Planes are expensive as we all can guess. The cost can easily start close to $2 million as an entrant.
The causes you can list endlessly: over regulation, lack of market, lack of competition.
But they are hypothetical. Once the price drops below the elasticity curve, the economies of scale starts to work dropping the price further and further. I'm setting that price point to about the same cost of high end cars at about $100,000. Anything beyond that, however cheaper it may become, will not work as marketable product. That's one of the reasons plane manufacturers keep increasing the price as luxury goods category.
So here is the question: Is there a way to drop the price radically?
Let's take a look at 4 areas:
- Design
- Material
- Manufacturing
- Labor
Design
Did you know you can build a plane yourself? Not only that, you're free to fly with your own plane. FDA gives experimental label on your plane.
What's more surprising is the kit comes at much lower cost than buying. Some kit manufacturers include Sonex, Velocity, and Van's whose price range settle around $30-60,000. That is much cheaper than the low end propellor plane's price tag of $200,000. That is in sharp contrast to car kit where the price tag never beats the manufactured one.
That means there's a huge range of design exploration to achieve low cost airplanes.
Material
Plane material uses high end material. Let's not touch on the mainframe because of the safety concern we will not touch in this article. But let's take seatings. Planes use fiberglass for seatings because of its flexibility. But seating is seatings. Seatings in bus uses vinyl liner for its price. The price drops much.
Manufacturing
There's a new innovation coming from 3D printing. They have a great potential in reducing material waste and brand new design.
In General Electric engine, they used additive manufacturing in new Catalyst engine, which reduced parts required from 800 to 12. That will amount to reduction in maintenance and wear and tear. Let alone manufacturing logistics saving since more parts mean more parts to wait before the completion (think of Just In Time method of parts).
Brand new design is hard to describe. The theory goes that with more intricate inner design with support structure, it can build lighter, more durable goods
Labor
In case of Boeing, they have traditionally built all planes in United States. Only in 2015, they started offshoring their manufacturing to China. That movement will accelerate looking at how automotive manufacturing went.
If there's a place where the wage is 1/2 of what you pay in US (think of China or Mexico). Imagine the wage contributes to 20% of overall cost. That will make $100,000 airplane to $90,000.
Hardship
These are the 4 high level methods that can drop the airplane costs. As investor Peter Diamendis says you need to aim for 10x improvement; that will realistically settle down at 2x improvement. The price drop must be greater than 1/3 of the current cost to justify any experimentation.
New manufacturing methods seem the most promising of all, while all others will drop the price 10-20%. Additive manufacturing seems to be the high watch list in the coming future.