satisfy customers and insurance companies. If they aren’t built to industry standard no one will buy and they can never be used in any commercial operation. The other thing you left out was the 10% surcharge put on high end products at that time. Maule and others like Hickley Yachts stay in business because of a rational grip on their business.

  20. Richard says:

    Fun to remember the Foxjet, there are probably others here who recall the brouhaha when on the first Friday night at Oshkosh where the Foxjet was being introduced a Williams engine was “lost”.
    Tony Fox melodramatically offered a $10,000 reward for its return and this allowed massive discussion and coverage all through Saturday on the announcement speakers, giving Tony a stage to talk repeatedly about the Foxjet. The engine was rather fortuitously “discovered” in one of his mechanics toolboxes.
    He never agreed this was a stunt, but if it was it was a good one! Anyone else remember?

    • Mac says:

      Hi Richard,

      Tony Fox made his first appearance at the old Reading Air Show that was held earlier in the summer before Oshkosh. I think the year was 1977, but it could have been ’78 when Tony showed up with the mockup and a film of the airplane.

      It was long before electronic video and the many “tricks” that are so easy to accomplish these days, but Tony and his group tried. There were jet engine noises, beacon lights flashing and the Foxjet on the film started to roll. The only problem is that you could see the rope connected to the nosewheel that was pulling along the plywood and putty airplane.

      Just think what Tony could have done with today’s video techniques.

      Bests,

      Mac Mc

  21. Ed Benson says:

    Recent reports by Cirrus owners place the cost of a repack closer to $13,000 for the earliest models (G1), which are the ones coming due now.

    Newer models (G2 & G3) should come in at a bit less – they were designed with access panels for the BRS and don’t need the same composite work.

    Still, not insignificant numbers. Like an overhaul, some of the cost should be figured into every flight to keep the eventual cost in perspective.

  22. stan sanders says:

    The secret to the dream is mass production. The reason no previous aircraft has been
    successful is that they have not been mass produced. I have a patent on a VTOL aircraft
    that I will be presenting to DARPA for funding. The prototype will be a UAV but it is
    sized as a PAV to be easily converted to a 4 to 6 place aircraft. This aircraft will make
    all current subsonic aircraft obsolete and if mass produced will make cars and trucks
    obsolete to prevent the global gridlock that will eventually occur if cars are not phased out. The aircraft will have to be automated to operate in a high density system using
    ADS-B with TCAS. In low density areas manual flight could be used just as it is now.
    More info to follow. Thanks, Stan

  23. Thanks Mac so true the Sport Pilot has gone thru the same thing everyone wanted it but now the airplanes are not cheap enough. We say we want it but then we wont support it.

  24. Jim Wheaton says:

    An aircraft manufacturer that is often overlooked is Air Tractor, Inc. The late Leland Snow designed, built and flew his aircraft first and then sold them. When I was a dealer for Air Tractor back in the ’90′s we talked about how he priced his aircraft. He told me, that he would place orders for the materials for 10 aircraft add in his profit margin and that would be the price of the airplane. At that time, as I recall, they were building 90 to 110 aircraft per year. Limited production, limited number of dealers and high product quality led to consistent demand. I suppose it should be pointed out that his “outside investors” involved the Texas town of Olney, that financed the initial factory at the airport in return for employment of the local population. That relationship began back much earlier with Snow Aeronautical Co.
    Too little has been written about this quiet man.

    • Tim says:

      Jim, the story you tell is not that different from other manufacturers that succeed because they pay attention to the whole business, whether its planes, cars, boats or motorcycles. There ‘s more to building something than the aluminum siding pitch.

    • Jim Alsup says:

      The story of Leland Snow is truly overlooked. This man created very profitable aviation businesses (Snow Aeronautical, Air Tractor) and I would love to see much more written about him. I believe that the area of aviation where you see the most common-sense, and therefore profit, is in the agricultural aviation world – and yet it is largely overlooked by any mainstream publications. Thanks for your mentioning of him.

      Jim

  25. Mike Baxter says:

    Great piece Mac! Once again, I think the people now at the top of Flying lost in a big way when you changed jobs, but their loss is a wonderful gain for EAA. Keep up the good work!

  26. Mark Wyant says:

    Mac,

    I quit trusting your opinions when you dumped all over the MU2 AND the Eclipse jet. What you do not understand you vilify. Maybe foreign investment will be a good thing.

    By the way, the MU2 is still the king of the turboprops – it just needs a real pilot to fly it and apparently you felt you weren’t up to the job

    • yogi says:

      dont be hating on MAC. lots and lots of operators don’t like the MU2, and the premium for insurance on one isn’t because it is the “king” turboprop…

  27. Jeremy Casey says:

    I have read through these replies and the original story and NO ONE has hit the main point about the Chinese “investments”. Remember the investors were AVIC which is essentially the Chinese government…they were NOT buying a “business”, they were buying TECHNOLOGY. When you can buy the whole company cheaper than you can develop a competitor, why do the R&D? I believe they also bought Continental engines…so they have “bought” a GA manufacturing industry instead of having to develop it themselves…

    • yogi says:

      excellent point Jeremy. there really are no large ‘private’ companies in China, which is actually fairly common in other countries in that part of the world. case in point is the chinese fighter program, which MAC and others have covered well.

  28. Gordon Arnaut says:

    Jeremy, the “technology” in Cirrus airplanes and Continental engines is 50 years old…

    There is no technology here and there is no intellectual property involved…what they are buying are fully functioning companies and that is always easier than building one from scratch…

    Also worth noting is that China needs some place to park its huge and ever growing pile of dollars that it gets from exporting manufactured products to the US…the US is the only country that can pay for its imports in its own money, instead of the export country’s money, which is what all exporters prefer…

    This is because the US dollar is still the world reserve currency…but probably won’t be for too much longer…

    So China is piling up US dollars and needs to do something with them…the US government would prefer that China only buy US government debt notes (Treasury Bills)…but China would of course prefer real assets to paper…

    With about $2 trillion in US dollars China could easily buy Boeing and GE and few others…but of course the US is not going to allow that…so China does what it is allowed to do and buys minnows like Cirrus and Continental…

    I disagree with a lot of what Mac has said here…in 1971 my dad, a pharmacist, bought a C185 on amphib floats brand new…I’m an engineer and I can’t even afford to think about a brand new Skyhawk at $300,000…

    In 1979 the US piston industry rolled 17,000 airplanes of the assembly line and the average cost of a 4 seat airplane was about $75,000 in today’s dollars…

    Last year, according to GAMA, a grand total of about 800 piston airplanes were manufactured worldwide…the average cost of each plane nearly half a million dollars…

    So what is wrong…? well just looking at how this story was written and the replies it got we see that everyone just automatically takes for granted that “investors” are a crucial part of making airplanes…

    This is wrong…this is exactly the problem…not the solution…

    In WW2 the US manufactured more than 300,000 airplanes…fighters, bombers, transports… in the space of five years…dwarfing today’s output despite the fact that manufacturing technology has advanced by light years since then…

    What role did “investors” play in those 300,000 airplanes…?…the answer is absolutely none…they were about as needed as a fifth wheel on a buggy…

    What was needed was factories, tools and workers…not some kind of “investors” whose only purpose is to take a middleman’s cut…

    And that is where we find ourselves today…our economy has seen its industry offshored and “financialized,” which means that the money man is king (god really)…the investors decide when a factory gets built and where and how much is going to be produced…

    The result is artificial scarcity that drives prices and profits up…

    When my dad bought that Skywagon on a middle class income, the financial sector was less than 10 percent of GDP…today is ONE THIRD…that is like a 33 percent tax that all of us are paying to a finance sector that is actually making things worse not better…

    Economics 101 tells us that finance is an extractive, not productive activity, that takes out rent from the real, productive economy…

    When you go to buy a new car fully half of the sticker price is built in finance overhead…that the manufacturer had to pay to finance sector just to produce that car and bring it to market…

    Airplanes even more so…the result is that it is the finance sector that has made the decision that personal airplanes are going to be a “luxury goods” product that costs half a million a pop…

    As Mac said the margin on each is very high, so the profits are great even though only a handful are produced…this goes against everything on which our industrial economy is built…

    The more you produce of a given item the cheaper will be its price and the greater profit can be made with a smaller margin…

    But then we are not living in an industrialized economy any more…we are now in a financialized economy…good luck to all buying a new airplane in your lifetime…

    • Antoni Deighton says:

      Gordon,
      You’re right. But you forgot to mention the quantity of government regulation that has been created since 1970, making it difficult and expensive to create and run any business. Sadly the cost of creating and manufacturing in the US makes it hard for new companies to survive. The only real solution is deregulation. But that seems unlikely,
      Antoni

  29. stan sanders says:

    I have a patent pending on a VTOL aircraft that is designed to run on natural gas or any other bio-fuel at several hundred miles per hour at a low cost per hour. Bill Ford, CEO of Ford Motor Company, stated recently that personal transportation will become limited, not by the price of fuel or CO2 emissions, but by congestion (http://www.ted.com/talks/bill_ford_a_future_beyond_traffic_gridlock.html). We will rapidly approach a point where traffic simply stands still, and that will limit our personal movement.
    The Verticraft is the ultimate transportation vehicle of the future. It has maximum speed and safety at minimum cost. Very high speed on the ground is very dangerous, while very high speed in the air is desirable and very safe. On the ground, vehicles are separated horizontally by a few feet with zero vertical separation. In the air Verticraft will be separated by hundreds or thousands of feet horizontally and by hundreds or thousands of feet vertically, making air travel thousands of times safer than driving. Residents of low-density, residential-only sprawling communities are also more likely to die in car collisions which kill 1.2 million people worldwide each year, and injure about forty times this number. The incredibly large costs involved in having to build roads and bridges to desired destinations and the destruction of the environment caused by those roads would be eliminated. The vehicle is designed to run on LNG or any bio-fuel to minimize emissions. A ballistic recovery parachute option allows the Verticraft to make a normal vertical landing in the unlikely event of multiple engine failure. Since airplanes are not mass produced they are very expensive.
    If your car were not mass produced it would cost several hundred thousand dollars.
    If the Verticraft were mass produced it could cost between 50k and 100k and eliminate the need for airports, hangars and rental cars. The initial market would be the 600,000 licensed pilots in the USA along with the estimated 400,000 foreign pilots
    Sincerely, Stan Sanders President Verticraft LLC.

  30. middleman says:

    Valuable information. Lucky me I found your web site by accident, and I am stunned why this coincidence did not took place earlier! I bookmarked it.

  31. I believe that is one of the most vital information for me.

    And i’m happy reading your article. But wanna statement on few common things, The website taste is ideal, the articles is really excellent : D.

    Excellent task, cheers

    My blog; driving lessons bromley (quicklearnerschoolofmotoring.wordpress.com)

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>