Icon: A Dark View Of The Customer Relationship
Icon Aircraft founder Kirk Hawkins has famously said his company aims to reshape—actually reinvent—general aviation by "democratizing" access to it. What that means exactly is about as clear as mud, but this week, Icon's buyer agreement escaped into the wild, and it appears as though Icon's view of "democratization" centers on a legal construct that gives the company broad protection against its customers while denying those customers the same basic rights buyers of other aircraft enjoy. If this is the shape of the future of general aviation, it's not very pretty, in my view.
The buyer agreement runs to 40 pages and is a tour de force in outlining specific protections for Icon, while forcing the buyer to legally sign away certain rights buyers of all products—not just airplanes—have traditionally assumed were part of the standard commercial transaction. Technically, the agreement is two parts, a sales agreement and an operations agreement that binds the buyer to use the airplane only in certain ways.
Some of the high points include a clause that has the buyer agree to indemnify Icon against lawsuits or pay an additional $10,000 to retain the right to sue. The agreement also appears to advance the claim that the buyer agrees that Icon is making no promises that the A5 is suitable for any particular purpose and that any representations made by Icon or its employees should not be relied upon. In other words, Icon won't be held accountable for whatever claims may have been made before the sale, other than what's in the POH.
As part of what the company has described as an effort to encourage safe operation of the aircraft, pilots must either be trained by Icon through a company-approved program or obtain their training directly through Icon. The company offers this training as an upsell at prices ranging from $1250 for a basic transition course to $9500 for a full sport pilot course with single-engine sea rating.
Following an example set by Robinson Helicopter, the company will require an airframe overhaul at 2000 hours or 10 years, whichever is shorter. The agreement is silent on what this overhaul entails or what it will cost, thus leaving an owner with an uncertain calculation on how an impending overhaul will impact the value of the airframe. One aspect of this buyers may very well balk at is this one: an airframe life limit that is the earlier of 10 years or 2000 hours from the second airframe overhaul. I queried Icon about this, but they declined to answer any questions on the agreement specifically. I take it to mean the airframe is limited to 6000 hours or 30 years, if the second overhaul occurs at 20 years. A reader noted that he read this as a 20-year life limit on the airframe.
In explaining the intent of the agreement, Icon sent me a copy of a cover letter it's sending to buyers. The letter says, in part, "How can a purchase agreement promote safety? By helping to ensure that ICON's airplanes are (1) flown by well-trained pilots, (2) flown within their operating limitations, and (3) maintained to ICON standards. We won't compromise on these principles and have structured our purchase and operating agreements around them."
Another company-centric feature of the contract is that the owner agrees to allow Icon to install a digital flight recorder in the aircraft, including a camera, and that Icon owns this equipment. The recording gear is to be kept running in flight at all times and Icon can do with the data what it pleases and may download it anytime, at its discretion. It grants the owner limited "revocable" access to the recorded data for his own use. And by the way, if the recorder is stolen or otherwise removed, the owner is on the hook to pay for its replacement and he's required to keep it in good repair. I suspect many would-be buyers will be put off by this kind of big brotherism. I know I would be, even though I think the intent of it has merit. Collecting data is useful for trend monitoring and that can improve safety. But it should be at the owner's option.
The contract notes that Icon obtained from the FAA a waivered weight increase against the LSA-specified limit and that this applies only in the U.S. Buyers outside the U.S. are on their own with whatever regulators they have to deal with. Although Icon says it intends to pursue such approvals elsewhere, it says the timing of such approvals "may never be determined." In other words, buyers writing a quarter-million dollar check to Icon aren't promised any help to obtain whatever approvals they need to legally fly the airplane outside jurisdictions of the FAA. The contract also asks the buyer to acknowledge that Icon will provide support and maintenance only in regions where it has established networks. Currently, that's only the U.S. and Australia.
One of the most bizarre aspects of the contract is what reads to me like a morals clause. Here it is in its entirety: "By entering into this Purchase Agreement, Buyer is part of the ICON pilot and owner community. Promoting flight safety and responsible operations throughout that community is a primary objective for ICON. A critical component of flight safety comes from the values, attitudes, and behaviors of the pilot. ICON expects all ICON aircraft pilots and ICON aircraft owners to demonstrate responsible, professional attitudes consistent with those of safely piloting an aircraft. As set forth in the Aircraft Operating Agreement, Buyer and the Managing Pilot agree and agree to cause pilots of the Aircraft (i) to behave professionally, respectfully and with sound judgment in connection with use of Aircraft, and (ii) to participate within the ICON community in a manner that is professional and does not adversely impact others within the community."
If you read this the way I read this, it seems to expose the buyer to legal action from Icon if the company determines, through its continuous video and data monitoring of the owner, that the pilot hasn't behaved "professionally and respectfully." These qualities aren't exactly defined in the agreement and are, evidently, left to the discretion of Icon. Further, the company's website depicts extreme low flying that many of us might consider to show poor judgment. Why such a clause would even appear in a buyer contract is baffling, in my estimation. Icon further saddles the buyer with the legal responsibility not to allow a pilot who hasn't been through Icon-approved training to fly the airplane. Moreover, Icon insists a pilot can't carry a passenger unless he has 10 hours of PIC time in the airplane.
As far the price of the machine and the agreed-upon terms, once again, Icon stacks the deck in its favor and against the customer by noting that prior to the purchase agreement, "the offer of entering into this … agreement is subject to change in Icon's sole discretion at any time." There's nothing in the language that particularly favors the customer, in my view. In case of a dispute over performance or details of the purchase agreement, Icon wants the customer to submit to arbitration and waive any right of jury trial.
The agreement also requires the owner to agree that the agreement itself was "negotiated" between the owner and company and therefore if there is a disagreement over the contract, the owner can't claim that the contract was a take-it-or-leave-it affair (contract of adhesion), which is then interpreted against the company that drafted it. It's a lose-lose for the owner, in my view.
Although the base price of the airplane has been given as $189,000, the sale contract I examined shows it as $197,000 for the base. Early buyers can opt for a "Founders Edition" which, for the addition of some features, adds another $35,000. A ballistic parachute adds another $15,000, for a total of $247,000. This makes the A5 one of the most if not the most expensive S-LSA on the market. For those anxious to have their A5 sooner than they might otherwise, there's a move-up option that costs $75,000, bringing the total to just over $300,000, allowing for credits.
In another example of image control, the first 100 owners in the Founders program agree to accept that the service network won't be fully developed and the airplane may have flaws to be corrected by service bulletin. During this period, up to two years, the owner agrees to be "supportive" of Icon, providing regular confidential feedback to the company. Does this imply don't complain to the press or the public, too?
What could be a killer—and should be, in my view—for many would-be buyers of this airplane is Icon's draconian insistence that at resale, the new buyer sign and affirm the same terms that the original buyer agreed to, including an operating agreement requiring training, oversight and the above-mentioned moral clause. Failure to do that invokes this clause: "In the event Owner Transfers the Aircraft or interest therein and fails to deliver to ICON an Assignment Form signed by the transferee as Owner (and/or the Acknowledgment and Joinder Agreement for a new Managing Pilot, if applicable) within 10 days after such Transfer, then Owner shall pay ICON an assignment fee of US $5,000.00." Moreover, even for an approved transfer to another owner, the owner has to pay Icon a $2000 fee to process and approve the transfer.
Furthermore, Icon demands to be notified of a potential sale and insists that it be allowed to purchase the airplane from the owner under the same terms. And by the way, failure to pay the assignment fee means the original owner has to pay Icon interest at 1.5 percent per month. However many original buyers Icon may find to sign this agreement, consider the hapless owner going out into the resale market with the same requirements to toe Icon's self-protective line. In my estimation, that would sharply limit the potential resale market and possibly tank the airplane's value on the used market from day one. You may rightly surmise that this once again puts Icon in the driver's seat, since it insists on the right to purchase at what's essentially first refusal and therefore would have considerable leverage on determining market value.
I spent a couple of days this week shopping Icon's idea with other manufacturers with this overarching question: Would or should anyone sign such a buyer agreement with a manufacturer? One aftermarket manufacturer, who also happens to be a lawyer, opined that the attempt at legal hold harmless may be the shape of the future. Despite the General Aviation Revitalization Act that was supposed to resuscitate the industry, high-dollar lawsuits continue to dog manufacturers. For that reason, Icon's attempt to limit its liability has an understandable appeal. But in my view, it's doubtful it will have the desired or any effect. One CEO of a major aircraft company told me it entered into a limited hold harmless arrangement to work out warranty claims and got sued anyway. Even winning such a suit is losing, given the high cost of defending such things. Further, Icon's indemnification language implies that it be held harmless if the NTSB finding absolves the aircraft as being at fault. But federal law specifically prohibits NTSB findings as trial exhibits.
My guess is a lot of lawyers will be advising their clients not to sign Icon's agreement or to amend it significantly. In my view, it so egregiously erodes basic customer rights and protections as to fundamentally reset the seller/buyer equation that it's a gross distortion of what business should be. If my lawyer source is correct and this is the direction we have to go to assure GA's survival, I'd just as soon knock out the lights and call it a day. You can't have an industry on this basis. In my view, no airplane, no matter how sexy or how sweet, would be worth such a subservient relationship with a company manufacturing something I intended to buy. Particularly if that certain something consumed a quarter million dollars of my wealth.
It's impossible to say where this will go. (As I was posting this, I was copied on one reader's email to Icon cancelling his order.) My view is that Icon's fundamental idea—a retooling of the general aviation concept with a flashy, Tiffany-type product pitched outside traditional GA marketing channels—is both refreshing and sound. I'd rank it as conceptually one of the best ideas for GA resurgence I've seen. Icon has clearly taken a long time to develop the airplane because the company wanted it to emerge as close to perfect as possible. Its promotion and sales material has been consistent with the perception of quality and it has attempted to fiercely control its image to the point of declining requests for flight demos from media outlets critical of it. Notably, that includes AVweb.
Have we seen this movie before? Maybe. Recall the original Eclipse kicked open the doors in 2002 and declared it would show the world how to build airplanes with a small, sophisticated jet built on an assembly line with unheard-of efficiencies and a price far below the competition. The phrase of the day was "disruptive technology." The whole thing tanked, buried under a heap of overmarketing hype and mismanagement. Eclipse got into trouble with late deliveries and you have to wonder if Icon might be struggling with deliveries, too. With great fanfare at AirVenture, it announced a delivery to EAA, but we've seen nothing since.
That Eclipse survives yet today in resurrected form is the sort of miracle only aviation is capable of. With Icon, the phrase is "democratization" but, in my view, it's hard to see much democracy in a buyer agreement that so lopsidedly favors the company against the customers' interests. Wouldn't it be better to build a relationship with the customer based on trust, a sound product and good service rather than herding buyers into a legal corral and giving them the impression you put them there so they can do the least harm?
Maybe that's just too old-fashioned. Maybe the bold new world of general aviation will be populated by manufacturers camped inside a compound with 12-foot walls lined by lawyers. If so, what a shame. This stuff used to be fun.