Even in 2019, procrastination towards ADS-B compliance is apparent. Brian Wilson urges operators to act now to avoid even higher costs, upgrade capacity problems and aircraft grounding…
Historians continue to debate whether Thomas Jefferson or Benjamin Franklin first coined the phrase “Don’t put off until tomorrow what you can do today”. Regardless of who said it first, representatives from both the FAA and EASA echoing the sentiment today.
The deadline for ADS-B is fast approaching and the percentage of the business jet and turboprop fleet that still needs to perform the upgrade creates industry-wide challenges. By January 1, 2020, aircraft flying in the US must have ADS-B Out equipment installed and operational. The retrofit requirement in Europe comes into effect from June 7, 2020.
Those who enjoy the challenge of arriving at the airport 30 minutes before a flight might just find scheduling their upgrade to be a formidable task moving into 2019. Consider the following:
- Only 52.5% of the business jet fleet is ADS-B compliant as of this writing.
- 10% of the upgrades performed have failed regulatory testing.
- Several major MROs warn customers they may not have capacity to support all of them by the deadline (many are booked well into 2019).
- 94% of the installation facilities polled state that finding additional qualified technicians to perform the upgrades is proving difficult.
- Installation prices are starting to increase, and equipment shortages are looming.
This dire situation led one senior avionics sales representative to claim “Shops will be dealing with ADS-B installations for more than a year after the deadline”. That means many aircraft could be grounded for an extended period.
Yet, shop managers have been telling their customers to perform the ADS-B upgrades for the past 2-3 years only to be met with general procrastination.
Impact on the Used Aircraft Market
In 2018 the used aircraft market swung from a buyers’ market to a sellers’ market, and the available aircraft inventory slipped below the 10% benchmark. Some observers anticipate that fleet retirements could be as high as 20% of the existing fleet as a result of the ADS-B fallout.
New aircraft will not fill the void. Deliveries of new aircraft in 2018 were flat (compared to 2017), and the forecast for 2019 shipments is for single digit growth at best. Used aircraft buyers must now sort through aircraft that are available for sale that are also ADS-B compliant. As one senior broker told AvBuyer, “ADS-B has had a dramatic effect on sales compared to a year ago”.
If there are two similar aircraft on the market and one is not ADS-B compliant, the non-compliant aircraft is quickly eliminated, or the selling price is markedly discounted. “Due to the large number of aircraft still in need of the upgrade, time must be allocated to call around, get pricing and seek possible installation slots before considering a transaction,” the broker adds.
“Even cash buyers do not want to purchase an aircraft unless its ADS-B complaint or has a scheduled event to perform the upgrade.”
Experienced lenders are taking a more proactive stance. They’re reviewing their existing client-base and some are reaching out to ensure their clients have ADS-B upgrades scheduled before the deadline. New clients seeking funding must provide proof that an aircraft they’re acquiring is already compliant or there’s an agreed plan and timeframe in place to meet the deadline.
Valuation and appraisals companies play a key role in informing banks and financial institutions on the status of ADS-B compliance on all their transactions. “Lenders will not even consider financing an aircraft without proof of compliance with ADS-B,” offers Jason Zilberbrand, president and CTO at Vref.
“I do not know of any recent transaction we worked on with a lender that didn’t focus on ADS-B. Lenders do not want to take the chance of adding an asset to their portfolio that could be grounded come January 1, 2020.”
The ADS-B adoption rate for aircraft 10-15 years old is noticeably lower than aircraft aged 10 years or less. This becomes even more pronounced for aircraft aged 15 years or more, and it is this category of aircraft that are more prone to an early retirement.
MRO Capacity Issues
One of the fundamentals of economics is supply and demand. Operators that are still unprepared for ADS-B compliance are about to feel the effect on their pocketbooks. Pricing for an ADS-B upgrade ranges between $50k-200k with an average price of $100k. However, speaking to a selection of MROs about possible price increases, one retorted that they had already done so.
“The equipment manufacturers will raise hardware pricing in early 2019 and we will pass that onto the customer,” another explained. Documentation is getting costlier as OEMs have increased the pricing for STC certification packages and service bulletins.
Labor is also getting more expensive as MROs seek to increase manpower, but are forced to pay higher wages and benefits to attract the experienced avionics technicians in a booming economy. One hiring manager told me that finding additional experienced personnel is proving “extremely difficult” and that labour rates will be adjusted accordingly.
Even though there is less than a year to go and avionics salespeople, estimators and managers are constantly calling their customers, procrastination is still evident.
Some operators who have an inspection scheduled for later in the year believe they will “just add ADS-B at that time”. Another common fallacy is that there’s time to spare, and that an operator “will start making some calls very soon” for quotations and available slots.
Anybody delaying scheduling an upgrade at this time will be in for an unpleasant surprise with many MROs booked until late Q2 2019 and one major avionics satellite shop already booked at 85% capacity for all of 2019. Many will not take on standalone ADS-B upgrades unless they are for a highly tenured customer.
The MROs are requiring – or at least giving preferential treatment – to customers who have maintenance inspections, paint or interior work scheduled in conjunction with the ADS-B upgrade. And even under those conditions, operators face being charged up to double time labour rates to get the work completed.
One major MRO warns that standalone ADS-B upgrades could get pushed out to their satellite shops, potentially increasing travel time and costs to reposition an aircraft for the required work. Though the avionics manager of another satellite shop confirmed they would undertake the work, he warned that operators “…should be prepared to pay additional labour costs,” and hope they would not encounter any equipment shortage issues.
Downtime to perform the upgrade typically ranges from three-to-ten working days. For installations that require minimum labour and are mostly tied to hardware upgrades, operators can choose the exchange route.
Performing the exchange option reduces downtime to a few days, but at a premium of 10-25% of the cost of the installation. Operators should schedule weeks in advance of their input date to ensure exchange boxes are available.
For installations that are labour intensive, operators could save some costs by forgoing the exchange route on the hardware and instead have their boxes modified. Again, proper planning is required as in most cases the hardware is shipped back to the manufacturer for modification, which typically takes 5-7 business days. Bear in mind, however, that manpower resources at the manufacturer could be limited, and turnaround time could increase.
One prevailing attitude surfaced among the responses of all the people spoken with in the preparation of this article: There is little sympathy for operators who have waited until 2019 to act on the ADS-B mandate.
Much time and resource has been invested over the last few years on educational luncheons, road shows, marketing and cold calling programs. The MROs have done as much as is in their power to do to help operators avoid increased costs and possible delays in complying.
It’s time for operators to pick up the phone and get serious about ADS-B compliance. The deadline is not going to be extended and the amount of aircraft that still require the upgrade greatly exceeds capacity.
Don’t be that aviation manager who is left explaining to the boss why they’ve missed the deadline, and why their airplane is grounded. Make the call today and ensure you have a slot in 2019.