On the eve of EAA AirVenture 2014, aviation analyst Brian Foley released summaries of two key areas affecting the general aviation industry: investment capital and engine technology.
On the capital front, Foley said that there is no shortage of investors who are willing to put money into general aviation companies. However, there is a shortage of what these investors are seeking–entities that actually make money, that is, “a good $20 million in annual revenues and $5 million in profits known as Ebitda [earnings before interest, taxes, depreciation and amortization].
“For the majority of ‘real world’ general aviation entities, trying to raise equity capital has been seven years of bad luck, especially for those without an established track record,” he said. Compounding the economic malaise that has affected general aviation are some spectacular startup failures such as the original Eclipse Aviation, Adam Aircraft, DayJet and others, he added.
The result is that aviation entrepreneurs are faced with raising money the hard way, from friends and family, angel investors and “individual aviation enthusiasts.” Startup entrepreneurs need “meaningful funds” before seeking additional funds from larger investors, he pointed out, and also need to have risked their own funds. Finally, a working prototype of the product is key. “Investors rarely put money into paper airplanes or clever concepts presented on PowerPoint,” Foley explained.
At the stage where the company becomes more established, the startup should have more success approaching venture capitalists, other aviation firms with complementary products, institutional investors and possibly investors from countries such as China that “are willing to take a longer-term view than U.S. companies,” he added. “For years now the financial community has steered away from all but the strongest, most well-established general aviation companies. It’s believed that we’re finally at the point that investors will begin returning. When interest rates eventually begin rising, financial institutions will need to boost earnings by lending more and investing in high-yielding opportunities, which just happens to be general aviation’s sweet spot.”
AirVenture is a hotbed of innovation, and there is no shortage of fascinating new developments, including new engines that promise to revolutionize the propulsion sector. Foley believes that engine technology will be a “next leg” in “innovation leaps” for general aviation, following on the heels of massive changes in the avionics sector.
Engine developments are accelerating because of a confluence of factors, he said. These include pressure to ban leaded avgas, which may make some aircraft buyers reluctant to invest because of worries about fuel availability. The transition to an unleaded aviation gasoline is still years away. Another factor is the tight supply of avgas in other parts of the world where general aviation aircraft could have a positive impact. Finally, there is enormous pressure to lower operating costs.
While Foley believes that the automotive-based diesel engines currently flying in certified aircraft are an evolutionary dead-end for general aviation, this sector is where a lot of action is taking place. Continental Motors has secured worldwide STCs for installation of its Mercedes-Benz-based Centurion diesel engines in Cessna Skyhawks and EASA certification for the Centurion-powered Piper Archer. The Centurion is also installed in the Diamond DA40 TDI and DA42 Twin Star, and Robin DR400. The Centurion engine was developed originally by Thielert Aircraft Engines, which eventual became Technify Motors after Continental Motors parent AVIC International purchased Thielert out of bankruptcy in May 2013.
Cessna has adopted diesel engine technology with its Turbo Skylane JT-A, which uses SMA’s SR305-230E engine, developed specifically for aviation. The JT-A is awaiting FAA certification, which is expected shortly. Before Thielert declared insolvency in 2008, Cessna had planned to field a diesel-powered 172, but that program was not pursued.
At last year’s AirVenture, Engineered Propulsion Systems unveiled the Vision 350, an eight-cylinder, Fadec-controlled, twin-turbocharged diesel developing more than 350 hp. Now called the Graflight V-8, the engine successfully made its first flight in Mojave, Calif., on May 22 in a Cirrus SR-22 flown by Dick Rutan. Engineered Propulsion Systems is showing the Graflight V-8 mounted in the SR-22 this week at AirVenture (Booth 337).
Diesel engine manufacturer DeltaHawk is also displaying at AirVenture (Booth 178) and is expecting FAA certification of its 180-hp DH-180A4 engine later this year. The DeltaHawk engine is also purpose-built for aviation.
All of these factors will drive “widespread adoption of the diesel engine,” Foley predicted. “These aren’t your father’s diesels, but rather high-tech, computer-controlled, lightweight powerplants designed specifically for the needs and rigors of aviation. We’ll see manufacturers move more aggressively to offer diesel options in their models over time and eventually switch predominantly to diesels. Doing so simultaneously addresses environmental concerns, future fuel availability, emerging market growth and market demands for improved operating economics.”