Collusion in aviation is not unheard of, and a handful of years ago several commercial carriers were implicated in price collusion that cost the flying public a significant amount of money. The companies included in this incident colluded to fix fuel and cargo surcharges between 2000 and 2006 to make up for lost profits (http://usatoday30.usatoday.com/news/topstories/2011-03-05-1759203546_x.htm). The price collusion came to light after some of the participating airlines came clean, toppling the scheme. If the airline industry was affected by price collusion, could this also be a possibility for general aviation manufacturers?
Many individuals who fly are concerned with the price of doing so; between the cost of purchasing an aircraft, regular maintenance, and fuel prices, owning and operating even the most basic of aircraft can cost $150,000+ initially and upwards of $10,000/year in annual costs, depending on how often the plane is flown. With such high costs, one would wonder if the general aviation industry is colluding on pricing against consumers. Let's take a look at how the general aviation industry compares to a typical industry that facilitates the development of price collusion:
1) Small number of firms: According to the General Aviation Manufacturer's Association, there were 12 companies that delivered GA aircraft in 2013 (the last reporting year). In addition, there were several companies listed in the report that are still in existence but had no deliveries in the same year. The number of firms in the industry is not small, by any means.
2) Product homogeneity: While there are similarities between some GA aircraft, once outside of the basic trainers, products diverge rather significantly. For those looking for just speed, one could purchase a Mooney or a Cessna TTx and travel at 200+ knots. However, these aircraft are not as spacious as others, and, especially in the case of the TTx, out of the reach of some budgets. For those with large families and not a lot of capital, a Cessna 182 or Piper Arrow might be a better fit. Lastly, there are several aircraft for the casual weekend flyer just looking to get in the air. A Cub or anything from the American Champion line would be a good low-cost fun flyer. In short, there is not much product homogeneity.
3) Cost homogeneity: For new aircraft deliveries, costs range from $100,000 for a new light sport aircraft all the way up to $1.15 million for a new Piper M350. This is just a comparison between piston single aircraft. For turboprop or multi-engine aircraft, prices just continue to go up from here. Prices are all across the board.
4) Price leaders: While there may be price leaders for aircraft that can fulfill similar missions, no one company stands out as being above the rest.
5) Industry social structure: While general aviation pilots can be seen as part of a club in and amongst themselves, I do not know enough about the social structure of the industry to comment on this.
6) High order frequency and small order size: As large capital purchases, aircraft are purchased in small quantities, and rather infrequently.
7) Large inventories and order backlogs: While there may be order backlogs after an unexpectedly large order, it is not in the interest of any manufacturer to keep a large inventory on-hand.
8) Entry barriers: There are significant entry barriers to a company looking to get started in general aviation aircraft.
In looking at the above analysis, general aviation aircraft manufacturers are not in a position that facilitates price collusion. The high costs associated with a new aircraft are likely due to market factors and not any deals behind the scenes.
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