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Why no attractive avionics upgrade deals?

There is one thing I can't stop wondering about. Why don't manufacturers of avionics regularly offer very attractive upgrade offers?

If you install e.g. a Garmin GNS430W, it's a pretty good device, today and in a few years from now. However, the GTN650 is an even better device. The difference is probably not substantial so very few owners will swap out a GNS430W for a GTN650. If you do, you have to buy a new GTN650 and try to market your GNS430W. Someone else will buy it and have it installed.

Let's say it costs Garmin about 10-15% of the end user price to produce one GTN650 (marginal cost), the BOM (bill of material) and labor. If Garmin made an offer that you can return your GNS430(W) to Garmin and get a GTN650 at a discount of 70%, then a lot of people would do the upgrade. The removed GNS430W could either be destroyed by Garmin or used to service the existing fleet. It would not show up on the used market and that guy that would consider installing it would probably end up buying a GTN650 as well. Garmin would make more money, their products would get adopted faster and customers would be less likely to jump to another vendor.

I used to sell high end storage systems for millions each. We would always buy back what the customer had (even if from another vendor) and make sure it either gets destroyed or sold to places where it wouldn't be competition for our new systems (Eastern Europe at the time). Even if that device was worth northing, we'd pay 6 digits for it. Like with avionics, our marginal costs were only a small fraction of the price and the customer always had to decide between keeping what he has (perfectly good systems) or doing the swap for a somewhat better product.

At this time I would never swap my GNS430W for a GTN650 because the latter would only give me slightly better capabilities but it is certainly an attractive device, slick and new. If Garmin offered such a deal, I might get tempted.

BTW: One notable exception is JPI with their EDM engine monitors. They do all kinds of upgrade deals and are an overall superb company.

I've been working some time with upgrading my avionics and last week I finally got the offer for:

  • a single unit aspen avionics
  • GTN 650
  • another GTN650 or a GNC255A
  • altitude preselect (it's a 1500€ item developed in Germany compatible with my current STEC autopilot)

WIth two GTN650s, the price is $51k, with the GTN650/GNC255 combo it is $44k. The price is actually with a 5% discount.

A substantial part of the price reflects the cost of paper work.

With such a price, I need to be sure that I want to keep my plane almost until retirement as I would not recover more than maybe 20% if I should sell. Presently, I am not and I therefore go back and forth between buying a different plane or upgrading.

IMHO, the high prices on upgrades, engine overhaul etc is what keeps aviation in a constant stage of economical paralysis. Further, I think there is a direct link between the high prices and how EASA runs things here in Europe.

Aviation vendors have to survive, and in order to do so they hand over the costs related to documentation requirements, regulations, inspections etc to the end consumer.

I think it would be a good idea, but I doubt that Garmin would credit 70% reduction for a trade in, The GTN650 has a lower dealer margin (I guess it is 25%) than the GNS430W which is 40%. The GNS430W may still be purchased new from Garmin. From one source, the list price is higher at $11,795 USD for the W and $10,493 USD for the GTN. Based on purchases off of eBay, a used W sells for in the vicinity of $7200 and is an easy sale. The non waas 430 sells for $3500 to $4500. If I were designing the program, I would offer a $3000 trade in credit for any GPS with the thought that owners of older units that have little commercial value would be the target, maybe including owners of existing non WAAS GPS units as it would normally cost around $4000 to upgrade to WAAS. The early 430 28 volt only units might see this as attractive as their only maintenance support is thru a WAAS upgrade.

KUZA

Perhaps the answer is in the heavy dependence on dealers, in certified avionics.

At the GTX650 level, the dealers are 99% necessary (the other 1% being the higher end of the US Experimental market) to sell and install the stuff and would go berserk if their revenue was thus undermined.

The dealer makes about 25% dealer margin so e.g. on a supply of a €5k item he makes €1k just for supplying it. He then might charge €1k for installation, which would have to rise to €2k in the absence of the dealer margin (or if the customer supplied the item!).

So a heavy dealer margin is essential in the business, the way it is currently structured. And Garmin support the existing structure strongly, which no doubt in turn forms a part of their success in the market.

The second-tier firms like JPI are in a sort of half-way land. Their boxes are widely sold by discount mail order resellers, are relatively trivial to install, interact little with existing avionics, are rarely type-certificate-mandatory and, being used for "monitoring only" can be put in by freelance installers as a Minor alteration. No reseller made anything on that $368 I paid to JPI. JPI don't sell new products direct to end users, officially, but it means very little.

Reseller margins are unfortunately the case of many problems, and anticompetitive practices. Many years ago (1980s) I was making printer sharing and printer buffering products. It was a good business for a small firm; £2M/year. We used to make a box for say £100 and sell it for £400 end user, or £300 to a computer dealer. There was an American company competing with us which used to make the same thing and sell it for £800 end user, and with the same dealer price of £300! It took us several years to shift them, and we did it only with heavy advertising costs in end user publications.

Incidentally, I read of amazing prices being achieved on used GNSx30W boxes right now, in the USA. It looks like a lot of people are trying to get them before they disappear, preferring them to the GTNs.

Administrator
Shoreham EGKA, United Kingdom

Peter,

I have yet to find someone who prefers the GNS430W/530W to the GTN650/750. People that are late the WAAS game may find it more attractive to buy used equipment. For the same price, no one in the US would buy a GNS over a GTN. Used avionics here in the US have always sold at a premium. Back before GPS, a used KNS80 would command $3,500 and a KX155 with a KI209 will still fetch over $2,500. The GNS430's non WAAS are still going for $3500 to $4500. My point is that used avionics have held their value, particularly the GNS series. I sold a used GNS430 when I upgraded to a GNS530 many years back for $6500 at the time, the price on the same unit has declined to where it is today, so I don't think people are trying to get them before they disappear. There were more than 110,000 of these units manufactured and they are plentiful, with several showing up on eBay each week.

There is a KLN94 on eBay this evening with just a few minutes to go and has 38 bids with a price of $2,524 so far. I would easily pay an extra $1,500 for a GNS430 that has a built in Nav/Com/GS, supports ARINC 429, supports PRNAV and can be upgraded to WAAS.

KUZA

When the TB20GT was last new (2002) Socata were offering either a GNS430+530 (or in some cases 2x530) or the KLN94+KMD550. The functionality (in the context of European database coverage) was about the same.

The autopilot etc options were the same - a KFC225

I went for the latter due to way superior VFR mapping and never regretted it.

However, the way European regulation is going, the GNS option would have been much more futureproof because even a basic GNS430 can be PRNAV certified. I don't think this could have been forecast back in 2002.

Interesting what you say about used avionics prices. In 2005, I sold a KT76C on US Ebay for about $2000, which was good given that a new GTX330 was then about $3300 (end user list price).

I hope this carries on, because soon I will be selling 2xKI229, KI525, 2xKMT112, KG102A, KA51B. Good old Apollo-era stuff The only problem is the shipping cost to the USA.

The KLN94 price might be getting inflated by the end of production, so if somebody wants to replace one, or wants a spare, they have to pay more. I have, on the shelf: KLN94, KI256, and a complete KR87 kit. I bought them from a TB owner who put in a G500, and I paid very much top dollar for that stuff.

Administrator
Shoreham EGKA, United Kingdom

I think Garmin doesn't need to get involved with the used avionics - there is such an active used market anyway. And as NYCYankee points out, the used Garmin stuff holds up well - well it did when I upgraded to the GTN-650s. 430Ws are still the best you can put in many aircraft so the demand is very strong.

And I agree with his other point as well - other than for certification or cost reasons - a 650 beats a 430 every time.

EGTK Oxford

Not to belabor the point on used avionics pricing, many take the strategy that they will wait until the price comes down. The prices usually do come down, but only after the equipment is obsolete. As long as the equipment is not obsolete, it will find a price point approximately half of what new costs and will rarely rise above dealer cost of new equipment.

KUZA

I suppose Achimha's point is that by Garmin buying back stuff, they effectively get to kill the second hand market. So anybody who would have bought second hand is now forced to buy new. I suppose that's very true.

However this does also drive customers away from Garmin products to compeditors. If there are no second hand Garmin products, then those who could only afford the second hand prices will but looking for another alternative, which might end up giving a compeditor an opening into the market.

Garmin have to weight one up against the other.

EIWT Weston

However this does also drive customers away from Garmin products to compeditors

They don't have any competitors - practically speaking...

Administrator
Shoreham EGKA, United Kingdom
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