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Mon, May 16, 2016

The Icon Dilemma… How Bad Is This Going to Be?

Details Continue to Arrive… Few of Them Encouraging

News/Analysis/Observation by Jim Campbell, ANN CEO/Editor-In-Chief

E-I-C Note: The issues surrounding the industry's growing concerns about the Icon Aircraft A5 program are many... and complex. We recommend the two previously published articles for a look back at what we've written about this matter in order to get caught up:

Over the course of a number of weeks, it’s become a regular occurrence for emails, calls, and even the occasional snail mail/letter to show up with reports, concerns, and details that continue to draw attention to the ‘Icon Dilemma’.

The trend is not a positive one.

From our original story about Icon’s bizarre, restrictive, and potentially unenforceable sales contract, to dozens of other reports that call the company’s health and management into question, or assert negative aspects of the company’s hiring, training or operational plans, it’s obvious that Icon Aircraft is a company ‘on the bubble.’

For those with money in this project, either as deposits on airplanes or for those who invested in this project, there are mounting risks and hazards… but one other potential risk is becoming prominent… i.e., what will happen to the Light SportSport Aviation industry itself, if Icon goes down in flames?

Light Sport Aircraft, or ‘LSA’ as they are most conventionally known, were supposed to be the savior of the sport aviation movement… using sensible/cost effective/modern industry consensus standards in place of stentorian/variable FAA regs that were capricious and dated. LSA was supposed to marshal in a new age of sport aircraft aircraft. But… that didn’t happen. LSA, instead, has had limited success… mostly because building good little airplanes is still not the easiest thing in the world to do, components costs are still driving airframe prices higher than desired, the sales volume does not allow for significant economies of scale, and FAA interference takes place way too often - creating significant cost and schedule expenditures that drive prices ever higher. It also didn’t help that too many of the companies filling the LSA market have the marketing skills/manners of a jelly fish… and little incentive to improve their lot.

The thought that there might eventually be a whole new generation of cool little airplanes that could cost under $100K was dashed by the reality of a market and industry that needed FAR more than a more reasonable set of certification/regs… and failed to note the additional requirements for a thorough overhaul in terms of industry outlook, leadership, behavior, communications and practices.

When Cessna entered the market a few years back, we had HIGH hopes, REALLY high hopes… they offered a solid little conventional airplane with modest pizzazz, performance and Cessna quality/branding… leading the whole industry to feel legitimized and hopeful… until Cessna’s (then) visionary leadership disappeared and the rug was pulled out from under the program with a series of myopic moves that virtually guaranteed the strangulation of the effort.

The LSA movement licked its wounds, soldiered on, and did what business it could… though much of the market was dominated by the few companies that had a modicum of marketing smarts, produced reasonably good products, and who also had sound reps for quality and honesty.

And yet, years later, when Icon showed up, it was marketing hype and marketing hype primarily, that drove Icon to entice upwards of 1500 (estimated -- the numbers vary) purchasers to pony up serious dollars for an amphib that ultimately did not outperform much, if any of, the competition, and didn’t even match up with the original promises made by the company a decade ago. They did this through intense scrutiny, discrimination, and brutal control of the media and PR process, overt hype (much of it suspect), and a number of over-the-top claims – along with an almost carnival atmosphere that proffered Icon/Kirk Hawkins as the savior of the aero-verse-- creating huge expectations that have heretofore not met up with reality.

Worse; they seemed to specifically target the aeronautically ignorant with much of their marketing… people without a lot (if any) flight experience… who only had Icon’s grandiose claims of being sport aviation’s future savior, to go upon. And as usual, there has been a serious disconnect between promise and reality. They targeted and sought out ‘journalists’ who could barely spell aileron to furnish an aero-ignorant public with glowing essays about the new aero-world order, while they proclaimed themselves the vanguard of a new generation of aviation business to a public who didn’t know anything about the old one -- much less have the ability to distinguish old from new. This did this while relying on some worn tropes to entice the public into making deposits about an airplane that not only did not yet exist… but still doesn’t (at least in the form originally promised).

Article after article appeared from so-called writers proclaiming how easy the airplane was to fly… because an Icon pilot let them have a few limited minutes with the stick… without even learning/attempting/comprehending the mission critical tasks and competencies required of anyone who hoped to fly a complete flight profile without creating a (literal) splash. Folks, being able to execute a sloppy turn under the careful of a demo pilot does NOTHING to allow a so-called journalist to evaluate how an aircraft will be able to execute a crosswind landing, negotiate a glassy water touchdown, pull off a soft-field takeoff, or any of the dozens of other tasks that are part and parcel of a complete flight. Flying is not that hard… heck, flying an Icon may not be all that hard… but neither is it truly ‘easy’ or without complications that require solid instruction and eventual competence from its pilot. Some of the fawning verbiage written about the A5, apparently under the direct and watchful eye (if not control) of Icon itself, was simply nauseating and more than a few real live pilots have told ANN that it was this kind of hype and baloney that diminished their trust in the Icon program beyond repair.

Further; the product that is being offered now costs considerably more than what was originally quoted, a number of the prominent features have disappeared, and the promises of production “any day now” have slipped from year to year to year… til now — and still -- nothing for sure. And, again, the constant refrain about learning to fly ‘Zero to Hero’ in 20 hours (the very basic requirements of a SP license), well… in all but some exceptional cases, that just isn’t going to happen. The scary part is that some insiders report that Icon’s Hawkins is pushing the 20-hour curriculum aggressively. I pray that gets adjusted.

A few whoppers have been particularly disconcerting. I got into a twitter snit with Icon some months ago in which they attempted to assert that they were already delivering airplanes -- and we questioned that… the response (a rare thing, that) was more of the usual… “First customer aircraft was delivered and numerous A5s have since been built. Are we missing something?”

They answered… and we replied,“OK... how many hours on that 'first' aircraft, where is it now, what is it doing? How many production planes built?” We never got an answer to those and other questions… but the impression they were trying to give, that they were in production, was false. Well… the first A5 was NOT ‘delivered…’ it was displayed in a PR stunt, put back on a truck to California, and no other ‘deliveries’ have so far been reported or have been confirmed to have happened. At that time, there were only a handful of A5s on the FAA registry, and no details as to their status… even now, there are a small number of aircraft on the registry… and little detail as to their status.

In another bit of PR reimagining, Icon attempted to feign pride in being nominated for a Collier Award earlier in the year.

“The ICON team is honored to be nominated for a 2015 Collier Trophy…” they tweeted -- without noting that it was they, who nominated THEMSELVES, for the award.

And yes, there’s a lot more hype where that comes from…. Making Icon appear disingenuous, less than truthful… and, well, kinda desperate.

And that’s where we find ourselves now… with a whole lot of doubt, a preciously small amount of credible info and a growing sense of doom and concern that a large portion of excretory byproduct is about to merge swiftly with a massive rotating fan blade.

But… why should all that matter?

Because... aviation can afford little more BS and unsubstantiated pipedreams/disasters (and the eventual fallout). We’ve been through way too many aero-scandals, with an extensive amount of damage (even in terms of lives lost), and the credibility of this industry is at an all-time low… along with critical, aggregate, sales numbers.

Years ago; when Jim Bede went bust, it took years for the kit industry to rid itself of the “Is this another Bede in the making?” suspicions whenever a new and as yet unestablished new program showed up and tried to stake a claim to a part of the market. Some of that stigma, real and/or imagined, still survives to this day.

When the Mini-500 bubble burst and Dennis Fetters much-hyped and ballyhooed little killer-copter could not do in production what a few prototypes suggested it might do (i.e., fly safely), it cast a pall over the homebuilt rotorcraft industry that has yet to fully dissipate. Worse; the death toll associated with this flawed little helicopter was brutal and sickening while the frauds of Revolution Helicopter are still resonating with hundreds of victims who had their high hopes turned into nightmares.

When the Eclipse VLJ program was destroyed under the watch of the foreign investors who took over the company when former bosses couldn’t revolutionize the BizJet game fast enough, and thereby vaporized nearly a billion dollars in investor capital, it not only set the VLJ game back but made it nearly impossible for new BizAv startups to find Venture Capital to THIS day. Ask anyone out there right now how hard it is to find VC for today’s new business aircraft.

Every aspect of this industry has its own little scandal story (and usually, only ANN to tell the truth about it), and the wounds and bruises to prove it… each tragedy setting aviation back years and helping to further diminish an exciting industry that used to be able to capture the imagination of ANYONE with only the hint of a good idea. The scandals, the hype, the less than honest aero-media, the ignorance of much of our aero-leadership… collectively, have all contributed to an atmosphere of failure and suspicion that makes our future all that harder to improve.

BUT… we have an industry in which few of the associations have the guts to question the hype-mongers (though some bright are beginning to emerge), an aero-media segment that is (with few exceptions) more interested in ad dollars than ethical journalism, and a community that is unwilling to mobilize to protect itself against those who would cheat, harm or outright steal from it.

The fact is this… if Icon goes down in flames… which certainly seems possible at this point based on the general attitudes we’ve seen and heard from the aero-community, it’s going to be one more nail in the coffin for a biz that is heavily laden with the nails of the past. And this time, the damage could be devastating.

So… the Icon Dilemma… where does it stand at the moment?

Not good… not good at all. And Icon is doing LITTLE to dispel the fear, uncertainty and doubt (FUD) their inexcusable (IMO) behavior has created.

Massive amounts of info and comments are still coming in on the Icon dilemma... everything from continued protests over the bizarre and needlessly restrictive/complicated purchase agreement to more significant concerns and reports about the company's ability to actually go into production... with questions arising about financial means/ability, production capability, flight training programs, the airframe itself, and so much more. The damage mounts.

Icon has promised a revised sales contract to replace the document that started the onslought of anti-Icon sentiment… but it has yet to show up… in a month where actual airplanes are supposed to be on the production line.

Even weirder, we're now hearing from folks who had hoped to work for Icon... getting info/pitches/hype about health benefits, salary structures, and the like... only to reportedly be low-balled when the actual offer is made and to find that there will be no benefits for at least 6 months (and no promise of firm employment).

Worse, in one of the cases we’re following, the potential staffer found he would NOT actually be working for Icon... but for a temp firm. That job applicant called it 'bait and switch' (and didn't take the job) and leaves us with one over-riding question... is anything about Icon what they say it is? Mind you, Icon did enter into an agreement with the state of California to receive benefits in exchange for the new jobs the company promised to bring to their plant in Vacaville – and the use of a temp company would seem to be outside the scope of that agreement. We're told that the state is looking into this situation.

A number of customers have come to ANN for help in getting refunds from Icon – only to run into difficulties.

In one case, the canceling customer told ANN that, “I want to thank you for your article about the ICON A5. You articulated the many concerns I have about buying the A5 and I have requested a refund of my deposit. I have asked for my money back because I will not agree to the terms of their purchase agreement and the huge price increase of this sophisticated toy.”

He continued… “ICON refers to the price increase as CPI and not a misleading increase of the base price. When I signed my deposit agreement in 2013, ICON claimed production was on a first-come, first-served basis, but now offer exclusive jump ahead in line privileges for a premium.

The response from Sara Allen (Director, Business Development) is that I can have my deposit back less $500 or wait until they are ready to build their (purchase number deleted for confidentiality) airplane and then get my full deposit back. Perhaps ICON will have learned lessons and modified their agreements before then. This does not make sense to me. They also want me to sign a contract to cancel a contract. I'm not keen on doing so nor do I understand why I have to?

It seems many ICON deposit holders are in the same boat as I am. If ICON keeps $500 from refunded deposits and have over 1000 cancellations, they still have over 1/2 million dollars without providing value for that money. Not to mention the interest they should be earning on those deposits. I also think $500 is usurious for a processing fee. It's one very expensive ball cap. (I never got a T-shirt).

...I'd sure like your help in getting a full refund and not a partial one. Is there anything you can do to assist? I imagine there is a great number of deposit line holders in the same predicament - this could be a much bigger financial issue than anyone is letting on.”

ANN did weigh in, and right away. Within hours of attempting to reach Ms. Allen, with ANN leaving several phone messages asking how Icon could add new terms to an unaccepted contract and demand a fee that had not been disclosed before the acceptance of the deposit, as well as some info we had received from the State of California on the subject, Icon reversed course… again.

The demand for a $500 fee was withdrawn and precedent established in which Icon should not be attempting to withhold any more such fees.

We hope.

The purchaser appreciated the backup and wrote ANN to state that,“I want to know how many of the 1500+ depositors are really out there and how many more have canceled. I suspect there may have been a large number of deposit holders out there, in great excess than what was reported, that have walked away leaving $500 in ICON's till. This could be an innovative unreported investment/income technique.

I respect that you didn't do another puff piece to help fund a(n) investment process of deposits/partial refunds without deliveries. I've been excited about this airplane since 2013 (coming up on 3 years) and disappointed in the turn ICON is taking…”

But again… this matter, like so much involving Icon these days, was circuitous, disingenuous and turned an unhappy customer into one that clearly would be unlikely to ever trust Icon again… and we’re hearing a LOT of such sentiments.

As a matter of fact; I was sitting at a table at a major aviation event, with a number of other aviation journalists recently, and as the subject of Icon came up, the attitude became quite negative. Now that the cat was out of the bag and the rest of the industry had woken up to the original ANN report, it was obvious that Icon was held in much disfavor… a condition that is going to take a lot more than some brilliant hype and outlandish promises to fix. Further; the reality of Icon has embarrassed a few pseudo-aero-publications who bought into or cooperated with the Icon hype. I’d hate to be the person that named the A5 ‘Editor’s Choice’ some time ago.

Ouch.

It does not help that Icon has overtly attempted to control media reporting. ANN is one of a few organizations that has refused Icon’s demands for some manner of editorial control over flight reports and has heretofore been denied the chance to fly the aircraft… even, in one case, after ANN suggested a wholly transparent public process for flying and documenting the aircraft that would have allowed for nothing but honest reporting and analysis and the ability for EVERYONE to see/hear it. Icon, apparently, does not support/allow non-restricted press freedoms and activities… and may have something to fear from accurate, verifiable, unbiased reporting. For a company run by a person claiming to have served in this nation’s military and whom reportedly defended this nation and the Constitution of the United States from all enemies foreign and domestic, Icon seems unwilling to let a free press do its job without their heavy hand guiding the process to assure the result they want.

There are other issues that have to our attention (especially their flight training program). We are investigating them carefully, especially since those speaking up, uniformly, express some concern over Icon reprisals for going public. We’re doing our best to deal with those reports, one at a time, within the constraints of the concerns raised by those reaching out to us.

Great disquiet surrounds the consensus forming that Icon has spent a LOT of money, possibly TOO much, over the last few years… and may be running low on the latest VC round that netted them some $60 million in 2013. The ‘Burn Rate’ noted by a number of industry experts suggests that Icon may need more money, and need it fast, to get the A5 into significant sustained-rate production… and if they don’t have it now, claims of May/June production efforts would seem to be in doubt. Further; major suppliers like Rotax (which makes the A5 powerplant) reportedly do not work on credit… nor, allegedly, do a number of other major vendors (especially in regards to a start-up company with no proven track record)… meaning that in addition to hiring/training a lot of people, building up a production assembly line, and continuing to run a company that is just starting to attempt to meet its promises, Icon is going to need a whole boat-load of cash to order expensive components that require a significant ramp-up to get components built and shipped to the manufacturer… and again, that just doesn’t seem to coordinate with the promises Icon is making for (real soon now) serial production.

We have had credible reports that Icon has solicited additional funding from the venture capital community in recent weeks and months, but no reports of their actually having received it… and knowing Icon’s penchant for immediate self-promotion and marketing hype, one would assume that if they’d succeeded in getting additional funding, they’d be shouting about it from the rooftops.

So yes, we keep asking questions… and we keep getting the cold shoulder – and we’re not the only ones. And yet, ANY marketing guru worth his salt, when confronted with so much bad news and industry backlash, will tell you that shutting up and refusing to discuss such concerns is, at best counter-productive, and at worst, corporate suicide.

So… can Icon survive? Possibly… but probably NOT with their current efforts and leadership strategy, and not with their arrogant “we know what’s best for you and the rest of the industry” attitude that pretty much sets themselves up as self-proclaimed industry saviors and treats the rest of us as sheep that need to follow them blindly and without question. Big changes may need to take place at Icon… the industry needs to demand transparency and honesty since we have nearly as much to lose, collectively, as Icon does…

And yet, as we asked a few weeks ago, Icon can do a lot of good for itself and our industry if they would only answer questions like we posed a few weeks back and work to build some trust.

Kirk Hawkins? Are you reading/listening? This industry needs answers if you’re going to restore any sense of trust… and refusing to be honest with the industry you claim to want to help, is no way to do it.

ANN will continue to report relevant details of this story as facts/evidence become available. We have a sickening feeling that we’re not close to being done…

FMI: www.iconaircraft.com, https://twitter.com/wheels_up/status/701776235278503936

 


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