Piston pain

Limited resources are allocated delicately and competitors are elbowed away sternly. Often a buyer’s choice is new or used. More than 12 percent of the global fleet is for sale by owner.

Less money buys less aircraft, and hopes hang on for a surge of new pilot starts with Light Sport Aircraft. That new entry-level sector has not been battered as badly as the 55 percent drop last year in single engine piston sales. But a 40 percent sales drop is little comfort when it was already supposed to have sparked a new age of affordable flight.

LSA Manufacturers in Australia and around the world yearn for thousands of new pilots to exploit that regulatory experiment, and wince as colleagues fear new European Union guidelines that could scupper dreams of one airframe version for one globe. Simple training in uncertified, industry-approved Light Sport Aircraft will catalyze interest in flying, they predict.

LSA leadership from legacy manufacturers recovered from its spin with a sudden and successful foray by Piper. Becoming exclusive global dealer for the Czech-built SportCruiser – now the PiperSport- put Piper on quick climb rate to dethrone German manufacturer Flight Design, which was waiting for Cessna to overcome SkyCatcher delays and seize that top spot.

The global recession made Australia a haven of stability as dreadful turbulence dropped global deliveries of singles from 2,755 in 2007 to 965 in 2009. Brighter days await, but realistic goals are well below the global peak in 1978 when 17,032 piston-powered airplanes were built in the U.S. alone.

“As far back as far as 1979 I’ve been traveling to Australia to sell Cessnas,” recalls John Doman, vice president of worldwide propeller aircraft sales for Cessna. Fond memories of 200 Cessnas shipped yearly from Wichita, Kansas to Rex Aviation in Bankstown, New South Wales are distant dreams indeed.

Without another surge of WWII pilots or a genesis of general aviation in untapped regions of Asia and the Middle East, modest goals are the only realistic ones. “We’re not looking at the Terrafugia,” states Doman, when asked if acquisition of the flying car manufacturer might spark 20,000 deliveries a year. “No, we’re not. I can state that with certainty.”

If or when sales do rise job security won’t be a sure thing, notes Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University. “What we do see is temporary jobs being available for them in this period,” he predicts. It’s going to be in 2011 before we start to have a rise,” he predicts. “We forecasted a month ago that contraction in the manufacturing sector still can continue in the first and second quarter of this year.” Recent layoffs have been smaller, he adds. “We’re really getting to that bottom of the aviation contraction in the cycle.”

Former employees have not fled the world’s aviation manufacturing hub of Wichita. “Opportunity with their skill set is not available elsewhere,” Hill says.

Being the biggest meant Cessna was hit hardest. Half of its 16,000 workers were let go, including many of Doman’s sales staff. “They’ve had to make their own way, but most people who are attracted to aviation have it in their blood. They love this business even though it’s cyclical and very challenging,” he says, adding that he’d be surprised if they turned down an offer to return. “We’ve made no such moves at this time. We’re still waiting to see that the economic indicators for recovery stay in place so we can sell more airplanes.”

Cessna’s dealer network remains intact and none of the authorized dealers for Cirrus Aircraft have failed either, says Ian Bentley, vice president of international sales. But their workforce of 500 is also less than half of its peak 18 months ago. “We have plant capacity for 12-16 per week. We’re currently building at less than half that rate,” says Bentley, referring to SR-22 and SR-20 production. The plan is to increase production throughout the year, eventually recalling some of the former employees who remain in Duluth, Minnesota. “Some are and some aren’t. We can flex upwards with current labor by probably two airplanes a week and obviously that’s a good buffer. The direct labor, as we call it, would be pretty much all we need to increase to accelerate production rates.”

The priority now is to increase the order backlog, which is not a figure they share,and to make sure the business is stable. “Not by pushing airplanes out into the marketplace but by making sure that the market demands everything we build.”

First quarter orders are double Q1 2009 orders and deliveries are up 30 percent. “This is where cautious optimism comes in. We certainly made a half decent start. In some places we’ve received orders this year that we didn’t receive any from the whole of last year. That’s countries as far apart as India, Japan and the Adriatic area, slovienia.” The most vibrant market, he mentions, remains Australia. “Australia was the only place where we saw increased business in 2009 over 2008,” Bentley says.

When the rest of the world catches up a pitched battle for dominance of the high-performance piston market can restart between the SR-22 and Cessna 400 Corvalis. “We were a little concerned when Cessna first got involved,” admits Bentley, recalling Cessna’s December 2007 purchase of bankrupt Columbia Aircraft. Just as Cessna prepared to invest its resources and experts behind that airframe to knock Cirrus out of the top spot, the recession hit. “I wonder if we can blame it on that,” jokes Bentley.

Doman sees that contest warming up already. “We’re now seeing increased interest in that airplane,” he says.

We’re not out of the woods yet, admits Ron Gunnarson, director of marketing for Hawker Beechcraft, “But indications are that utilization is up. People are using their aircraft more and that means we’re headed in the right direction.” Like Australia, the Pacific rim has held strong with orders for jets but not pistons. “That’s more typical of a larger aircraft emerging market, upstream of the single engine pistons,” explains Gunnarson.

“The most vibrant market, he mentions, remains Australia. “Australia was the only place where we saw increased business in 2009 over 2008,” Cirrus’s Bentley says.”

Globally, he adds that Hawker Beechcraft has managed to claim more market share in piston sales as deliveries everywhere fall. “A downturn in the market really starts to show the value of airplanes – which one holds up better than others. Like anything that holds up well in a downturn, an airplane will usually rebound as well in the upturn,” he says.

Piper hopes its proposed training center in Brunei will lead to a piston boom in that region. It’s Brunei’s money that bought Piper last year, with Imprimus of Singapore making the investment as new owner.

PiperSport leaps SkyCatcher

Employment in Piper’s Vero Beach, Florida facility is now above 800. It’s not the 1,200 people working before the recession but it includes 240 workers hired back from recessionary lows. “We will produce and deliver 75 percent more aircraft this year than we did last year,” predicts spokesperson Mark Miller. Fifteen perfect of the 90 Pipers sold last year were trainers, says Miller, “This year 50 percent will be trainers.” PiperSport is the reason for that leap, including sales to the new academy.

A surprise January entry into the LSA sector suddenly has Piper on track to dominate. As of late April there were 15 orders, which Miller expects to multiply once the distribution network is operating in June.

Light Aircraft Manufacturing Association President Dan Johnson thinks Piper was smart to partner with Czech Sport Aircraft as the exclusive dealer for the SportCruiser, rebranded as PiperSport, and to absorb previous SportCruiser dealers rather than starting over.
“Piper made a series of small decisions that, for example, Cessna could have done,” Johnson says, They chose to develop their own at significant cost and, as we’ve seen, notable delay.”

The 162 SkyCatcher was, and still is, the long-awaited successor to Cessna 152. Problems with spin control extended development and fixing it still contributes to production delays at Shenyang Aircraft in China, meaning more than 100 customers planning to take delivery this year will wait until 2011. Even buyers who weren’t critical of outsourcing production to China are frustrated.

Cessna has stopped predicting delivery dates, but remains confident that the SkyCatcher’s $112,500 price and new features of their Learn to Fly program will lure new pilots to aviation.

“We think that will be a game changing event and go a long way to the number of student starts,” says Doman, “With more pilots we hope to sell more planes from our entire product line.”

As of April 29 SkyCatcher orders totaled 1,026, though that tally changes daily. The first production model was delivered to Rose Pelton, wife of Cessna CEO Jack Pelton. The second is a prize in a Sporty’s Pilot Center sweepstakes, and the next two go to the Experimental Aircraft Association. The fifth SkyCatcher is for a Cessna employee who intends to lease it to a Wichita operator for private training.

Leasbacks will be common, suggests Doman, but for now private training academies have placed few orders. The first focus is on Cessna Pilot Centers and Doman says his sales team is waiting for deliveries to bring the backlog down before pushing sales. So far the SkyCatcher has sold itself.

The LSA sector remains eager for Cessna to lend its 82 years of experience to boost confidence, which Johnson says is hanging on.
“It’s been decidedly awful. 2009 was bad, but 2010, the first three months of the year, were even worse,” he says. “There’s no bravado, or go-getting attitude when things are hot and sparking the way they should. It also has had an effect on the number of new models we’ve been seeing . We were seeing two a month for years. Now we haven’t had any brand new ones in three months.”

Sales at Sun n’ Fun in April, a general aviation show in Florida, brought new optimism. “PiperSport had seven sales, then Aerion with six Lightening sales, then a good handful of others with three or four sales,” Johnson says, adding that a sale at a show usually means another sale soon afterward.

Bankruptcies are uncommon, Johnson notes, with only three failures out of 74 manufacturers (including weight shift, powered parachute and gyros). “Most of them were business practice problems. but three or four losses out of 74 is almost statistically irrelevant,” he explains. Niche products like seaplanes do well, but it’s hardest on mid-sized manufacturers. “They want to be big players but couldn’t quite reach critical mass that I think may fall out,” predicts Johnson.

“The good news is, Randy Babbitt, the head of the FAA these days, echoed his comments from AirVenture, saying the manufacturing community, the LSA producers, are doing what they are expected to do. the safety record remains good. he gave the entire LSA industry very good points.” The revolutionary reliance on industry standards of ASTM International rather than government certification could mean a lot for heavier sectors. “If this experiment in LSA works, perhaps the next Cessna 172 would not have a type certificate. Perhaps it would use the next ASTM standard.”

Twelve nations that have adopted the LSA category and thirty more are considering adoption. Proposals in Europe take a different path, one closer to normal certification. The majority of LSA distributed worldwide are built in Europe but flown there as microlights. If the European Union accepts the European Aviation Safety Agency’s idea for a European Light Aircraft 1 category, manufacturers say they’ll be forced to pay more than 100,000 Euros each year to qualify. They are bypassing EASA to directly lobby the European Union to reject ELA and adopt LSA instead. Jan Fridrich is leading that charge as secretary general of LAMA-EU, which formed in April at AERO Friedrichshafen. “We had 31 manufacturers of light aircraft plus two manufacturers associations: U.N.I.C.A from Italy and AVSL from the Czech Republic,” Fridrich says. He believes at last half of light manufacturers in Europe could not survive the ELA proposal.

Jens Henning, vice president of operations for the General Aviation Manufacturers Association, remains positive on LSA potential. “It is the new entry point,” he says, but “It hasn’t reached maturity. They’re all trying to get a piece of a pie that’s close to 1,000 airplanes worldwide.”

LSA “is the new entry point.” But, “It hasn’t reached maturity. They’re all trying to get a piece of a pie that’s close to 1000 airplanes worldwide.”

Flight schools haven’t fully embraced the sector, and Henning hopes they will soon to replenish dwindling pilot numbers. In 2009 the US had 72,280 student pilots, compared to 97,359 ten years earlier. Popularity of aviation as a futuristic adventure has lost ground to high technology, he laments, “If you couple that with an aging pilot population and retirement of people who learned to fly during the boom years…”

Used market

Airplanes age well and Gunnarson of Hawker Beechcraft finds himself competing against aircraft he already sold. He can’t exactly criticize its dependability to make the sale. “Whether it be avionics or engines or performance, there are also the warranties that come with new aircraft that are attractive to steer people away from the used airplanes,” he suggests, “There are often tax purposes, whether business or depreciation, that are economic triggers that can steer people toward buying a new aircraft as well.”

It’s a buyers market. “There’s been pricing pressure across all aircraft types right now, as there is with every commodity. We’re actually holding up fairlry well with that,” he asserts.

Haggling on price and options is harder these days with Cirrus Aircraft. “Overall we aren’t discounting,” says Bentley. “While we could sell rather more if we were to come up with big discounts, our priorities are to make sure the business is sound and stable.” Also, “If you sell an airplane at a $60,000 or $70,000 discount, the guy who bought one at list price is now out that same amount on the used market.”

The recession is reshaping production and will alter labor relations, predicts Hill from Wichita State University. Workers can return immediately, but “normal fulltime positions, will be different. we’re going to be looking at much more temporary and contractual workers ad this starts to recover,” he says.

“It could be very beneficial for the aviation sector because they’re going to have much more fluidity as the markets and the business cycles go up and down.”

Productivity will improve with fewer employees, Hill expects, thanks to machinery investments. “There are already signs of that idea moving forward. That’s one of the first sings of recovery. All of a sudden there’s more demand for high end manufacturing equipment. A lot of companies are buying up new technologies to replace the labor needs,” he says. “It’s always during contraction periods. That’s the most optimum time for companies to do that substitution.”