Back in 1989, when the small Swiss plane maker Pilatus announced the PC-12 as its single engine King Air competitor, there was much disparaging the idea that senior business execs – with company money to burn on fuel – would trust their lives to a single engine turboprop.
Turns out the sceptics and naysayers were spectacularly wrong. The PC-12 took direct aim at the all-conquering King Air 200 and much to most people’s surprise, including the dour Swiss, the single engine, pressurised, IFR Part 135 approved turboprop has become a disruptor that turned the market for executive turboprops on its head.
It began in 1989 when Pilatus Aircraft, named for the mountain under which it nestles at Stans Switzerland and who were hitherto famous for building the funny PC-6 STOL utility aircraft so beloved by our bush pilot writer Hugh Pryor, announced its intention to enter the business aviation market with a single-engine turboprop. The PC-12 first flew in 1991 and was certified in 1994 – a 25 year success story.
It’s been a huge success. As of August 2019 there were 1,600 PC-12s flying worldwide. It’s not just a business or utility aircraft, as it caught the imagination of wealthy American owner-pilots who treat it as a kind of Chevy Suburban SUV and load their dogs and bikes to go to their mountain cabins. Perhaps unsurprisingly, North America (USA and Canada) accounts for 74% of the worldwide Pilatus PC-12 fleet, followed by Europe (12%) and Asia Pacific (6%). Africa is a lowly 5%, but we beat Latin America and Caribbean (3%), probably partly due to the effectiveness of the Pilatus PC-12 Centre dealership at Rand Airport.
Pilatus made the brave decision to bet everything on the reliability of the Pratt and Whitney PT-6A engine. But it is not just in having one engine that the PC-12 disrupted the venerable King Air. It was in the application of CAD design, and one of the spin-offs has been the ease of maintenance. A friend who operates both King Airs and PC-12s marvels at how a maintenance item that takes 3 hours to do in a King Air can be done in half an hour on a PC-12 – due primarily to good design and accessibility.
Apart from significantly lower maintenance and operating costs, one of the unexpected benefits of this superior design philosophy is now to be seen in the unsexy but crucial residual values. Some aircraft are depreciation champions – whose value falls like a new Range Rover’s. The PC-12 has done the opposite – it has managed to maintain extraordinarily high residual values, which means that the PC-12s have not only been useful aircraft – but that they have been good investments as well.
Respected aviation research firm RVA has done an analysis on PC-12 residual values and concludes that; “After a prolonged period of sharply lower residual values, [aircraft buyers] are increasingly looking at how aircraft hold their market value when making decisions to buy, sell, and/or invest.”
The 2008 financial crisis revealed the weaker investment aircraft, presumably as owners struggled to unload them. Yet the PC- 12s rode through the market turbulence with their residual values hardly being bumped. This shows that Pilatus didn’t so much find an elusive sweet spot in the market with the PC-12, as create a new market, whose demand was not as sensitive to the vagaries of public sentiment as King Airs, Piper Cheyennes and Cessna Conquests.
The other key aspect of PC-12s retaining their value must be that the manufacturer has remained disciplined regarding new product development, product enhancements, production rates, and pricing. Thus, Pilatus resisted the urge to sell stock at discounts. These discounts, from some manufacturers of bizjets, approached the 40% mark – but were always kept confidential. When a manufacturer discounts its new plane prices, the effect on used aircraft values can be catastrophic. Pilatus did their existing owners a huge favour by resisting pressure to cut prices. It may seem obvious that an OEM that protects the value of its used aircraft will be rewarded with better customer loyalty and a steady pipeline of repeat sales prospects, but when the financial pressure is on from a plane builder’s bankers to move stock and get cash in to cut debt, it is hard to stay true to these long term investments in goodwill.
This commitment to long term goodwill is paying off. It is remarkable that PC-12 deliveries have generally increased in the past five years, against the background of a slow decrease in business turboprop deliveries. In 2012 the PC-12 accounted for about 18% of new business turboprop deliveries worldwide and this has grown to 25% by 2018.
Noteworthy too, is that planes get more sophisticated and more expensive and yet Pilatus still managed to grow its market share. Relative to 2005, which was the launch year of its first major upgrade, the NG model, the PC-12’s new equipped list price in 2018 has increased 52%, which is a similar rate of increase to the competition. It took another eight years for Pilatus to introduce a further upgrade, modest though it was as it added just 5 knots to the cruise speed, (to 285 KTAS at FL 220, plus a 10% better time-to-climb) and featured lower cabin noise and vibration levels, thanks to a composite 5-blade propeller and aerodynamic clean-up.
But the key point is that product upgrades have not done much damage to older model resale values. There is very little of the “built in obsolescence” for which Ralph Nader so successfully criticised the American car makers and with which Cirrus aircraft is flirting.
The old joke about Volvos or Audis is that when you buy one you will keep it forever because no one will buy it off you, doesn’t hold true for the PC-12. The market wants second-hand PC-12s. Assuming you have priced your plane correctly, RVA reports that the chances are you will sell your PC-12 49% quicker compared with all other aircraft in the business turboprop fleet. In terms of the often times painful wait for your plane to sell; over the past five years, used PC-12s have averaged 283 days-on-market before being sold or leased, compared with 560 days for all other aircraft in the business turboprop fleet.
After more than twenty five years of service, the PC-12 continues to attract an almost cult-like following amongst owners and operators and customer loyalty to Pilatus is remarkably high. Customer surveys conducted by JETNET iQ on brand awareness, brand quality and future purchase intentions show Pilatus is highly regarded within the business aircraft owner and operator community.
This is a testament to the PC-12’s quality, reliability and unique features and capabilities. Pilatus has a well-deserved reputation for doing what it does very well and adheres to policies that include internal funding of product development, disciplined production rate planning and execution and limited discounting of new aircraft. This formula provides upside for key stakeholders and enables residual value retention, providing aircraft buyers of both new and pre-owned Pilatus PC-12s with peace of mind that they have made a smart investment.
The relatively few PC-12 aircraft that are sold in pre-owned markets are currently retaining about 80% of their original selling prices 10 years after factory delivery, a performance that continues to be unmatched in the business aircraft industry. This is a testament to smart design, careful factory pricing and production and a managed product life cycle process.
It has taken Textron, as the owners of Beechcraft and Cessna, twenty years to come up with a challenger to the PC-12. And the remarkable thing is that it is a virtual direct copy. The only significant difference is in the choice of engine, with Cessna deciding to forego the legendary PT-6 for the FADEC-controlled GE Catalyst engine.
And the great news for the many fans of the Pilatus brand is that the PC-24 jet should repeat this remarkable performance in residual values. It provides a natural step-up for those who want to trade in their well-loved PC-12s for a Pilatus product that will go higher faster and further and yet still have the utility to load big objects through its large rear door and get into and out of tight dirt strips.