The talk of the GA world for the past several days, and especially the first day at Sun ‘n Fun, has been the new ICON Aircraft purchase contract for its A5 amphibious Light Sport Aircraft. The reason for the controversy is a series of clauses that has generated emotional responses from A5 position holders and that has given pause to industry observers, too. In our view, there’s good reason for such a reception.
The agreement sets up a series of requirements that seems onerous and consumer-unfriendly. While some can be viewed as attempts by ICON to smartly limit its liability, others seem aimed to control the behavior of its customers in ways wholly unrelated to safety or liability. Here are the lowlights.
- The contract requires owners to maintain and not meddle with the flight data recorder that ICON has the right to access at anytime to check in on your flying activity. It plans to install cockpit cams at some point in the future, too. So smile big now. If ICON finds you flew in a way that’s outside of its comfort level, you won’t be smiling later. This raises an interesting point, as ICON’s own press materials are filled with low flying with aggressive maneuvers close to the ground. I wonder if they are, by implication, okaying such flying by their customers, as well, or if different rules of conduct apply to the company than to the owners of its airplanes. In any case, the stipulation is not unique; Cirrus has data recorders in its airplanes, as do other manufacturers.
- The agreement requires owners to train only with ICON-approved instructors and to have the airplane maintained only at ICON-approved maintenance shops. While this sounds understandable from a safety point, from an economic perspective, it’s crazy. Before I bought an airplane, I’d ask how much it was going to cost me to operate it. Right? That’s Airplane Ownership 101. With ICON being in control of the processes for both training and maintenance, an owner is put in a position of having to trust ICON that it will keep these costs reasonable. It’s hard to see how the company, which has been late to market and to production with the A5, has earned such a level of trust. How much will it cost to get an annual? Your guess is as good as anyone’s. And if the cost proves prohibitive, you’re out of luck. ICON makes itself the only game in town.
- The contract requires the first 100 owners not to be publically critical of ICON. If I have to explain why this clause is offensive, welcome on your recent arrival in a democratic land where free speech is a given, and let me tell you about this little clause called the First Amendment contained in a more important document that we call the Constitution of the United States of America.
- Without going into a lot of detail, because I could write the entire column on this subject alone, be aware that the A5 is a life-limited product with overhaul limitations on the engine, prop, chute, rocket and airframe. The airframe will have to be overhauled at 2,000 hours total time or 10 years regardless, though I’m not clear exactly how a composite airplane can be overhauled. Moreover, ICON isn’t saying how much any of it will cost. On top of that, there’s a life limit on the airplane, too, though those who have studied the language of the agreement seem to disagree on what that life limit is.
- ICON gets a say on who you sell the airplane to. If you decide the A5 is not for you, then ICON’s contract requires you to inform the company of any pending sale for their approval; and, yes, you guessed right. The new owner will have to sign the agreement, as well. ICON does say that it will buy the airplane at a fair value if they turn down the prospective buyer. It also raises an interesting question. Who really owns the airplane, the buyer or ICON?
- The agreement has a number of clauses intended to get owners to pay ICON for the right not to abide by the contract. One clause, which might not be defensible in court, requires buyers to give up their right to sue unless the NTSB rules that the accident that precipitated the suit was due to ICON’s negligence. The problem, as a couple of commenters have pointed out, is that NTSB findings are intentionally prohibited from being used in courtrooms, an ingenious principle of law that firewalls the Safety Board from legal entanglements and keeps them shooting straight. Still, if a buyer wants out of the no-sue clause, he or she can pony up $10,000 to do so.
I understand that some of this is ICON’s attempt, however tone-deaf and probably ultimately ill advised, to limit its product liability. The problem, of course, is that the agreement is so onerous and creepy, and because it introduces a great deal of cost uncertainty, that it’s hard to imagine anyone signing it.
One manufacturer spoke to us off the record about the contract controversy and sympathized with ICON, which he said needs to present the contract language in very direct terms and then cannot comment on it for fear of those comments being used against them later in court, which makes sense.
Maybe there’s a greater level of comfort with such contract language than I imagine. Perhaps many consumers will see it as just an expensive version of a cell phone service provider’s pages-long agreement that all of us accept, but that none of us actually reads. In the case of the ICON A5 purchase agreement, however, a lot of folks have read it. And what we’ve seen is troubling on a variety of levels that will have life-of-ownership implications on the purchaser.
Moreover, it’s hard for me to understand how, if product liability containment is the ultimate goal, a clause that seeks to stifle the consumer’s free speech fits with that spin. It seems more like corporate culture to me than strategy. The clause is consistent with ICON’s past attempts to control coverage and opinion. When it conducted its initial press event last summer, ICON required the media outlets covering the event (and flying the airplane) to agree to let ICON review and approve any stories that resulted before they could be published. It sought to guarantee a cover with the A5 on it in return for providing access to the airplane, and it required journalists to use only ICON’s photography for the stories. The media outlet I headed at the time, along with a few others, told ICON that wasn’t about to happen, and ICON, instead of settling for a poorly attended product launch, backed off the demands.
I’m curious to see how the purchase agreement goes over with ICON’s customers. The company has said that if any prospective buyers want out, they’ll give them a full refund of the initial deposit. Any progress payments, however, ICON will keep 20 percent of, which seems inconsistent. Why, after all, should one customer be allowed an easy exit once the agreement is unveiled while the other, more invested customer should pay a big fee? It makes no sense to me. Their issues with the agreement would hold equal weight regardless of how much they’ve already put down.
The airplane manufacturing business is not an easy one, and the problem of product liability is a tough nut to crack. But ICON’s efforts, as reflected by this contract, go far beyond the liability issue. In many ways, it appears that ICON is attempting to make the aircraft manufacturing game a subscription model, as AT&T does with its cell service and Time Warner does with cable, and so on ad infinitum. The model is a tempting one, because instead of selling one thing once, you sell part of it again and again. By insisting upon owners using its service and flight training, as well as having their aircraft rebuilt on what seems to me to be a too-regular basis, ICON seems to be attempting to get paid again and again for a product its customers already bought, though it will seem to buyers, given this agreement, that it’s ICON that still holds the keys.