LSA Manufacturers are missing the boat

[BrianL99]

As the FAA action on Class III Medicals becomes imminent, there's more noise about the LSA market and the effect the changes may have on the LSA market.

Just my opinion, but the LSA manufacturers and associations have really missed the mark, when it comes to marketing.

Yes, the ability to fly one without a Medical is a benefit, but in my opinion, far from the whole story. I fly an LSA because the cost of maintenance and upgrading is a fraction of what it would be for a Part 23 aircraft. I could get a medical tomorrow, but I have no need for one ... I have zero interest in owning or flying a Part 23 airplane.

Perhaps the FAA changes (if it happens), will get the LSA industry off its butt and they'll start marketing the benefits of LSA ownership. If they don't, the new LSA business in the USA will suffer.

[Mark Gregor]

Brian,

I am always happy to hear another pilots opinion. I welcome yours and others opinions to what I say below.

In my experience marketing LSA is a not what you might expect. When we announced the P92 Light at $69,999
for a brand new aircraft interest was low. We heard over and over the LSA price was too high yet when we announce an aircraft at a low price we had few buyers.
We consistently see most interest in the expensive models loaded with options. The people who can and will actually buy a new aircraft want top of the line. Tecnam had a major sales increase in this country last year. A big part of it was focusing on high end models. Our new factory presence in the country was also a part of it.

We are always happy to sell any of our models throughout the price range but its clear which models are most likely to sell.

Now to your point about the operating cost. Surely LSAs have lower operating cost but it does not seem to be a big deal to the pilot purchasing a new aircraft. I expect it will be more important to the second buyer. Rotax service is a regular concern for new buyers.

I did a presentation at the sebring expo a couple years ago about how you could own a new Tecnam for the same or less cost as a $45,000 cessna when you actually considered all the operating cost. I got mixed responses to it. I don't think anyone disagreed but still it was not what made people decide to purchase.

The uncertainty of what will come of the third class medical is a concern for many. Myself and all at Tecnam believe that what ever happens to the third class should not be an issue to a Tecnam buyer. Tecnam aircraft were not designed and built around the compromise of the 1320 weight restriction. Our aircraft are sold in other countries at much higher gross weights without changes to the airframe. I tell potential customers that Tecnams are high quality two seat aircraft period. What ever happens to LSA is not going to diminish the market for a high quality two seat aircraft. For example if a private pilot wanted to purchase one of our aircraft with the 914 engine installed and add constant speed prop they would have a 150 knot aircraft on 5 gallons of fuel per hour. There will always be a market for an aircraft like that!

Mark Gregor
Tecnam US Marketing Manager
Mankato, Minnesota
507-327-9465

[BrianL99]

Interesting response Mark.

You might possibly be right, I never considered a new LSA. That said, what's the competition in the new LSA business? 5-8 year old Cirrus or Diamond? 10 year old Bonanzas? Seems to me, maintenance would be a issue, no?

If there was one new LSA I'd consider, it would be that loaded up Gold/Taupe Astore that was at Daytona ... what a gorgeous airplane.

Tecnam was actually my first choice before I bought my Sting, but I didn't have much luck buying a used one. If Eli hadn't pissed me off so often, I probably would have eventually bought one.

[rezaf_2000]

In my experience marketing LSA is a not what you might expect. When we announced the P92 Light at $69,999
for a brand new aircraft interest was low. We heard over and over the LSA price was too high yet when we announce an aircraft at a low price we had few buyers.
We consistently see most interest in the expensive models loaded with options. The people who can and will actually buy a new aircraft want top of the line. Tecnam had a major sales increase in this country last year. A big part of it was focusing on high end models. Our new factory presence in the country was also a part of it.

Mark, thanks for sharing your view of the market from a manufacturers point of view. But here's where the problem is IMHO: The prices of new LSAs are in a bracket that a very small percentage of the people can afford (the 1%?). For them, either the price isn't that important, or the percentage difference of the models is small enough (less than 25%) that picking the less expensive base model would hurt their resale value.

Now, if a manufacturer could introduce a quality fixed wing LSA (not an ultralight style contraption, but something like your P92, Evektors, Allegros, etc. ) in the $40K~$50K, now that would enter the territory of a much much larger percentage of people, the middle class.

Automobile manufacturers can easily hit that mark, and have been doing that for a half a century. With a $25K purchase price, one can expect a very competent family size sedan car. At $35K price point, an average buyer can expect all the possible options in a Chevy, Ford or Toyota. At $50K, one would already expect a luxury or a sport car. So, it can be done and has been done for a long time. I would like to dare all the LSA manufacturers (in this case Tecnam) to try to build and sell a no-compromise LSA at $35K~$45K price range with a Rotax 912 engine (therefore cheap E10 gasoline and great reliability) and decent useful load (550+ lbs) and cruise speed (100+ knots), with modest glass panels like MGL avionics EFIS/EMS (that cost less than $2K) and a modest GPS. Yes, you might compromise on the profit margin, but you will recapture the profit in the numbers.

[SportPilot]

.......

[rezaf_2000]

If you look at the P&L's of LSA manufactures, you will see it can't be done. Airplanes are not cars.

Why? It was said that the major reason airplanes cost skyrocketed in the past 3 decades was due to the part 23 certification costs, up to tens of millions of dollars. The ASTM certification was supposed to solve this issue, and from what I've heard, it has. Supposedly ASTM certification is a hundred or two hundred thousand dollars. Certainly less than 25 million dollars for part 23. So, again, why not?

[Merlinspop]

In my experience marketing LSA is a not what you might expect. When we announced the P92 Light at $69,999
for a brand new aircraft interest was low. We heard over and over the LSA price was too high yet when we announce an aircraft at a low price we had few buyers.

I think Legend's experience with the stripped down cub they offered a few years back parallels yours. After all, who would want a Cub with just a few round gauges and minimal communication capability?

[Jack Tyler]

Mark, thank you for offering a clear view of the actual LSA marketplace rather than the wishful one that is so inviting for folks to imagine.

'Challenging a manufacturer' to build to a lower price is in essence challenging an entire supply chain. And each of these suppliers have their own cost realities which the LSA manufacturer has to live with. Economies of numbers have limited impact because sales volumes are so very low and because the manufacturing process isn't vertically integrated. (Imagine all the individual vendors who are paying employees and the light bill so they can each contribute a very small piece to the finished LSA product). Just a glance at the Rotax price list paints a clear picture - http://www.lockwood.aero/c-1-rotax-airc ... gines.aspx If an engine and its accessories represents ~25% of a S-LSA, how does one produce a $25K-$50K aircraft?

Well, the answer could lie near the bottom of that price sheet with a Rotax 65. Or with the price of a Jabiru 2200, which X-Air uses to produce a $60K S-LSA. Or with Slipstream offering the Rotax 65 and asking you to finish construction of a $30K-$40K Genesis. IOW manufacturers can build down to a price while offering less capability - and a meaningful number of these small LSA manufacturers do exist and play at this end of the market - or the manufacturer can compete for the more affluent buyer by manufacturing more performance capability, adding the marketing and support costs that such a buyer also expects, and requiring the larger ROI as a result.

For me Mark's main message is that there is no free lunch, no matter how hungry one is. The entire LSA industry and its collective pricing schedule can't be wrong. One can buy less performance, one can seek more performance while mitigating cost by self-building, or one can buy what someone else built.

[deltafox]

“We know we’re not the cheapest option in the market, but we make up for that by providing our clients with once in a lifetime experiences and providing them with the best guides and programs," says Mike Brcic. He’s very aware that they’re not the lowest-priced option in their space but also understands that his customers are ready to pay for an amazing experience and because of that, his company has grown aggressively for the past few years."

Reference: http://www.entrepreneur.com/article/242322

[MrMorden]

If you look at the P&L's of LSA manufactures, you will see it can't be done. Airplanes are not cars.

Why? It was said that the major reason airplanes cost skyrocketed in the past 3 decades was due to the part 23 certification costs, up to tens of millions of dollars. The ASTM certification was supposed to solve this issue, and from what I've heard, it has. Supposedly ASTM certification is a hundred or two hundred thousand dollars. Certainly less than 25 million dollars for part 23. So, again, why not?

Because automobiles are produced on assembly lines by the millions, bringing in economies of scale. Aircraft are produced by the tens or hundreds, and are essentially each hand-made.

You can't justify setting up an automated $100 million+ assembly line to build eighty planes a year.

[Flocker]

We consistently see most interest in the expensive models loaded with options. The people who can and will actually buy a new aircraft want top of the line. Tecnam had a major sales increase in this country last year.

How big of an increase are we talking about? How many of the "expensive" units did Tecnam sell?

[Flocker]

I did a presentation at the sebring expo a couple years ago about how you could own a new Tecnam for the same or less cost as a $45,000 cessna when you actually considered all the operating cost. I got mixed responses to it. I don't think anyone disagreed but still it was not what made people decide to purchase.

I'd be interested in hearing this presentation. Would you be willing to post the jist of it here?

[Flocker]

Tecnam aircraft were not designed and built around the compromise of the 1320 weight restriction. Our aircraft are sold in other countries at much higher gross weights without changes to the airframe.

Can you quantify "much higher gross weights?" Let's use the '08 for discussion purposes.

[zaitcev]

One has to be wilfully blind not to see that more expensive LSAs sell better than less expensive. I saw it from the year-to-year numbers easily without waiting for Mark's testimonial. If you think a $150k CTLS is too expensive, consider that $230k Carbon Cub is matching it in the market and may even overtake in 2015.

It is also easy to see how insane the requests to build an equivalent of P92 for $45k. You only need to look at manufacturers who try to push the envelope down and see how well they are doing. And we have several.

- M-squared Breeze: 2-seat S-LSA, $45k. It is a glorified Quicksilver, only with struts.

- U-Fly-It Aerolite 103: $20k. It's a signle seater, and well, an ultalight. And that's the cheapest decent ultralight you can find. That's _it_. Even if you look at, e.g. BYF, it's only a couple of thousands cheaper than Aerolite 103.

If you put together the man-hours and BOM for 2 Aerolites, you cannot possibly build a P92 with that. For one thing, the engine is 3 or 4 times as expensive.

-- Pete

[SportPilot]

.......