Friday, December 26, 2008

A bit of Holiday Cheer....


Vern spoke at the VLJ Forum in November and dispensed the Raburn brand of wisdom to an attentive audience. In this holiday season, the world is troubled in so many ways. If only we could sit at the feet of the master to receive more revealed truth. Civilization is blessed in that Raburn is the gift that keeps on giving.

Vern is speaking in February at a seminar held by the Journal of Air Law and Commerce. The Journal is the oldest scholarly periodical in the English language devoted primarily to the legal and economic problems affecting aviation and space; it has a worldwide circulation with more than 2,300 subscribers in 54 countries.

We are lucky to have received an advance copy of Vern’s prepared remarks:

“Good morning, ladies and gentlemen, dudes and dudettes. My name is Vern Raburn. Some have called me the Father of the Very Light Jet – I’m not sure about that but I would certainly be named in any paternity suit. Others have identified me as the Grand Panjandrum or Exalted Vizier of the VLJ Revolution. I accept this with my characteristic modesty and note that I received the Collier Trophy and Cabot Award.

The name of the Journal contains the words Air, Law and Commerce and I’d like to address each of these topics. I’ve had a lot of experience with air, especially heating it to temperatures well above ambient. I have considerable involvement with the law… in fact my legacy is keeping a whole herd of lawyers busy in Delaware and elsewhere.

It is commerce that I would like to address in detail. Some have questioned our success during my tenure at Eclipse Aviation. We did spend quite a bit of money. In fact our spending would exceed the gross domestic product of some small countries. But these funds were invested wisely. The list of technical advances incorporated in the Eclipse 500 is awesome: cutting-edge avionics, brakes, tires, windows, pitot tubes, trim tabs, throttle quadrants, digital engine controls, bleed air systems, environmental controls and novel metal welding techniques.

However in spite of brilliant design and execution, our company was laid low by the global economic crisis. It is clear now that Eclipse Aviation was the miner’s canary in the worldwide financial meltdown. We were the recession’s earliest victim and the skies would be darkened with VLJs had we not encountered these impossible conditions. I expect that MBAs for generations to come will study our business case.

I am heartened by the financial bailout package just announced for two of the big three automobile makers. I have an appointment with President Obama about Eclipse Aviation – the company may not be too big to fail, but it is too important to let slide. I have soap in my hole; er no, no. I have hope in my soul that Barrack Obama will listen to my appeal. After all the Eclipse 500 is the greenest jet out there and the only one able to sequester carbon as it flies.

Thank you, and now I will take a few questions."


As usual, I'll remind our readers Black Tulip is our resident satirist, and that the tulip mania peaked in the Netherlands during the 1630s. The black tulip was the most sought after, until found to be biologically impossible. 

81 comments:

gadfly said...

“Thank you, and now I will take a few questions.”

“Yes Sir, your Royal Highness . . . Why did you pick on . . . er, choose Albuquerque, for your operation? Was it our excellent climate? (Outside, today, I have the challenge of driving through snow and ice, to get home) . . . Is it our long relationship with aircraft? (There is a fine example of a bi-plane on display at the airport, ABQ . . . in “mint condition” as it was taken out of the crate about ninety years ago). Is it our expertise, in developing “bombs”? (Yeh! . . . New Mexico has been there, done that . . . and the world hasn’t been the same since . . . but your little “bomb” hardly qualifies . . . ). Maybe you found that you could play the local politicians “for the fool”! (Well, there you probably have made a good choice . . . !)”

“But, really, . . . bottom line, why did you pick on New Mexico? . . . What did we do to you? Whatever it was, I wish we could take it back . . . with compound interest!”

The gadfly has been on social security for what? . . . six years now . . . so I’m going to pretend that I don’t need to work anymore . . . at least for a weekend. And I guess in the days to come, the contribution to the local deficit by the “Eclipse” will somehow be lost in the bigger picture of corrupt politicians on both sides of the aisle. (Oh, did I mention the mayor wants a “trolley car” system through the center of “modern Albuquerque”?)

“Your Royal Highness, Sir . . . you are a genius! You timed everything perfectly . . . and can blame everything on the international financial climate . . . and escape clean as a whistle.”

“Please provide us with a hint . . . as to your next wonderful scam . . . er, project. We need to begin looking for funds to invest.” Not!

gadfly

(Things are desperate when it takes the "gadfly" to prime the pump for further discussion . . . Hello out there! . . . anyone home?)

bill e. goat said...

Seasons Greetings!

Shane,
I'm glad you're enjoying your vacation- thanks for keeping the blog up over the holidays !

(I'm not quite sure Wedge would consider you and Stan as Santa Claus figures, but you've sure been keeping track of who's naughty and nice. (Speaking of naughty- did you leave a lump of...coal in Wedge's stocking? :)
--------------------------------

Black Tulip, thanks for the witty post (again)!
--------------------------------

Gadfly,
Thanks for priming the pump. (I got pretty "primed" myself over the past couple of days :)
--------------------------------

Well. I've been trying to figure out why the two biggest dullards in aviation, Kresa and Poling, are still on the BoD at EAC. (As opposed to the biggest crook, who no longer is). Okay, they really aren't dullards, they are simply hideously incompetent as board members at EAC. Hideously incompetent other places too? Maybe. But why are they still on the board at EAC?

Well, some surfing around reveals that Kresa is a bit of a devotee/lackey of Al Mann's (he's on the board of Mankind and Advanced Bionics). Guess he makes good coffey for those long board meetings, or something. Nice smile too.

Financial oversight- well, lets see: At Avery Denison, he's "Member of Ethics & Conflict of Interest Committee and Member of Audit Committee".

Hmmm, that seems like a whopper, what with the rather "convenient" BK at EAC.

Kent Kresa Bio
--------------------------------

That leaves us with the question of why Harold Poling is still on the board. Maybe he started on the board to bring automotive know-how to EAC (he is former CEO of Ford). Well, that was a success- they are in the same shape as Detroit...
Harold Poling Bio

(Okay, Ford didn't go BK, or take federal money- there's a story here too: why pass on free candy? Again- a little research shows why:

"Ford executives had refused bailout money, and will instead rely on a $23.5 billion government credit the company received in 2006 to stave off bankruptcy". (I'd forgotten about that one).
Detroit Bail Out
--------------------------------

So. If Kresa is a Mann-servant, then what's Poling doing still around? Black Tulip, provided the definitive quote which unlocked this, and a larger puzzle, in the subject from the opening post:

"I am heartened by the financial bailout package just announced for two of the big three automobile makers".

AH-HAH !!

Kresa is linked with GM (currently) and formerly Chrysler (for over a decade), and with taking over TWR (automotive, as well as aerospace, supplier).

Poling is former CEO of Ford Motor Co.

Now it's obvious- if GMAC can get federal funding by declaring itself a bank, then EAC is hoping to get federal funding by declaring itself a car company !!
---------------------------------

Tsk tsk to those of you who dismissed Gunner's assertion that Eclipse was seeking to compete with the Moller flying car !!
Moller

(Interesting to note, the latest Moller model number is- anyone care to guess? 400!!
---------------------------------

!!!
From the Moller Web Site:

"Henry Ford, Chairman, Ford Motor Company-1940; 'Mark my word: A combination airplane and motorcar is coming. You may smile. But it will come...'"

(I'm smiling :)

bill e. goat said...

Regarding that Ford clan, and what I honestly mistook an earlier interview with Wedge as an over-the-top Black Tulip parody (as the saying goes, "truth is stranger than fiction")-

From the October 20, 2008 headline post "A Nuclear Winter Looms":

"A couple weeks ago, 10 days ago, I was in Amelia Island. I flew an Eclipse there. I was invited to Edsel Ford’s 60th birthday. Edsel said to me 'This is the challenge. Our business depends on one thing--scale. It’s not about the car we build, it’s that we build it on a large enough scale. We have to get to that level that we break even. We know we’re making the right trucks. We know we got a great product in Europe. But for us to bring one of those cars to the States, we can’t just shut a factory down and start making Fiestas. It would be multi-billion dollar investment. Overnight we saw attitudes in America change.'"

Amelia Island- as in Amelia Earhart ???

Wedge on parade in an Eclipse ???

Edsel Ford, as in, THE Edsel ???

MORE discussion about volume being crucial ???

MORE talk about multi-billion investment ???

(And it's all true- it really is Wedge talking, not BT !!!)
---------------------------------

(Interesting article on the other "Big E" brand- I had not realized it was a brand, rather than a singular Ford model. It sounds like whiz kid Robert McNamara- one of those characters that rambles, or bumbles, depending on your interpretation- across American history post-WW2, played a large part in the Edsel story. ??Too bad he didn't get involved in EAC, no telling how things would have turned out...)
The Edsel (Ford) Brand

Robert McNamara
Complicated times, complicated problems, complicated solutions. I think not an evil man, but US troop involvement was only 500 when he became Secretary of Defense. (Sad eventual outcome, for everyone, some much much more than others...)

(And talk about truth is stranger than fiction- his middle name IS "Strange"- really!!)

(...Makes you wonder what Wedge's middle name is ? :)

eclipso said...

Merry Christmas to All


Since I'm in the area and fly all of the local airports (including Addison), I will have to mark my calendar for Feb

It's always more fun when the other party doesn't know who you are. Perhaps I will get to ask some questions. Send all your best ones to Shane or put them here. (Even better because it keeps The Wedge on his toes.)Until later, I am off for 10 more days and as Shane would put it..."time for a pint"....

BricklinNG said...

Cessna 340 turbine

O&N Aircraft, who have been turbinizing the P210 for years, are now flying a turbine C340.

www.onaircraft.com

So a nice Cabin, with (presumably) up to date avionics (Garmin 600, probably) and the advantages of turbine over piston, as well as more power and speed. O&N are not yet posting performance stats, but I wonder what the knowledgeable readers of this blog would expect. Speed, range, load (after considering lighter engines but heavier fuel). Could this airplane actually deliver the best balance of performance, range, cost and cabin comfort across the supposed VLJ market niche?

gadfly said...

These articles will give an overall picture of the New Mexico political climate, . . . the second shows Eclipse gets a "Cow Chip Award":

http://www.abqjournal.com/upfront/2811143upfront12-28-08.htm

http://www.abqjournal.com/news/state/28111019state12-28-08.htm

gadfly

bill e. goat said...

Well, there are some pretty interesting characters here on the blog.

Just in case they'd like to become even MORE interesting (dare I say!):

A-4 Skyhawk for sale: $75K

HURRY- AUCTION ENDS DEC 31 !!

This'll put those wanna-be SEJ sissy-boys with their Piperjet's back in their place!

(Ummm, I'm still looking for a good used aircraft carrier to keep it on).

(or just check eBay item number: 330296510018)

baron95 said...

Briklinng said ... Could this airplane actually deliver the best balance of performance, range, cost and cabin comfort across the supposed VLJ market niche?

This is no different than the Turbine Duke. And the Duke is trully an airframe asking for a reengine. A 385HP overstressed Lycomming that is a maintenance and SFC nightmare vs a 310-325HP easygoing continental in the C340 already with great RAM conversions available.

A niche within a niche.

What makes you think a C340 turbine conversion will cost much less than a C425?


Either way, the target buyers of SR22s, C400s, D-Jets, EA500, are not people like you and me that will put up with ancient airframes and a bunch of STCs. They want a complete package, with factory support, training, maintenance and a spotless and standard (i.e. resalable/financeable/insurable) airframe.

The guy that buys a beat-up firebird and drops a Z06 engine and tranny on it is the candidate buyer for the reengine C340-turbine. A dying breed.

The guys that buys the BMW 750i, with set lease prices, included maintenance, road side assistance, etc, is the candidate buyer for the new planes.

Different animals. GA will only survive by attracting the high-income type As that will never put up with s%#@ (Eclipse buyers excluded, of course).

WhyTech said...

"are now flying a turbine C340."

Who wants a to put this kind of money into a 30-40 year old airplane? (I am guessing around a million $ plus or minus a bit, not including the airframe.)

Niner Zulu said...

More Mustangs now being listed on Controller with no premiums. Here's a couple of examples:

IFR, Q2 Cessna Citation Mustang for USD 2,395,000 plus CPI-W plus Options, without any premium. , 2009 Paint, 2009 Int

S/N: CJM-00704, TBA, NO PREMIUM July 2009 Mustang position, pick options by January 15th! $2,395,000

S/N: TBA, TBA, 0 TT, 0 SNEW / - / 0 SNEW, IFR, Late 4th Quarter 2009 Mustang Delivery Position! No Premium! Price is $2,395,000 plus CPI-W , 2009 Paint, 2009 Int , 4 Seats

Bear in mind, these are "asking" prices. Nothing is moving and there are more planes on the market than buyers, so it is likely that sellers are going to have to offer a discount on the aircraft in order to avoid having to pony up the balance and take delivery of an aircraft that they either a) don't need, b) can't afford c) only purchased hoping to flip at a profit and now realize they can't, or d) all of the above.

Deep Blue said...

I ask Niner Zulu (Good point by the way):

What about the 250 (Two Hundred and Fifty) E500s on the market?

That's 250 (Two hundred and Fifty) E500 VLJs on the market.

Two Hundred and Fifty (250) EAC E500 VLJs on the market.

Niner Zulu said...

The point being, it is now likely you can purchase a new Mustang at LESS than Cessna's list price.

Think about it - if you have a deposit on a Mustang that you absolutely can't take delivery of, for whatever reason, then you have to sell your position at whatever the market will pay or walk away from your deposit. And now that the market is at no premium, the only chance you really have of selling your position is to offer a discount on the deposit and try to recoup whatever of your deposit you can.

So there is silver lining to this recession/depression - it is now a buyers market after several years of being a sellers market.

Niner Zulu said...

Deep Blue,

Well, I think the owners are really in a pickle. I admire the fact that many still have hope, but I think the ONLY thing they should be thinking about now is how they can out of this mess they got themselves in to, at the least possible cost.

That means dump your jet for whatever you can get for it, and take the tax write-off on the loss.

There is always a "greater fool", and maybe one of the position holders who lost their deposit would jump at the chance to get into an E500 for less than what they would have paid had the company actually delivered their aircraft. It would be a win-win situation, at least until reality set in for the buyer.

Niner Zulu said...

Looks like a few E500 sellers are already moving the market down.

JetAviva has an E500 listed for $1,250,000 with 15 hrs TT .

There are 2 others at $1.3m and $1.325m, both with low times.

These are the smart sellers, IMO.

Then there are the dreamers, one asking $1.7m and another at $1.899m proclaiming "You can fly this fantastic new Single Pilot Jet anywhere in the world!". I think WTF would be the appropriate response here.

Zed said...

Recall that to achieve an annual profit, EclipseJet must deliver 15-20 aircraft per MONTH at $2.5M, or 20-25 per month at $2.0M

There are roughly 22 production days per month ...

Place your bets ...

bill e. goat said...

Zed,
Funny you mention production rates...

Early posts regarding the turbine 340 got me checking into the 310/20/40 series.

Weights, dimensions, range, pax are all about the same.

Production rates? Looks like the 310/20 series was probably around 200 per year too.
Cessna 310 Wikipedia

Which...brings to mind numerous quotes from late summer, saying Eclipse would probably go belly up in the first half of 2009. I don't know what this was predicated on- I thought it overly optomistic- but maybe if not for the global credit crunch, they would have indeed survived until then.

This might explain the Teal groups forecast in October for the 2008 and 2009 deliver of 165 and 65, respectively.
Charter X: Teal Group on EAC, Oct 2008

One does wonder however, if there are 65 shipsets of something sitting around (wings, windshields, engines ??)

I reckon BK was figured on all along*, so there was no concerned how deep the hole was dug- management knew it was unrecoverable (unless one subscribes to Wedge-onomics; $5B hole and 10,000 deliveries, and 20 years). And indeed, the more airplanes fielded, the stronger the built-in customer base with regard to for-profit retrofits.

(Anyone think it strange that, I believe, NO avionics or FIKI retrofits were accomplished? I think only a token number of "speed kits" were retrofitted).

*Especially as the IPO was increasingly an unsustainable proposition- R&D delays maybe worked to society's advantage here- if EAC would have had a stable design, perhaps the production numbers would have got to 300-400 per year, enough to launch IPO. But the cash flow situation would have been no different- indeed, probably worse- as they were loosing money on every sale. I don't think EAC ever intended on launching IPO based on current profitability- instead, it was to be triggered on the illusion of profitability- volume production.
--------------------------------

While still contemplating production volumes...
Why did Wedge keep pounding the number "500 to break even"?

1) I would note that this does indeed correspond to 20 years to build 10,000, the "recover to break even" point from a $5B hole, assuming $500K, or around 20-25% profit, per airplane)

But, if we use a Wedge lie-detector (are his lips moving?) and observe in generally he never told the truth, except by accident or coincidence; we are left with other motives for his proclamations of the necessity for building 500 per year:

2) To bolster "confidence"??

("Hey, they guys talking about building over 500 airplanes per year at a minimum- there must be something to this VLJ thing")

3) To prime the pump of further investment??

("Hey, they just need more money to break even").

Man, in retrospect, it is SCAREY how many people bought in to that one. Sure sounded seductive though.

(ESPECIALLY if one didn't know what the production rate of 310's was decades earlier, when GA sales were stronger...)

Frankly, I would say perhaps all three are applicable. Maybe Wedge was guilty not only of dispensing EAC-flavored Koolaid, but also of being poisoned with NASA-flavored Koolaid (re: Small Aircraft Transportation Systems).
NASA SATS Fact Sheet

And, from a 2005 NASA press release:

"Even a rare June extreme heat wave couldn't dampen the enthusiasm of some 3,000 people who came to Danville, Va., June 5-7, to see what could be part of the future of air travel: on-demand, point-to-point flights from neighborhood airports by advanced small airplanes and very light jets.

"One of the benefits of such a Small Aircraft Transportation System (SATS) would be that passengers would not have to go through congested major airports".
SATS 2005 Conference
(Note the Adams 500 and 700 in the background...)

MAN- that is PURE Wedge-speak. Was he really so ignorant as to guzzle THAT Koolaid??

(Particularly when considering the SATS consortium was the ever-self-promoting folks at NASA, the ever-incompetent ATC-modernization folks at the FAA, and an assortment of pork barrel grant researchers).

Interestingly, the definitive web site referenced in both NASA articles, http://sats.nasa.gov, has been pulled down and is defunct.

Like Adam.
Like EAC.
Like Wedge.

The Teal group's October 2008 report summed it up pretty well,

"The Eclipse program was designed from the outset to be revolutionary and unique. In Teal Group's estimation, the people behind Eclipse have attained this objective. This program is the single worst aviation program Teal Group has ever covered".

Shane Price said...

Many thanks to Black Tulip for taking the time to write that piece for us.

Yes, Wedge really did agree to that invitation. The irony of the timing is quite amusing, in that the fate of EAC V1.0 will have been determined by the middle of February. What really got me about this is the complete lack of coverage this has had from anyone else.

Seems no one is interested in the Wedge, except us....

Snippet Time

1. The good news is that all staff got paid at EAC and DayJet in time for Christmas.

2. The bad news is that Al Mann seems to have 'gone to ground', which has affected a range of the 'Chapter 11' processes.

Shane

just zis guy, ya know? said...
This comment has been removed by the author.
airtaximan said...

Silly me, I didn't check the link, and didn't realize the invitation for VErn to speak at the conference was legit.

Funny thing is, I can imagine some pretty interesting questions, regarding the "Evolution of Eclipse Aviation", which is the topic of the speech.

Q- how has flying a non-conforming plane and taking deposits changed aviation practices regardng deposits?

Q- how has promoting a trumped up order book with an exaggeration factor of more than 2-1 changed aviation reporting practices of the same?

Q- how has using "refundable" deposit money for a development program rather than producing the aircraft for the customer changed how deposit program should be run?

Q- How do you think the consumer will regard "guarantees", such as performance and operating cost "guarantees" in the future, since you broke all of yours, usually just after demanding more deposit money, and still had no real way to refund the deposit money?

Q- How has the idea of progress payments changed, since your company "scheduled" hundreds of planes for delivery in 2006, and delivered none (you said one) and still many hundreds more in 2007 and delivered a fraction, despite taking hundreds of millions of dollars in progress payments based on your "schedule" which could never, ever, ever be met?

Q- Why should it cost $3B or more to develop a little GA jet plane? Do you think creditors have a right to know where all the money went?

Q- What liability do you tink there should be regarding executives who knowingly promise operating cost advantages based on a program like JetIncomplete, which is proven during its short life to be completely inaccurate and a fabrication to unfairly compete?

... I am sure you'll all come up with better questions, and I wonder BT : " is there a transcript of his "speah" going to be available? Will there be Q/A? or will this be just one more Rant like the Florida speech, where VErn basically trashed the industry again, and pointed fingers all around.

I think, given the realities associated with the evolution of EAC rather than the Revolution which he touted for 13 years - they should not let him say one word, and just...

...shine a bright spot light on him, and have him stand there for an hour.

eclipso said...

From the above post:

Post your questions as I will be going over to ADS for the lies....er...speech from the Wedge.
I don't know how many questions I can ask before I'm asked to leave, but there will be a camera running when I do...

E

BTDT said...

A few comments on the current discssion of market conditions.

As has been pointed out the "glut" of jet toys on the market has begun. For those of us that have been around for a few decades we have seen it before. The Citation market back in the early 70s had sellers with positions that were as much as 3 years down the road. Then the late 70s and early 80s with interest rates of 17%+ hit the financial side and someone had to bite the bullet. Cycles, it is all about cycles. In ecomonic terms there is an equal factor using the terms Willing Seller and Willing Buyer. When those two points of the economic playing field are equal to each other we have the good times.

Now lets look at the other side where we have an Unwilling Seller and no buyers Willing or otherwise. Currently we are in that cycle and in fact going deeper into what I would guess is a 5 year length of this situation. From past history in aviation there seems to be a 7-10 year cycle of good times followed by a sudden stop, a bottom, and then a SLOW crawl back to the upside. I can not think of anytime over the past 44 years where we had a slow decline and a slow build up to "Normal" markets. Thats where the Unwilling seller comes in. As has been mentioned its either take the hit now on a deposit or hope that by the time your bright new jet is ready for delivery things are back to the equal level. These Brokers of positions play a fast game and have about a 50/50 chance of coming out on top. But if they do get the extra bucks they live the good life. If they don't hit it right they take it in the rear so to speak.

I remember one of them moving from a $500K house to a $20K double wide trailer in a matter of months back in the early 80s.

Another problem is the situation of people in the aviation industry that should not be there. For the life of me I don't know how some of them get into the positions on the Corp Ladder that they have obtained. But we have them and until we have a clearing of the Corp Ladder with them sliding down after the climb up, we have to live with it. I would hope that some of the Aviation houses of higher learning would include a course on common sense and use EAC as an example of what not to do.

So we live with what has been created and hope that those that created it either get some smarts and learn or go somewhere and manage a Burger King. I think Peg would be a good example of one. If the Wedge was put in managment at a Burger King you would end up with a Whooper that had the meat and stuffings on the outside and the bun in the middle. Hmmm. Yes I guess that would be a good definition of Dispruptive Techy stuff.

BTDT

bill e. goat said...

BTDT,
As Dave I. might say,
"Would like Saturn Rings with that Astro-Whopper?"
:)

(Indeed- the "Whoppers" *were* pretty astronomical, and the entire experience caused heartburn for many...)

airtaximan said...

BTDT

"Corp Ladder"

in the relevant case, I think it was more like "the stripper pole"...

Niner Zulu said...

BTDT you said it well.

Is it just me, or does the jet market seem to be in the same mode as the housing market i.e. a Mexican standoff? Most sellers aren't dropping their prices until they are on the brink of foreclosure, and the buyers aren't buying at any price high or low.

It's a strange situation. So many people failing to recognize that everything about the market has changed. It isn't 2005 anymore and we're not going back. When economic stimulus packages don't work, it's no longer a recession. It's a depression. That's when all asset classes drop to pennies on the dollar.

Or, as they say, "it's not your father's market - it's your grandfathers."

airsafetyman said...

"As has been pointed out the "glut" of jet toys on the market has begun. For those of us that have been around for a few decades we have seen it before."

And we will see it again until more corporations realize the cost of not having a responsibly run flight department far outweigh the costs of having one. Many coporate flight departments are low key operations dedicated to getting company people and equipment where they need to go when they need get there. Some corporate flight departments have decades of flawless operations with no accidents or incidents at all. That is more than you can say about any airline or even the USAF operation that flies around the President. Especially sad is the case of Ford Motor where the company head, Alan Mulally, is from Boeing which has an entire division marketing coprorate aircraft. Alan folded like a wet blankie and flushed pilots, mechanics, flight attendents, and managers with decades of experience right down the drain and onto the worst job market in decades. Way to go Alan! Let me run down and buy a Ford product! Or maybe not. Maybe Ford will retool soon and pick up several Honda Jets?

Deep Blue said...

BTDT/9Z/ATM:

Good points and background on the private jet sales cycles over the decades.

I might suggest one other issue to consider that seems to amplify or exaggerate business jet/GA sales cylces and that is:

There is no large scale, dense commercial market for business jets.

Yes, I know there is fractional, which is quite a success, but still, that is a business built on sales to HNW individuals and the operations a product of individual private flight requests.

The BizAv/GA sector has never developed into anything as dense and far reaching as the airline sector, which is a true stand-alone commercial industry.

That is why I think, the air taxi concept held so many in a state of high expectation and hope: it promised to "commercialize" the otherwise private sale/consumer- good approach to GA aircraft sales.

airtaximan said...

Deep Blue,

man, that's one smart comment... "the promise of commercial scale for GA - air taxi"

But how?

make a smaller, less rugged, less comfortable plane, with limited payload-range... to compete with cars?

How stupid does this look, now... considering the goal was as you stated, to develop a commercial market for GA?

IIRC, the EA50 was designed to satisfy Vern's needs... a little-guy-GA-pilot, no family, laDeeda....

Imagine how he got it wrong?

The there's Ed... Mr. Air Taxi. OH wait -it's about the computer system, not the plane.

Imagine how he got it wrong.

Then there's the investors...a computer guy (Gates) and A bio tech guy (Mann)...

Imagine how they got suckered...

And now the saviour - Mr ETRICK... another tech guy.

OH BOY...

Deep Blue said...

ATM:

I agree; the airplane part of the system was never built to purpose; it was a guess, or I think in EAC's case (and frankly in EMB's who has also been touting an order book for air taxi start-ups) just an attempt to portray the E500 as also an air taxi platform, when it's nothing of the sort.

I don't think "personal jets" lend themsleves to commercial service; even if you accept the tiny cabin dimensions, you're still left with an airplane that was not engineered for high cycles/hours, and, after-market is way too immature right now to efficiently support a "fleet."

I continue to think an ideal "air taxi" aircraft is actually a cabin class, with plenty of "flex" room for varying loads, baggage and also able to respond to out-of-network operations (charter).

It may be that "air taxi" is much more like an airline derivation than a GA/Bizjet/charter one. If the bodies are out there in such numbers as DJ and others suggested, then why not get 10-15-20-30-50 at a time? an RJ, right?

I don't see any reason why the prime OEMs could not build a designed, cabin-class air taxi craft, and at a breakthrough price.

Maybe the Chinese will.

Of course the other key issue is service price and here I continue to believe that an air taxi business cannot gain traction in the market until the "ticket" price is about 40-80 cents per mile, or some other pricing structure that produces a similar nominal price.

Richard Aboulafia may have got it right: the consumer market is not shaped like a pyramid, it's shaped more like an hourglass: a very small market of high net worth/corp/exec buyers, and then a bulge of buyers with very limited budgets.

airtaximan said...

Air taxi recipe for success

step 1: define a realistic/existing large underserved - I propose premium airline passengers, NOT cars

step 2: create a durable comfortable small(er) "passenger" plane, if it does not already exist - payoad range for full load over 1,000 miles, IMO. Enogh passenger seats so that half full, you can charge by the seat at around $500 per flight hour.

step 3: price the plane and support model such that someone can make money with a fleet

Just my thoughts after watching Vern burp $3B screwing the pooch on this

baron95 said...

NZ said... So many people failing to recognize that everything about the market has changed. It isn't 2005 anymore and we're not going back.

Be careful of generalizations and statistics. The fact is that the housing market and GA/BizAv market is very "market/product"-specific.

There are in fact many housing markets in the US that where prices are going up like it was 2005. Other markets/locations are pretty normal. If you look at the data, you'll find that most of the drop in the average house selling prices are in the overspecuated markets of CA, FL, AZ, etc.

Similarly, the GA and BizAv market has "hot" products like Phenoms, Skycatchers, SR22-Perspective and "dud" products like Eclipsi, B/C-55 Barons.

If you are going to rely on statistics, you are well advised to look at the data beyond the headlines, or you will make poorly informed mistakes.

baron95 said...

ASM said... Way to go Alan! Let me run down and buy a Ford product! Or maybe not.

Exactly right. I will not buy one of their products on principle (and that is prob a first for me). The sad display of testicular deficinecy of the Detroit-3 CEOs, combined with them sucking up the UAW's president who wants to keep draging the industry down, is more than enough for me.

But the fact that they single-handedly did more to set BizAv back than any event in history, short of the mannufactured and temporary oil crisis, is sure to keep me away for decades.

baron95 said...

DB said... I don't think "personal jets" lend themsleves to commercial service; even if you accept the tiny cabin dimensions, you're still left with an airplane that was not engineered for high cycles/hours,

Some here keep on repeating this as a fact. On demand air-charte is NOT a high-cycles, intense aircrat utilization activity. Quite the contrary. It is one full of down time.

Second misconception is that it requires particularly "sturdy" aircraft. Quite the contrary again. On-demand air taxi passengers are quite demured and well behave even gingerly particularly on the first few trips.

Look. What is really high-cycles high-abuse in GA is primary flight training. Six cycles/day on bored CFIs and ham-fisted and landing-bouncing student pilots.

Yet, even the flimsy 172 can survive it.

So basically airframe sturdiness is a non-issue.

baron95 said...

ATM said... price the plane and support model such that someone can make money with a fleet


You think that is easy for a "new" plane? Air taxi/on-demand charter ops can barely break even with used planes and many are exiting the business every week.

Domestic arilines are not making money. Domestic air charter are not making money. Interstate bus service is not making money. Domestic passenger rail is not making money (even with subsidies).

And please spare me the "in europe it works BS" - it is in no better shape.

You just need to accept that it is a marginal business at best.

The competition from driving, to discount airlines, to corp biz av to fractionals to simply owning a plane is just too great for on demand short-mid haul to be "profitable" enough to suppot a fleet of new jets. It just will not happen.

airtaximan said...

"It just will not happen"

well BAron, there goes your last chance for an affordable twin jet...its based on rate, and until people take flyers ed with drivers ed in high school, its a taxi model that drive volume.... no private market comes even close.

Stop describing how things ARE, and begin working an a model of how things could be... I thought you love American entrepreneurship - why not attack a lrge dissatisfied market -premium airline customers.

Problem is the 172 cannot go far enough or fast enough in comfort to make areal jet trip and take passengers off the airlines.

Congrats for describing a rung out slow single prop as reliable... see its possible!! now try to find the right tech mix for a twin jet... then make sure it can fly passengers on real jet missions, and perhaps you have some semblance of a equipment that could make a difference for GA as a real passenger solution. The EA50 was a joke.

If you tink durability and dispatch reliability are secondary requirements, you are crazy. Netjets, at 1/3 the airlines flight hours per plane require guarantes from their equipment suppliers for dispatch reliability - and there's areason - GA planes were designed for a few hundred hours a year. Quintuple that for revenue, and you have a real problem if the plane is down, for ANY reason. Thinkit can be a flimsy POS, think again. Dayjet kep a 2-1 ratio of working planes to ones in the shop - how did THAT work?

Anyhow, imagine a mode/equipment/pricing that works for air taxi, or cry in your soup. You are the one who is complaining there is no innovation leading to an affordable twin jet for GA guys like you, right? The answer is in passenger service for high rate and low cost, or stick with the 172buddy - and stop dreaming.

bill e. goat said...

ATM,
"step 2: create a durable comfortable small(er) "passenger" plane, if it does not already exist - payload range for full load over 1,000 miles, IMO. Enough passenger seats so that half full, you can charge by the seat at around $500 per flight hour".

My initial thought was, a King Air is about as close as you can get to a rugged, utilitarian corporate transport. I don't think they offer particularly outstanding reliability, but they are rugged- I haven't seen the statistics, but suspect most of what breaks is systems-related, not structural (but, as Baron points out- this is a truism for almost all airplanes anymore).

Then, I thought of what a first-class pax might want- he'd want to walk onto a Challenger 60x. Looks like an airliner on the outside, feels like an airliner inside.

But operating costs- yikes!

Something in-between, an as close to affordable as possible, is probably the Beech Premier. Fast, decent range, almost-tall enough, almost-wide enough, almost-cheap enough, almost redundant-enough.

But to get all those things past "almost" would probably bump costs another 30-50%. And bump weight another, what, 20% or so. Problem is, the Premier is already bumped up against 12,500# for FAR23. Going to FAR25 level systems redundancy would be a significant expense. (I'm told one reason Beech uses composites is to maximize the usable interior diameter- if it had another 6 to 8 inches, it would indeed provide "first class" accommodation, I think).
--------------------------------

Baron, I agree with all of your recent posts. I had not considered the "ruggedness" of a 172, but I believe you are correct. What causes non-dispatch in most airplanes is systems, not structure. Reliability/redundancy is the issue- not ruggedness.

"Air taxi/on-demand charter ops can barely break even with used planes and many are exiting the business every week".

Right-o. This is exactly why I was suspicious of the Eclipse business model, and Big Ed's limo service.

I think Detroit's generally bumbling appearance in front of congress hurt them, more than the biz-jet issue. But I don't blame them for doing things for appearance sake, once the general (-ly clueless) media was "on the story". Survival of entire companies was at stake, not just of the flight departments. (If anything, I've been disappointed with the lack of a media campaign by NBAA or GAMA- but I suspect they are laying low in order to not attract attention to the favorable tax breaks for purchasing new airplanes).

I'm sorry for ASM's fellows though. I hope (and believe) they will see a substantial invigoration by mid 2009.
---------------------------------
EAC auction set for Jan 14.
EAC BK auction

airtaximan said...

who cares if its structure or systems, unless the structure is the limiter...

bottom line, designed for surable taxi use looks more like a Checker Cab than a Yugo any day.

Wah Wah... for the ea50 - the BS stops here... there's no air taxi business that can jsutify that dumb plane - its dumb from the inside out in all respects considering it was supposed to be a revolutionary mini-airliner... with a large passenger market...


WRONG.

Niner Zulu said...

B95,

I don't need statistics to tell me what is going on in the GA market, the stock market, or our economy. Anecdotal evidence is enough. I see friends losing jobs, real estate not moving, airplanes not selling and every homeowner I know has lost all or a good portion of the equity in their home - much more than what the "official" numbers are, in fact. It's really not too hard to draw conclusions from what each of us is seeing happening to friends, family and businesses around us.

With regard to real estate - I know people who aren't even bothering to list their home for sale, because it's pointless. Same with cars, motorhomes, airplanes, vacation homes, you name it.

So my conclusion with regard to the GA market is: I believe the GA market is tanking as we speak. VLJ's included. I believe the "real" prices at which aircraft will sell are much, much lower than what people are asking. 20% less. 30% less. Maybe more. In fact, if you could chart the value of aircraft using candlestick charts, I think you'd see a steady march down since sometime last year, with no "rallies" to speak of, and no bottom in sight.

The problem with the data on GA sales is that the statistics lag the market - by the time we see it, it is history. Useless for forecasting.

Anyway, I'm not disagreeing with anything you said. But I didn't mention any statistics. When they do come out, I think they will verify my conclusions.

Hey, if I get it right maybe I'll end up with a subpoena from GAMA for supposedly violating an NDA agreement with them, releasing the poor sales data early! ;-)

Niner Zulu said...

One further thought - perhaps I should limit my comments to EAC related matters. But there isn't really much left to be said, is there.

Just waiting for Shane to name his final segment "We Told You So!"

9Z

Shane Price said...

9Z

Just waiting for Shane to name his final segment "We Told You So!"

Not quite so fast, my old friend!

All indications are that this one will go right down to the wire. I've been kept up to date with the (limited) action that's been going on over the holiday period, but I expect things to get very interesting, very soon.

That's using the EAC definition of 'soon', btw.

A more general comment from where I 'am' right now. It's one of the leading Alpine resorts, where I've spend quite a bit of my time and have done for more than three decades. It's usually full of 'high net worth' individuals, from all over.

Not this year....

Notable absentees this year include East Coast Americans, Arab oil princes, English stockbrokers and Russian oligarchs. There is only one reason for this. An aversion to spending money.

I'm sticking my head out (again) but I rate the chances of a successful EAC recovery from Chapter 11 at slim/none. Again, this is simply that the sources of funds to restart production are new CUSTOMERS for the FPJ. And I just don't see a new flood of buyers for a small jet.

The Wedge is right (for once) to be surrounding himself with lawyers in February. I suspect he's going to need lots of them....

Shane

just zis guy, ya know? said...
This comment has been removed by the author.
airtaximan said...

aximanJZG...

I think Shane meant a "recovery" of their BUSINESS... and probably should have said, establishing a business.

So far, EAC has been more like a DARPA project than a business, except money flowed from individuals as well as gov't, and some of the funds were couched as revenue...

Reality is, this was never a business, per se. No way to make money with this plane - they proved you could rasie money saying the right things to the right kind of investor, while losing a lot of money on each product produced with no end to the losses in sight.

So there you have it, somoen is buying a "company" out of bankruptcy, from themselves really, in order to have the priveledge of trying to figure out how they will ever sell and produce this wanker of a money losing plane - developed with $3B... still not completed, and with no customers at a price anywhere near what they need to break even.

Who cares who ends up with this bag of sh^$?

Only the stiffed, I guess

For the future - they will need to rasie a lot of money from somewhere... so look to the future stiffs to care. Look for stories of production in LCC such as Russia to reduce production cost (we don't manufacture anything" VR, cira 2006) and tall tales of fleet orders...

They will need a lot more money from somewhere... so caveat emptor - more stories to come for sure.

eclipse_deep_throat said...

Baron said,
Domestic airlines are not making money.
Domestic air charter are not making money.
The competition from driving, to discount airlines, to corp biz av to fractionals to simply owning a plane is just too great for on demand short-mid haul to be "profitable" enough to support a fleet of new jets. It just will not happen.
***
Baron, for someone that encourages use of statistics, I am very disappointed in you. What you posted is clearly NOT true in absolute terms. This information is free and easily available at www.southwest.com and www.berkshirehathaway.com. Both Southwest airlines and NetJets have been - perhaps the only two - profitable aviation companies of late. Southwest claims to have been profitable for the last 35 consecutive YEARS, and that is one stat I believe without question. Page 1 of the Southwest 2007 annual report has net income at $645 million. Page 23 of the BH 2007 annual report lists net income at more than $13 billion. Now, both companies are certain to have dramatic changes to their 2008 net income. However, I will be shocked if Southwest posts a negative net income for 2008. That goes double for Berkshire (note, I highly recommend everyone read Warren Buffett's comments in the 2007 annual report. His description of moats and roman candles as metaphors for business issues is priceless).

Deep Blue referred to a comment from Richard Aboulafia describing the GA market as an hourglass. That seems plausible to me. Financial statistics make it hard to see that SOMEONE in this market is making money even if margins are thin. I have no clue how American Airlines, Delta, and United can still exist but that is beyond the scope of this post. My argument is simple: Buffett would NOT own NetJet's if it was not profitable in some way. But even Buffett makes mistakes, from page 8 of the 2007 BH report:

The airline industry’s demand for capital ever since that first flight has been insatiable. Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it. And I, to my shame, participated in this foolishness when I had Berkshire buy U.S. Air preferred stock in 1989. As the ink was drying on our check, the company went into a tailspin, and before long our preferred dividend was no longer being paid. But we then got very lucky. In one of the recurrent, but always misguided, bursts of optimism for airlines, we were actually able to sell our shares in 1998 for a hefty gain. In the decade following our sale, the company went bankrupt. Twice.

Buffett also explains their cumulative losses in Europe over a ten-year period added to $212 million. Today NetJets is the leader in that biz model in both the US and in Europe. As much as Vern hates the opinions of "experts," I have long wondered what if Vern had been smart enough to chat with Warren before starting the EAC venture. In my opinion, IF Vern was truly a visionary, he would have partnered up with Warren to build planes exclusively for NetJets instead of teaming up with Ed and DayJet. Maybe that model **could** have worked if Vern and Ed tweaked certain details...

Regardless, I will agree with the description of the GA market as an hourglass ...or more of a "bar-bell" economy: deluxe top-of-the-line service for NetJet customers versus 3rd-class steerage service for Southwest customers. Listening to people like Don Imus praising NetJets leads me to believe that THOSE customers don't want the risks of owning a plane despite the fact that they have the net worth to afford one. That alone should tell you what high net-worth people think of owing a plane. If you have read the book “The Millionaire Next Door,” you know that most high net-worth American’s own a Ford F-150 and would totally eschew the concept of owning a plane. My former father-in-law is a millionaire running the great Piggly Wiggly empire of Grundy county Tennessee; I would laugh my ass off if he were to buy an EA500. The fact that Kid Rock may “own” an airplane doesn’t impress me. Many foolish people own a Corvette and a $500,000 house simply because they currently have the $$$ to finance that lifestyle. Smart companies – like Berkshire Hathaway – don’t depend on those customers for their success.

On the flip side Baron, if Cessna and HondaJet are entering the market, they must see some potential for profit eventually. I think it boils down to the product mix for Cessna, that a Mustang exists solely to attract those "marginal" consumers into the market, companies most price sensitive. HondaJet must also have some fuzzy 10-year plan to make more than just one model or else their entire investment is pointless.

We can spend hours analyzing the biz sense of the GA and commercial plane biz. I will admit that both ends of the spectrum don't make sense to me: both the EA500 AND the Airbus A380 are just out of this world. At over $300 million, how on earth can ANY airline company make money with just one A380 over a 30-year period??? What does it cost to operate per hour??? My God ...that sucker must burn a ton of jet fuel **per minute**. But there was a Willing Buyer and a Willing Seller in that market too. Just because it defies our logic doesn't mean it was a bad decision to build it/buy it. I remember the same economic discussion regarding the construction of the World Trade Center in NYC. It cost millions to build it in the 1960's at a time when $/square foot was cheap in NYC. But then things changed in the 1980's and the WTC was poised to cash in ....which is the central theme of supply-side economics. I suppose those that buy the EA500 and the A380 have a vision 10-15 years into the future and they are making the bet that profits will be a function of supply, f(x)=y. I'd prefer Las Vegas if I were going to wager $300 million...

In the context of EAC, I'm willing to suspend my final conclusion until I see what Roel has up his sleeve, specifically with what he does in Europe and with what happens to that phantom Russian factory (Red October?). By December 2009, we should be able to discern if his biz model - in what one can do with an EA500 - is truly disruptive AND profitable. It may not be possible to have both at the same time. Thank God it’s his money at risk and not mine...

e.d.t.

baron95 said...

airtaximan said...
well BAron, there goes your last chance for an affordable twin jet...its based on rate,


I know. I've come to grips with it. I've already accepted that the personal plane of the future will be single-engined. Piston, TP, or FJ, or fuel/cell or electric powered it will be single engined.

I'll be on the bandwagon of powerplant reliabiliy and maintenance for reliability.

Just like ETOPs made twin ops 180min+ away from land 100% safe to-date, there is no reason not to make SEOPs extremely safe as well.

Particularly, given that the only a miniscule number of fatalities in SE planes is due to powerplant mechnical/electrical failure. Make the powerplants/systems just a little bit safer and you make that a non factor for the average private flyer.

baron95 said...

ATM said... Anyhow, imagine a mode/equipment/pricing that works for air taxi, or cry in your soup

(agree with all you are saying)

I already know the model I want for personal transportation and light duty air charter.

1 - SE Fan Jet. With at least 1 potty on co-pilot's seat with hard privacy (a la PC12 - best design I've seen). Model A: 5 PAX, at FL 280, 300 KTAS, 1,000nm with 800 lbs payload. Model B: 6,000 lbs MTOW, @ FL280, 330KTAS, 1,200 nm with 900 lbs payload.

2 - FAA/EASA change the regs so higher costs presurization requirements begin at FL280 (same as RSVM), and require NO TYPE RATING for modern SEJets with MTOW of 6,000 lbs or less and 6 seats or less.

3 - Fully automated on failure and redundant electricals, avionics, buses, systems. Mandatory powerplant trend monitorng and telematics. Fail-safe maintenance procedures. Goal of one in-flight total power loss in 100K hours.

4 - NO HSI requirmeents on powerplants (on-condition trend monitoring based), with TBO of 5,000 hrs+. That is to defray the cost of the engine by longevity.

5 - HARD Federal liability limits on aviation accidents except where gross negligence or wilfully destructive acts are involved.

All of the above is readily at hand, and there is no reason it does not come to pass other than bureaucratic inertia and the like.

We'd have a resurgence in GA. Those planes would filter to the used market in a few years, etc.

Chances of it happening in the next 10 years. ZERO. In the next 20 years. 1 in 3.

baron95 said...

B.E.G said ... Problem is, the Premier is already bumped up against 12,500# for FAR23. Going to FAR25 level systems redundancy would be a significant expense.

No need for that. It can be certified in the Part 23 commuter category with little extra expense other than mandatory engine-out take-off performance data.

baron95 said...

NZ said ... Anyway, I'm not disagreeing with anything you said.

Neither was I. I believe you are correct in your observations. I was just pointing out that, as always, there are always exceptions. Some markets and some planes are still hot.

I pitty the people that fire-sold their SUVs at $20K losses and bought a Prius for $3K over sticker, because they believed the news hype on fuel prices, hybrid sales, etc.

But for each one of those, there is a guy or gal driving around a nearly new SUV of their dreams for less what the guy paid on a cramped and poorly performing Prius. There is loss and there is gain in any market.

With home prices down and interest rates in the 4% rate, it is just a matter of time before things turn around. There is no way around it.

Black Tulip said...

Baron95,

Regarding your electric-powered single-engine airplane... won't the extension cord get in the way and limit range?

gadfly said...

Through the eyes of the “gadfly”:

The name, “Eclipse”, was a self fulfilling prophecy. The company was never based on sound judgement, true ability, and wisdom, but an assumption that modern technology, applied by computers, and washed (drowned?) with liberal amounts of money can produce anything the mind can imagine. And underlying these assumptions, was a person or persons that had little or any respect for absolute honesty . . . and humility, in the process of developing a product.

Can a “very light jet” topping the scales at 4,800 lbs MTOW be designed and produced at under a couple million, in 2009? . . . Sure! But it must first of all, fulfill certain basic requirements.

The “gadfly” does not have the option of going into all that, just now. However, let’s summarize it in few words: “Focus on a single target!”

A more proper name for the “thing”, the monstrosity which still remains at “zero” completed aircraft, might be the “Blunderbuss”. The blunderbuss was an early firearm, with a funnel shaped barrel . . . an attempt to spread the “shot” in all directions, with the theory that if you fired the thing in the general direction of the targets, something, surely, would be hit. And so, the “Eclipse” was an attempt to hit all targets . . . and missed ‘em all!

A “very light jet” to meet the payload/speed/altitude/distance requirements for a family of “four” . . . the present technology is enough to support all that.

A “very light jet” to meet the requirements of transporting a couple businessmen from “A to B”, in regular air-taxi fashion, with all of the above specs . . . all within present technology . . . and within the original “claims”, etc., . . . all this is completely viable.

So what was lacking? . . . First, dead honest founders! . . . Don’t ever, ever under-rate this priority. Second, focus on a single beginning objective! Third, the “genius” single talent that must be given full reign in design . . . that rare individual that brings together an inventor’s mind, and a background of experience in manufacturing, aerodynamics, electronics, “human nature” (in both the workers and the users), . . . and that worn out platitude of someone who doesn’t march in “lock step” with the “norm”.

So, what to do if you cannot bring together these requirements? . . . Go into real estate, or sell computer software . . . or hardware . . . or sell “Amway” . . . anything, but stay out of the aircraft industry.

gadfly

(You know what? . . . the “Blunderbuss 500" somehow fits. Well, in the interest of “brevity”, we can honestly call it the “Blunder . . .”.)

gadfly said...

Airedales of every sort:

Flying is not natural to “man” . . . otherwise, God would have provided each of us with muscles, a breast-bone, etc., of massive scale. (Can you imagine what we would look like in feathers?)

But God did give us “brains” to use. God gave us the privilege to use our brains, to go beyond, and above, our normal realm . . . and He promised to give wisdom to those that asked for it.

Eclipse is an example of folks that failed to follow the formula . . . and (among many other things) failed to “ask” for wisdom. Obviously, all this has much to do with far more than the physical techniques of “flapping wings” and/or using the vast resources available to achieve heights and speeds, unknown by any bird or insect.

The entire scenario is an example of “fools” running around in a vast black box . . . bumping into each other . . . hoping for success . . . with about the same odds of life being “self created” in a trillion years. If you have never done the “numbers”, you owe it to yourself, to begin . . . about now.

Most have no clue as to the precision required to produce a viable “very light jet” . . . Eclipse is a prime example of assumptions “run amok”.

If the precision required for a successful “very light jet” requires the maximum of human intelligence and wisdom, expand your mind to the next levels . . . and you have barely begun to approach the simplest of creation.

gadfly

(If you cannot deal with powers of ten, to the 150th, and beyond, don’t even begin to enter into this world . . . you will be completely overwhelmed, and disappointed, if you happen to be thinking in terms of “chance”. And, by the way, we live in a universe in powers of ten to less than half that. [If you don't understand what that means, start multiplying ten times ten . . . 150 times. 'Don't bother, neither your calculator, nor most computers can produce the answer . . . which will still fall far short . . . and if you were in the "lottery", you still need to win on the first try . . . maybe.] In the simple terms of your college professors, you have been "had", in a most royal manner . . . for the sake of a political/moral agenda!)

Bubba said...

Just posted on the Cirrus site...Captain Zoom has purchased an aircraft. I guess he will shill for Cirrus now that he can no longer shill for The Wedge. In his post on the Cirrus site he asks for "any suggestions, insights, ideas, experiences and caveats any owners might have for a guy who has just bought one (Cirrus)".

I have a couple of suggestions:

A. Get a license to fly the thing.
B. Find someone who cares.

I'm sure the folks on this good site can think of a few other suggestions for Zoom. The suggestion box is now open!

Bubba said...

Oh wait...I forgot to add this to my list for Zoom

C. Fly your new plane to Sun N Fun.

airtaximan said...

Baron,

you are a great guy..

happy new year to all

Lets hope for some real entertaining drama from EAC or the surviving entity in 2009... the safe kind.

Bubba said...

Well, this morning I see that Zoom has proclaimed the Cirrus SR22 turbo to be the "Best of Breed" for the year. Indeed, it is a great plane and I might even agree with his assessment but his shilling for EAC gives him ZERO credibility. His lack of ethics is appalling! I haven't read his tripe, but I'll bet he fails to mention he just BOUGHT (or was given?) a used Cirrus Sr22!

baron95 said...

EDT I am very disappointed in you. What you posted is clearly NOT true in absolute terms. This information is free and easily available at www.southwest.com

Hummm.... Exactly what part f my remarks "Domestic airlines ARE not making money" do you disagree with?

Southwest latest quaterly report on Oct 16 was a LOSS of $120M. Perhaps you should visit Southwest.com and get up to date info. And once they start operating in LGA, you'll see many money losing flights added to their pain.

baron95 said...

Black Tulip said...
Baron95,

Regarding your electric-powered single-engine airplane... won't the extension cord get in the way and limit range?


I know you wrote as a joke, but did you know that the USAF/US Army have actually issued RFx for electrical "refueling" aka recharghing in flight. It was for drones, but, you know....

Think of a KC135 or KC30 with a bunch of extension cords hangin down rechaarging the ultraquiet drones and you won't be too far out.

Niner Zulu said...

I saw where the first Phenom 100 is being delivered. It looks like a great aircraft and is clearly the top of the food chain for VLJ's, but doesn't seem to be getting much fanfare due to the poor economy.

Guess it's time for another reality check.

There are 27 Phenom 100's listed on controller, many indicating a "base price" of $2.85m. I'm not sure I believe the ads, because I was given the opportunity to reserve one at $2.75m as late as Fall 2006. A lot of people got in at the lower price, and they are trying to pocket the $100,000 difference between what they paid and the new "base price", advertising a "smaller" premium.

Hmmm.

Our favorite butcher recently closed their doors. They couldn't stay in business selling high quality fish and meat to a very affluent community. They had a great location. Two years ago, there were lines at the counter around 5:30pm as people stopped by on their way home from work. Last year they were offering coupons and discounts. Now there is a For Lease sign on the door. Did all the rich folks stop eating, or are they being more stingy with their dollars?

The reason I mention this is that flipping jets is not the same lucrative business it was just 2 years ago. In fact, it's pretty much financial suicide. Sellers are either going to have to take delivery of their order, or give away all or most of their deposit just to bail out.

eclipse_deep_throat said...

Baron said,
Southwest latest quaterly report on Oct 16 was a LOSS of $120M. Perhaps you should visit Southwest.com and get up to date info. And once they start operating in LGA, you'll see many money losing flights added to their pain.
***
There are lies, damn lies, and then there are Baron's lies. Sure, for the 3rd quarter that ENDED on 9-30-2008, as reported on 10-16-2008, Southwest lost $120 million. For the first 9 months that ended on 9-30, Southwest still posted a POSITIVE cumulative net income of $234 million, versus $533 million for the first 9 months of 2007. Perhaps you should visit Southwest.com and read ALL the numbers for net income. You have a consistent MO of selective memory and even selective use of numbers as long as it suits the agenda you wish to advance at the moment. Even if you are right and I am wrong, so what? Explain why you think SW has a bad biz model. My point was that they mave made money over the last 30-some odd years, a fact that you glossed over or outright ignored. Even in bad years they make money, albeit less money than the same corresponding time period last year, but they still have positive profits because they have a sound biz model.

And LGA, LaGuardia? Another red herring. Southwest deliberately refused to fly into to Newark, NJ because of the fees they charged. I have flown in and out of EWR countless times since I lived in Piscataway, NJ up until 1991; their refusal made proper biz sense to me. SW has used PHL and ISP to serve the NYC area for a good long time since the fees those airports charge are lower and better fit the low cost fare structure SW customers expect. If they have a new cost-effective deal with LGA, great. If it doesn't work for them long-term, I'm sure SW management will make proper adjustments.

It IS possible SW will end 2008 with a cumulative negative net income. But I doubt it. If they post a net loss I would still invest $$$ with them only b/c I trust SW to return to profitability sooner than anyone else.

And no witty critique from you on Warren Buffett and NetJets? Hmmmm.

e.d.t.

flyboymark said...

Electrics ARE here and technically ready to fly 30-45 minute flights but this outfit (Sonex) takes things slow:
http://aeroconversions.com/e-flight/

FlightCenter said...

The data on the FAA website indicates that Eclipse did not deliver any E500 aircraft in the month of December.

According to FAA data, Eclipse has delivered a total of 258 aircraft since deliveries began, 159 in 2009. Here is the breakdown by month.

Jan-08 -- 10
Feb-08 -- 16
Mar-08 -- 16
Apr-08 -- 28
May-08 -- 14
Jun-08 -- 25
Jul-08 -- 21
Aug-08 -- 17
Sep-08 -- 6
Oct-08 -- 4
Nov-08 -- 2
Dec-08 -- 0

Shane Price said...

Thanks for that update FlightCentre.

I will take this opportunity to remind people (again) that you maintain the delivery and order history spreadsheets, links to which can be found in the top right hand side of the blog home page.

One question about the FAA numbers. I understand that s/n 260 was in the course of 'delivery' when the axe fell in ABQ, and that this aircraft is the subject of it's own set of legal proceedings. What interests me is the status of s/n 259. Has it actually been delivered?

Shane

baron95 said...

Take it easy E.D.T. I try to be factually accurate in everything I write. When I make a mistake, and it is pointed out to me, I immediately apologize and/or correct myself.

I said domestic airlines ARE (look up the definition of the word) losing money. That is a generic statement of the market. The Legacies consistently lose money on their domestic operations and simply use them to create loyalty (mileage programs) and feed international service where they (hope to) make money.

You came out swinging saying I am totaly WRONG, and tried to pick on the WN example, which at best would be an exception, but in fact is not, because WN IS losing money, as reported in the LATEST available financial reports that YOU told me I should look up to "educate" myself.

So take it easy.

I've been following WN for a long time, and they do have many smart strategies (keeping unions out, keeping out of congested airspace/airports, single-type fleet, etc).

BUT, the problem is that their pilot compensation is now out of whack, and the legacies are bringing their costs down.

I think WN will be like any other airline - marginally profitable on good times and unprofitable on bad times. Competition from the likes of B6 and VX on one end and the more competitive legacies, will continue to depress WN's pricing power.

One more round of consolidation such as UA+CO and AA+AS, loss of th eoil hedge advantage, the VX+VS and B6+LH tie-ins will be really tough on WN.

But, of course, the legacies have proven that they can make the dumbest moves (like hedge oil at $100+), that they may continue to crater. But given equaly smart management on say DL and WN, I'd like to play the DL hand better.

But the smart move is NOT to play in domestic airline. The real hand to play is EK, SQ, etc. Growing, profitable, all international carriers, that can hire young, non-union, crew to fly young fleets.

bill e. goat said...

Baron,
I'm perplexed.
You extolled the virtue of young flight attendants, over middle aged and older ones, because they are cheaper to hire.
Now you extol the virtue of young pilots, over middle aged and older ones, because they are cheap to hire.

Give both groups are largely cultivated with tax dollars (schools, roads, police departments, universities, the FAA oversight), how do you propose paying for those same services with wage earners making half as much? By doubling income tax? By going further into state and federal debt?

Cheap labor is a disaster for a democracy- nations ascend based on the middle class ascension. And we are already seeing our schools, roads, police protection, FAA oversight, etc decay SIMULTANEOSLY with the decline of the middle class.

If you are in favor of doubling property taxes, and doubling income taxes, then I would say it is appropriate to cut wages in half.

Or maybe just lower the standard of living in the US by half. (Actually, I would suggest it would be more of an exponential decline, but I'll leave that to our economist-minded folks to comment on, if they care to).

Thanks.

bill e. goat said...
This comment has been removed by the author.
bill e. goat said...

Baron,
BTW, I'm not putting you on the spot for your views- I just would like you to elaborate and extrapolate where what you are advocating would lead, good and bad.

I deduce you would consider the cheap labor "good", but who is it good for in the long term? And what are the full costs to the nation over the next two generational periods?

I believe as a nation, we have been exploiting the investments made in our physical and social infrastructure (schools, roads, public works, etc) by earlier generations. Society dedicated a lot of effort to improving our nation 1930-1975 or so, but since then, I would argue that we have not been investing, or even maintaining that physical and social infrastructure, but rather just "cashing in" on short term profits, (or take your pick: exploiting, raiding, raping) and ignoring the long term consequences.

Just like we've been ignoring the long term consequence of our exploding national debt- that was a topic of passionate and intelligent debate in the 1970's, when it was MUCH smaller. Now, it's just not "fashionable", after all, it won't affect THIS quarter's reports.

baron95 said...

B.E.G. not the place for a wage policy debate, BUT, so long as someone is willing and able to do a job for lower pay at an equivalent productivity level, by definition, those with higher pay or more restrictive work rules or higher benefits are overpaid.

You can prevent the market corrective forces by barriers to trade or by unions driving entire industry sectors to the ground, but not for long.

It is irrelevant if wages in America were going down (they are not) IF the prices of goods keeps going down.

The middle class is not declining, quite the contrary. By any meaningful definition the american poluplation is doing better than ever before.

Chack: Average number of hours/months that an average worker needs to work to buy a car, a computer, clothing for the whole family, food staples, vacation, air-travel, etc. They are all at historically low levels.

Who cares if workers in the UK make more per hour if they need to work twice the number of hours to buy the same car as an American.

Lets put on a 100% tax on imports. That would solve a lot for union workers in the US in textile and mannufacturing, but would be disastreous for the whole population that will have to pay more for less.

We have it just right in the US. Let unreasonable union jobs and uncompetitive companies fail, let competition be brutal, lets favol the American consumer.

We want free cell-phones, reasonably priced cars with outstanding financing deals, cheap airfares with polite, motivated, well groomend and young flight attendents, etc. We could care less if Toyota and Honda and Embraer, EK and SQ are the ones that are giving it to us, rather than Chrysler, Piper, NW.

So move over to the 21st century EDT. The is no healthy way to preserve artificially inflated wages and benefits from the 20th century in America. It is move on or die. It can be a slow death like the UAW or a fast death like the steel industry, but death is certain to those that cling to past uncompetitive ways.

Happy new year. The last one of the first decade of the 21st century.

baron95 said...

B.E.G. not the place for a wage policy debate, BUT, so long as someone is willing and able to do a job for lower pay at an equivalent productivity level, by definition, those with higher pay or more restrictive work rules or higher benefits are overpaid.

You can prevent the market corrective forces by barriers to trade or by unions driving entire industry sectors to the ground, but not for long.

It is irrelevant if wages in America were going down (they are not) IF the prices of goods keeps going down.

The middle class is not declining, quite the contrary. By any meaningful definition the american poluplation is doing better than ever before.

Chack: Average number of hours/months that an average worker needs to work to buy a car, a computer, clothing for the whole family, food staples, vacation, air-travel, etc. They are all at historically low levels.

Who cares if workers in the UK make more per hour if they need to work twice the number of hours to buy the same car as an American.

Lets put on a 100% tax on imports. That would solve a lot for union workers in the US in textile and mannufacturing, but would be disastreous for the whole population that will have to pay more for less.

We have it just right in the US. Let unreasonable union jobs and uncompetitive companies fail, let competition be brutal, lets favol the American consumer.

We want free cell-phones, reasonably priced cars with outstanding financing deals, cheap airfares with polite, motivated, well groomend and young flight attendents, etc. We could care less if Toyota and Honda and Embraer, EK and SQ are the ones that are giving it to us, rather than Chrysler, Piper, NW.

So move over to the 21st century EDT. The is no healthy way to preserve artificially inflated wages and benefits from the 20th century in America. It is move on or die. It can be a slow death like the UAW or a fast death like the steel industry, but death is certain to those that cling to past uncompetitive ways.

Happy new year. The last one of the first decade of the 21st century.

airsafetyman said...

Baron,

What is with you and the unions? Southwest Airlines pilots are unionized as are their mechanics. What's left - the college kids that man the gates? The Boeing 777 was made with union labor; the Eclipse 500 without. Which of those would you rather fly on? The new Corvette that will blow the doors off most anything European at a fraction of the price was made with union labor. Outsourcing has taken away American jobs and has resulted in lower quality for all of us. Have you ever tried to get your airline ticket changed by some Indian in Bangladesh, or talked with one of American Express's helpful agents in a third world hell-hole call center to try and get assistance? The English language is a sometimes thing for them. Talk about being overpaid, what about the heads of Citibank, Bank of America, Wachovia, Lehman Brothers, et al? And you are worried that some retired union member can see a doctor without mortgaging his house?

eclipse_deep_throat said...

Baron said,
So move over to the 21st century EDT. The is no healthy way to preserve artificially inflated wages and benefits from the 20th century in America. It is move on or die. It can be a slow death like the UAW or a fast death like the steel industry, but death is certain to those that cling to past uncompetitive ways.
***

I agree and I see your points, no problem. I am a Tom Friedman/The World is flat kind of person; Unions are obsolete in most cases (BEG: Friedman's boook is another one you should put on your reading list). A "mercantilist" system is rather incestuous with domestic production only for domestic consumption. Like you said, it can be done but it is not a **healthy** way to improve the opportunities for workers in any country. Also, I am not a staunch defender of unions at all, except in cases where they need to protect workers from being injured at work and/or thrust into positions they are not trained for. The UAW has made some dramatic mistakes in the last 30 years because no one there seems to have even a rudimentary education on modern economics. I have writted scathing letters to Senator Bingaman, New Mexico's senior Senator now that Dominici has retired. As I have posted earlier, Alfred Sloan must be spinning in his grave with GM on the verge of CH7. The biz model he created in the 1920-1930's had consumers progress from Chevy to Cadillac throughout their life. Trucks were NOT supposed to be their sole profit center. The UAW missed a big opportunity to ensure proper accounting rules were in place to show a net profit for each plant and each vehicle. And when sales of any one model tank, the UAW could have been in a position to hold Mgmt feet to the fire by having it IN THE UNION contract for the plant to change to another model within 30 days, etc.

The analogy I think is relevant is with that of SAG union labor in Hollywood, CA. It's easy for creative accountants to show that a $100 million movie didn't make a "profit" at the box office. Hence, a lot of A-list actors / actresses are able to get paid on the back-end with DVD and Blu-ray sales, etc. Each contract is unique but the marketing of Will Smith, Jennifer Aniston, Jim Carey are distinct brand names today. If their most recent project tanks, the dice have memory in this case. The UAW could have put a modern spin on this by keeping track of the net profit on each car/truck out the plant doors. But when GM dumps product on to fleet buyers like Avis, which it used to have an ownership interest in, well that distorts the calculation of a real net profit (I can't remember if GM still owns a stake in AVIS).

BEG:
As we have have discussed privately, "cheap" labor is not a bad thing in and of itself. Most doctors completing their residency are lucky to get paid more than $35k per year, and that is much less than the $60K I made at EAC as a non-union grunt in 2007 at the age of 35. Generally speaking, most Americans' peak income-earning years are between ages 40-55. That is also the time when most working adults have a big bullseye on thier forehead if/when their bosses want to cut costs. Labor is the first thing that managers can cut only because it has an immediate effect on monthly biz expenses. Accounting 101: labor is recorded as a "salary expense" in most for-profit companies.

BEG, also remember that your average capitalist / plutocrat is one that has "internalized" the values of Adam Smith: his or her self-interest is their primary motivation to get out of bed each morning. But, IF they have made a decision to be in the biz of making widgets, it takes MORE than just cheap labor to get thier attention. Does the cheap-labor environment protect property rights and intellectual property? The social infrastructure IS a critical factor when deciding where to locate a plant. Now, I briefly dated this nutcase girl in El Paso, TX back in Dec 2006. El Paso scared the crap outta me, more than HER pissy mood swings!!! You can easlily see the crap hitting the fan every day with the drug trade in Juarez and the cartels killing people off for sport. A lot of that mess crosses the border one way or another. On top of that, the Mexican govt is either corrupt or they are both corrupt and inept at finding ways to stop the madness. The news has been reporting something like between 10-20 people are killed in Juarez EVERY DAY. Considering all the cheap labor one can find there, would you like to set up shop in Mexico right now? In this scenario, Mexico can have a ZERO percent income tax and capital gains tax, but I would NEVER move there nor set up a biz there. Downtown Bagdad would be a better spot to own a Subway franchise with the US military looking out for you...

Time for dinner.
;-)

e.d.t.

baron95 said...

A slow week on the Blog - it is time to tickle Fred.

Fred here is your New Year's Present - It is an educative video on how slow some drive on US highways.

Since I know that closing rates of 80 KPH on the Autobhan scare you, I didn't want you to be caught off gard, if you rent a car in the US.

Note: B95 does not condone driving like that on public roads.

Cheers.

baron95 said...

P.S. That was in Arizona, which is not too far at American road speeds from Eclipse - thus, the connection to the Blog. ;)

baron95 said...

For the record, I am not against Unions. I am against unions that are out of touch with reality and are trying to cling to an untannable sructure.

The UAW is probably the worse. It was (is) the most successful union in the world. Unless you have seen the phone-book-sized UAW contract (and I have seen snippets from it), you can not comprehend how pervasive and perverse the work rules are and how the business is structured around the union demands, not the market place competitive presures.

If all autoplants in the world were bombed to ruins, like in 1945, that contract could work. But when we have the likes of Hyundai pumping increasingly high-qality cars with lower production costs, it is a recipe for disaster.

The UAW, save for government intervention to pay back the union election favors, would suceed to drive its actively emplyed membership from 1M to ZERO in 2009. Right now, they only managed to drive it from 1M to 250K. But it looks like they are going for total victory. ZERO.

baron95 said...
This comment has been removed by the author.
baron95 said...

ASM said... The Boeing 777 was made with union labor; the Eclipse 500 without. Which of those would you rather fly on?

First, the B777 was entirelly of conventional construction. All the inovation in the B777 was in full CATIA design, ETOPS-off-the-bat, Flight Control SW and Avionics SW.

All those inovations came about by mostly non-union engineers and designers. On the line, the B777 was put together by IAM union member just like the 767 and 747.

The Cessna Mustang-Columbus were/are made (mostly) without union labor. The G1000 is made without union labor. So are almost every GA/Biz Av plane in the market.

When Boeing really needed inovation in mannufacturing (high-rate-production wwide-body with a goal of 3 days final assembly per plane), they sent most of the work outside IAM. Now, it is true that Boeing totally screwed it up on the 787, but when they recover, Boeing will have determinisc contracts for over 90% of the cost of a 787 vs having to deal with IAM actions.

I think you are seeing Boeing mgmt saying, we can't compete going forward with the IAM doing anything more than 10% of the value of the plane. We will not be like Detroit and see our market share taken away by forign competition because of uncompetitive labor.

See the above comment - There is a way, and I'd love to see it happen, for the IAM to get that work back.

Lets see if they get their act together in time to win 737RS/Y1 work, or if we'll see a total outsourcing a la 787.

baron95 said...

E.D.T (B.E.G) You are super guys. I had pegged you as "old-thinking" union zealots, but I now see that you are enlighted individuals.

I'd love to see you running the IAM at Boeing. I don't think there is much chance you'd be elected, but, it would be an enourmous improvement if it happenened.

Modern unions in the US should be looking almost exclusively for opportunities to increase productivity in the US, so no other worker in the word could produce the widget faster, cheaper, better.

They should work on work rules, factory structures, compensation incentives that totally drive productivity. They should be ahead of the curve on plant consolidation, work-force size adjustments IAW business cycles, etc.

Resisting these moves, only makes the US production plant less competitive over time and further rives mgmt to outsource.

THe MHI and Alenia plants in Japan and Italy also have unions and high wages. But it is not (by and large) Boeing's problem to deal with. They have a certain/determinisc contract and that is it.

The IAM should have bid under the same terms. I.e. the IAM will beat labor costs and work rules work force size, etc from alenia and MHI and want this contract.

Then, we'd have the 787 wing box and fuselage tubes and wings built in the US by IAM members.

I'd love to see that.

Black Tulip said...

Big article in today's Wall Street Journal - "Why We Keep Falling for Financial Scams"

Tulipmania is featured but Eclipse is missing.

airsafetyman said...

"The Cessna Mustang-Columbus were/are made (mostly) without union labor."

Historically Cessna's manufacturing quality (union or non-union) has not been that highly-regarded until Eclipse came along to become the new bottom feeder.

baron95 said...

ASM said... Historically Cessna's manufacturing quality (union or non-union) has not been that highly-regarded

Agreed. Except for the Citation line of late. The Mustang, though, being the first Citation built in idependence, seems to be well built. Lets see if that is a turn around point for that facility.

As for Eclipse, I think their mannufacturing was actually pretty good for a start up company. If you saw an Adam 500, closest comparisson (startup first-off product) you'd be appaled. The thing looked like a disaster put together by a bad high-school class.

baron95 said...

The thing though, is that any non performing employeed at Independence can be fired on the spot and any great employee, regardless of seniority can be promoted. Try that at an UAW or IAM shop.

bill e. goat said...

Hello Baron, EDT, and fellow economic theorists. Where is Fred lately? Since I spent about eight hours working on the following post, I'm going to go ahead and put it up- not for confrontation, but for stimulation- so please consider the "NO"s as rhetorical constructs, rather than finger wags:)

(Some of the propositions are marginal- such as family income over the decades- I do believe it has declined a few percent, Baron believes is has changed somewhat more dramatically- I'd say it's close enough either way to call it flat, so I'm not advocating that "my -2% is more accurate than your +4%). But for the purpose of challenging one's mental framing of the situation, here we go. Related to Eclipse? Well, my principal interest in Eclipse has been "myth busting the financial spin"- the same thing applies below. Thanks.
-------------------------------
"B.E.G. not the place for a wage policy debate, BUT...,

NO.
It's going to be at least 12 more hours before someone does something incredibly stupid at Eclipse (again), so let's have some fun! :)
----------------------------------

"so long as someone is willing and able to do a job for lower pay at an equivalent productivity level, by definition, those with higher pay or more restrictive work rules or higher benefits are overpaid."

NO.
As long as someone is doing the job, for lower pay at an equivalent productivity level, by definition, those with lower pay are underpaid.
--------------------------------

"You can prevent the market corrective forces by barriers to trade or by unions driving entire industry sectors to the ground, but not for long."

NO.
You can protect the US work force with barriers to trade and unions, keeping entire industries from being bulldozed to the ground because the jobs won't be off-shored. And you can do it for as long as unfair elements of the competition exists.
---------------------------------

"It is irrelevant if wages in America were going down (they are not) IF the prices of goods keeps going down."

NO, and NO.
Real wages ARE going DOWN.
Real wages ARE going DOWN
-and-
The price of goods keeps going UP.
The Price of goods keeps going UP
---------------------------------

The middle class is not declining, quite the contrary. By any meaningful definition the american population is doing better than ever before".

NO.
If prices are up, and wages are down, how is this "better"?

"Since 1975, practically all the gains in household income have gone to the top 20% of households"

(What leftist think tank put this drivel out? The CIA 2005 factbook on the US).
---------------------------------

"Check: Average number of hours/months that an average worker needs to work to buy a car, a computer, clothing for the whole family, food staples, vacation, air-travel, etc. They are all at historically low levels."

NO.
The amount of labor required to work to buy products, infers a relative degree of productiveness. (e.g., the more productive the workforce, the more product is generated in a specific duration of labor).

Where this falls down is when the products are imported. Our work force hasn't become more productive, or more prosperous- it's just that the imported products are cheaper.

(Indeed the long-term consequence is just the opposite: The more imported products we buy, the weaker our economy becomes, and the MORE hours we have to work to compete with foreign countries).

Wrong for: cars, computers, clothing – these have a lower point of sale price because they are made by cheap foreign labor.

Food? Cheaper due to industrialization of farming (resulting in fewer farm jobs), and immigrant serfs.

Staples? Foreign products.

Vacation and air-travel? Cheaper because the economy is in the dumper, and there are forced to lower prices.

AND- consider: housing? NO. Medical care? NO. Education? NO. These are the "big ticket" items that affect families a lot more than how many tennis shoes are in the closet. Think about how many hours a family has to work, to send a kid to a public university- I'd say about a 300% "hours of labor" increase over 30 years ago. Same when that kid gets out of school and tries to buy his first house. Or go to the doctor or dentist.
---------------------------------

"Who cares if workers in the UK make more per hour if they need to work twice the number of hours to buy the same car as an American".

NO.
The larger issue is: do you care if workers in UK make $100K because they are all engineers, and workers in the US make $20K because they all work at McDonolds? (and are "consumers", not "producers").
-------------------------------

"Lets put on a 100% tax on imports. That would solve a lot for union workers in the US in textile and manufacturing, but would be disastrous for the whole population that will have to pay more for less."

NO.
Let's put a tax on imports that is commensurate and neutralizes slave labor exploitation, environmental policies, and infrastructure investment.

This would force third world countries to develop (which I AM in favor of- even if it does present completion to the US work force- when it's FAIR competition). The import good prices are going to be higher, either because we tax them, and it goes straight into our treasury, or because their cost of production is up: they are forced to pay their workers more, protect their environment, and build schools.

We spend a trivial amount of our disposable income on clothing necessities (more if we got into -truly- discretionary spending on frivolous fads and conspicuous consumption).
---------------------------------

"We have it just right in the US. Let unreasonable union jobs and uncompetitive companies fail, let competition be brutal(*), lets favor the American consumer".

NO.
What is brutal is living in the bottom 20% of US society- the people whose jobs are being offshored for ever cheaper labor, to support corporate profits, and the prosperity of the upper 20%.

Let unreasonably compensated CEO's and unproductive monopolistic companies fail. Let competition be FAIR, let's favor the American WORKER first- then the consumer. (There are too many "consumers" that are NOT producers- and those "consumers" are sending their purchasing dollars overseas- which HARMS our economy, and contributes to a downward spiral).

Once again, I present a "passe", Last Century, Dinosaur-ish (?- yikes!:) concept: trade imbalance. Did you hear it even mentioned in the recent Presidential debates? Nope. Just like the federal debt- it's just such a dated economic principle- who cares. It's ALL ABOUT quarterly reports, right? (Fools paradise. Tickets for the Titanic are on sale today- two for one).

Balance of Trade

Federal Debt

Extra credit problem: Does anyone see a correlation between these two curves?

*I find the use of the word "Brutal" pretty ugly in this regard. People in this group are working two or even three jobs, can't afford health care, daily food choices are difficult for those with kids. I don't want to live in a country with a Brutal society.
----------------------------------

"We want free cell-phones, reasonably priced cars with outstanding financing deals, cheap airfares with polite, motivated, well groomed and young flight attendants, etc. We could care less if Toyota and Honda and Embraer, EK and SQ are the ones that are giving it to us, rather than Chrysler, Piper, NW".

NO.
What I want is consumer protection from mandatory 2-year cell phone contract, Detroit building decent cars that aren't such of such poor design, and hideous styling that they can only be sold at a loss and require special incentives just to move off the lot, and flight attendants that I know are making a living wage, and not on food stamps.

"Consumers" could care less where their car or airplane or airline supplier are based: the American Worker ("producer"), DOES CARE. Money spent on American products, stays in America, and makes the country stronger by financing schools, roads, police, FAA, etc., rather than the benefiting mostly the elite in third world countries, or our competitors in developed nations.
--------------------------------

"So move over to the 21st century (BEG). The is no healthy way to preserve artificially inflated wages and benefits from the 20th century in America. It is move on or die. It can be a slow death like the UAW or a fast death like the steel industry, but death is certain to those that cling to past uncompetitive ways".

NO. NO and NO. NO. NO, but NO.

Here's some news: I am in the 21st century, and I got here 20 years ago, when I saw where the disastrous policies of Ronald Reagan were leading.

We have to take healthy steps to prevent artificially depressed wages (domestic and abroad) from killing the country we know.

We ARE dying as a nation-

How many roadways are now privately operated?

(because government doesn't have the funding to provide this most essential service?)

How many people live in gated communities now?

(Because cities don't have the funding to adequately staff, and intervention programs have been slashed? Gated communities ares is perhaps the ultimate proof that we are failing as a society to address our social and economic ills- easier just to wall out reality, than deal with it).

How many people send their children to private schools?

(Because public schools are struggling with a decaying tax base? My same general sentiments apply as above).

Comment: the children being affected are relatively powerless. Our society, one generation from now- not the children's parents- will either reap the rewards, or ill-consequences, of the present generations action, good or bad, as well as inaction).

It is time to take some steps to make our country healthy again, rather than continuing to raid the investments made by the WW2 generation. We can't even balance our budget, and we pretend like it doesn't matter- our economic policy has been a fool's paradise for the past near-30 years. Consumerism is NOT the way to build a strong nation- it is the way to ruin one.
---------------------------------

Regarding those UAW folks?
NO.
The UAW didn't design 3-ton "Sport" "Utility" Vehicles, thank you, nor 4x4 1 ton pickup trucks to negotiate those treacherous parking lots at the mall, nor dually pickup trucks to go to the grocery store, nor all wheel drive cars for good traction on those slippery desert interstates, nor 250 HP family cars, nor economy cars that are hideously uncompetitive.

Short-sighted CEO's did.

And consider the consequences:

Yes, UAW membership has dropped to 67% in 30 years.

But GM employment dropped 42% in just the last 4 years.

Chrysler had 120,000 employees when it merged with Daimler in 1998, now it has 55,000, count quickly because it's dropping like a rock- a decrease of 54 % in the last 10 years.

UAW membership drops below half a million

GM Recovery plan

Ford?
(I gave up after two hours of searching for U.S. headcount over the years- I suspect it is similar to GM's).
--------------------------------

Steel industry, quick death from unions?
NO.
Dumping, from Japan, Brazil, Russia, China, etc. Been happening from the mid 1970's.

Congresses response: about as rfesponsive to this situation, as they are responsible for attending to the national debt: "don't worry about it (as long as I can get re-elected, and I'll let the lobbiest spin the situation away)”.

Dennis Kucinich testimony
(Sorry, time constraints again- I tried to find a party-neutral source. I did find references to the problem of dumping by Japan in the 70's and 80's, and China and Russia in the 90's).
---------------------------------

Well, here's why to worry about those "dinosaur concerns from the last century:

"Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups".
(CIA factbook on the US economy, 2005).

"The United States has one of the widest rich-poor gaps of any high-income nation today, and that gap continues to grow.

(CSM June 13, 2005, article interviewing Alan Greenspan):
"In recent times, some prominent economists including Alan Greenspan have warned that:
the widening rich-poor gap in the U.S. population is a problem that could undermine and destabilize the country's economy and standard of living stating that 'The income gap between the rich and the rest of the US population has become so wide, and is growing so fast, that it might eventually threaten the stability of democratic capitalism itself'".

Standard Of Living
--------------------------------

"Happy new year. The last one of the first decade of the 21st century."

NO.
The LAST new decade of the 21st century.

(Well, just kidding- at least there is one thing we can agree on:)

Let's hope things don't get THAT bad.

But for millions of American families, it will be the last decade of comfortable living.

The last decade of upward social mobility was probably the 1970's. (Despite the fact we have an ever increasingly mobile society- maybe of necessity, as job losses force relocation).
---------------------------------

It occurred to me, as I searched with increasing angst for Ford Motor Co employment statistics over the past several decades, with no success (I made me realize just what a long time it's been since I was last totally stymied on a net search):

The singular statistic we use when discussing a company, is stock price. Everything I found was charts of stock price, rather than headcount.

When you reflect on that, it's really a sad to contemplate what society is using as a metric of success.

airtaximan said...
This comment has been removed by the author.
Shane Price said...

New post up.

Well, it's not strictly 'new' in the sense that it's a review of 2008.

Shane