Icon Delays Deliveries, Amends Purchase Agreement
Icon Aircraft has pushed back customer deliveries until at least 2017 and has announced a major revision of its controversial purchase agreement. In a conference call held with invited aviation media representatives, CEO Kirk Hawkins cited manufacturing difficulties as the reason for the delivery delays. “We have to slow down so we can go fast,” he told the conference call. In a news release issued just prior to the conference call, Thomas Wieners, the VP of manufacturing, said the “ambitious plans” to build 175 aircraft in 2016 have been scaled back to just 20 aircraft. “After completing seven aircraft, with 11 more in production and having received a total of 30 composite airframe sets, we’ve learned that our production process and parts of our supply chain are not yet ready for high-rate production,” he said. The company will lay off 60 employees and terminate 90 contractors. A total of 160 employees will remain with the company.
None of the 20 aircraft to be built this year will be delivered to any of the 1850 position holders Icon says it now has deposits from. Instead, they will be distributed among three to four training centers. The Vacaville, California, training center will remain in operation and new ones will be built in Florida, Texas and possibly southern California, Hawkins said. Hawkins said using the first 20 aircraft for training will smooth the transition to high-rate production by ensuring customers are ready to fly their aircraft when the deliveries begin.
Hawkins declined to say whether EAA’s Young Eagles program will receive the A5 that Icon “delivered” in a splashy ceremony at last year’s AirVenture. EAA had planned to auction the $250,000 aircraft at the Gathering of Eagles fundraising dinner at AirVenture 2016 but the aircraft was trucked back to California after AirVenture. Hawkins said he’s discussed the auction aircraft with EAA Chairman Jack Pelton and wants to talk more with Pelton before saying any more on the subject. EAA spokesman Dick Knapinski said the organization was under the impression the aircraft would be in Oshkosh at the end of July but will clarify the status of the airplane this week.
Icon was not going to release details of its amended purchase agreement on the conference call, saying the news about the delivery delay superseded those developments. However, during the conference call, Flying Magazine posted a story on its website with details of the new agreement and Hawkins relented. He admitted the first stab at an agreement, a 40-page document with plenty of legal twists and turns, was overly complicated and had too much legalese. “It should not have gone out in the form it went out [in] without explanation,” he said.
The new agreement will be a quarter of the length and absent some of the more controversial clauses that resulted in significant backlash from customers and aviation media commentators. The 30-year life limit has been removed and the 10-year mandatory overhaul will remain but the cost will be capped at $15,000. The so-called “responsible flier clause” in which Icon pilots were bound to be safe, competent and respectful has been tossed. “It was very subjective and not that enforceable,” he said.
A requirement that new pilots fly solo for at least 10 hours has been changed to a recommendation and Icons will not be equipped with automatic audio and video recorders that must be maintained and operated. Icon has also removed a clause giving the company right of first refusal to buy back aircraft being sold by the owners within the first 12 months of ownership. Hawkins said the clause was intended to prevent flipping by brokers and speculators and not control the secondary market.
The company is keeping some of the agreement’s sections that caused considerable controversy when they were first released. New owners will have to undergo flight training authorized by Icon and agree to the revised maintenance schedule and standards. A flight data recorder will be installed on every aircraft and must be maintained in operating condition. The new agreement retains the covenant not to sue Icon for accidents the NTSB determines were not caused by flaws with the aircraft. Icon will waive that clause for a payment of $10,000.
The company wants the agreement to be passed on to future owners of used Icons. Owners who sell their aircraft will be required to transfer the “ongoing managing pilot agreement” to buyers or pay a $5,000 fee to Icon. The agreement will specify that the new owners will have to live up to the original purchase agreement, as amended, with regard to training, maintenance and operation. Icon will “incentivize” the perpetuation of the agreement by offering those who sell their aircraft $5,000 worth of options on a new Icon.