Back to basics with the 3Rs?

New airplanes cost too much. Used aircraft prices have slumped. The fleet is aging. There’s a lack of new thinking in the industry. The pilot population is dropping. I think you’ve heard all this before. Now, an old friend has an idea. But I think I’ve heard it before.

The idea is the large-scale “remanufacture” of select used GA aircraft – new engines, interiors, avionics, wiring, etc. Retail prices would fall between new and conventional used aircraft at about 50%-60% of new. It’s hoped that such offerings could reposition the GA airplane on the price/value scale, increasing perceived value while reducing the price of “new” aircraft. In short, this would create a better “value proposition” and would inject fresh “new” inventory into the dated owner-flown, charter and flight school fleet – thus stimulating demand.

A couple of decades after leaving the GA industry, my friend Tom Bliss closed his Phoenix ad agency and is back in GA, this time mostly in publishing. An idea man and too talented for the industry’s hide-bound ways, he took off in the 1980s to do advertising and marketing for major corporate clients. But still an aviation guy, he flies a C-210 which, like the fleet average, is some 30 years old. That gave him an idea.

Bliss convened seminars at NBAA and AOPA Summit last year to noodle his “3Rs” idea to “Rebuild, Restore, Re-equip” the GA fleet. This year, he’ll continue exploring the concept. He has already interested some 42 businesses to get their input and ideas, and perhaps get some of them in “on the ground floor.” He notes there are a lot of good re-builders out there — but not “an industry.”

There are obstacles. For starters, some OEMs object to the term “remanufactured” since it has a specific meaning in the engine business. I raised the issue of products liability with Tom. Does some umbrella business or organization really want to face the liability for all that re-work by a collection of players? And Tom acknowledged the dilemma of how such “new” airplanes would be valued by the insurance and financial industries. That’s been a problem before.

His goal is to create a new class of aircraft with a new brand — the “3Rs” airplane that’s neither used or new but a better choice than either. In fact, he foresees a product with “a very high level of new content.”

In part, his challenge involves the scope and costs of that comprehensive new content. And on liability, he seems to be trending away from starting a business and towards establishing an umbrella branding and marketing organization — a combination Underwriters Laboratories (UL) and Milk Marketing Board.

Such an organization would issue standards and guidelines for various companies fabricating and installing a standard set of upgrades (for each select model) and market the 3Rs concept to establish the brand.

Additionally, there would be an audit function to assure that participating re-builders are adhering to technical and quality standards. The result: A “Good Housekeeping” seal of approval and market acceptability, he predicts.

Whether this would avoid liability concerns is open to debate. Bliss feels that such standards and auditing could be parlayed into acceptability among insurers and aircraft financing people. While OEMs have been cool to his idea, he says, the avionics and engine manufacturers are warm. Of course! They see new after-market sales.

What airplanes would be candidates for this treatment? Targets would be the most-popular models, with no damage history and parts support still available from OEMs or the aftermarket. Bliss says Grumman-Americans and Navions would be out — no parts availability — as would tube-and-fabric airplanes. (However, a new project to reman Navions recently surfaced elsewhere.)

But we’re not talking just singles here. Bliss imagines a range of 10 types from 172s to King Airs, C-425s and C-441s, if not some older Citations. His goal is to market 500-600 remanufactured aircraft a year in categories from turboprop to trainer to cross-country-capable rental plane.

Independent of “3Rs,” it’s already happening at the high end. And former Cessna CEO Jack Pelton just announced a new program to reman and upgrade old Cessna 421s into a $2.5 million turboprop twin like the C-425 Conquest. Nextant Aerospace has been re-doing Beechjet 400s as FJ-33-powered 400XTs.

Most interesting, I think, are prospects for piston singles. Among concerns from the NBAA seminar last fall: Corrosion, damage from previous paint stripping, appraisal value, insurance, financing. (Bliss hopes for “standards to impress and change minds” in these areas.) I still feel the hot breath of liability. Bliss thinks a 501c3 organization or trade association with few assets could be protected from liability by employing “voluntary standards.” Presumably, a coalition of manufacturers, shops and suppliers would work together and pay fees to support the marketing, standards-making and auditing of the umbrella organization.

And marketability? The effort foresees these airplanes as a new class of product. Bliss would promote their acceptance with a strong advertising program and warranties. He would boost the “value image” of such used but remanufactured airplanes.

I think some of this has merit, especially the idea of standardization for quality control and market appeal — in other words, Bliss’ “consistent price and value.” As NBAA’s seminar audience noted, there’s so much variability in re-done airplanes today that each has to be evaluated case-by-case. “3Rs” wants to fix that.

At the same time, a comprehensive re-do (including aged wiring, often overlooked) would trump the average used airplane, even the good ones. And the associated re-manufacturers could enjoy shared volume discounts on parts and components to help control production costs.

This is a tall concept and a tall order. I can’t shake the feeling that it came up before in the 1980s when (as now) the economy faltered, OEMs cut production and prices soared.

The idea of shifting the price/value calculation is a superb one. How one gets there — and gets by potent pitfalls of liability, valuation and financing — is problematic.

I’m not sure those trying to sell a used aircraft today should worry yet. Besides, if “3Rs” does become reality, there will be hot new demand for 500-600 additional used airframes a year.

© 2013 Drew Steketee All Rights Reserved

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