Why prices of your flying machines are going up specially from US and Western Europe

[Abid]

This is a perfect example of why this still continues to happen. This is a letter from surface treatment company that does plating, anodizing, elctropolishing, de-embrittlement etc.

To Whom It May Concern,

We regret to inform you that we must implement price increases and additional fees to offset our rising
operating costs. These adjustments will take effect on January 1, 2025.
1) All piece pricing will increase by 25%,
2) Minimum lot charges will increase by $50 across the board,
3) Some testing fees will be increased as reflected in our updated Price List,
4) Copper Sulfate testing on passivation, currently performed at no charge, will now be assessed a
$25.00 charge,
5) Baking charges for stress and hydrogen embrittlement relief will change from a flat fee to $10 per
hour. This is determined by specification and/or PO requirements.
6) $25 will be charged for every Certificate of Conformance required (please indicate on PO’s if
required),
7) A $10 fee will be charged for 3rd party shipping (e.g., UPS, Fed Ex, Freight, etc.),

The cost of chemicals has been steadily increasing, with prices rising almost weekly. Similarly, waste
treatment expenses and disposable prices have skyrocketed and show no signs of slowing down. In
addition, the minimum wage has been raised from $8.00 to $13.00 per hour. As a result, we are required
to offer premium wages in order to attract and retain employees for these challenging, labor-intensive,
and high-temperature positions.
The ownership would like to emphasize that our goal is not to make anyone wealthy. Our primary focus
is on preserving this family-owned business for the long term, along with the dedicated employees who
contribute to its success. The decision to increase prices is not one that we have taken lightly; rather, it
has become a necessary step in ensuring the sustainability of our business.

Very Truly Yours,

_________________________
Lonnie Harder
Vice President

 

[SpyderMike]

Pricing on all items generally rise over time, no? Capitalism. Interesting that they own a company not intending to create wealth though...

 

[Abid]

Pricing on all items generally rise over time, no? Capitalism. Interesting that they own a company not intending to create wealth though...

They don’t rise 25% in one year 2 years after pandemic is over. The same is happening with composite chemicals and cloth. I believe the companies are charging just because … the supply chain is not really in Trouble any longer.

What this means though for aircraft manufacturers is that they will have to raise prices to cover these costs.

 

[SpyderMike]

They do...you just provided evidence.

They increased their price 25%. How much does that increase affect your finished product cost? Are you going to eat that cost or pass it along?

Regardless of the reasons, which change over time, prices, in general, tend to go up. Whether they increase incrementally on a regular basis or jump more on a sporadic basis is more indicative of the company management and market conditions. When was their last price increase and how much was it?

You have never ever increased your pricing in reaction to market conditions?

Just wait until tariffs are announced! That will ripple through like a price wave (if it really happens).

 

[SpyderMike]

Just got this email:

The following changes will take effect on December 23, 2024:

• The rates for UPS® Ground, UPS® Air and International services will increase an average net 5.9%.
• UPS Air Freight rates within and between the U.S., Canada, and Puerto Rico will increase an average net 6.0%.

 

[Abid]

They do...you just provided evidence.

They increased their price 25%. How much does that increase affect your finished product cost? Are you going to eat that cost or pass it along?

Regardless of the reasons, which change over time, prices, in general, tend to go up. Whether they increase incrementally on a regular basis or jump more on a sporadic basis is more indicative of the company management and market conditions. When was their last price increase and how much was it?

You have never ever increased your pricing in reaction to market conditions?

Just wait until tariffs are announced! That will ripple through like a price wave (if it really happens).

Well I will increase prices and pass along this cost. And no 25% increase is not something that happens all the time. In 20 years of light aircraft dealings the last 2 to 3 years is the first time an increase like that has come about.
As to what it means for my cost exactly, I don't think I am obliged to provide you that info, but this is just one vendor. This has happened by now to almost every vendor including avionics and raw materials, but it has largely stabilized so this letter coming now is a bit strange timing.
I can see 5.9% increase in UPS rates. That is a far cry from 25%.

Tariffs would be quite a thing because there are a ton of things and materials that US manufacturers use that are simply not even made in the US. Tariffs have to be very nuanced and selective and slow in implementation to have the desired effect of encouraging manufacturers to make those here. I doubt tomorrow some American is going to wake up and say I am interested in making Rotax 915 engine right here. It isn't that they can't. It is that it has way too much liability and there is hardly any chance of tort reform at national level to reduce frivolous lawsuits from coming your way for a limited market. So, for such an item it makes no sense to put a tariff on. May be there could be tariff on a MTO Sport and Magni M16 because we do have alternatives here and certainly Europeans do not buy American stuff much at all regardless. Only American patriots buy European made stuff painted in red, white and blue flag on top of fiberglass . Kidding but it actually is true. In general, I am not in favor of tariffs.

 

[SpyderMike]

I understand...having been in the aerospace manufacturing business for much of my career.

I am not saying 25% happens all the time...in this case maybe their management hasn't raised prices in five or ten years and should have adjusted it on a more frequent basis. Then again, if there product or service sells for $10 then 25% isn't really that much (depending on the quantity purchased). But if it is $1M then most would say that 25% rate is a lot even based on buying one. It's a bit relative I suppose. UPS's 5-6% increase is significant if you are in business as a high volume shipper with tight margins, no? There are a lot of those out there...we are getting tons of catalogs in the mail right now.

I personally got burned the last time tariffs were launched. I was in fixed priced contracts with a foreign part manufacturer and the end customer. The tariffs were launched with little forewarning (and little forethought as they were withdrawn later) and no time to negotiate. We had to eat a 5 digit tariff charge on each shipment if we wanted the incoming product released to us to continue production.

Some people think tariffs are a smart move. For the most part, I disagree. I say let capitalism play out. If there is money to be made, then someone will find a way to make it, as long as there is a relatively level playing field (where the nuances play out).

 

[j4flyer]

Tariffs are in some cases welcome. Here is Ca the Chinese would not buy our AG products even when grown to their specifications. This shut us out of a large market. The Chinese also won’t buy other items unless we build factories in China and use their labor. In the US companies are firing workers at their factories (some whos factories were kept in business by tax dollars) and moving to other countries to increase profit. Tariffs help persuade these companies to stay in the US and retain US labor. So, there are pros and cons.
As for the increases as Abid spoke of, here in Ca the EPA is famous for causing these increases. They decide a product is hazardous and the shipping and disposal costs double. MEK and paint are prime examples . House paint was running $150 for five gallons. We now pay close to 500. MEK was 25 per gallon. Check out the AC spruce price with shipping.
Anyway, enough complaining from me

 

[magknight]

Payroll is going up, software licensing is going up (QuickBooks seems to increase prices ever other week!), external professional services, materials, rent, taxes. It’s no surprise and unfortunately the SG&A and COGS cost for most businesses will never come back down, so prices are here to stay. So we all just need to make more money to maintain the same standard of living… guess I’ll just have to raise my prices…