Another thought I have when we start talking about General Aviation like that applies only to pistons, there are twice as many turbines now than there were 20 years ago. (maybe more, I’ll check when I have time)

The total number of avgas burning pistons has increased, but it certainly hasn’t doubled.

Therefor I don’t believe a decrease in avgas indicates anything, other than more people moving to turbines. This is a well known phenomenon, as turbines get more affordable and more prevalent. Think TBM, SF50 and thousands of cheap turboprops and jets. Many that cost less than (newer) piston airplanes.

They will when the new tax tables come out.

I've been meaning to tell you this but not for public distribution. My first business investment was a twin screen theater in 1976, now a 4-plex. I had been planning it since I was in undergrad and after law school it was my first goal.. It immediately gave me financial independence. I've owned many businesses over the years that I sold, but I still own the theater. There was a special allocation of funny money for theater venues. They have sent me something over $260,000 and are sending me half that again in a couple of weeks. The "average" person has no grasp of the extent of these government handouts.

Jg

John,

I wondered. But I wouldn't be embarrassed about the post, or the money. My view is its the first time in my adult lifetime I ever got to anything but shovel it the other way. And from my vantage point I saw lots of successful business people applying for, and receiving, one or more of the programs (primarily PPP). While PPP was incredibly helpful for many, and kept some alive, it was just "free" money for many as well. That's my attitude. If they're giving it away why shouldn't you line up for it?

Obviously, the problem was time and inexperience with respect to how the programs were designed and administered. If there ever is a "next time" I'd expect a bit more proof of actual need will be required.

John,

This is the problem with the PPP monies. Any business that qualifies, that does not take the PPP, is at a financially competitive disadvantage. The propriety or wisdom of the program notwithstanding, crazy for business owners not to take PPP if their competitors are doing so.
Also in many respects, the shutdown of the economy was gov't sanctioned, if not mandated.

there is also an interesting change in the buying public view on what is an adequate transportation device. in the 80's a four passenger aircraft or a car that was available at that time was just fine. for instance AC was a luxury and not a necessity. a small size passenger space was just fine for most of us.

If you drive even the luxury cars of that day it is amazing how much better a present day car is. we also love our SUV and Cross over. the small 4 passenger car is basically gone and we now have a huge number of luxuries not available in the 80's

thus the ideal small aircraft transportation is a larger cabin roomy well equipped aircraft. even the Cirrus aircraft are a huge improvement in luxury over what was available back the.

we expect more and more costs more.

this affects availability of new technology as compared to the average wages that we get the cost of an acceptable small aircraft has dramatically increased. thus we have few new aircraft available as tha average middle class guy cannot afford the quality he has come to require in his transportation.

I have literally been called a fool for not taking PPP money…

Yet here we are.

My bank wouldn’t give me an LOC I requested… said I should apply for a PPP loan instead.

I’m not judging anyone for taking it. But I do agree with Bill, not only was it an unfair advantage.

(edited for clarity)

It wasn’t that we refused it based on principle, I just looked at it logically and said if we have clients we won’t need it and if we don’t it won’t matter.

At the time I didn’t trust that there weren’t strings attached, so that was a concern as well.

Just wanted to be clear that I don’t blame anyone for taking it. We only had four employees last year with two being myself and Amy. If our circumstances were different we would probably have taken it.

Chip, Tony, I'm not embarrassed for taking it. I just showed too much of my skirt with the miss placed post to Tony. The income taxes that I have paid all my life wipe away all guilt.

But, I WAS NOT TRYING TO GET INTO A DISCUSSION OF THE RIGHT/WRONG OF GOVERNMENT HANDOUTS OR THE ECONOMIC CONSEQUENCES.

My point is to address the factors that have affected the current shortage of airplanes. My query is how this is going to play out in the market when the handouts stop.

Chip has made a very important observation and backed it up with facts from "his" world. Most of us are not in his market so we "chip" at the edges with our thoughts. No pun intended.

Jg

but you did bring up the economic consequences, nothing wrong with that.

I often wonder how much of an influence PPP has had on demand for lots of high ticket items.... aircraft included.

Chip, your bank wanted you to take PPP because it is a no-risk transaction for the bank. Fed pays them to process loan. Fed backstops loan in event of default or forgiveness. No-brainer.

Bill,

We aren't disagreeing. I'm just trying to keep the "economic consequences" focused to those directly, DIRECTLY, affecting the aircraft market. I have, from the very inception of PPP loans been attributing the buying frenzy on many markets, to those loans and other handouts of the Covid legislation.

Jg

wholeheartedly agree... only question is about how the aftermath looks.
Will the current buying frenzy be followed by a profound slump?

That being said, when chatting with folks at various FBOs and folks in and around charters, it seems like the charter business is on fire as well. Will some of this demand become a semi-permanent boost for GA, or will it fall off and folks return to airline travel?

Unknowable.

We are seeing first time turbine buyers who are buying because they can’t rely on charter or the rates are too expensive.

I’m with Bill, unless folks go back to the airlines, I don’t see it changing.

The real divide in the market isn’t between pistons and turbines, it’s between late model and old. The airplanes that are 20 years old and newer are going to continue to be in very high demand and prices will continue to rise.

Aircraft 20 - 30 years old will be stagnant when the market cools… anything over 30 years old will continue to decline in value.

This assessment is based on a lot of factors, not just airlines or government money. It’s financing and insurance. Perception and operating cost… and availability, especially availability. We have precious few late model aircraft.

This thread is really a classic about individual understanding of basic economic forces and why and how they play out. Chip points out that airplanes are hard to find at any price and prices are up. This is demand issue as well as supply.

John observes that the market isn't sustainable at the current level because it's driven by not only typical demand forces but extraordinary ones: i.e. "funny money" (PPP, Main Street Program, extendend and enhanced unemployment benefits, SBA loan payment forgiveness, massive payments to state and local governments, etc.). Chip points out that demand increase are exacerbated by people not wanting to fly the airlines or charter. That too is an extraordinary demand input.

I think all agree that supply will remain limited due to manufacturing inability to increase supply in any meaningful amount.

So far so good.

Here is where I think it will potentially get interesting. Human beings, generally speaking, forecast current circumstances into the future. It's a common human trait and undoubtedly hard wired into us. The problem is that the future is seldom the same as the current situation. It's dynamic and changing all the time. People fall into investing in "bubbles" continually because of this.

The funny money paid to virtually everyone (and for those like Chip who didn't take it directly they took it indirectly, i.e. Chip's seeing all kinds of benefits, including undoubtedly income benefits, as a consequence of Covid) has undoubtedly led to an increase in financial capacity - i.e. more has been conserved as a consequence of the payments than would have otherwise, and for many, an increase in spending capacity also occurred. By the way, virtually every article you read on the stimulus undercounts the total because they typically only list "transfer payments" and ignore both the cost, and increase in spend/saving capacity transfer - i.e., Fed fostered artificially lower interest rates among others.

This increase in financial capacity has led to an increase in demand for virtually everything including airplanes.

But will it last? I don't think so.

First, demand is an emotional decision. People want things. But they can only act on those desires when they have capacity. The current capacity is artificially high and cannot be sustained. Also, people wont act on their wants when they're afraid. And fear is on the rise - as it should be. It should be for the simple fact that almost all the assumptions we've made about Covid, it's economic consequences, etc. have not borne out. That is why the economy, in general, is slowing now. There will be demand consequences in the aircraft market too.

Second, demand is largely supported by capacity. As I note somewhere else U.S. banks deposits on average year over year have increased about 30%. But they are also declining now as people convert that capacity to purchasing or "investing". So, capacity is declining.

That capacity could be bolstered by productivity but we're not really seeing increases in that just yet. And I predict it may be a while. In most recessions business reorganizes, cuts costs, improves operations and increases profits which help fuel the next recovery. In this respect Covid is a bit different in that the "recession" only lasted a couple of months before being given a massive defribrillization.

But we are going to see massive employment dislocation that was coming anyway but has been sped up by Covid. Currently, employees are quitting in record numbers and some won't ever come back. But many more are going to be permanently dislocated as business takes the opportunity to accelerate reductions in human employment with technology. It's happening now before our eyes.

So, personal capacity is not going to stay at this level, and demand will suffer as a consequence. The people will cry out the longer this pandemic goes on for additional relief. I think it will be much harder for government to throw money at as we go because the boomerang impact of that will be untenable. So, capacity and demand will decrease.

The "boomerang" impact isn't just hand wringing over the "national debt" . If it were people (countries) would just stop buying our bonds and we'd be forced to stop printing money. While they may do that it, of itself, won't stop the Fed's ability to add to it's own balance sheet which they can do infinitely. The boomerang impact that will dampen even the most ardent giveaway proponents is inflation.

Currently the Fed says inflation is temporary. Almost no one believes them. That's why consumer spending - and thus the enconomy - is slowing. And while really smart people with agendas try to explain "common sense" as no longer correct it doesn't mean the common people are wrong. We've massively inflated the money supply (ever wonder, as an aside, why the Fed quit publishing the M2?) which is driving both capacity (temporary) and demand. But it is also robbing the value of savings, investments, etc. So far, that robbing has been more like pilfering - not especially noticeable. But additional stimulus threatens to light the fuse of uncontrolled inflation.

When that happens the price of everything goes up but the ability to pay is destroyed and so demand must plummet.

So, I think it's unlikely that we will see the kind of indiscriminate stimulus we've just witnessed. (Though there may be the indirect stimulus as a consequence of the infrastructure bill if it actually gets enacted).

We may see demand destruction due to tax policy as well. While it remains to be seen how it may be enacted additional taxation, on an ever larger body of people who's income has been artificially inflated, and on the real creators of jobs, economic growth and wealth (i.e. businesses and investors in those businesses).

So, how do we "land this plane" as a friend likes to ask? While airplane supply isn't likely to increase much if at all demand for airplanes is temporary. Nominal prices may go up due to inflationary pressures devaluing all currency but real prices will come back down. Buy an airplane if you can afford the risks of all of this and have a real productive use. Otherwise you'd better be nimble.