Current View (June 2018) of the General Aviation Market

July 4, 2018

A version of this article first appeared in the June 2018 edition of our free newsletter, to subscribe click here

This month I have been doing some work on the manned aerospace market. For those of us with an involvement in the market it is interesting to go through the numbers. There is good data available on the North American market from GAMA and the FAA as well as other online sources.

The North American Market is not predicted to experience dramatic growth over the next two decades, however there will be significant end of life replacement in the existing private and commercial aircraft fleet.

In commercial aviation the North American (N.A.) commercial aircraft expenditure is expected to grow at a CAGR of 0.6%, the Asia Pacific region commercial aircraft expenditure is expected to grow at a CAGR of 6.6% – 11 times greater than N. A., Latin America and the Caribbean a CAGR of 7.3% – 12 times greater than N.A

Global MRO Expenditure Growth 2015-2025 (Doan, 2015)

The values are indicative of the overall growth of the economies.

2016 World Economic Growth (FAA-2017, 2017)

It is reasonable to assume that the general aviation sectors will grow in line with both the general economic growth and the growth in MRO aircraft expenditure.

Comparison of Other Countries to the United States

Registered GA Aircraft per Million Population, source data from (Hu, 2015)

General aircraft ownership per population is very high in the traditional developed economies. This is the result of multiple factors: Wealth, Culture, Level of Education, Available Infrastructure, Regulations. It is reasonable to assume that over time the level of general aviation aircraft ownership in developing nations will significantly increase.

Some individual countries/regions are examined below:

India

In India between 1990 and 2015 the number of business aircraft grew from 41 to 487, a tenfold increase. Of this growth 245 aircraft were helicopters and 100 aircraft were turbo props.  (Martin Consulting, 2016). In the same report several growth rates for the India business aviation market are given, the median case is 7% CAGR. This results in an additional 857 aircraft predicted to join the business aviation fleet in India by 2025

China

In 2016 China had 2185 registered general aviation aircraft, by 2020 China plans to have 5000 registered general aviation aircraft. (Brent & Yuan, 2017).

Fixed Wing Market

Historical Data


General Aviation Sales Figures 1995 to 2017 (GAMA-2017, 2017)

The Piston Aircraft and LSA Fixed Wing Market

It should be noted that the market for piston aircraft was significantly attenuated in the financial crisis of 2008 and the number of aircraft shipped has not recovered to pre 2008 numbers. However the US$ billing amount in the piston aircraft segment has recovered to 76% of the total billing amount.

Piston Aircraft Billings US$ 1994-2017 (GAMA-2017, 2017)

It should be noted that the average unit price for a piston engine aircraft has been rising at a near constant rate of $20,000 per year over the range of the available data – from around $250,000 per unit to $650,000 per unit between 1994 and 2017.

To take some individual data points, 2 US ‘recently’ (within the last 20 years) certified 4 seat piston aircraft:

Cirrus SR22 certified in 2000, initial price $276,600, Current price: $540,000

Based on the US Bureau of Labor Statistics the cumulative rate of inflation between 2001 and 2018 would result in a price increase from $276,600 to $395,780.

The price of a basic Cirrus SR22 has increased by $144,000 over the rate of inflation

Diamond DA40 certified in 2000, initial price $179,900, Current price: $459,800

Based on the US Bureau of Labor Statistics the cumulative rate of inflation between 2001 and 2018 would result in a price increase from $179,900 to $254,507.

The price of a basic Diamond DA40 has increased by $200,000 over the rate of inflation.

There are many reasons for the relatively large increase in real price of new general aviation aircraft over time:

  1.       The original price of the aircraft was underestimated and the initial production run for the original orders was done at little to negative profit. After the original orders were fulfilled the price was increased to create or increase profitability.
  2.       There was an increase in the cost of doing business (raw materials, labor, regulations) over and above the rate of inflation.
  3.       There was a large reduction in volume of sales and a price increase was necessary to cope with the loss of ‘economies of scale’, however the rate of price increase has remained relatively constant through the large reduction in market size in 2008.

Piston Aircraft Average Unit Price 1994-2017

Conclusion on the Piston Aircraft Market

  • The large used aircraft market, combined with higher prices for new aircraft, is largely responsible for the reduction in new piston aircraft sales.
  • The increase in the price of new piston aircraft is partially responsible for the interest in used aircraft.
  • To compete in the piston aircraft market the aircraft manufacturer must present a value proposition to the purchaser better than the current aircraft in the market.

The Turbo-Prop Aircraft General Aviation Fixed Wing Market

In contrast to the piston engine market the general aviation turboprop market was minimally affected by the 2008 financial crisis.

Turboprop Billings 1994-2017 (GAMA-2017, 2017)

And the overall billing value for the Turboprop market shows gradual ‘table’ growth over the period for which data exists.

The turboprop unit price shows a slight downward trend over time. The unit price is still between US$2,500,000 and US$3,000,000.

Turboprop Aircraft Average Unit Price 1994-2017 (GAMA-2017, 2017)

In comparison to the piston aircraft market, steady growth over time with a small downward trend in unit price is to be expected in a utilitarian product based on mature technology. It also shows that the original (pre 2008) pricing for turboprop aircraft was likely more realistic compared to piston aircraft.

Projected Data

The FAA predicts a reduction in the US general aviation fleet size. This does not mean that there is not a growing market for new aircraft. The average age of the general aviation fleet in the US is 46 years for single engine piston aircraft and 43 years for twin engine piston aircraft, for turboprop aircraft it is 28 years (GAMA-2017, 2017). Over the next 20 years a significant proportion of these aircraft will have to be replaced.

General Aviation Fleet Size Prediction 2007-2037 (FAA-2017, 2017)

Note that the value of the Light Sport Aviation (LSA) segment is projected to grow over the next 20 years as is the fixed wing turbine and rotorcraft segments.

From the available data the North American general aviation market appears to be saturated and sales are mostly from fleet replacement. In contrast the rest of the world (excluding Europe and Australia) are likely to experience a growth in general aviation at least in line with their predicted economic growth – and that could be very good news.

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