Why do engine prices climb?

[bret]

For a rough estimate it looks like the average price of this prop turning thing has gone up 1,000.00 a year for the last 10 years? any economist care to jump in and explain? has inflation been this high or is there another factor at play here?

[BobTurner]

Because they can....
There is almost no competition in the new engine market.
In the used market popular cores limited availability keeps prices up.
So prices are set to maximize profit, not sales.

[ijustwannafly]

100% agree

Strictly because they can


It really annoys me to watch prices climb every year. Your right on with the 1k.

Its about 1k a year for no good reason.

The engine guys may be making money by doing this but pretty soon no one except the super rich is going to be able to afford a decent engine.

I called company X last week and quote of 4k more then my buddy paid for his engine 2 years ago. Same engine.

The other thing is fuel.

Our EAA chapter had a presentation by a petroleum engineer on friday night. She had some pretty interesting data. She works for a gasoline manufacture. According to her, leaded av gas could be gone by as early as 2018.

When the switch happens the potential to require a massively expensive top end retrofit with new material for valves and valves seats will occur. Yet another excuse for engine prices to climb


The few diesel engines out on the market in testing right now are extremely complex. Turbos and many many many more computers and parts to take care of. Statistically this will contribute to less reliability. I heard rumors that new diesel engines will be in the high 40k range. Nearly 50k and the excuse of the manufacture is going to be "well you can run Jet A in your plane now for $2.80 a gallon". The whole industry is a debacle and I really think that the changes that are on the near horizon with fuels are going put many of us out of this wonderful hobby financially.

The price of a new lycoming for pre WW2 technology essentially is already out of control. Since when did a lawn mower engine cost as much if not more then my pickup truck? Certified engines i can see but a non certified experimental engine 30k+ ?

why?
Because it can. Its not a commodity. Its a privilege

This is just about the same thing that is happening with hangars. Tons of FBO,s nationwide at larger airports are tearing down T-hangars and not renewing land leases. why? to build corporate hangars that bring in much more revenue. We will be lucky if generations to come even have small piston engine aircraft to train in.


sad........

[Brantel]

One big factor is lawsuits. Remember you don't have to lose a case to be on the hook for some unreal $$$$

Just about everyone attached to the major parts of these planes gets sued when accidents happen...

[N941WR]

Three things come to mind when I hear this discussion; quantity and liability.

How many new engines do you think Lycoming, ECI, and Superior sell every year? Call it 5,000 total? Be generous and call it 10,000 engines a year. Profit from those 10,000 engines must support the manufacturing staff, tooling, licensing, paperwork, fixed costs, etc.

Then add to the cost of those dwindling numbers the cost of liability insurance, whether self insured or via Lloyd's of London. Again, that "risk" must be spread over those few engines. As an industry, if their liability insurance is $10,000,000/yr, that comes out $1,000 per engine.

One other thing, ECI was just purchased by Continental. Superior was also recently (last few years) acquired by another company as well. Both of the new owners of these two companies will raise prices to cover the cost of their acquisitions.

It is kind of the perfect storm; reduced manufacturing quantity, insurance liability, and debt load.

[BillL]

They probably have to increase prices so they can stay in business. Lycoming is so small they don't have a line item in the Textron annual report. This unit would have to compete for funds to maintain and develop. They must develop just to stay even. In a conglomerate, the runt of the litter does not last long. Always fighting. If it was such a high margin business, the competition would be growing fast. In the last downturn, they were just about the only source of a new engine.

[alpinelakespilot2000]

Originally Posted by bret

For a rough estimate it looks like the average price of this prop turning thing has gone up 1,000.00 a year for the last 10 years? any economist care to jump in and explain? has inflation been this high or is there another factor at play here?

On a $25k engine, $1k per year is only 4%. Although overall inflation has been a bit lower than average over the last few years, I'm not surprised at $1k.

[ijustwannafly]

Originally Posted by N941WR

Three things come to mind when I hear this discussion; quantity and liability.

How many new engines do you think Lycoming, ECI, and Superior sell every year? Call it 5,000 total? Be generous and call it 10,000 engines a year. Profit from those 10,000 engines must support the manufacturing staff, tooling, licensing, paperwork, fixed costs, etc.

Then add to the cost of those dwindling numbers the cost of liability insurance, whether self insured or via Lloyd's of London. Again, that "risk" must be spread over those few engines. As an industry, if their liability insurance is $10,000,000/yr, that comes out $1,000 per engine.

One other thing, ECI was just purchased by Continental. Superior was also recently (last few years) acquired by another company as well. Both of the new owners of these two companies will raise prices to cover the cost of their acquisitions.

It is kind of the perfect storm; reduced manufacturing quantity, insurance liability, and debt load.

You make a good point but how do you explain the cost of a $22k engine over haul?

[ChiefPilot]

Originally Posted by N941WR

Three things come to mind when I hear this discussion; quantity and liability.

I paid for the whole seat, but so far I've only needed the edge! The suspense is killing me :-)

[Kyle Boatright]

Originally Posted by ijustwannafly

You make a good point but how do you explain the cost of a $22k engine over haul?

$12k in new parts and accessories.

$2k to refurbish old parts (crank, crankcase, gears, etc.)

$8k of labor, overhead, warranty support, documentation expenses, and profit.