Premium #251 – Can the Icon A5 Survive? |

The Icon A5 is a very neat looking light sport aircraft. The aircraft is a two-seat amphibian that is effectively, a seaplane that also has landing gear for airport operations. The aircraft was designed for pilots with less experience than a private pilot’s license, operating under the light sport aircraft category. While performance of light sport aircraft is quite limited, with a maximum speed of 120 knots, these aircraft are meant to be owner-flown recreational flying machines. The design looks ultramodern, and the amenities of the aircraft are quite nice, as illustrated in the photos below: The interior of the A5 was designed to be similar to an automobile. The aircraft also has folding wings, and can be towed on a trailer should a customer not have an airport handy. The company was founded in 2006 in response to the FAA’s creation of a sport flying category, enabling the manufacture of light sport aircraft. Icon’s mission is “ to reinvent personal flying by providing consumer-friendly, safe, technologically advanced aircraft that allow the freedom, fun, and adventure of flying to be accessible to those who have dreamed of it.” The A5 finally reached production and customer deliveries earlier this year, and more than 1,800 deposits have been accepted for the aircraft since the program inception. In 2016, Icon required a new purchase contract and associated ownership agreement that is quite unusual when compared to typical industry contracts. The contract ICON requires its customers to sign gives Icon control over the use an disposition of every aircraft sold for as long as the life-limited A5 flies. Icon’s contract goes much further than typical for the industry, and appears to be unique in general aviation. This includes restricting owners from being able to resell the aircraft to anyone they choose. The Icon contract contains very unusual provisions. Every pilot who flies the A5 must receive training from Icon-approved instructors, their aircraft must be maintained by Icon-approved mechanics, and forsake their rights (along with rights of their heirs and estates) to sue Icon for anything other than a defect of design or manufacturing that is determined by the NTSB to be the “probably cause” of an accident. Buyers can pay an additional $10,000 to opt out of this indemnification, but cannot opt of of the installation of a flight data recorder. The Icon contract is 41 pages long, versus one page for a Cirrus. Seaplanes are more difficult to fly than land planes, as weather and waves present issues not encountered with paved runways. Nonetheless, the icon was designed to be stall and spin resistant, and met the low stall speed guidelines for light sport aircraft. But low level flight is inherently dangerous, even over water, and additional training is required to safely operate seaplanes. Perhaps this is why Kirk Hawkins, Icon’s CEO, stated that buyers may own the airplane, but Icon owns the brand, and the company wants to guard against damage to the brand, which could result from accidents that are the product of mistakes made by pilots. Initial Low Pricing Hasn’t Held Much like the Eclipse, Icon created a new category of aircraft, aimed at a lower priced segment of the market. The concept was exciting, and at a price of $139,000 in 2008 was attractive enough to generate more than 400 sales by EAA Air Venture in 2009, and more than 1,800 in backlog today. This is one of those airplanes that when you see it, you want to buy one. But the initial pricing and cost estimates didn’t hold, and priced increased to $189,000 in 2013 and $247,000 in 2015. In May 2016, the company announced that it would produce 20 aircraft, all destined for training centers, rather than the 175 planned for the year. The company had also planned 500 deliveries in 2017. In May 2016, the company laid off 60 employees and terminated 90 contractors, leaving 160 employees. By July 2017, production had resumed and six of a planned 15 aircraft for 2017 were delivered, with 200 scheduled for 2018. On November 2, 2017, Icon announced further price increases, from $207,000 for the base model to $269,000 and from $257,000 to $389,000 for the fully loaded model. The company plans to deliver only fully loaded models in 2018, so those who ordered base models must wait until at least 2019 for deliveries. It was expected, and customers anticipated, that price increases would be in line with CPI, the consumer price index, so many potential customers were unpleasantly surprised by the magnitude of the price increase. Today’s price is a far cry from the $139,000 in 2008, and we suspect that many of the 1,800 deposits may be refunded, particularly after three notable crashes, two of which resulted in fatalities. A Challenging Year for Icon With higher costs, a slower than planned resumption of production, and two fatal accidents, 2017 has not been a good year for Icon, as safety issues have emerged. Earlier this year, the company’s very experienced test pilot and the chief designer were killed in an A5 accident, and last week, former MLB pitcher Roy Halliday was killed in an accident with the A5 he acquired last month. In May of this year, a fatal crash in California on Lake Berryessa when the aircraft’s chief designer and test pilot both perished in a crash into terrain. “The airplane would not have been able to climb out of the rising terrain surrounding the area, which led to his failure to maintain clearance from terrain” said the National Transportation Safety Board. That crash is described in this news report. https://www.youtube.com/watch?v=ltR0YZp5CUU On November 7th, former Baseball Pitcher Roy Halladay perished in a crash off the coast of Florida while flying the ICON A5 he took delivery of the month before. While Halladay grew up around airplanes, he took up flying after his baseball career ended. He filmed this clip with ICON as an advertisement when he took delivery of his aircraft just a few weeks ago. https://www.youtube.com/watch?time_continue=98&v=CO9dIyNM_9Q The Bottom Line: Icon is clearly now in trouble. With three recent accidents, the safety of the aircraft has come into question. I can imagine a lot of wives looking at the Roy Halliday video, sensing his wife’s initial trepidation, and reinforcing any trepidation they may have after the accident by just saying no to their husbands. With a notable spokesperson losing his life, the credibility of the company has been damaged, perhaps irreparably. Financially, a ramp-up from 15 aircraft to 200 aircraft in one year is a difficult task, moving from 1.25 per month to 16.67 per month. Few companies have been able to pull off such increases without major difficulties. We don’t see how Icon can accomplish this given their track record to date. We’ve seen great ideas in aviation fail before. It appears that Icon is on that path, which would be a shame, given their innovative design and concepts. But with two fatal crashes this year, financial problems, and a doubling in price from initial estimates, the affordable toy now costs as much as far more capable aircraft. We love the concept. But with higher pricing and safety issues, we don’t see their backlog as sustainable, nor a lot of new orders coming in until safety questions can be fully answered. Our forecast is that a Chapter 11 is, unfortunately, looming as likely in Icon’s future. We hope that eventually a new investor can pick up the pieces, fund production at rational pricing and ramp-up levels, and improve the safety of the aircraft. The concept is great, but the execution, like most new general aviation ventures, has not been what it needed to be.

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