The effects of political wrangling on LSA

The new year is here and with it the effects of Congressional wrangling over the so-called fiscal cliff. Maybe the political leadership have found some temporary resolve, but eventually cuts appear inevitable.

Some aviation groups have gloomily predicted as much as $80 billion in GDP losses if the FAA takes an estimated $1 billion haircut … a 6% slice off of its annual budget. Even if such results of restrained government spending may be overstated, a budget cut will likely affect the Light-Sport and recreational aircraft end of the market.

The FAA employs around 50,000 people, some of whom are bound to be furloughed if a budget cut is implemented. Some may even be permanently released through a reduction in force. This means less personnel to conduct the agency’s actions. When the FAA issues directives, but lacks the resources to implement them, planned mandatory actions may flow slower than molasses in wintertime.

In the summer of 2012 the FAA issued new directives that significantly increased the chance the agency will insist on performing highly detailed audits of LSA producers, ostensibly to enhance safety. What does this mean to airframe producers and customers?

Let’s say you own a company and you’ve been working overtime for the last couple years or more on a new model you hope to bring to market. Last year you were told that new models or new companies were likely to require an FAA audit before the new aircraft could be sold to customers. The FAA forecast a pace of two audits per month. Several companies took the precaution of putting their name on the wait list for an FAA audit. Now even that languid pace may be threatened by budget cuts.

One possible outcome is that your new model — however well tested and otherwise ready — may not get an FAA audit for weeks, possibly months. If your company is overseas, add more months for the FAA to budget travel and get approval from their counterpart authorities in the other country. Can your company survive without making a sale of that new model for what could be many months?

If you get that, you can see clearly why some companies are growing anxious. They are told they must get an audit, but an audit could be a long time coming. That’s the stuff of nightmares, which makes fiscal cliff negotiations as real and present a concern as making the payroll at the end of the month. Maybe we’ll know by spring. What’s your guess?

Comments

  1. Hi Dan:

    Good observation, as always. The government seems to be in a great position where they can create a crisis that will affect others. They grown their own mission unilaterally and if they can’t fulfill their end of the bargain, the private sector suffers.

    Since you asked, I see some companies lawyering up if the logjam really happens.

  2. Hey, L.S.A.s have gotten so Expensive does not matter much , now working on Cert. was going to look at Purchase of one …

    • Hi Ray:

      Yes, _some_ LSA have loftier prices though they are still much less than a comparably equipped Part 23 model. However, several good choices are available for about $80,000. For a brand new airplane that is a reasonable value. Please check more extensively before you write off the purchase of a LSA. And, even if the prices still seem out of your range, consider partner ownership. This is a highly viable way to own any aircraft and AOPA has a partner program (free) to help. Good luck with your certificate! –Dan

    • Kent Misegades says:

      Ray, new LSAs have never been cheap, but these companies need to make a profit and will respond to demand. If this results in a $150,000, that’s what free markets do. Look though at a few recent things though – Pipistrel’s success has given them the means to develop what may be the most world’s most advanced four-seat aircraft, the Panthera, but also a low-cost LSA trainer, the Alpha. Italy’s Tecnam has become the world’s largest producer of light aircraft but also offers single and twin-engine four-seat aircraft and is working on an 11-seat commuter. But they can now afford to offer a low-cost version of their P92 Classic training plane for LSA. Van gave a great talk at Oshkosh 2011, addressing complaints that his company would not offer a factory-built LSA for $40,000. Explaining that the cost to him for the engine and avionics alone exceeded this amount, he invited anyone who thinks they can produce such an airplane, and make a profit, to give it a try. The reality of component, fabrication, labor, insurance, overhead and regulatory costs – in addition to meeting market demands – means that it will be hard to find anything much under $100,000. A Cessna 150 cost $7,000 in 1959. In the same year, the average annual income was $5,000 and the average cost of a house was $30,000. Gas was 25 cents a gallon.

  3. Kent Misegades says:

    Good article Dan, thank you for warning us. Here is though yet another reason to take certification of aircraft out of the hands of bureaucrats and put it into the private sector. In some countries, for instance Switzerland and Germany, certification of homebuilts is performed by national organization, for instance the Swiss Aero Club. I understand that early in the history of the EAA, the FAA asked the EAA to do this but it refused. I think it is time to revisit private certification and any other means to get the government out of our industry. It is pretty clear that an ASTM-based certification of LSAs, as opposed to the traditional FAA Part 23 process, has yielded far greater results.

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