since i sold my sr20 in 2001 i have not been following the forum as closely as i used to, hence my apologies if this issue has already been raised. i am now looking to buy another sr20 and whilst i am aware of the sales success cirrus enjoyed last year, regarding the financial strength of cirrus , is it sufficient to weather what might be a severe recession in 2003 and 2004? already it seems that demand has dropped significantly for new aircraft ( i was offered a new sr20 for may delivery by cirrus design yesterday) and second hand aircraft are selling slowly.
Given our current economy and the pending war with Iraq and maybe Korea I would think companies selling GA airplanes, boats, etc… are feeling the pinch. Unless this war gets underway and resolved one way or another soon, things will get worst before they get better. Fuel prices will continue to rise and people will stop spending money. In my business I already see many companies who are financially very sound, having decent profits and holding their own, but they are refraining from expansion because of things like wars that are out of their control.
From my research, most single engine aircraft depreciate on a curve that lasts close to eight years before we start seeing an uptick in the value of that used aircraft. So, if you buy an airplane and keep it 7-8 years and if there is modest inflation adjustments, it should hold its own in value at least. I would not expect to make money in anything related to single engine aircraft ownership.
At this point with close to a 1,000 aircraft sold. Cirrus has just as much change of survival as New Piper, Mooney and maybe most other single engine aircraft companies other than Cessna. I give Cessna a slight advantage in survival because they are larger and they have a more diverse product base, but Cessna is feeling this economic slowdown as well.
As I see it, if you like to fly and can afford it buy the plane. The time to enjoy life is today.
They are selling so slowly that production is up to 2 per day and is double that of Piper. I guess that means that when there are more available, there are more for sale.
I think as soon as the War thing is over. We will see prices go up. For used more than new. I would say used like a 22 and new like a20. I am just happy To fly Just a nice airplane like the one guy says. If you can enjoy life now. Becouse these are the good old days. Don
Your question is perfectly reasonable. This is a tough time for all general aviation manufacturers. Sales are down for everyone, and financially marginal players (Mooney and Commander are good examples) are going to have financial difficulty.
It’s probably a safer bet to predict that well-entrenched players owned by giant corporations, like Cessna & Beech, will not go away. Cirrus has less of a track record and less muscle behind them.
However, Cirrus has produced a lot of aircraft and has a lot of momentum and is showing no signs of being undercapitalized. I think it’s safe to say they are here to stay. And even if they disappeared, which is very unlikely, there are enough Cirrus aircraft already in the fleet to provide a financial incentive for someone to step in and provide support. Look at all the orphan/antique aircraft on any small airport.
My 2 cents worth.
Tim
If you have the money now, i would go for a second hand '22.
A lot of people who have the money are trading for a PFD / de-ice equiped '22 so they are not expensive.
On the other hand, Cirrus Design stopped the ‘end-of-year’ sales of the '22 ($ 13.000 lower than usual) and do not let SR20 position holders, like me, trade up to a '22.
So they must have enough customers for their planes.
But they didn’t raise the prices (like they used to for CPI) in february. So the price must be competative.
My 0,02 eurocents
Jaap
One fact I would look towards is the $100,000,000 investment they received 17 months ago. That eliminated their debt and freed up working capital. Based on their production rate I would think their current run rate is between $100M and $150M. My guess is that they are in pretty good shape.
If you are really worried, you can buy a Dun & Bradstreet credit report online for $117. That would give you a lot more insight.
Cirrus Design Gets $100 Million Deal
Cash Influx Will Eliminate Debt…
Cirrus Design announced yesterday that it has received shareholder approval for a financing package worth $100 million with Crescent Capital, an Atlanta, Ga.-based investment company. The transaction gives Crescent a 58-percent interest in Cirrus. Despite that number, Cirrus spokesman Ian Bentley told AVweb yesterday, “Nobody’s been bought out here. This is much better characterized as a large investor. [Crescent] is an investment company, not a management company. This is not a Textron, that is going to take over and tell us how to operate. And with one big partner, life gets more under control than with a lot of little ones.” Crescent Capital Investments is the U.S. arm of the First Islamic Investment Bank of Bahrain.
…Clearing The Decks To Ramp Up Production
In a news release, Cirrus CEO Alan Klapmeier expressed delight with the plan. “This is a very exciting time for Cirrus. This transaction helps to complete the picture and allows us to continue to grow and achieve our goal to be the world’s largest manufacturer of piston aircraft.” The financing package virtually eliminates company debt, releases cash flow for production rate increases and product development, pays Cirrus shareholders a dividend, and introduces more working capital into the company, according to the news release. The cash boost means full steam ahead for the innovative company: “You ain’t seen nothing yet,” Bentley said.
Could CD be offering you an SR20 that someone cancelled before delivery. Walt Conley (Cirrus Sales Manager) told me 3 weeks ago of an SR20 immediately available due to the buyer failing to get financing.
The time to enjoy life is today.
truer words were never spoken. if you can afford the airplane - why is a short line to get a new plane bad news. sure five years from now the economy might be better - but then you’ll be five years older - slightly slower on the controls - that much less time to enjoy the new plane. then you’d be writing - the line to get a new plane is 18 months - is it worth waiting?
And by buying, you are doing your part to help turn the economy around! Carpe Dium!
i wrote that second hand aircraft appear to be selling slowly, which i think is borne out by the number of repeat posts advertising used aircraft. it is clear that demand has dropped for new aircraft too - this is not simply explained by increased production (and if production has been increased and is double that of piper , well thats even more worrying to me , right now i would have thought it would be more sensible to reduce it) demand is lower and will decrease further due to the worsening economic slowdown and the war. that cirrus, as a producer of a luxury good, will suffer as a result i would think is a given. my concern is that if cirrus went out of business , maintenance of my plane would present difficulties ; i do not know anything about the financial strength of cirrus, hence my original question
If you research the WHOLE GA climate and its history, this is an issue that exists in EVERY recession. When the economy tanks, leisure and luxury activity suffers more than any other industry. I have seen nothing about Cirrus that makes them uniquely more vulnerable than other other company. Piper, Mooney and others have gone bankrupt but parts and service are still available. Cessna has been bought out at least once. Beech is now owned by Raytheon. This is the nature of the airplane business.
To think other than the fact that sales would be down right now is turning a blind eye to reality.
There are lots of arguments to suggest that in the current climate, Cirrus may be the better investment due to its new technology and eye on the future. But if you cannot stomach the usual up and own swings in aviation which will always be there, then buying may not be for you.
Jim:
You are seeing more posts offering aircraft for sale because there are more aircraft to sell. When there were only 200 aircraft, 2 for sale would be 1%. There are now close to 800 aircraft with 2 per day off the assembly line. If there are 5 for sale, there are a smaller percentage for sale then ever before. Find the aircraft you love and buy it. I am sure Cirrus is looking forward to the day when there are 20 aircraft for sale, and production in 6 per day. Will the 20 for sale scare you off? If you are seriously concerned about financial stability, do you research, talk to the investors, etc.
If “buyer passion” is a reflection of financial stability, and a companies future, I think you will not find an aircraft group more passionate that the COPA owners.
Why not ask the sellers why they are selling. I have never spoken to anyone who doesn’t like the aircraft.
Jim: I also think that a lot of the used market is made up of existing owners selling their planes to step up to an SR22 or to a better equipped SR22. I have no good data to support this other than anecdotal evidence.
As for the overall backlog, clearly the backlog is a function of production volume, now about 2 planes per day (9 per week) and the sales activity. I am confident that the sales activity has slowed, and I am comfortable saying that the economy is primarily to blame. A smaller, yet important factor is the availability of discounted planes on the used market.
As for the financial health of Cirrus, I am certainly in no position to say anything with authority, but It would seem that the key there is the number of planes that they need to deliver to be profitable and how scalable their production is. I would hope that they could scale back to 1.5 planes a day or perhaps 1.25 in order to keep a backlog of 3-6 months while remaining profitable (or at least a positive cash flow).
I’ve picked the 3-6 month backlog as a ‘healthy’ number given the comments made by Cirrus as to how far in advance they have to order parts and options for planes. To be efficient, the backlog should be at least as long as the lead time necessary to produce the planes. Otherwise there would be gaps in the line.
That’s my $0.02, but I’m sure that it isn’t even worth $0.01 Canadian![;)]
Marty
Dennis:
I’m one of those Cirrus owners who has decided to sell. I LOVE the plane and I expect to buy a SR22 as soon as my plane is sold. Even though there are a greater number of Cirrus out there, we are still the envy of all the single engine piston fleet. How do I know? I just see the faces of all the admirers who approach my plane and look inside. And if they are bold, I get asked for a ride. And with the ride comes a smile and a question of how much will it cost them to put them in the drivers seat. To sum it all up, I’ve tried all the rest but the Cirrus is best.
Eric Goldfine
SR20 112HW
Cirrus sold 267 airplanes in 2002 and delivered 400…sales people have been expanded to about 24 total in 12 regions…they expect to sell 500 airplanes this year (if all goes well)…ebitda in quarters 3 and 4 2002 both positive…sales per quarter strong…things look pretty solid…
Since the production execs are from NUMMI I would expect that there is big drive to reduce lead time first. It’s more effective, and in the long run it will produce more profit.
What you are seeing is a few people who for one reason or another backed out of their contracts. Not many, but a few.
I know that back in January when I was shopping for a contract, the best I could do for delivery for an sr20 contract (15k on deposit) was an August delivery. I ended up buying a different contract with a bigger deposit and took delivery on Valentine’s Day. (Woot!)
Anyway, since then you may have had some people back out due to safety concerns, insurance rate boost issues, and recession issues. The first two have been thoroughly discussed on these pages.
I don’t believe that Cirrus is having any real issue with this, and there is no back lot full of orphan Cirri.
So if you want to take advantage of whatever circumstances now let you cut to the front of the line, don’t be shy!
Marty SR20 N836C