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Bad News: Continental Aerospace sold to private equity firm

Ordered an IO-370 for delivery next year.
Wonder what this means for those of us that have orders in.
Guess we will find out.
 
storm_pilot said:
Educate me as to why this is a bad thing. Currently owned by a chinese equity firm. Will be owned by an American equity firm. Seems like a win to me.
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We won’t know until he find out. Most PE firms want to maximize profits. Look at Thoma Bravo for example.

Thoma Bravo will certainly sell Jepp and ForeFlight in the next ten years or so. Not sure what will happen in this case
 
Continental sells to China
“it’s the end of the world”
Continental sells back to the USA
“it’s the end of the world”

Idk…. Continental has lost out on several defense contracts due to the China ownership and they can’t sell any engines to the civil air patrol. This may force Lycoming to be more competitive in that space.
 
This thread gave me a brief moment of chest pain until I remembered that my insurance company is Global Aerospace, not Continental Aerospace.

That said...I too am wondering why this is assumed to be a bad thing...
 
Ownership changes carry risk...the PE buyout of Hartzell has effectively doubled their prices on smaller stuff (Plane Power alternators for example). Maybe that means they are actually profitable, or maybe that means us, the consumer, are paying for the PE debt load (look at the West Marine bankruptcy for a case study).
 
storm_pilot said:
Educate me as to why this is a bad thing. Currently owned by a chinese equity firm. Will be owned by an American equity firm. Seems like a win to me.
Click to expand...
Pretty much everything they have acquired resulted in a doubling of the retail price along with substantially higher repair costs. These speculative PE firms tend to find brands with strong and sticky demand that have financial issues. They inject the cash necessary and then milk that demand with generally very large price increases untill the demand dries up, then sell the assets. Its a fairly profitable approach when there are smart people running the show, but it tends to be unpleasant for the consumer and often results in driving the brand out of the business; Eventually competitors arrive with more realistic prices, but not always the case. In the interim, customers get a wallet dent. In cases like ours, the market is small, so competitors don't rush in.

If these guys start doubling conti prices, we can hope that superior sees the opportunity and steps things up to improve quality, keep prices constant and see a big boost in revenue.. Also possible they just follow suit, then everything is priced at Lyc levels. I see a scenariowhere this can drive things MUCH worse than they are right now depending upon how this plays out.
 
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They can command the high prices because there is no competition for the aviation parts. The FAA can help by reducing the onerous rules and regulations to allow off the shelf replacement such as alternators for examples. Until this is changed, the manufacturers have the market cornered and they can command the high prices for the parts.
 
My disappointment with Continental over the last few years has stemmed from the fact that they shrunk their product offerings. We have a Titan IOX-360 on our -7, and it is fantastic. They dropped almost everything from their experimental production line except for the 340 and 370 almost immediately after our purchase, which are fine but don't meet the profiles of the next two airplanes in our queue. They let Lycoming dominate the market; what business has ever thrived by ceding significant ground to a competitor? I hope new ownership reconsiders the path.
 
lr172 said:
Pretty much everything they have acquired resulted in a doubling of the retail price along with substantially higher repair costs. These speculative PE firms tend to find brands with strong and sticky demand that have financial issues. They inject the cash necessary and then milk that demand with generally very large price increases untill the demand dries up, then sell the assets. Its a fairly profitable approach when there are smart people running the show, but it tends to be unpleasant for the consumer and often results in driving the brand out of the business; Eventually competitors arrive with more realistic prices, but not always the case. In the interim, customers get a wallet dent. In cases like ours, the market is small, so competitors don't rush in.

If these guys start doubling conti prices, we can hope that superior sees the opportunity and steps things up to improve quality, keep prices constant and see a big boost in revenue.. Also possible they just follow suit, then everything is priced at Lyc levels. I see a scenariowhere this can drive things MUCH worse than they are right now depending upon how this plays out.
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+1... This is no bueno for the GA community IMHO. Of course it depends on which side of the table you sit on. Private equity (PE) ownership often leads to efforts to improve efficiency, margins, and pricing power, which translates to rising prices for engines, parts, and related services. PE firms typically acquire companies with stable cash flows and aim for 3–7 year holds to generate strong returns. Aftermarket parts/services (high-margin) are common targets. I suspect we're gonna see aggressive pricing strategies. PE firms do whats in the best interest of their bottom line... not the interest of the GA community. A Gordon Gekko kind of move.
 
I don't see prices for our titan engines going up much. They are already pretty much in line with lycoming. I think I saved 1, maybe 2 grand but gained 2 years of not waiting. The only reason I went with Titan was the reduced lead time.

It was announced today that Cirrus is barred from any DOW contracts because of being Chinese owned.
 
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