As sales slow, LSA companies use pause to refine their products

Dan Johnson, president of the Light Aircraft Manufacturers Association, is an expert on Light Sport Aircraft.

The sluggish economy has slowed the pace of new model introductions. Holding steady at 109 approved Light-Sport Aircraft — every one of which arrived in the last five and a half years — more designs are still to come. In the interim, companies whose aircraft already populate the LSA marketplace are putting additional effort into refining their aircraft and processes.

Much like the residential housing market is seeing more remodeling work than new construction, LSA companies are making good use of a slower sales period to improve products, revamp production lines, upgrade engineering and documentation, and tweak other organizational tasks. When companies are building airplanes as fast as they can (as in 2006, 2007, and early 2008), these time-consuming details can be challenging to accomplish.

Aviation giants are suffering, judging from continued layoffs at major aircraft producers. The malaise also affects recreational aviation, but not as harshly. Smaller companies don’t have large overhead structures and big payrolls to meet so they can actually weather economic recessions somewhat better. Nonetheless a small number of LSA producers have been forced to close their doors and that possibility is why LAMA, the Light Aircraft Manufacturers Association, is constructing its LAMASafety.org website. In addition to directing owners and mechanics to a single location where they can find links to safety alerts for all LSA manufacturers, the website will also permanently store relevant information like Safety Bulletins, Pilot Operating Handbooks, maintenance manuals, parts catalogs, and more.

Why? Because when a company leaves the business, its website — through which safety information is commonly distributed — goes dark, possibly stranding owners of their models. The FAA asked the industry to do better at maintaining this vital information and LAMA has stepped up to the plate, thanks to donations from leading producers. I’ll have more about this pivotal development in the weeks ahead.

For more information: ByDanJohnson.com

Comments

  1. Kent Misegades says:

    Perhaps I missed something when LSA gained Congressional approval, but I do not recall promises of the mythical $30,000 airplane with all the bells and whistles of a new C172. Common sense will tell most that when you build an airplane behind a $25,000 engine (Rotax 912ULS) and equip it with a basic glass panel (what people want in 2010) you already have $40,000 worth of components before the manufacturer has added an airframe and cost of his labor plus a healthy markup for profit in order to improve his offerings, expand sales/service network, etc. Van hit the nail on the head in Oshkosh this year when he responded to someone in the audience whining that “the industry” has not yet delivered him a $30,000 airplane “as they promised” to which Van said basically “show us how to do that”. I visited Breezer in Germany in the spring and this company is doing very well producing well under 50 airplanes a year. Their modern facility and quality production (100% Made in Germany) shows that some LSA companies are highly productive and will survive even in lands with high labor costs. In the end, the cost of their craft are driven primarily by customer demand. Will some LSA makers fail? Sure, that’s the reality of a free market. But ten years ago we had zero LSA aircraft and very few new Part 23 designs. Given the explosion in new designs since then I see LSA/SP as a huge success. Free markets will drive down costs as far as reasonable, but not beyond the point where a company makes a loss. Survival of the fittest is a normal part of life, and business. No Pollyanna predictions will help a weak company survive in the end, but neither do Chicken Littles help the industry. I agree with Dan that the glass is more than half full with respect to LSA. Let’s accept the fact that some businesses will fail and move on.

  2. Thanks for your comments, Jeff. Critical reading can improve writing and reporting and I have no problem with your comments.

    However, I do not believe I called the LSA industry “healthy,” instead stating that the recession has not been as harsh to LSA providers as it appears to have been to large-scale producers. Of course, size is not the only determinant to survival. And I agree any business, large or small, requires adequate margins. But I believe I can argue that microbusinesses operate differently than large corporations.

    Yes, the prices of many LSA are higher than we wish though the large majority of that price increase is due to exchange rate valuations between the dollar and euro, a macroeconomic development beyond the control of producers. However, as my website reports recently, you CAN buy a ready-to-fly LSA for $53,000 (or even less), a value that — considering the time value of money — is actually better than we expected back in 2003-2004. You may not prefer one of those low-cost aircraft but they are available.

    As to small companies surviving the downturn, certainly you make good points, but I know of no LSA companies with $100,000 salaries to cover and they can work in very small, low-cost facilities. Do LSA providers have their challenges? Certainly, yes. Will some fail? Again, yes. But we can have a gentlemen’s wager regarding how many will survive to the end of 2011. Currently we have 72 active producers (companies still in business and able to provide aircraft). Let’s compare numbers in 15 months. By your reckoning, we should have only 36 active producers by then. I think we’ll have more.

    Meanwhile, thanks for your close read of my work and for your visit to my website. I also appreciate your kind words about my efforts to promote LSA. You’re right; I do see the glass as half full rather than half empty. But maintaining a positive attitude is very important to long-term success and I’ll bet you agree.

    Dan

  3. Jeff Magnus says:

    Dan,
    First I would like to say I appreciate all your efforts to promote LSA’s.

    I just read an article you wrote that was published in GAN and cannot believe you are telling readers that the LSA market is healthy because they are smaller companies and do not have the same overhead as the big aircraft manufactures? I rescue small business for a living and can tell you that type of thinking is absurd! All business require a reasonable margin to prosper regardless of the size of the company, it is all relative! If you truly believe a smaller company can survive longer because it has less overhead, then you probably believe tire pressure increases when you put more people in a car!

    The bottom line: A company’s ability to survive a down turn is dependant upon several factors, none of which is solely reliant on size! Regardless of the size of your company, without adequate financial resources, failure is inevitable.

    Why would you mislead your readers to believe the LSA market is healthy? The financial premise under which the LSA market was advertised has not come to pass. Do you remember that in 1997 when Cessna resumed 172 production one could purchase a new IFR certified aircraft for $112,900. Today that is the low end of the VFR LSA market! The average salary does not support 90% of the population’s ability to purchase and own an LSA!

    I object to industry promoters’ that attempt to blow blue smoke up someone’s ass when it is painfully obvious the market is struggling, at best! I don’t know who you are talking to but I have no doubt that the current 109 LSA manufactures will shrink to less than half by the end of 2011! I sincerely hope I’m wrong! Unfortunately our economy is based upon jobs and income, neither of which is headed in the right direction at this time!

    Have you looked at used LSA prices lately? That is generally a very accurate indicator of which direction the market is headed.

    Dan, I’m glad your supporting the industry, but please be honest! Please refrain from following the rest of the crowd and be responsible.

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