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7 3000 2500 Total incl VLJs starting in 2007 Gross US Shipments 2000 1500 Other Piston 1000 High-End Piston 500 Turboprop Light Jet 0 2000 2001 2002 2003 2004 2005 2006 2007 2008est Source: GRA analysis of GAMA General Aviation Airplane Shipment Reports, various years. Figure 3. Breakout of gross U.S. shipments of small GA aircraft. change from 2007 (largely due to low interest rates). Looking the high-end piston segment, which saw the introduction and further ahead, the model projects a significant decline in ship- growth of the Cirrus SR-22. In 2000, this segment accounted ments in 2009, substantial growth by 201112, and then mod- for about 10% of shipments and grew to about 34% by 2006. est increases through the end of the forecast period in 2017. It is noteworthy that from 2000 to 2007, sales in the high-end segment quadrupled, but the overall relevant market grew by Market Segmentation Analysis only about 18% (about the same percentage as overall real GDP). This suggests that even with the introduction of highly As VLJ production develops over the coming years, it is successful new aircraft models, total growth in the small GA expected that shipments will be subject to these same eco- market is still driven primarily by changes in the overall econ- nomic fluctuations. For more understanding, it is useful to omy. The other salient feature of Figure 3 is that both turbo- disaggregate the historical data for the existing market seg- prop and light jet shipments have remained fairly constant ments. Unfortunately, the export and import data are not over the past several years. available for individual makes and models; instead, histori- However, there are indications that the economic slow- cal changes in the market are assessed based on gross U.S. down in 2008 has affected high-end piston shipments fairly shipments (ignoring exports and imports), but breaking out the piston segment into two sub-groups--"high-end" and dramatically. Through the second quarter of 2008, high-end "other"--as shown in Figure 3.5 The estimates for 2008 as- piston shipments dropped by 26% relative to the same period sume that the production rates for each segment observed in 2007 and overall share dropped to about 27%. It is inter- in the first half of the year relative to the first half of 2007 esting to note that the turboprop and light jet sales continued remains constant through the rest of 2008. In addition, the to increase slowly in the first half of 2008, and the drop in the line total includes Eclipse and Cessna Mustang VLJ production high-end piston sales was partially offset by the early appear- starting in 2007. ance of VLJ shipments from Eclipse and Cessna. The figure shows that the overall growth in U.S. shipments From a longer-term point of view, however, it is believed over the past several years has been driven almost entirely by that VLJs will compete more closely with the turboprop and light jet segments. To see why, it is useful to understand how 5 VLJs may fit into the competitive landscape. One way to ap- The high-end piston segment is defined to include the following models: proach this is to compare aircraft characteristics that may be Cirrus SR22, Cessna/Columbia 350 and 400, Mooney M20 series, Beechcraft Baron G58, and Piper Malibu Mirage. Within this group, it important in determining how potential customers choose is the Cirrus and Cessna/Columbia aircraft that account for virtually among all available alternatives. To understand this compar- all of the growth shown in Figure 3. ison, data were assembled on average current selling prices
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8 Table 5. Comparative price and performance characteristics of existing models. Cabin Volume incl External Baggage Speed Range Type Make/Model Price ($000) (cu. ft.) (mph) (NM) Cirrus SR22 G2 460 169 180 930 Piston Cessna 400 620 169 187 1143 Beechcraft Baron G58 1,078 196 197 888 King Air 90 2,952 227 260 840 King Air 200 5,089 303 283 920 Turboprop King Air 350 6,115 351 310 1440 Piper Meridian 1,897 120 262 550 Cessna 208B Caravan 1,844 340 182 780 Cessna CJ1+ 4,528 243 381 857 Light Jet Cessna CJ2+ 6,068 311 413 1074 Beechcraft Premier I/IA 6,205 370 426 850 Note: Average prices for Cirrus SR22 and Cessna 400 prices obtained from www.controller.com; range for Baron G58 obtained from www.cessna.com and certain key performance characteristics for a representa- the regression; points above the line show aircraft priced above tive sample of existing high-end piston, turboprop, and light their expected price. From a competitive analysis standpoint, jet models, shown in Table 5. it appears that the high-end piston aircraft (which are at the To ensure consistency in the measurements, all of the data low end of the price structure) are priced below what one (with a few noted exceptions) were obtained from the same might expect based on their performance characteristics. At source (Conklin and de Decker Aircraft Cost Evaluator). the same time, all but one of the turboprops in the sample are A linear regression of price against the performance attri- priced above expectations. butes of speed, range, and cabin volume (including external One should not read too much into these interpretations storage space) was run. The actual versus predicted price results because there may be other important attributes that would shown in Figure 4 are quite interesting. help explain the relatively higher-than-expected price of turbo- The 45° line on the graph indicates an actual price equal to props (e.g., higher payload, better short-field capability, the expected price from the regression. Points below the line easier to fly than jets, etc.). Nevertheless, such an analysis can reflect aircraft that are priced below their expected price from highlight potential market opportunities by identifying gaps 8000 7000 Beechcraft Premier IA (J) King Air 350 (T) 6000 Cessna CJ2+ (J) King Air 200 (T) Actual Price ($000) 5000 Cessna CJ1+ (J) 4000 King Air 90 (T) 3000 Piper Malibu Meridian (T) 2000 208B Grand Caravan (T) Baron G58 (P) 1000 Cessna 400 (P) Cirrus SR22 (P) 0 0 1000 2000 3000 4000 5000 6000 7000 8000 Expected Price ($000) Figure 4. Expected versus actual price of small GA aircraft.