Piper's Déjà Vu
Piper opened up Sun ‘n Fun with a bang this week when it announced two new aircraft models, the Piper Pilot 100 and 100i. See the details in Kate O’Connor’s news story and video. These are essentially retools to the venerable Piper PA-28 platform, of which Piper has sold about a gazillion.
It’s also a retooled idea. Industry veterans will recall that Piper tried this very same idea in 1988 with a variant of the Warrior called the Cadet. At the time, M. Stuart Millar, a wealthy businessman who was also a World War II fighter pilot, had leveraged a buyout of the then-struggling Piper. Appalled at the sorry state of general aviation—sound familiar?—Millar’s idea was to gin up demand by slashing prices.
And boy, did he. The Piper Warrior then popular among flight schools sold for $115,000 in 1990, while the Cadet was offered for $60,000, in a VFR version—almost half the price. Piper’s price Delta on the new VFR-only Pilot 100 isn’t quite that large, but at $259,000 ($285,000 for an IFR version), it’s a huge discount over the typical nearly $400,000 glass-equipped trainer.
And at the lower prices in 1988, Piper did stimulate its sales volume—for a time. But the airplanes were being manufactured at unit losses that no amount of volume could recover and by 1991, the company filed for Chapter 11 protection. The Cadet probably wasn’t the sole cause of Piper’s demise, but it was a contributor.
So how is the Pilot 100 to be any different? Good question. In 1990, Piper had two big-ticket rainmakers to sustain it, the Malibu and Cheyenne, although the latter was always low volume. It was also still building Arrows, Archers, Dakotas, Saratogas and a couple of piston twins. Even the Cub made a brief comeback. Now it has high-margin turbines in the M500 and M600 and the piston M350, plus the usual smattering of Senecas and Seminoles. It’s axiomatic in aircraft manufacturing that the higher the price, the higher the margin. Loss leading may work in retail, but it’s a loser in aviation.
And therein lies an important difference. Piper said a “limited number” of Pilot 100s would be available in 2020. That sounds like production allocation to me, meaning only a measured portion of Piper’s limited industrial capacity will be given over to low-margin, entry-level trainers—perhaps just enough to test the marketing water and refine the production economics. With the Cadet, Piper did the reverse. It pumped the numbers up on a money-losing model and if it found ways to take cost out of the build, it obviously wasn’t enough.
In the video, Piper’s Simon Caldecott said Piper has found ways to reduce the build cost, including additive manufacturing for interior parts, technology I’ve seen cropping up elsewhere in aviation. I suspect they’re using more CNC in the factory, too, as is everyone else in the industry.
Then there’s the question of volume. In 1988, Piper tried to force it and the market uptake just wasn’t there. The market is stronger now, by degree, because of demand for professional pilots. In the Pilot 100, Piper appears to be nibbling at the margins to expand it with a price-driven offering, without swinging for the fences. But the reality is, the trainer market is just not huge. Piper said it had an order from L-3 for 240 aircraft of mixed models, representing the largest civil order in the company’s history.
But those are options over 10 years, probably representing two or three aircraft per month. That’s a better place to be than Piper was in 1990, when it was building like mad and pushing airplanes into a lukewarm market and losing on every sale.
Just because history repeats itself, doesn’t mean mistakes have to.
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