AIN Blog: Icon's Liability-limiting Purchase Agreement

The controversy of the week last week was surely the purchase agreement that light sport aircraft (LSA) manufacturer Icon Aircraft has developed for buyers of its A5 amphibious airplane. Some of the language in the agreement is unusual in the context of what buyers of light aircraft are used to seeing. Much of the agreement seems intent on protecting Icon from product liability litigation: the buyer has the option of paying $10,000 to eliminate a clause under which the buyer agrees not to sue Icon. 

Other clauses, as well, are raising eyebrows.

Until this purchase agreement became public (I found a link to it on the Air Facts website, but the document is hosted on the AOPA website; Aero-News.net first broke this story), no one apparently knew that the A5 will be equipped with a flight data recorder. In the agreement, the buyer must pledge never to remove or tamper with the recorder. And the data that is recorded belongs to Icon, not the buyer. 

Another notable clause stipulates that all maintenance be done only by Icon-approved shops. 

Icon has placed specific limitations on the A5 in the purchase agreement, such as a requirement that the engine be overhauled every 2,000 hours or 15 years; that the airframe undergo an overhaul every 2,000 hours or 10 years; and that the airframe is life-limited to 6,000 hours or 30 years.

There is a lot more legal language in the purchase agreement, and some of it makes me wonder whether all the provisions would hold up in court. For example, it might be hard to get the FAA to agree that a manufacturer can tell an aircraft owner exactly where and who can maintain an A5, although LSA rules do allow the manufacturer to dictate actual maintenance practices. In the rest of the aviation world, it’s not unusual for manufacturers to try to limit access to maintenance data to authorized facilities, but there is a regulation that is supposed to prevent this (not that it always works). I’m not sure if this would apply to an LSA manufacturer such as Icon, but perhaps it should. 

Hard limits on airframe life and overhaul intervals aren’t unusual, but typically they're spelled out in the type certificate or maintenance manuals, not in purchase agreements.

The data recording issue is noteworthy because modern aircraft throw off tons of data, and if you’re buying any aircraft these days, I would suggest looking over the purchase agreement and other paperwork very carefully to see exactly who owns all that data and what can be done with it. The original Eclipse Aerospace collected many bytes of data from the 260 or so Eclipse 500s that it built before going bankrupt, and some owners had issues with this. Rumor has it that somewhere there is a record of an early owner rolling his Eclipse 500. The point is, this isn’t a new issue and it does need to be addressed.

From Icon’s perspective, it's easy to understand the thinking behind this purchase agreement, especially the section where it asks Icon owners/pilots to “behave professionally, respectfully and with sound judgment in connection with use of the aircraft…” Every manufacturer hopes that pilots exhibit that kind of behavior with their aircraft.

Icon founder and CEO Kirk Hawkins explained the company’s position in an open letter sent on April 8. “We hear you loud and clear. And I promise, we’re listening carefully,” Hawkins wrote. “Hopefully, after years of watching the Icon team, you’ve seen us take on our industry’s toughest problems and try to creatively solve them with smart people working relentlessly behind the scenes. Loss of aircraft control through stall/spin accidents was the elephant in the room for airplane designs. You saw us address that problem with a truly remarkable spin-resistant airframe. The next elephant in the room is safety-related product liability. We’re trying to approach that one as thoughtfully as we did spin resistance.”

The letter went on: “The purchase agreement has two fundamental objectives: vigorously promote safety and responsible flying; and directly address the GA product-liability crisis. We can’t achieve these alone; it will require a true partnership with our customers and the industry.

"Over the past 30-plus years, GA has experienced one devastating liability blow after another, leaving a trail of shuttered hangar doors and crippled manufacturers scraping to get by instead of being at the forefront of innovation. Things that don’t adapt don’t survive, and the future of our industry is in jeopardy. Every manufacturer is intimately aware of the issue. The problem of safety-related product liability is massive, lurks well below the surface and must be addressed.

"Icon's mission is to make flying much more accessible to those who dream about it. We'll keep fighting that good fight and we hope those who want a healthy industry will join us. There are no certain futures, but what is definite is GA can't stay where it is. If we want a different future, one where personal GA is growing and healthy again, together, we need to adapt.”

Icon is busy ramping up its manufacturing operation to deliver against a massive backlog of orders for the A5. It will be interesting to see whether Icon modifies this purchase agreement, or if it has any effect on sales, but is the safety and reliability of the Icon A5 fleet truly the measurement of the effectiveness of the Icon purchase agreement? We'll just have to wait and see.