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.
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.
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.
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.