One of the biggest players in aircraft parts and systems says it’s investing in its aviation companies and intends to continue strengthening “their manufacturing and service capabilities and better serve aircraft owners and operators.” The quote is part of a written response by Arcline, an investment company that has recently purchased several aviation companies, including Continental Aerospace, to a study done by an Alaska pilot on the impact of those and other acquisitions.
Maj. Ryan Gourley is an F-22 instructor and evaluator for the Air Force Reserves in Alaska, but on his time off he’s flying his Cessna 180 as much as he can. When he needed tailwheel parts he was taken aback by the cost. He put his analytical mind to work and quantified what anecdotal reports have been alleging for years: When investment funds take over companies that make parts for certified aircraft, prices go sky high. Arcline and Victor Sierra started buying up such historic aviation brands as Hartzell (Arcline) and McFarlane (Victor Sierra) several years ago, and the common perception in the industry is that price increases were immediate and substantial. Scroll down for the full copy of his report.
Gourley began gathering data on price increases and discovered there was real substance behind those hangar bitch sessions. He’s afraid it might spell the end of recreational and small charter aviation as we know it and he’s been asking aviation groups for help in highlighting the peril. AvBrief Editor Russ Niles and Smart Aviator Editor Larry Anglisano did a video interview with Gourley and sought responses to his concerns from Arcline and Victor Sierra. Arcline responded through its public relations firm, but we never heard back from Victor Sierra. Arcline gave us a statement on behalf of the whole organization and also one from the perspective of Signia Aerospace, the subsidiary that includes its aviation properties.
Here’s the Arcline statement:
“The aviation industry has faced meaningful supply chain constraints and rising supplier costs in recent years, contributing to higher costs across the market. During this time, Arcline has continued to invest in the manufacturing and service capabilities of its aerospace businesses, including expanding access to more affordable, used serviceable parts and investing in maintenance, repair and overhaul (MRO) operations to support aircraft uptime, factory-quality service at convenient locations across the country and flat-rate overhaul and exchange programs. These investments also include the development of a $30 million, 150,000-square-foot Innovation Center in Ohio to enhance composite propeller manufacturing and MRO activities. We remain focused on investing in our aviation businesses to strengthen their manufacturing and service capabilities and better serve aircraft owners and operators.”
Here’s the Signia Aerospace statement:
“Our partnership with Arcline has enabled us to make significant investments in our businesses, expanding our capabilities and strengthening how we serve our customers. In addition to investing in our products and maintenance, repair and overhaul capabilities, we have extended warranty periods, reduced lead times, and developed flat-rate and exchange programs to give aircraft owners and operators greater predictability in maintenance and repair pricing. We continue to expand our offerings to meet their evolving needs.”
If we hear back from Victor Sierra, we will publish whatever form its comments take. Here’s Gourley’s report.
It’s too sad that there’s so much doom and gloom in Aviation today. The FAA has finally done what we’ve been asking them to do for over 75 years. They have made regulations allowing General Aviation Aircraft Manufacturing that is friendlier. “Consensuses Standards” are much less costly and complicated.
Certified Aircraft including the J-3 Cub and 7AC Champ must be manufactured and operated to the same standards and rules as the latest Boeing 777. After World War II soldiers wanted flying to be simpler. They created organizations and publications just to discuss and make General Aviation different then Commercial Passenger Aviation.
Time to let the past go friends, Let’s move on and let these equity firms do what they do. New innovation is here and growing fast. Americans have conquered many challenges and creating a better General Aviation (Sport Aviation) is now our next great achievement.
A factor in my decision to sell after over 40 years as an aircraft owner. Seems like these could be possible violations of “anti trust” law. Any good anti trust lawyers out there?
Business’s have to make money to operate and stay in business. It’s unfortunate so many people, especially pilots, just don’t understand the concept.
Don’t mind businesses making a profit; I want them to stay in business. The problem is when they corner the market for a specific product and immediately raise the price purely from a greed standpoint. There was no engineering advance to the part, just an economic decision to gouge the captive audience.
Maybe the product had been historically underpriced for an extensive period of time and had to be adjusted accordingly.
Don’t think so. At the time, it was normal to see a 3-5% annual increase in price. Now, 100% increase over 13 years is way past “historically underpriced “.
That statement is broad and condescending.
I think most people here understand that aviation is inherently expensive. They also understand that it doesn’t have to be THAT expensive.
The private equity model of wringing cash out of a company while destroying its ability to serve customers and pay employees is sickening. I wish everyone understood that.
Well said! Greed is NOT good!
Understood, but so many C-Suite execs look to take advantage of the situation. Case in point are the fees charged at FBO’s such as Signature and Atlantic et al.
So when Hartzell bought Emag the prices jumped $500, what cost did Hartzell incur to justify the price increase. There weren’t any improvements to the product, just a name change.
PE firms primary motivation is ITS bottom line. Notice Arcline says it ‘ INTENDS to continue strengthening “their manufacturing and service capabilities and better serve aircraft owners and operators.”’ How is it INTENDING to accomplish this? “expanding access to MORE AFFORDABLE, used serviceable parts and investing in maintenance, repair and overhaul (MRO) operations to support aircraft uptime” Yeah, they always say…”Arcline has continued to invest in the manufacturing and service capabilities of its aerospace businesses”. Actions speak louder than words. The F-22 instructor pilot/C180 owner/hopeful future Part 135 operator is saying he sees no tangible proof of that. Why? Whatever part is being manufactured is priced beyond practical small business purchasing power. So, instead of investment in manufacturing with the goal of offering availability and affordability as a long term, stay in the GA aviation business, goal… its investing in used parts procurement combined with investments in MRO operations that are centered around the only readily available parts…that being serviceable used parts! Arcline, in my opinion, has no long term interest investing in moving to efficient, affordable, manufacturing of certifiable airplane parts for commercial/GA aircraft because that does not produce an immediate quarterly positive earning report. Arcline’s profitability is centered around making money off investment money, not creating businesses and jobs that actually produce something of value serving a particular aviation market.
Look what has happened to the automotive businesses supporting vehicles form the 1945-2000, the so called classic car/truck market. Fram, Raybestos, Isky Cams, Crane, Comp, Edelbrock, Champion, Delco, Allied, Autolight etc totalling over 105 aftermarket companies that for over 100 years in most cases, manufactured parts for these vehicles. These companies, who HAD the tooling, the manufacturing capability, and long term customer support were bought 10 years ago by a single PE firm. This year, that PE firm went BK! ALL of those companies instantly disappeared…including the tooling and manufacturing capabilities with it…FOREVER! Who in the US is going to re-tool for drum brake pads for a 56 Ford Crown Victoria for example? No one. Tangible proof? Go to Walmart and try to buy a formerly common, average, middle of the road quality Fram oil filter. Gone!
China and other Asian countries were sent this business by the PE firms, making those parts to the spec of the PE firms to further enhance PE profits…NOT the spec of the OEM. Guess what? Those parts did not work properly. Who gets the blame? China and other Asian countries. They woke up! Instead of building items to an obvious lesser spec for short term profitability, they are in the process of developing those parts outside of PE firms specs to a spec that DOES work. They are creating a small business cottage industry American companies used to supply. Case in point…Chinese manufacture a $400 Muncie M-22 four speed trans clone commonly found in GM muscle cars of the 60’s and 70’s. A used, complete, SERVICEABLE, rebuildable M-22 costs about $2,500 to $3,000. A fully rebuilt M-22 for a 67-69 Z-28 Camaro is $4500-$5,000. Racing versions costs over $6K. China makes a M-22 clone, with some improvements for $400 including free shipping! Does it work? You bet…being pounded by a modern LS3 making over 500hp! An Edelbrock Torquer intake manifold runs on average $400-600 dollars for a variety of American V8’s. China makes a clone for $200 which works just as well as an OEM Edelbrock formerly American manufactured intake manifold prior to PE purchase. Will that clone win you points at a Pebble Beach Concours Show? NO. But it puts tens of thousands of old American muscle cars back on the road for the average American and now expanding overseas American muscle car buyers/owners. Yeah…Chinese, European, Japanese, Korean, SE Asian, and South American folks love and seek these cars. You can even buy an EV version of 55-57 two seat T-bird’s, 66-70 Ford Bronco’s, 65-66 Mustangs ready to drive…or complete roller chassis for installation of ICE driveline’s of one’s choice. Want a Japanese 70-72 Datsun 240Z? You can buy one from China.
In another AvBrief article, we read the current US policy is now to restrict or stop parts support for Chinese airliners who asked for and was granted permission to source American manufactured engines, avionics, landing gear, etc….for years. Now, THAT’S a sure fire way to extend and expand US aviation parts manufacturing. Seriously?
We are our own worst enemy…and seem to be oblivious to this fact until our own personal oxe is being gored.
Well said. American business thinking barely goes beyond the next quarter, Chinese (and others), runs decades. When my lab sought out bids for a ~300 unit run of super high tech modules, no American or EU company submitted a bid, or submitted one so high as to make it obvious that it wasn’t serious, the Chinese came through: on price, on time and near-perfect quality. The dirty little secret is that western “tech” companies like GE, Westinghouse, Siemens, are hollow shells of their former selves. Even w/o private equity, short term profits are boosted when their expensive smart people are fired or laid off.
But few of these light GA aviation parts are high-tech. After all, 1950’s components were made with 1950’s machinery. Send the spec sheets to Asia and weeks later you’ll have 10, 100 or 1000 in hand and with any quality you specify. Increasingly, we can’t even to that anymore. Young digital donks or financial wizards are easy to find. Production engineers? Nope.
If of course by “We” you’re NOT referring to us ‘Proletarians’? …again ‘DOBA’ Sir.
PE = Buying a company with debt and then adding debt service + profit margin and generous fees into the pricing structure. As History 101 so aptly described, many markets simply will not support the new pricing structure. I am still trying to figure out how they can call it “private equity” when there is no actual equity involved. Is this the same thing as “greenmail”? I am so glad I closed my business and retired!
Private equity firms have destroyed so many businesses in this country. And it benefits a small group of greedy persons. They’re corporate raiders. The Private equity firm name they like since they think it sounds bettter than corporate raiders, which is more descriptive of what they are. Their actions against companies they buy up stock from is called “looting” on Wall Street. They exploit a flaw in the stock market that the SEC should rein in. Through changes in laws and enforcement.
This is a very strange article. VS Aviation at Oshkosh 2024 was out with a team of engineers inspecting and taking measurements for producing replacement baffle kits on legacy SR 20 and SR 22 Aircraft, which are unobtainable at any price. Within three months of that visit, we had a brand new baffle kits available for all of those Aircraft. At a price point far below what CIRRUS would offer let alone be able to produce. I’m not sure if anyone writing this article actually picked up the phone to have a conversation with anyone at one of these acquired companies for what has been done since the acquisition but speaking from personal experience they’ve saved me a lot more than I’ve had to spend.
We buy fasteners from Genuine Aircraft Hardware. Good prices, nice people. Higher prices are the invisible hand of free markets that send signals to others to enter the business at lower prices. Best is to let free markets run their course.
I contacted the US Attorney General about Arcline owning all the parts. This is either a Monopoly or at best price fixing.
I haven’t heard back, but maybe if more complained they would look into it.
I am already signed up for the newsletter.
Ron
It sure appears to be an anti-trust situation developing. A Taiwan produced experimental 60A alternator from a private firm, to larger private firm to PE and the price went from $500 to $1800. An assembly of ND clone parts w/o changes. This is in sharp contrast to the Cirrus baffle example. No fan of broad scope government intervention here, but true predatory monopolistic markets are to be avoided and certainly worth reviewing.It sure appears to be an anti-trust situation. A Taiwan produced experimental 60A alternator from a private firm, to larger private firm to PE and the price went from $500 to $1800. An assembly of ND clone parts w/o changes. This is in sharp contrast to the Cirrus baffle example. No fan of broad scope government intervention here, but true predatory monopolistic markets are to be avoided and certainly worth reviewing.
Being recently faced with the Piper wing spar AD and the currently imminent installation of the inspection panels required for continued airworthiness inspections a couple of PMA suppliers provide these panels at the egregious and gouging cost of over $400 for a product with less than $10 worth of materials and at the most an hour of labor by hand or 10 seconds for a production stamping press can be decried as gouging of the highest degree .
I’ll give you another prime example of gouging beyond belief, McFarland’s turbo V-band clamp @ $1,538.36 for a modified version of a $25-30 standard industrial part that has maybe $5 additional materials and 30 minutes of labor.
There is a small light at the end of this tunnel which is FAR 21.9 (a) (5) that allows for owner produced parts.
Now granted some assemblies are too complex to produce individually but these examples are or should be well within the capabilities of any competent A&P, and or a owner provided part inspected by said A&P.
I’m definitely not one to advocate for government intervention but for the health of general aviation and if nothing more than the volume of FAA bureaucracy that is dedicated to its oversight for its own protection and longevity ,Perhaps the FAA bureaucracy should step in.
The government should definitely step in. Congress has a number of members who are pilots. Call them. What the government needs to do is promote competition with anti-trust legislation. Monopolies (or near-monopolies) should not be allowed to exist, even in small markets.
Russ, thank you for the request for comment and for the commitment to publish our response. For clarity, the address your request went to is a general inbox with limited visibility, particularly over the weekend, which is why you hadn’t heard from us before this piece ran.
I do find it interesting that, given your familiarity with several key people at Victor Sierra, no one reached out to any of us directly. Any of us would have been glad to respond.
We will be replying to your request soon, and we appreciate the opportunity to share the full picture with your readers.
John Herman
VP Sales & Marketing, Victor Sierra Aviation
Mr. Herman, I sincerely hope your response actually addresses real justification for some very large increases in price, and is not just another meaningless corporate bloviation.
Bought a new Hartzell prop for my RV8 13 years ago for $6500. The exact same prop today costs $12,800. No surprise after Arcline acquired them in 2023. There has been zero change to that prop so they definitely don’t need to recoup any research and development costs, they charge that price because they can. They also acquired Whirlwind props, E-Mag ignition systems, Sky-tec starters, Plane-Power alternators, just to name a few. No surprise that the price of ALL those products have risen dramatically after acquisition. They charge more because they can and do.
The experimental aircraft market is not beholding to STC’s, OEM or PMA parts, yet we’re still being caught up in this private equity search for profit. Once the private equity markets kill GA for all but the wealthiest, they’ll move on to the next target and leave a trail of destruction behind them.
In all ‘fairness’ …a large portion of that increase is ‘Inflation’.
Still, after accounting for that …an almost 35% increase!
35% inflation increase over 13 years, I get it. 100% increase over 13 years, not so much.
General Aviation is suffering from the same lack of concern from anti-trust officials as the firearms industry. They both can be considered political duds because actions there either don’t raise attention or are politically controversial (firearms), and people not directly involved just don’t care. Even with a constitutional amendment (2nd amendment) doesn’t help. Just look how General Aviation has been treated by TSA after 9/11. Even though GA had nothing to do with 9/11, GA has been stuck with all kinds of restrictions, including the proliferation of “TFR’s” that do nothing to make the country more secure. Now you have these private “equity” companies threatening to price GA out of existence. Same thing is happening in the firearms industry as well. There are more people who consider GA a national security risk than a national asset!
“threatening to price GA out of existence”
….I’m afraid ‘That-Ship-Has-Already-Sailed’ as (True) ‘General’ Aviation was killed-off about 35+ years ago by the same ‘Disease’:
Welcome to the ‘New’ (and improved?) American-Way – ‘Corporate Creed:
‘PROFIT’ ….SOLELY for its own sake …and the unlimited enrichment of its upper echelons
I much appreciate the story and all the comments! And thought I would mention that the problem isn’t unique to aviation. In addition to all my decades of aviation experience I decided in my “sort of” retirement to volunteer as a leader of our rural fire department out here in the mountains of Northern New Mexico.
The same problem is affecting fire departments large and small across the country. Previously there were many independent traditional fire and emergency apparatus repair and maintenance shops in most larger towns and cities. But private equity operations have been buying up as many as they can. Once they secure the supplier role for a region they jack up prices on parts and service while terminating their more experienced and expensive shop managers and mechanics.
So now anytime anything breaks or needs service we are faced with sky high prices, long waits with apparatus out of service, while too often a repair isn’t done right and the equipment has to go back. In our case it means another drive to Albuquerque more than two hours away – plus another vehicle to bring us back while the shop hopefully works on the problem.
Rol Murrow NM99 Gavilan, New Mexico
Parts prices have gone through the rood.
When a supplier is sold for a high price; prices of those supplies rise to pay the buyer.
There is also a vast difference in some parts prices.
Example;
Wheels and brakes.
One primary supplier supplies wheels and brakes at extremely high prices;
Prices several times what they were just a few years back.
The tooling, engineering, etc. were surely written off decades ago.
A couple of other suppliers produce arguably superior products at a fraction of the price.
The legacy supplier is simply taking advantage of the fact that their products are certified on various applications.
The difficulties and costs of getting another suppliers product approved in a legacy application are high.
The legacy supplier is operating a blatant rip-off!
The process of getting improved products approved needs to be streamlined.
I have come to understand that much modern business is more about extraction of dollars than it is about providing services and/or products and making a reasonable return. I was taught and still believe in stakeholder capitalism with 5 stakeholders: customers, employees, suppliers, the community in which we run our business and the owner/s or investors. The trend is evident in everything from veterinary services, to housing, to food. Just because operating this way is legal does not make it morally good.
Bane Capital, a private equity firm, bought Rotax in 2003 and prices tripled overnight.
See (above) ‘Reply’ to C172Eowner