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Sunfish
10th Jul 2005, 22:44
Everyone talks about GA being in dire straits. There are routine predictions of its death at the hands of over regulation and running costs. The obvious question then is what evidence is there?

By evidence, I mean hard numbers on operating costs that can be benchmarked against other countries, especially America.

I wonder if this evidence exists already? Does a certain unmentionable organisation have any hard data?

The numbers I am thinking about include:

Fuel cost, Insurance, engine overhaul, engine or propeller replacement, maintenance charges per manhour (OK personhour), representative spare parts costs (eg new windscreen, flap, aieron, wingtip etc.) I'm sure some of you can think of more meaningful measures.

Then there are insurance, airport, registration and hangerage charges and airways and landing charges and depreciation.

From the data we should be able to determine a notional fixed cost of ownership and hourly rates based on a variety of notional annual usages for common types in pvt and commercial settings.

If we actually have (or can construct) this information, then perhaps we can answer a few questions and have an informed debate instead of just flapping our gums as usual around here.

Obvious questions to answer are:

Are costs excessive compared to international benchmarks?

Are we being gouged by anyone, if so who? How do we stop it?

Is regulation excessive and does it constitute a barrier to entry, forcing our costs up?

Sorry if this is old news, but without such data we are wasting our time complaining about anything and in addition, we cannot possibly know what we should be doing by way of strategy to fix the situation, if in fact it needs to be fixed.

I wonder if CASA would like to fund such a study? I also wonder if maybe I should try and collect the numbers myself?

Ultralights
10th Jul 2005, 23:10
i dont think comparing cost to other countries would be an accurate indication, compared to the Uk, we are cheap, compared to the US, we are expensive, a more acurate indication would be Aircraft movements, at airports over time, the number of new licence issues and endorsments and the like. i remeber the days at YSBK you had to join a que while taxiing to depart on a weekend! these days, you could pretty much camp on the runway and not worry about being hit by an aircraft!

wishtobflying
10th Jul 2005, 23:29
Read this: http://www.pprune.org/forums/showthread.php?s=&threadid=179365

"There were over 650 organisations on CASA's website when we
first started AMROBA, it was CASA list we used to get started. There were
1200 plus organisations in 1990."

That speaks volumes in itself ... if less aircraft are flying, then they don't need as many maintenance organisations.

Sunfish
10th Jul 2005, 23:54
What started me off was a suggestion over a drink yesterday that U.S. prices were a lot less than Australian prices for things like engines. It was then suggested that the difference was due to "paperwork" required in Australia. I don't have the slightest idea if this is true.

As for differences in costs, sure there are bound to be some, but the question that needs to be answered is are the differences signifigant enough to affect GA behaviour? I'm aware Europe is more expensive, but are they significantly more expensive when we take into account pay rates? As for the U.S.A. "economies of scale" don't feed into operating costs as far as I can tell, and if they do, then whats to stop Australia from sourcing product from the U.S. and cashing in?

What I want to know is if there is any single factor, or group of factors, that could account for the so called decline in GA?

Creampuff
11th Jul 2005, 01:02
Ultralights and wishtobeflying you're merely making Sunfish's point (perhaps inadvertently).

The reduction in numbers of organisations to which AMROBA refers could be caused by any number of factors, none of which necessarily means "less aircraft are flying". I suspect that there are actually more aircraft flying today in Australia than there where in 1990, but fewer of them require maintenance from the organisations which AMROBA represents. And I suspect that many of those aircraft don't operate in and out of GAAP aerodromes, their pilots preferring instead to avoid the charges.

However (and I think this is Sunfish's point) my suspicions are all well and good, but cold hard facts might be a little more useful in convincing government that GA is rooned, if so why, and if its just evolution and the market, why GA shouldn't be exposed to the same market and evolutionary forces as any other industry.

When the car and train were invented, the number of organisations that serviced horses and carts declined.

When electric and diesel trains were invented, the number of organisations that serviced steam locomotives declined.

The number of organisations that fix TVs/videos/dvds/radios is in decline, because the march of technology means that they are becoming throw away items: it's cheaper and quicker to buy a new one, rather than pay someone to fix it.

Just what do you expect the government can and should do to maintain the use of and infrastructure around 1950/60s aviation technology?

Uncommon Sense
11th Jul 2005, 01:35
Perhaps if the figures were to include RAA/Auf aircraft, many pilots who prob used to fly GA types, were included the numbers would not look so dire - most of these types do not require LAME maintenance either.

Have a look at the turnout at NATFLY at Narromine - hardly dieing at the recreational end, it is booming.

And a lot of the aircraft types now in RAA are faster and technically superior to the 50's / 60's technology mentioned above - and importantly lately, easy on the juice.

gaunty
11th Jul 2005, 01:55
Sunfish
The information you are looking for is readily available and easily obtained.

Against the US which is the nearest comparative, the only extra costs in regard to say maintenance and parts might be the difference wrought by the exchange rate, freight/ferry and relative industry payscales.

One sentinel might be that when we floated the Oz dollar in the early eighties, the exchange rate went from around $1.25 to $0.85 almost overnight.

Almost overnight Oz costs especially for the capital component went from around virtual parity, with the exchange rate differential mitigating the distance and regulatory cost issues of the time, to real world differences relative to the real value of our dollar.

E.G. exchange rate say $1.25 new 1980 Cessna USD$65,000 = AUD$52,000 plus freight/ferry C of A costs and eqipment = Oz retail circa AUD$65,000.

Post float exchange rate say $0.85 for the above = AUD$76,500 plus freight ferry costs = Oz retail circa AUD$91,500, literally overnight.

Given that by that time the fleet average age was already 10 years old and that the race to the bottom on rates had been in full swing for that long with revenue rates still set at increasingly lower than 1970 dollar (0.85) equivalents, who was going to renew the fleet.

The key to the whole issue has always been the revenue rates set by the operators.

They do not seem to have too many problems with paying $25,000 for the same type of motor car as they paid $2,300 for then, but can't seem to make the translation in aviation terms. Car rental rates reflect the same.
We could argue the "correctness" of the analogy all night long but that's how many angels dance on the head of a pin. :ok: :rolleyes"
Go check the number of 6 figure boats bobbing around in your local marina.
One might be tempted to suggest that if they are unable to take such a ridiculously simple concept on board they would not even come close to meeting the "fit and proper" requirements for the holding of an AOC.

I digress.

In essence apart from the exchange rate differences applied to the parts, fuel, freight and labour costs the operating costs differences between the US and Oz are not all that different.

If there are any regulatory and compliance cost differences (the Oz regs largely reflect the FAA regs, given the Oz operating environment is as the moon is to the earth) they are not significant given that the revenue rates charged reflect the real costs including depreciation and replacement costs.

They do not.

We have a different tax and fuel excise regime, we can't change that easily we just have to use that as an input.

The net result in any event is and it's Economics 101 you work out your costs including depreciation (against new replacement) and all of the overhead and mangement costs and then add your PROFIT margin.
If the business plan can not ultimately support that rate then you don't have a business. I suspect they might have taught you that in your MBA.:ok:
You can go rewrite the plan recheck your data and it'll either get over the line or not.
If there is some blue sky amongst the clouds, the decision to pursue it or not, is then made on the basis of the risk capital available.
Usually, the creditors, bank or the finance company are the unwitting "shareholders" or suppliers of the risk capital.


Are costs excessive compared to international benchmarks?

No and it's not the costs that are the problem it's the revenue rates charged or not as the case may be.

Are we being gouged by anyone, if so who? How do we stop it?

Gouged is an emotive term used by most operators to justify their transfer of the "profit" opportunity from the passenger to the supplier.

Is regulation excessive and does it constitute a barrier to entry, forcing our costs up?

Maybe in private ops, but not so in commercial terms.

Yes it should by definition constitute a barrier to entry.
It is the only way you can set the bar and the level playing field in acceptable standards.
It is the lack of uniform enforcement of that barrier to entry that has caused many of our problems.

Forcing up our costs?? The costs are what they are, the problem seems to be ignorance (ignore ance :uhoh: ) of the totality of them or not passing them on to the market.

Yes we should have competition in the market and yes it does stimulate the total, but lets have it at an economic level.

Despite the usual suspects, who have little or any capital involvement, bleating, reducing compliance and service provision costs is not going to save them, nor is it "killing" GA.

GA as it is currently practised (v, tr and adj) is "killing" GA.

The AUF/RAA seem to have it right in their patch for the recreational flyer.

There's a PhD in there somewhere.

Adamastor
11th Jul 2005, 01:56
Movement numbers at Bankstown in recent financial years:

99-00: 295,974
00-01: 321,036
01-02: 339,010
02-03: 337,314
03-04: 227,796
04-05: 197,520

A 42% drop over the space of the last three years is pretty dramatic (mind you at over 500 movements a day, not sure if I'd be camping out on the runways!). Of course, these figures might only be a result of training numbers dropping as the industry rebalances around a glut of unemployed pilots?

gaunty
11th Jul 2005, 02:05
Adamastor

touche mon ami
:ok:
Of course, these figures might only be a result of training numbers dropping as the industry rebalances around a glut of unemployed pilots?

Creampuff

a point (can't find the "reflex or acute" on my keyboard) as usual :cool:

AGOODREAD
11th Jul 2005, 06:44
To say that GA is dying is ridiculously simplistic. If you have the time, read the economist's views:

http://www.btre.gov.au/docs/reports/r111/btre_report111.pdf

Sport aviation is booming while hours flown in traditional type certificated CASA-registered aeroplanes has dropped as people move to lower cost aircraft for their pleasure flying. CASA GA aeroplane registrations are still growing but at a lower rate than other sport aircraft registered with RAA etc. As well, passengers have moved from charter to regional airlines, so the passenger money has moved from 'GA' to 'RPT'.

So some businesses are booming and others are not. Maybe aircraft maintenance businesses have consolidated into fewer but bigger businesses. Is not this the normal evolution of a mature market? You have to be quick on yer feet to make a buck out of aviation.

Chimbu chuckles
11th Jul 2005, 07:00
I strongly suspect insurance is cheaper here than the US...as to most of the rest of the cost increases they can be attributed to normal inflation on top of very unfavourable exchange rates....the only thing which might mitigate exchange rates to some extent would be local parts manufacture on a large scale...but then we don't have enough aircraft here for it to be very profitable so export markets would be essential and then we'd end up paying Oz$ equivelent to internation US$ prices anyway so I can't see huge savings.

An example in my aircraft maintenance over the years;

I paid $40k for a very good engine overhaul using new Millenium cylinders...similar in the US would have been USD20k but then at the time the AUD was worth USD0.50. I think in reality the job in the US is cheaper because my 'Big Mac' theory of relative currency value says in these kinds of comparisons AUD$1.00 very nearly equals US$1.00....a Big Mac costs $5.00 in each country:ok:....and 5 pounds in the UK:(

With many parts you can actually, and most people do actually, buy aftermarket at much cheaper prices...locally manufactured transparencies in Oz are just as good and lots cheaper than importing from the US...except windscreens which I couldn't get locally.

When we were planning the C Check for the Falcon Corporate jet I was fly in Singapore the savings possible by flying it to Oz were huge because we would have been paying the same hourly labour rate as a number but in OZ$ not USD...even after ferrying it was going to save 100k or some such. The rate at the time was as above...1USD=AUD2.00.

An interesting thing I have noticed is as I have slowly fixed up my Bonanza over the years...new windows, interior upgrades, new radios, GPS etc more people have wanted to fly it...and that at a higher hourly rate which has reflected higher fuel prices etc...I now get an average of about 10 hrs a month utilisation at a rate that actually covers all costs...except perhaps a little unsceduled maintenance but even then it probably averages out OK.

If/when it starts to average more than 10 hrs a month:eek: it would start to show a little profit. EDIT: Note that I mean it covers costs/hr going forward...aircraft ownership is not a good investment...it's about the dumbest thing you can do with money...like boats...but you're a long time dead and it's fun...why leave too much to your kids?

Utilisation is the single biggest factor in hourly running costs...the difference between 10 hrs a month and 20 is huge!!! One of the things that makes operating an aircraft like a C210 through a charter company lease back not very likely these days is too may aircraft doing it...you'll get an operator promising the world utilisation wise and usually average way less...maybe half sometimes...and that just tears you to pieces on the hourly rate they feel is the maximum they can pay.

These days when someone suggests putting my aircraft back in Darwin with a suggested monthly utilisation/hourly rate I just say "GAURANTEED IN WRITING?" and they quickly start umming and ahhing....if the work was there and so steady they'd buy the aircraft off you instead of wanting to rent it at a rate that hasn't been appropriate to the utilisation for 20 years.

I have said before and it is true...traditional GA is dying because boating is more fun for the average punter....swap rundown aeroclubs with nearly no-one there and no facilities for a meal/drink etc with yacht clubs equiped with great restaurants/bars and days on the water with neked wimin:E and it is obvious.

Sunfish
11th Jul 2005, 07:24
Chimbu, you haven't seen the women I go sailing with!:E

Anyway, now its a quick walk to the yacht club bar for a pre dinner libation with a few mates! It's nice living in Williamstown.

TeleMaPhone
12th Jul 2005, 01:22
Has anyone seen the stats on the number of licenced pilots?
(ref. http://www.casa.gov.au/fcl/fcl_req.htm)

Just a quick rundown;
In 2001 the number of current private pilot licences was 18425, in 2002 this dropped to 15860 - and has slowly declined from this large drop...
What could explain this - lack of interest in flying, Sept 11, aging population, not enough schools servicing smaller towns (being a bit of a country boy I think this may be a factor - my town has an aeroclub with several interested in flying, but no plane at the airport or instructors to service the area)...
Overall, the less flying the more everyone has to charge to get by, the more people charge the less that fly... and on and on it goes...

TMP

scrubed
12th Jul 2005, 20:16
I dunno about GA in particular but it's definitely proof of something carking it when a bigshot like Stunfish can't even spell the word dying (http://dictionary.reference.com/search?q=dying) properly.

I thought you were a CEO, aren't they supposed to edumacated........????? :confused:

:rolleyes:

Why are you always posting GA stuff here, there's a D&G GA forum, you know....... :rolleyes: