C162 Skycatcher not such a good deal any more

Talk about airplanes! At last count, there are 39 (and growing) FAA certificated S-LSA (special light sport aircraft). These are factory-built ready to fly airplanes. If you can't afford a factory-built LSA, consider buying an E-LSA kit (experimental LSA - up to 99% complete).

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theoarno
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Post by theoarno »

I think this goes to show that just because you build something CHEAPLY in CHINA it doesn't mean it will be inexpensive!!
Thank you Cessna for putting american workers out of buisness for more money than it would have cost to buy an American made product.
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Post by Jack Tyler »

To briefly move from the esoteric back to the practical side of the discussion - the affordability of LSA's and how competitively priced the Skycatcher is (not) - let's take note of the fact that the Euro dropped below $1.30 today. A very small piece of good news for importers of Eurozone-built LSA's tho' how much of a continued drop in the Euro will be reflected in the pricing of LSA's remains to be seen. Importers/distributors/retailers of LSA's are probably far away from turning a profit on their entry into this market.

Paul, you disappeared on us for a while - good to see you back!

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Post by dstclair »

the affordability of LSA's and how competitively priced the Skycatcher is (not) - let's take note of the fact that the Euro dropped below $1.30 today. A very small piece of good news for importers of Eurozone-built LSA's tho' how much of a continued drop in the Euro will be reflected in the pricing of LSA's remains to be seen. Importers/distributors/retailers of LSA's are probably far away from turning a profit on their entry into this market.
Unfortunately, I think you're right in that this recent drop may not have much effect on the price of new European imports. The exchange rate was 1.27 when I took the plunge. At the time, CTSW, Sting, Remos were in the $120k range and Evektor was over $130k. New models of these now include as standard those things that used to be options.

Perhaps pipistrel will show that more basic models have a market as well which could drive prices down.

My guess, and that is all it is, is that it'll take a drop to 1.1 before US prices would appreciably drop.
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Post by drseti »

Thread edited to remove off-topic posts.
The opinions posted are those of one CFI, and do not necessarily represent the FAA or its lawyers.
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Post by drseti »

Much as the SkyCatcher price increase may disappoint, it's a better turn of events than the alternative. Cessna could well have abandoned the product, as Piper did the PiperSport (and, more recently, the PiperJet).

My concern is more that a whole new generation of MBAs may take this as an object lesson in how to generate development capital. You need only low-ball the price of a new product, take in a thousand deposits of $5000 each, and have the use of $5 million, interest free, for four years. Even if everyone who bought a delivery position wants that deposit back when you announce a price increase, you're still way ahead of the game.
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Post by designrs »

drseti wrote:take in a thousand deposits of $5000 each, and have the use of $5 million, interest free, for four years. Even if everyone who bought a delivery position wants that deposit back when you announce a price increase, you're still way ahead of the game.
There should be consumer and/or contractual protection against such practice! Some sort of middle ground to limit price increases.
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Post by designrs »

designrs wrote:There should be consumer and/or contractual protection against such practice! Some sort of middle ground to limit price increases.
... something like if the price increase is greater than the cost of living increase or (x%) per year, the buyer has the right to refuse the new price, and deposit will be refunded WITH INTEREST (at fair but slightly elevated interest rate).
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There are many different kinds of deposits...

Post by Jack Tyler »

It all depends on how the manufacturer chooses to write the purchase agreement (which is the vehicle by which the deposit and its conditions are defined). A good example is what happened with the U.S. boat building industry (a different but also recreational capital good purchased with discretionary income) in the 1970's, prior to the first price hikes by the predominantly Middle Eastern oil producers. There were backlogs of orders placed with many boat builders, mostly located in California and in the NE states such as Rhode Island. In some cases, the deposit was handled just as described above: it went into an interest bearing account, the interest was based on some legitimate baseline (tho' at a rate a bit lower than what a CD might pay), and the collected deposits were not used to fund the manufacturing activity. However, some builders were essentially operating a Ponzi scheme, since the cost of capital (to expand production or insure a steady cash flow to purchase materials) was driving up their price in the market place. Westsail, based in Costa Mesa, CA, was the most notorious of these - building a well-respected product, but using in part funds from Customer B to build Customer A's boat. (The owners of the business BTW were never prosecuted and potential buyers ended up losing both deposits and progress payments when the company failed. We might consider this a small Morality Tale about the importance of some govt. oversight and also accounting standards upon which some legal recourse is based).

So the potential Skycatcher buyer is in the same position as any buyer of any manufactured product: s/he faces not just the choice of this specific LSA and how it is equipped vs. what it costs, but also the conditions under which it is sold. (Think for a moment about your experiences buying new cars...). For buyers who didn't like the deposit arrangements, they were free to opt for another LSA choice. If they didn't like the wait period, they could purchase an LSA that was currently available. However, we can't expect a manufacturer to face an unknown future economy while building a brand new product (price of goods, new labor contract conditions, potential add'l govt. regulation, offshore manufacturing uncertainties, Acts of God - after all, we are talking about Kansas) while insulating the buyer from all those variables by offering a fixed price or fixed pricing schedule for an extended period of time.

Paul's point is (still) worth considering: Textron will continue to expect Cessna to rationalize its product line. If Skycatchers don't earn a reasonable profit and ROI, it doesn't need to be built. And for those of us who see a direct link between the long-term viability of the Sport Pilot license and the widely distributed availability of SP training and LSA training a/c, Cessna staying in the game is of benefit to everyone in this industry. My fingers too are crossed...
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Post by rsteele »

Certainly the contract is the vehicle that controls what the final price of the 162 is allowed to be. I do lament the fact the everyone in America is either expected to be a lawyer or to employ one just about every day. (Think of the number of time you have to agree to a TOS on the web). I am curious about the positions of any Cessna Pilot Centers who were required to order a 162 which hasn't been delivered. Raising the prices on something that you are required to buy because of a previous business arrangement seems exceptionally onerous.

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Post by drseti »

Ron, I'm given to believe that most of the Cessna Pilot Centers had early delivery positions, so the price increase may well affect primarily individual buyers.
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Post by c162pilot »

I think a better question to ask is will customers buy the Cessna 162 at the new price point. A few might, but I think Cessna's ambition to be the market leader in the LSA space will be severely curtailed.

As for the CPC requirement, they are bound by contract to have a plane on-line that is less than 2 years old. The thought was they would all refresh their fleets with C162 SkyCatchers, perhaps now they may be more incented to buy a C172 instead.

Previously I was a staunch advocate of the C162, I flew it and liked it, but I also liked flying the Remos GX. At this new price point, I think the Flight Design CTLS and the Remos GX continue to be more attractive. With both Tecnam and Flight Design now developing credible 4 seat designs we may see the CTLS customer move up to the C4 in the same way that Cessna previously expected the C162 customer to move up to the C172. Should the Euro continue to fall then planes from Europe will only become cheaper.

From what I am hearing the cancellation rate by C162 deposit holders is much higher than Cessna expected. It may be that part of the price increase strategy was to 'flush' out the bad business that was on their books so they have a more realistic view of what will be bought in the future. However it appears they may have as they say "thrown the baby out with the bath water".
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Post by Jack Tyler »

As I suggested earlier, Ernest and the GE biz model is having its impact.

"In the past few months, Cessna has seen the departure of Mark Paolucci, senior vice president of sales; Trevor Esling, senior vice president of international sales for Europe, the Middle East and Africa; Bob Stangarone, vice president of corporate communications; Stan Younger, vice president of Cessna’s service facilities; Mick Hoveleskin, vice president of contracts; and Bill Collier, vice president of Cessna’s parts division. There have been other management changes as well.

Cessna declined to comment on the departures.

Read more here: http://www.kansas.com/2012/03/15/225607 ... rylink=cpy
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