Finally, Some Good News

Dale Klapmeier and Pat Waddick

It’s been a tough time for general aviation since the U.S. economy went bust in the early fall of 2008. But I was happy to hear some good news for a change when I visited Cirrus Aircraft in Duluth last week.

The good news is that for the first time since the recession began in 2008 Cirrus has a backlog of orders for its new SR22-G5 piston single. The backlog is by no means huge, but still, sales are finally headed in the right direction.

Part of the reason for the pickup in demand is the new G5 model of the SR22. Cirrus was able to increase maximum takeoff weight from 3,400 to 3,600 pounds and keep nearly all of that weight increase as new useful load. That is a remarkable achievement.

The G5 is a rare new production airplane that can carry at least two typically sized couples and enough fuel to go a long way, or maybe even fill the tanks. Pilots want all of the equipment that increases capability such as ice protection, air conditioning and many add turbocharging, but they also want a big useful load. The G5 delivers.

Another aspect of the new success at Cirrus is what I would call right sizing the production plans. Though an optimistic attitude serves all of us well in many aspects of our lives, being unrealistic about the size of demand for any product can kill a manufacturer. It’s extremely difficult to forecast demand for airplanes, but for several years Cirrus, like many companies, had erred on the optimistic side in planning, and that has been costly.

This year Cirrus co-founder and CEO Dale Klapmeier and new company president Pat Waddick told me last week that conservative planning—realism actually—has won out. Cirrus will build five airplanes a week, 260 for the year. That is about what the company sold last year, and close to demand the year before. We all hope the economy is improving, stock market indexes are way up, but there are not really solid reasons to believe the market for high performance piston singles will jump.

If Cirrus can build and sell the planned 260 airplanes without deep discounts or other costly measures to move excess inventory the profit picture is okay. And that’s what it takes to keep any manufacturer humming along.

I think the change in leadership positions at Cirrus is also encouraging. Dale, along with his brother Alan, had the dream of building airplanes. And they made the dream come true. But Dale’s first love is spending time with Cirrus customers and, well, continuing to build the dream. It’s impossible to not like Dale, he is charming and affable. And he has the hard earned street cred as both a pilot and airplane builder that makes him so interesting to spend time with whether you fly a Cirrus, or some other type.

Pat has been at Cirrus for 25 years joining the company as an engineer. Pat lived through the wild swings of the VK30 piston pusher kit effort. Then the ST50 program to put a turbine engine in the VK. And he persevered through the many near death experiences Cirrus survived to get the SR20 and then SR22 into production. He has the irreplaceable experience and engineer’s attention to detail needed to run the operations day to day. And to manage the enormous number of projects big and small that are necessary to transform the SF50 single-engine jet from a proof of concept into a real production airplane.

With a reasonable level of funding from its Chinese owners, and a well suited management team in Klapmeier and Waddick, I think Cirrus gives us reason to be optimistic about the future of general aviation manufacturing and flying. It sure is nice to see some good news.

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14 Responses to Finally, Some Good News

  1. SkyGuy says:

    Buying an expensive initial…..and re-current expense….is good news ?

    Think not.

  2. nu says:

    I have been surfing online more than 3 hours today, yet I never found any interesting article like yours. It

  3. Gordon says:

    “I think Cirrus gives us reason to be optimistic about the future of general aviation manufacturing and flying. It sure is nice to see some good news.”

    What the heck…?…Cirrus is going to build a handful of airplanes this year…just like last year…at an average sticker price of about three quarters of a million a pop…

    Who the hell can afford that…?…perhaps the top one percent of income earners…and they would rather be flown around in a professionally piloted jet…how is that “good news” for the little guy aviator who is disappearing in droves…?…

    We need an airplane that costs what it cost back in the heyday of personal aviation…about one fifth of what today’s way overpriced piston airplanes go for…

    Cirrus is a boutique market that’s all…260 guys buying Cirruses each year is not going to revive personal aviation…

  4. Patrick says:

    The GA press continues to amaze, as with the nonstop befuddlement over the declining pilot population. Why, why, why is GA going south?

    Hmmm… couldn’t have anything to do with the fact that a new 100-kt, 2-seat LSA taildragger costs as much as a luxury sports car… could it? And the modern equivalent of a Bonanza (albeit with fixed gear) costs as much as a law-firm partner’s home.

    I’m beginning to think that most members of the GA press have the same problem as actors and musicians. They don’t live in the real world, and thus can’t know how ordinary people live.

  5. Hmm. Meanwhile, Paul Bertorelli of AvWeb wrote an editorial this week questioning why, if the Dow is at record highs, the GA market isn’t seeing a rise in sales. Surely Gordon’s argument must have something to do with that.

  6. Jeff Boatright says:

    According to “The Cost of Living” website (http://thecostofliving.com/index.php?id=124&a=1), a 1946 dollar is now ‘equal’ to $11.20. I have no idea how this was derived (you can read about it at the website). From other websites, the average cost of a new car was $1,400.00 (x 11.20 = $15,680). That will buy a very sparse entry level car today, so the $11.20 might be a little low for things like cars, planes, etc. I’d say many of us here have been known to spend maybe twice that much on a new car (not me, mind you, because I am cheap!). Regardless, how does that work out for my type of flying?

    In 1946, a Champ sold for $2,095. Multiply that by $11.2o = $23,464. Double it and that’s $46,928. Oddly enough, a $50,000 LSA is what many people have by screaming for. Also, oddly enough, $50,000 gets you into some of the better C-172s on the used market.

    Now, if we were going to talk about, oh, I don’t know, EXPERIMENTAL AIRCRAFT (do we still do that around here?), I’d say that my $12,000 Pietenpol is looking very good. Of course, it’s not everybody’s cup of tea. After all, not everyone wants to fly every weekend… ;)

  7. Gordon says:

    Jeff…that sparse entry level car for $15,000 today is light years better value than that 1946 car…

    Now 1946 was really the beginning of the personal airplane industry…so it makes more sense to start a little later…say 1978…at that time you could buy a C152 for about $13,000 which is about $45,000 in today’s dollars…

    Now it is easy to say…go build an EAb…or buy a used Skyhawk…well those are exactly the “answers” that have brought us to where we are…ie the extinction of middle class airplane ownership…

    I don’t want to get into a whole lot of detail here but I remember the 1970s…my dad bought a brand new Skywagon on floats when I was 14…and like most ordinary people who bought airplanes the cost was approachable…with a new airplane you did not have to worry about the $10,000 annual…or the new engine…or prop…or whatever…

    You bought a new airplane just like people buy new cars today…you buy it so you don’t have to spend a new car’s worth of money on repairs…

    New products drive the car industry and any industry…if we are going to have ordinary people flying their families around in airplanes…we need to have affordable family airplanes…like we used to…simple as that…

    Continued in next post…

  8. Gordon says:

    Do we really want to know why we are in the place we are now…?

    Well go to the GAMA website and download their 2012 statistics factbook…in it you will find all the info on how many planes were made each year…how much their total selling price was etc…going back decades…

    Here is the situation today…the GA industry manufactures and sells about $20 billion worth of aircraft each year…98 percent of that is executive aircraft…jets and turboprops…of which about 2000 are sold each year at an average price of about $10 million each…

    The few hundred piston airplanes a year account for just TWO PERCENT of GA industry revenue…

    Now flip a few pages and see how things looked in 1978…that year 17,000 piston airplanes rolled off the line…including nearly 3,000 twins..they made up the bulk of GA revenue…about $3.5 billion in today’s dollars…

    Jet and turboprop sales were quite a bit less even by dollar value…under 800 airplanes…total dollar value of $2.7 billion also in today’s money…

    So we look at the numbers and we see the facts staring us in the face…back in 1978 the average price of that turbine executive aircraft was only about $3 million in today’s money…and less than 800 big spenders could come up with that kind of money…

    Today there are over 2,000 big spenders who buy an executive aircraft each year…nearly three times as many…and they spend on average more than three times as much per plane…for a total increase in spending power of NEARLY TENFOLD…

    That is the story…the big spenders have done very well thank you…and the GA industry…seeing where the money is…has decided that fiddling around with little airplanes for the ordinary Joe is not worth it…

    How can it be…they would have to sell 200,000 airplanes each year…at an average price of $100,000 each…in order to make the $20 billion they make now selling 2,000 executive airplanes at $10 million each…

    Now you tell me if 200,000 piston airplanes a year is feasible…

    So that is the whole thing right there in a nutshell…it is not liability insurance…which makes up a tiny percentage of airplane cost…or certification…which is also a very small cost factor relatively speaking…or other such myths…

    The simple fact is that it is not profitable for the aircraft industry to bother with us…since the big spenders are able to spend TEN TIMES what they did a generation ago…

    Maybe we should ask why…?…or more precisely why has the middle class income not kept up with that huge wealth expansion at the top…?…if we had even five times the spending power we had in 1978 we could afford that $750,00 Cirrus…

    The average cost of the piston airplane…including the much more expensive twins…according to those same figures was $58,000 in 1978 dollars…which is about $180,000 in today’s money…

    If we left out the twins the average price would surely be under $150,000…exactly one fifth of that Cirrus…

    • Jeff Boatright says:

      Oh, I agree Gordon (and Paul): We should be asking how it is that productivity of the American worker is at an all-time high, yet real wages have been stagnant since the 80s. But best not to go there…might get called out for being a DFH.

  9. Cary Alburn says:

    Well, I for one think the Cirri ads are cute, with the little tykes in that “3 passenger” back seat–and so very realistic.

    Why, the average young and up-coming family with 3 little kids under 10 can certainly afford a $750,000 purchase to go fly to Gramma’s. Let’s see. If the kids are under 10 and the folks started their family after Mom and Dad graduated from college, they’d be around 33-34 years old, so they’ve been in the earning market for about 10-11 years–although actually neither was able to get a job right out of college and had to wait tables for the first 3 or 4 years. Surely they’ve paid off their total of $100,000 student loans by now, at only $1012/month and 4% interest, and also they’ve made their down payment of $35,000 on that mid-level $350,000 home and are paying off their mortgage at the rate of $1503/month.

    Hmmm. That down payment was probably a 2nd, payable in 5 years, so that’s another $644/month. And they have a couple of cars, not quite new but serviceable, so that’s probably another $700/month. And then they have groceries and utilities and insurance and taxes. But that’s all well short of their combined incomes of $100,000 (after all, they’ve only been in the job market for 10 years but only earning anything reasonable since finally finding jobs in their fields)–so of course Bank of America or Citibank or any one of the other megabanks would be glad to lend them $700,000–that way they only have to come up with a $50,000 down payment, and payments will only be around $5548/month for 15 years–and 100LL will only run maybe $17,000 a year, because after all, if you have that fancy airplane to go to Gramma’s, you must use it to go to Gramma’s, right?

    Wait a minute! Somehow those 30-somethings with the 3 little kiddies just can’t do that, can they? And I forgot the $12,000 repack charge at the 10 year mark for the BRS, and perhaps at 200 hours/year the overhauled engine at $50,000, not to mention all of the normal maintenance costs of such a fancy airplane, and the updates to its G-whiz panel, and all the instruction necessary to make sure Dad and Mom are safe pilots.

    Perhaps the Chinese owners of Cirrus will buy Bank of America or Citibank, and maybe they’ll extend the airplane loan out to 100 years, payable in 15 with a balloon. And maybe they’ll refinance the house and extend it out to 100 years, payable in 30 with a balloon. Perhaps the student loans and the car loans can all be rolled into the house loan. Surely, that’s doable–after all, China right now has financed and built several large cities in which no one lives, which include multi-million dollar hotels and malls and such.

    No wonder the economy is so good that Cirrus can build and certify a slightly bigger, hugely more expensive plastic airplane, so that Gramma can see the grandkiddies more often.

    Yup, things are looking up! :)

    • Ric Lee says:

      Cary, your post is so right on and to the point! I do not understand why people dance around the problem of high cost aircraft and low wage jobs. The once thriving middle class has been losing ground since the late 70′s while the 1% have been making fantastic gains.

      I have been invited to attend 2 Cirrus demo days now and was not even given the time of day at either one. Makes me wonder how on earth they ever sell an aircraft. Do you have to beg them to purchase one or drive up in a Porsche?

  10. Bruce Culver says:

    One thing that seems to have escaped a number of people in the business: as the number of active pilots and planes declines, there is increasing pressure on the support infrastructure fior GA aircraft. When the number of customers and planes falls to a sufficiently low level, you’ll see A&P mechanics going out of business, FBOs closing, engine and prop shops consolidating and/or closing, radio and insfrument shops ditto. It will take time, but gradually the support structure for GA will slowly disappear, and at some point, even the doctors and bankers in their $750K fancy airplanes won’t be able to have them serviced – and what happens if you have an AD that requires immediate compliance, and no way to have the work done? Ask not for whom the bells tolls – it tolls for thee….. The real irony here is that the people who will be least affected by this possible turn of events are those who have built their airplanes themselves, possibly even built their engines themselves, and who have the aircraft repairman certificates to prove it.

  11. Michael Sheridan says:

    The crux of this is that the middle class is disappearing. We have a government by the rich, and for the rich. How many top executives from the financial institutions that caused the 2008 great recession went to prison: none. My father worked in a trade, as a union member, and was able to buy and fly an airplane. The simple truth is that although productivity is high from American workers, the vast majority of the money goes upstairs for the several place million dollar salaries.

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