Icon: A Dark View Of The Customer Relationship

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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.

Comments (58)

I've seen a lot of speculation that the real business plan is to re-purchase the company in a bankruptcy sale and then produce airframes at more reasonable prices.

All that said, the terms are ridiculous; anyone who agrees to them deserves what they get.

Here's hoping the homebuilt market continues to grow, so we can do away with such nonsense.

Posted by: Robert Gatlin-Martin | April 1, 2016 11:00 AM    Report this comment

"Icon gets weird..." Paul Bertorelli, AirVenture 2015.

Posted by: Rafael Sierra | April 1, 2016 11:10 AM    Report this comment

After reading this Paul, all I can say is "Bye Bye Icon"

Posted by: Ric Lee | April 1, 2016 11:40 AM    Report this comment

Merciful $DEITY. Having been the purchaser of an LSA that became notorious in its own way (and where's my AvWeb hat for the letter about that you published, hmmm, Paul? :-) , there's no way in hell I'd have signed this agreement for it. I'd have taken my money elsewhere.

My roommate just dropped perhaps the ultimate comment on this. "An air-Tesla?"

It will be interesting to see just how many orders get cancelled for refusal to sign the agreement.

Posted by: Jay Maynard | April 1, 2016 11:46 AM    Report this comment

Do I owe ya a hat? E-mail me your address.

Posted by: Paul Bertorelli | April 1, 2016 11:48 AM    Report this comment

I wonder what it looks like from the inside? Are they in an echo chamber where their ideas seem brilliant? Are they in a death spiral and anything seems like "the thing" that will save the company? Does the airplane have a flaw that concerns them?

Posted by: JEFFREY SMITH | April 1, 2016 11:55 AM    Report this comment

Wait a minute, will people be buying this plane, or renting it?

Posted by: KIRK WENNERSTROM | April 1, 2016 12:20 PM    Report this comment

That resale clause will kill any idea of selling a plane to family members for "$1 and other considerations".

This guy is ruining my good (first) name's reputation.

Posted by: KIRK WENNERSTROM | April 1, 2016 12:24 PM    Report this comment

Waaait a minute, today is April Fools Day, isn't?

Pretty funny, ICON.

Ok, so when can we really expect to see a sales contract and actually buy one?

Posted by: KIRK WENNERSTROM | April 1, 2016 12:26 PM    Report this comment

Loophole: Can't I buy the airplane and then sell it to my wife and have her not sign the agreement? I'd have to pay $2K transfer fee plus a $5K penalty but that's cheaper than even the $10K "right to sue" fee that the first owner might pay. She'd have the right to sue and not be bound by any of this other stuff.

Posted by: jvo fnr | April 1, 2016 1:17 PM    Report this comment

My son woke me up around 2am last nite to say the local airport (where I hangar) was on fire. It took me about as long as it did to realize an April fools joke as it did to realize this am that Paul was serious with this blog, which is to say, fairly long. Lesson learned by me also to make my jokes about things like changing the Constitution to favor airplanes a bit clearer. :)

There must be a group of people out there, probably similar to HOA residents, that would enter into such contracts. I second Robert's wish for a vibrant and growing homebuilt sector.

Now I have to break the news to my son (late sleeper) that someone let air out of one of his tires...

Posted by: Dave Miller | April 1, 2016 1:31 PM    Report this comment

So, the comment I made last blog about society changing to one that views any and all personally-defined risk as unacceptable seems to be the way Icon is going. It sounds like they feel the buying public (those that can afford a quarter-million-dollar toy, that is) isn't trustworthy and only they know what is best for the customer. This is rather disappointing.

The sales contract seems to also preclude the possibility of a flying club owning one for the use of all members. Or a co-ownership, for that matter.

I have to agree with Paul on this one. If this is how GA is to be "saved", it would be better off to just roll over and die. I'll go back to amateur auto racing where the personal legal liability situation is more favorable.

Posted by: Gary Baluha | April 1, 2016 1:45 PM    Report this comment

"I'll go back to amateur auto racing where the personal legal liability situation is more favorable."

Not only that, but you're allowed to actually kill yourself if you want.

Posted by: Paul Bertorelli | April 1, 2016 1:51 PM    Report this comment

Do they think we're only giving such a purchase the lip-service perusal of a EULA like that which we afford mobile phone operating system updates? Hopefully the "don't read this, just sign here" trick only works in commoditized product markets--something ICON doesn't yet (and may never) have.

Posted by: Yonah Kondor | April 1, 2016 2:00 PM    Report this comment

First they get a special pass around the LSA process and get an exemption for "safety" reasons. Then they dramatically raise the price. Then they create an onerous, obnoxious, one-sided, 40-page "negotiated" contract. There has always been the strong smell of arrogance from this company--now the arrogance is in writing. One also wonders what's with all the caveats and indemnifications. Do they have something to hide?

Or perhaps they're just following the original Eclipse "strategic" plan to "democratize" aviation. How'd that work out for "early adopters?"

Posted by: ROBERT M SHERIDAN | April 1, 2016 2:03 PM    Report this comment

ICON seems capable enough to give themselves a black eye to the brand.

Posted by: Mark Fraser | April 1, 2016 2:42 PM    Report this comment

I agree with 85% of what Icon is trying to do here.

When I read about accidents...and I am talking flagrant stupidity by the pilot, and then read the legal brief with the lawsuit, I don't blame this company at all!

Because you can't place a "enter this aircraft at your own risk - understand there are certain risks involved, some may be fatal" as a placard, would be nice. I know many of us have found our-self in a pickle, weather changes and/or other factors come into play that could have resulted in a less than ideal outcome, but seriously, some of the lawsuits are ridiculous.

Guess who pays? That's right, we are paying for it as pilots, and is the PRIMARY reason we are flying around in crap airplanes! If you want to talk about cost of operations and airplanes, you can zero in on the liability issue that is stymied this industry, no doubt.

I recently heard about a lawsuit that has been on-going for over five years now. A Cessna twin engine charter crashed after takeoff. It was obviously pilot error due to a loss of control situation, but everyone was killed and a lot of peoples lives were affected. Nothing wrong with the airplane, it flew ok until you go below VMC, then it is a killer, so what do you do?

Continental paid out big time, the propeller manufacturer paid out big time, and Cessna had a big check to cut...on a 31 year old airplane! The insurance coverage on the airplane was good enough, but why not kill the industry and have everyone that has a means to pay out, pay out!

Here is where it gets crazy. They are also suing the insurance broker! Although the coverage was adequate, the owner had asked for a quote for higher coverage, declined it but because the broker didn't recommend this coverage and bind the aircraft with extra coverage...he was liable?

Therefore, we need to stop the lawsuit problem, because it really is a HUGE problem and is killing this industry. In the automotive world, these types of lawsuits are getting to the ridiculous, so you are seeing and will see a huge increase in liability costs that the few that are dumb, make the rest of us pay for the cost of ignorance or stupidity.

Posted by: Michael Dempsey | April 1, 2016 3:19 PM    Report this comment

I have to agree with Mr Dempsey on this. Paul, a little surprised you didn't mention the waiver all skydivers end up having to sign if they want to skydive at most drop zones. Drop zones could not exist without those waivers due to the current legal environment. Although Icon's attempt at this is a little extreme, in the end it will be the marketplace that will end up deciding if Icon stays in business with their purchase agreements.

Posted by: matthew wagner | April 1, 2016 9:22 PM    Report this comment

If I remember correctly, does the name Vern Rayburn sound familiar here ? I believe that he was one of the original consultants to ICON as well as the founder of Eclipse. Both companies are doomed.

Posted by: SCOTT ALPERIN | April 1, 2016 10:26 PM    Report this comment

Thanks for bringing up the skydiving waiver. I thought to describe the comparison, but this blather was getting a little long.

The waivers are different by degree. I have signed dozens of DZ waivers and these documents do one thing only: they absolve the drop zone of any liability of any kind in the event of an accident whether caused by negligence or the skydiver himself. As you point out, skydiving couldn't exist without them.

What they do not do is require me to wear a recording AAD so the drop zone can monitor my jumps, nor do they require me to pay the drop zone if I decide to sell one of my jump tickets to someone else or sell my gear to another jumper. Nor do they require me to "support" the drop zone in any way other than paying for jumps. Nor do they expose me personally for lack of a respectful and professional attitude, whatever that means. In other words, as a customer, I'm not signing a document that exposes me to risk from the very business I am purchasing a service from.

Thinking about this further, I don't object at all to the basic hold harmless. You do, after all, have the option of paying more to retain your right to sue. This strikes me as fair and may (or may not) address the spurious suit scourge. But all the other restrictions go too far, in my view, and fundamentally reset the customer relationship in a negative way.

For example, if the buyer decides to remove the camera/recorder or not fix it if it breaks, he's in violation of the contract and could be sued by Icon. Or denied support. When a company constructs a legal framework so it can sue its customers for multiple reasons, that's not a business relationship that strikes me as desirable. It has turned customer service and respect on its head. As I said, if the industry has to do that to survive, it's more doomed that it might otherwise be, in my view. Perhaps the new age customers Icon hopes to attract won't feel this way.

If It were doing it, I would incentivize this behavior. If you'll run the camera and recorder, for instance, we'll give you 10 percent off on the overhaul or annual inspection or something. Might not achieve the air tight legal protection Icon seems to want, but it would split the difference in the right direction.

Posted by: Paul Bertorelli | April 2, 2016 5:50 AM    Report this comment

I don't want Kurt reinventing general aviation by "democratizing" access to it. If every knucklehead is is in the sky and they fly like they drive, it won't be pretty up there. It's not a forgiving profession, sport or hobby. Kurt wants to do it to line his pocket. He has a rather interesting airplane, but anyone who signs that contract is out of their mind. Please BOYCOTT ICON by not signing or buying this product. Send a LOUD message to these "businessmen" that this isn't how to do business.

Posted by: Brian Jay | April 2, 2016 6:27 AM    Report this comment

The idea of the vendor getting a "cut" of all subsequent sales is ludicrous, so is the idea of life-limiting a product without any data or inspection, so is the idea that the owner can get sued for not servicing something they don't want or need for a safe flight.

IF the plane was extremely great or extremely cheap, it might be temping put up with these added costs of ownership imposed by the vendor. The trouble for ICON is that it's not that great of an plane on paper and it's certainly not cheap to buy new.

Posted by: Mark Fraser | April 2, 2016 9:44 AM    Report this comment

Aside from the contract law issues (e.g. is the contract unconscionable or otherwise improper under the UCC or a particular state's contract and consumer protection law), Icon may be on (somewhat) from legal ground to sell the aircraft with significant limitations on future use and resale.

The Court of Appeals for the Federal Circuit, which is a specialized appeals court that hears all appeals related to patent law (and several other specialized ares of Federal law), recently considered the doctrine of patent exhaustion. Exhaustion basically means that your rights as a patent owner terminate with the first unrestricted sale to a customer. In the Lexmark en banc decision, the CAFC held that if the restrictions were disclosed to the buyer at the time of sale, then the exhaustion doctrine did not apply and the patent owner was able to enforce the limitations.

This decision is highly controversial for too many reasons to go into here, but one is that it is inconsistent with the first sale exhaustion doctrine applied to copyrighted works and seems to conflict with several Supreme Court cases treating exhaustion (a 1917 film projector case and a later 1942 case). I think that the equity and property rights arguments are the most important ones that cut against allowing a seller to limit future disposition of physical property by the buyer. Equity in that the seller is doubly enriching themselves: Benefiting not only from the first patent-protected monopoly sale to the buyer, but also attaching their tentacles to the future sales and uses of the item and taking a slice of that future sale as well; Property rights in the sense that you are buying the item, not leasing it. It seems fundamentally repugnant to our basic notions of non-real property ownership to limit how the buyer uses and disposes of the item.

Many suspect that the Supreme Court will review Lexmark or a potential future case arising under the holding and likely reverse the CAFC because the exhaustion doctrine has been relatively uniformly applied to not allow limitations follow after a first sale.

Anyone interested in reading the Lexmark opinion can find it here: www.cafc.uscourts.gov/sites/default/files/14-1617-Corrected_Opinion.pdf
Be forewarned that it is long and not that exciting unless you are a IP attorney or law student.

Legal mumbo jumbo aside, Icon is likely making a significant mistake to paper over the sale with such draconian terms. I was considering one, but I'm not even bothering with a test flight; I'd never consider buying one on these terms. I suspect other potential customers will feel the same.

[As an aside, the jump waiver discussion above, while interesting is not really similar to the sale of chattels because it related to participating in a activity not acquiring property.]

Posted by: DON HUDDLER | April 2, 2016 1:01 PM    Report this comment

Thanks for that detail, Don. Illuminating. Can help but make me wonder if this could get a court test sooner rather than later.

Posted by: Paul Bertorelli | April 2, 2016 1:41 PM    Report this comment

A new variation on the Eclipse "this will change everything" fantasy. They will deliver about 5 of these, and then we will be reading about their restructuring for the next 20 years.

Posted by: Russell Savory | April 2, 2016 3:24 PM    Report this comment

Bizarre. Anyone who can afford $300K for an airplane will have an attorney. There are very few attorneys who would let their clients sign the documents you describe. A purchaser will end up with a $300K boat anchor.

Posted by: DANA NICKERSON | April 2, 2016 9:24 PM    Report this comment

AND ... as onerous as the ridiculous "contract" Icon expects customers to now sign, there's another item thus far overlooked. The A5 is an S-LSA. This means that the manufacturer -- in this case the same people who wrote the ridiculous contract -- can change the maintenance requirements at will ... with no way for an owner to fight back. They could drive buyers insane if they wanted to. It'll become still another "tool" in Icon's box with which to control everything about the airplane to THEIR satisfaction, not the customers. They could, for example, rename an AN3-4A bolt as an Icon p/n 12345 and make it mandatory ... at high cost. An extreme example but it could happen.

Most people don't understand that once the FAA 'blesses' a certificated airplane's design via a Type Certificate (TC) and then likewise blesses their production process via a Production Certificate (PC), the design -- essentially -- belongs to the FAA for non-commercial Part 91 uses. Only an FAA generated Airworthiness Directive (AD) can apply to the airplane, beyond normal maintenance. The manufacturer then becomes the Design Approval Holder (DAH) but the FAA approves changes via the AD process.

On Mar 28, 2016, the FAA (in a rare display of common sense) issued SAIB HQ-16-14 entitled, "Service, Inspection Times and Inspections." The thrust of this document is to inform owners and operators that manufacturers CANNOT change maintenance requirements after the fact UNLESS it is AD form issued by the FAA. This is a pseudo form of checks and balances ensuring that the manufacturer can't come up with onerous requirements to "protect" itself. This action was instigated by the famous mechanic, Mike Busch, who was pushing back against Cessna Aircraft's desire to change -- and enforce -- a new Airworthiness Limitations Section of the C210 maintenance manuals. The FAA legal department agreed that Cessna couldn't do that and so they issued the SAIB for clarification purposes. This is SUPERB NEWS for all who own a certificated airplane as it applies to all of them. Simply put, only the maintenance manual's airworthiness limitations in effect at the time of manufacturer -- as updated via AD's -- apply to all certificated airplanes. Rejoice, Cessna owners, et al, and print yourself a copy of the SAIB.

Moving back to S-LSA's, there is no such protection because ASTM Standards apply and the manufacturer is in the so called driver's seat as far as maintenance is concerned. They own the design, they own the maintenance manual and that's that. In a sort of sly way, the FAA offloaded the control over airworthiness and maintenance to the manufacturers. So any Icon A5 purchaser who chooses to sign the contract is likewise agreeing to follow whatever the maintenance manuals say and those are a moving target. Also, if an S-LSA manufacturer goes out of business, the owners of the airplanes are ... outta luck. There is NO WAY I would buy an A5 even if I had the money to burn. Given what's happened here ... I predict it won't be long before they do a split-S to the inverted.

Caveat Emptor !

Posted by: Larry Stencel | April 3, 2016 4:24 AM    Report this comment

Allow me to toss this little grenade into the whole issue of liability and costs. Excellent legal opinions aside, and I am always gratified to read what our well-educated fellow pilots have to say in these fun discussions, to me it seems that we forget an important fact.

When it comes to us pilots, we're worth more dead then alive.

All of these legal options have nothing to do with the poor slob (idiot risk-taker or unfortunate victim) who is no longer among us. The guy who bought it in an accident is no longer just an average nobody. He or she is now someone who has been taken from our midst by corporate greed and incompetence which deprived his or her loved ones of decades of warm, life altering help and advice, planet saving disruptive inventions, and, of course, millions and millions of dollars in un-earned income, suitably adjusted for inflation and multiplied by a pain and suffering factor for the aggrieved spouse and children (who are all honor students and star athletes, by the way).

It's the beneficiaries of the accident that inflate the cost of the risk that pilots take to persue their hobby (in my case) or earn a living. Granted, if a company is liable for a design flaw or mis-representation of a product, they should be held responsible. But we've seen time and again that the vast majority of accidents are due to human error.

This perverted sense of the cost of failure is what's driving companies like the soon-to-be-bankrupt Icon into such a dysfunctional business model. Perhaps one solution would be to require the owner-operator to show proof that he or she is adequately insured and agree to binding arbitration. There will still be lawsuits, but at least there will be an initial definition of responsibility for risks.

Keep in mind, though, that you won't be around for that arbitration. Only the dead have seen the end of lawsuits.

Posted by: James Freal | April 3, 2016 8:20 AM    Report this comment

Caveat venditor. Larry, you are good. Thanks.

Posted by: Rafael Sierra | April 3, 2016 11:26 AM    Report this comment

Don, you should tell your Icon salesman that you're no longer considering his airplane and why. If they don't hear it from folks with money, they won't change.

Posted by: Jay Maynard | April 3, 2016 11:44 AM    Report this comment

I made a minor title error for the SAIB HQ-16-14 ... above. It's "Service, REPLACEMENT times and Inspections.

I've been involved in aviation for more than half a century through the go-go days of the 70's to the absolute doldrums of today. As I see it, MUCH of the problem can be directly attributable to money grubbing lawyers zeroing in on "those rich boys in aviation" using the tenets of strict liability to suck the lifeblood out of those with deep pockets ... the OEM's, the parts manufacturers and the insurance companies while ignoring the fact that most airplane accidents are caused by the pilots flying them. For gosh sakes, even NTSB reports cannot be used at trial. What kind of stupid tort system is THAT? As taxpayers, we're underwriting the NTSB yet cannot use their expert findings ... NUTTY!

After most all the airplane companies stopped propeller airplane production in the mid-1980's, and the General Aviation Revitalization Act of 1994 (GARA) came along, I fail to see what it's done for us ... overall. I googled GARA and was surprised to learn that the cost of insurance for each airplane produced went from $50 per in 1962 to $100K per in 1988 -- a 2,000 fold increase in 24 years. Between the years 1978 (the peak of GA production) and 1985, the total cost of new airplane liability insurance went from $24M to $210M. In 1987, insurance costs were $70K - $100K per aircraft. Yikes. I wonder what it costs today per machine? Meanwhile, in 2009, the average cost of a GA airplane approached $6M ... likely because piston production is no longer a major source of their revenue but turboprops and jets are.

Here we are 22 years after GARA and the price of a Cessna 172 -- the safest and most produced GA airplane of all time -- is priced out of reach for all but the wealthy few. Thanks ATLA!

This is why aviation attorneys are flying L-39's and living in gate guarded communities while the rest of us are flying 40 year old Cessna's ... IF we're lucky enough to have gotten "in" early enough, and struggling with mortgages. I think when I'm done with my airplanes, I'm going to chop them up for parts and fuhgetabout it. I be gettin' close.

Maybe what's going on over at Icon is really the proverbial canary in the coal mine?

Not to defend them but if they feel it necessary to require such an onerous contract ... it really IS time to start shutting down the low end of the industry. I'm certain the lawyers are salivating just waiting for the first A5 crash? I question why anyone in their right mind would even consider starting up a GA production line of any kind in this sort of legal environment. No wonder manufacturing is likewise moving out of the Country and what remains is becoming more and more automated, as Paul said.

Posted by: Larry Stencel | April 3, 2016 1:23 PM    Report this comment

"...salivating just waiting for the first A5 crash?" As a prospective investor I'd be much concerned about this. Perhaps the underlying reason for the Icon/buyer covenants as they are. As Icon, I'd want to dispel any doubts of financial failure, protect the investor and promote consistent funding. However, it's hard times in a a tough and desperate market. Standing aside, I wish them success.

Posted by: Rafael Sierra | April 3, 2016 2:43 PM    Report this comment

Larry:

I have something (related) that I'd like to bounce off of you. Please e-mail me at yars (at) yarsley (dot) com. Thanks.

-YARS

Posted by: Tom Yarsley | April 4, 2016 6:23 AM    Report this comment

I have been seriously considering the purchase if an A5 ever since seeing the concept model on display at Oshkosh several years ago. Even after learning about its very limited payload capacity and unimpressive cruise speed - I was still interested. However, after hearing about the owner's agreement I've now decided it's definitely not for me. They have some gall to think that I will allow them to:

1) Dictate who I sell it to;

2) Charge me a fee to sell it;

3) Force me to sell it back to them (and for not more than I paid for it - which could indicate they anticipate the MSRP to climb significantly in the future);

4) Install cameras and flight data recorders that will (eventually) report data directly back to ICON (Gee, are they going to "ground me" if they don't like my flying technique?)

5) Prevent me from giving my kids and others some flight training - and eventually allow properly licensed pilot friends/family to fly it

The reluctant buyer in the story is correct - it's as if ICON is just renting the plane, not selling it. Sorry buddies, if you want me to dish out ~$250K you do NOT get to dictate these kind of terms to me!

Good luck ICON - you just lost many potential buyers - myself included and did some serious damage to your corporate image.

Posted by: Dave B | April 4, 2016 7:26 AM    Report this comment

Interesting that after they sell positions to early adopters, they introduce their heavy handed sales contract. Say goodbye to 25% of your deposit should you cancel your order. Then again the $500 dollar loss is far less valuable than freedom or perhaps lessons learned. Should the company name be changed to "I con"?

Posted by: AARON HUGUET | April 4, 2016 8:15 AM    Report this comment

From my perspective, they have allowed the lawyers to put the company out of business. I feel sorry for those people who invested in the company thinking that the product could make money.

You can make money when you sell a product that can only meet the terms of the contract if it sits parked in a hangar. The company deserves to crash and burn.

Posted by: ROBERT J TEZYK | April 4, 2016 8:30 AM    Report this comment

As a deposit holder, I will tell you that they have undoubtedly now lost this sale. I don't care how fun they think the plane is, nothing is worth the demeaning and controlling behavior Icon is exhibiting to its potential customers. The key word here is potential. There are very few of us yet committed. I suspect there will be fewer now.

If this is the final agreement, I suspect it is the beginning of the end for this company. The attitude of a company is crucial. If the customer thinks they are being taken for a ride, they will bail! I have had the privilege of having a ride in the aircraft, I will definitely not be taking a ride with the company.

Posted by: Jim Ewing | April 4, 2016 8:37 AM    Report this comment

Kirk Hawkins says he is going to "re-shape general aviation."

Hey Kirk - you are going to "re-shape" your way out of business. I noticed that there isnt a pic of him in this article. Probably because his head was too big to fit.

Posted by: Thomas Autrey | April 4, 2016 9:07 AM    Report this comment

Any interest I had in this promising aircraft is GONE. Icon can thank it's lawyers for the failure it will achieve.

Posted by: Manny Hart | April 4, 2016 9:11 AM    Report this comment

Hawkins says he wants to "Re-shape" general aviation ?

Mr Hawkins - You are going to re-shape your way out of business. I dont need your 90mph jet ski with wings. I noticed that there is no pic of Hawkins in this article. Probably because they couldn't get his head to fit due to the swelling.

Posted by: Thomas Autrey | April 4, 2016 9:16 AM    Report this comment

"Democratize" aviation? Really?

Any freshman poly-sci student can tell you that a system where individuals retain the semblance of property rights but with the government holding total power over use and disposal is the textbook definition of fascism, not democracy. Geez...

As for complying with the "values & attitudes", does this mean that Icon can recall the aircraft if, for example, one expresses values or beliefs in public that are in conflict with Icon's corporate values (whatever those undefined values may be?) Geez again...

I agree with Paul; if this is the new norm, then will the last one to leave please turn off the lights!

Posted by: A Richie | April 4, 2016 10:07 AM    Report this comment

In the mid 70's in SoCal -- after the first oil embargo shocked us all out of our chrome plated gas guzzlers -- some "gal" started The 20th Century car company and unveiled a new 3-wheeled auto called the "Dale." It was going to be a super efficient 70mpg vehicle using a BMW motorcycle engine. It produced quite a flurry of interest and -- for just $500 (a lot of $ then) -- you could become a position holder. I darn near fell for it and someplace in my hangar, I have an original sales prospectus.

Well, it turns out 'she' was a 'he,' the car was nothing but foam and fiberglass and she, or was it he, disappeared. She was featured on "Unsolved Mysteries" only to reappear as the operator of a flower shop in LA before being arrested. The one and only example exists -- as I understand it -- in the Petersen Auto Museum in LA? Google "Dale auto" if you want a laugh.

Well, what if you wanted to perpetrate a similar scam on aviation? How would you do it? By producing a slick looking airplane to an unsuspecting pilot population hungry for the next great aeronautical idea. You put up slick looking kiosks at major air shows, price it reasonably and after you get enough people to part with deposits you take this data to investors to collect serious money ... for salaries and perks and etc. You live off of this for a decade by 'slipping' the schedule and then, in the end, knowing you can't produce it and don't want to run away to Guatemala like the Dale 'lady,' you foil everyone by hoisting an onerous 41 page "contract" on depositors knowing they're gonna walk.

WAIT! I think someone at Airventure 2008 did that, too. Didn't a big airplane company take more than 1,000 $5K deposits from people hungry for a reasonably priced brand name S-LSA? Didn't they promise all sorts of great and wonderful things only to ultimately walk away from the idea? Didn't they insult their prospective red blooded American pilot clients by subsequently announcing the thing would be Hecho en China? And, in the end, didn't their sales people stand next to the overweight "thing" at airshows like Sebring with hooks trying to make someone look at it? Fortunately, in that case, most folks there got their $$ back but ... still ... they promised more than they could deliver at a price that couldn't generate a profit? Sadly, I fell for it.

Hmmm ... I wonder when the next flying car company will suddenly pop out of the woodwork? I'd love to fly to SnF tomorrow and then drive it in. Today, however, I gotta get back to picking out a color for my 84mpg "Elio" while I figure out how to spend my 50% reservation bonus.

It's a brave new world out there !

Posted by: Larry Stencel | April 4, 2016 10:48 AM    Report this comment

Rebuild, refurbish resell. Stay with a known and you can't go wrong.

Posted by: Thomas Cooke | April 4, 2016 1:17 PM    Report this comment

Hmm, on the one hand I can see where ICON wants to make sure the aircraft are maintained, and, being a floatplane, will be in more corrosive environments than your average spam-can. So, sure, they'd want to ensure the airframes are inspected every 10 years to ensure they don't fall out of the sky. And I can see where they want to try to maintain their reputation by ensuring all pilots are qualified.

Trouble is, all these restrictions put such a damper on ownership I seriously wonder who is the owner here. Icon is acting like they're the owner and they 'allow' the pilots they want to fly them.

In that case, call it like it is and have Icon maintain ownership of the craft so they can maintain them they way they want and lease it to only those they want to, but never transfer ownership to the 'buyer' because what is being described sure ain't "ownership," especially with Big Brother looking over your shoulder constantly. Now, if they were to rent or lease them and keep the paperwork for themselves, sure, they can to what they want as it's their airplane.

But as Sigourney Weaver said in "Galaxy Quest:" "F*** THAT!!! That (episode) was BADLY WRITTEN!!!" \

Only in this case, it's the sales contract that's 'badly written.'

Posted by: David Rosing | April 4, 2016 3:30 PM    Report this comment

I co-own a 1964 Lake Amphib, and my partner and I have looked with interest at the Icon before laughing that the Lake out-performs the Icon in all ways and carries two more people, all for less than 15% of the cost. Good thing there was no calendar life limitation on the Lake!

Posted by: Mark Espenant | April 4, 2016 3:51 PM    Report this comment

If this is the future of new aircraft then my 180hp Cessna 172H is just going to increase in value even quicker than I thought.

Posted by: Carlos Rodriguez | April 4, 2016 4:25 PM    Report this comment

I think there are two possibilities: the decision-makers in this company have been smoking LSD or - there is another agenda here that does NOT involve selling airplanes to the public. The general rule is "follow the money," so I vote for the latter.

Posted by: JAMES WILLS | April 4, 2016 5:32 PM    Report this comment

Imagine an auto company trying to sell their products while encumbering them in this manner. No, your wife cannot be a "Managing Driver". What faulty ignition switch? We own all videos of your teenager making out in y(our) vehicle. You may not drive to Canada from the USA. Etc.

Couple the ICON story with the requirement for 70,000 Young Eagles Volunteers to take training and subject themselves to a background check, and one truly does know that GA has moved to a depressing state.

Posted by: David MacRae | April 4, 2016 5:36 PM    Report this comment

ICON't imagine anyone actually agreeing to this.

Posted by: Keith Wood | April 4, 2016 9:19 PM    Report this comment

Sounds like a great "DEAD ON ARRIVAL" approach to me. The love affair of the company with its own product is producing some pretty weird results. The founder being a "fighter pilot" somehow might have this "BIG BROTHER" entitlement that he adopted from the government. It is enough that big brother is watching us already with everything imaginable. Having companies that produce an expensive toy for the more affluent also wanting to be "on board" is just not going to happen with me, as a matter of principle.

I wonder where in the process they got lost in lala-land decided to be above all with this entitlement mentality. Sure, there will be a couple of 6-Star type A mentality people who will go for it as it is too much of a shiny tempting toy. I am surprised that there is no clause in there that prohibits the company from being sued by gawkers who might have an accident because they were soooo distracted by the beauty of the aircraft being towed behind a car, or that the car towing the airplane to the lake or airport would have to have at least a 10 million dollar liability coverage or else they won't be allowed to tow it....... As if there are no more responsible people out there.

It is creating these kind of contracts that achieve the opposite of what our industry needs. What you focus on grows and what you forget atrophies. The focus on what all can go wrong and is built into this contract simply fuels what they want to prevent.

History has shown it so many times. Prohibition of alcohol, war on drugs, war on terrorism all lead to more of what isn't wanted. Even me writing about this here and now is fueling it, but maybe some who reads this can see the big picture as well and simply become more aware and not support any of these philosophies. You vote with your money. The vote at the box or machine has little or no effect in comparison. Thanks for reading.

Posted by: Gerhard Paasche | April 4, 2016 10:51 PM    Report this comment

I was thinking of how like attracts like. There might be those who put money down and feel like they have been taken advantage of on this aircraft and might get together and join forces on a class action suit to sew the ICON company for not telling them the truth about the intention of the contract up front.

As a compensation it would be fair that they want their total deposit back plus interest of 1.5 % per month like in their contract, add factor 2 in for the emotional pain plus the lawyer costs.

How good will that feel to the investors? I think the deposit holders should do that as a good example to following the lead of ICON on their own ideas. This is the result of the two class thinking and entitlement. I don't think that I am the only one who is coming up, as I am not even an investor or deposit holder. LOL really loud!

Posted by: Gerhard Paasche | April 4, 2016 11:16 PM    Report this comment

I can't imagine this 'contract' surviving a courtroom test (and it will be tested, at the very least by the large % of depositors who will demand their deposit back). There is a very basic tenet in contract law that says you cannot contract away someone's legal rights without giving something of value in return even more so when that taking flies in the face of what is common and accepted in the rest of the industry. Just to pick just one item of many in this mostrosity, if they demand sevicing at only Icon approved facilities by Icon approved mechanics, adequate consideration on Icon's part might be if they were to provide adequate facilities or guarantees that an Icon approved mechanic will arrive in a reasonable time to provide service for a reasonable fee. Since no consideration exists, my non professional opinion is that Icon will have a hard time defending that portion of the contract in a court challenge. Seems likewise for most of the rest of the document.

Posted by: Rob Norris | April 5, 2016 3:18 PM    Report this comment

@Rob Norris, a big question is how does FAR Part 43, Appendix A on Preventive Maintenance that allows pilots to perform oil changes and the like apply to LSA's? If it does, does the ICON contract prevent an owner/pilot from doing his own oil change so he MUST use the now-unavailable authorized mechanic at the unavailable authorized facility?

Yeesh. I still think the person that signs this contract really isn't the owner . . . .

Posted by: David Rosing | April 6, 2016 8:44 AM    Report this comment

All the Icon A5s are S-LSA, so it looks like all of part 43, including the preventive maintenance section applies. See part 43.3 (g):

"43.3 (g) Except for holders of a sport pilot certificate, the holder of a pilot certificate issued under part 61 may perform preventive maintenance on any aircraft owned or operated by that pilot which is not used under part 121, 129, or 135 of this chapter. The holder of a sport pilot certificate may perform preventive maintenance on an aircraft owned or operated by that pilot and issued a special airworthiness certificate in the light-sport category."

From an article by Carol Carpenter, "A light sport repairman with a maintenance rating (LSRM), or an A &P (as listed in the maintenance manual) are authorized to perform maintenance and inspections on SLSA aircraft in accordance with inspection procedures developed by the aircraft manufacturer."

Which leaves a lot of power in the hands of Icon (or any other S-LSA manufacturer) to define the inspection procedures. Whether Icon can 'require' more qualifications (such as factory authorization of every A&P and LSRM) than the regulations do remains to be tested in court. I suppose the marketplace will be the final judge. I think Icon is setting themselves up to fail.
Note that an A&P is always authorized to perform maintenance on a S-LSA.

According to 14CFR S43.1(d), "This part applies to any aircraft issued a special airworthiness certificate in the light-sport category except:

(1) The repair or alteration form specified in SS43.5(b) and 43.9(d) is not required to be completed for products not produced under an FAA approval;

(2) Major repairs and major alterations for products not produced under an FAA approval are not required to be recorded in accordance with appendix B of this part; and

(3) The listing of major alterations and major repairs specified in paragraphs (a) and (b) of appendix A of this part is not applicable to products not produced under an FAA approval."

Posted by: Rob Norris | April 6, 2016 11:01 AM    Report this comment

All the great insights and legal opinions set aside, ICON has no intention of selling an aircraft. Even if they sold 1000 planes on day 1 how could they afford to service this agreement ? If the fleet flew an hour a month someone would need to review 1000 hours of footage, not counting data. And if a pilot continually used bad judgement and ultimately bought it, wouldn't ICON have liability for not having supervised operations appropriately ? And who at ICON will be responsible for otherwise enforcing the contract ? They might say you must pay $2000 to sell the plane, but how could ICON afford to enforce that ? They can say you can't let your brother or wife fly it, but how would that be enforced ? There is little doubt in my mind that ICON wants out. This is an indelicate and heavy handed attempt to achieve that goal. There next court filing will be interesting.

Posted by: Marc Curvin, MD | April 6, 2016 4:18 PM    Report this comment

The ridiculous "contract" notwithstanding, the probable unenforceable nature of many of its precepts and the wide ranging gossip about same, at SnF, there was the Icon booth -- perhaps a bit less obtrusive than at Oshkosh -- but sitting prominently right on the main walkway. The volume of gawkers was noticeably down and those who were there were obviously not serious buyer types. I stood and watched numerous people look at the kiosk and continue walking. This reinforces the beginning of the end for Icon as a purveyor of a modernistic S-LSA amphibian in any volume sufficient to keep their business model viable, long term. Methinks that all they're doing is trying to collect more deposit monies from the unsuspecting and not much more? In the flesh crowdfunding ... if you will.

Marc's numerical analysis is spot on. The contract is their muted attempt at going out of business by blaming deposit holders, et al, for not getting with their "program." I wonder, are the Icon deposits held in escrow? Having been bitten by Cessna on their FlyCatcher fiasco, I would never ever again give a deposit without it being held in escrow by a third party AND with strict performance gates related to MY receipt of a machine before being tapped.

Posted by: Larry Stencel | April 8, 2016 10:03 AM    Report this comment

a few observations/predictions/questions:

1) the value of a SeaRey just went up (from what I understand: a fraction of the price, same or better performance, worse looks from the perspective of Icon's target market)
2) few people that Icon is targeting read AvWeb - many of them are not currently involved in aviation
3) lots of people will sign this contract, if it's your first plane you probably aren't as offended, and if you have a bunch of money and think the plane is cool you may not care - it's a toy, after all
4) looking forward to reading about what their monetary penalties are for not following the rules (i.e., go flying with a faulty connection on the recording device, let someone else fly the plane without Icon specific training, etc.)
5) The name says it all: "I-CON" (i stole that idea from someone else)

Posted by: ALBERT ALLEN | April 8, 2016 5:23 PM    Report this comment

Holy Cr*p! These guys must have more lawyers working for them than engineers! Icon ought to just rent/lease these planes and forget about selling them. What's the difference?

Not as pretty, but Searey, here I come!

Posted by: Hal Pushpak | April 17, 2016 8:27 AM    Report this comment

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