What’s Next for Icon?

Icon Aircraft’s announcement yesterday of a sharp production cut and layoffs of 60 full-time workers comes at crucial time for the California startup. With deliveries anticipated to be in full swing by now, the company instead is shifting its delivery schedule by about a year as it continues to burn through its cash reserves. But Kirk Hawkins, Icon’s founder and CEO, says the setback could ultimately prove to be a positive for the fledgling manufacturer and its customers.

Hawkins said manufacturing and supply chain teething problems Icon encountered while building the first batch of A5 light sport amphibians forced the company to halt production at its new Vacaville, California, plant. Hard lessons learned now, he said, will pay dividends in the future.

“While the A5 is extremely well engineered and an amazing aircraft to fly, frankly we need to improve its manufacturability,” Hawkins said. “We have to slow down to go fast later.”

Icon will build 20 A5s this year, as opposed to the 175 originally planned, which will be used for pilot training at sites in Florida, Texas and California. It has finished seven A5s so far, with 11 more in various stages of completion. A total of 160 employees will remain with the company after the 60 production workers and 90 part-time contract workers were let go yesterday.

Icon says it has 1,850 position holders for the A5, who will undoubtedly be disappointed by the news that they will have to wait longer to receive their airplanes. They can take solace in the fact that the company has scrapped an onerous, 40-page purchase agreement crafted earlier this year and replaced it with a much more palatable contract.

The biggest question now is whether Icon can sustain the production delay financially. Hawkins says the company can.

“Fortunately we have an investor base that is very supportive of the mission,” he said. “They are committed to providing additional capital to get through this phase.”

He declined to say how much money will be needed to keep Icon afloat until large numbers of airplanes start heading out the doors and into the hands of buyers — but ultimately the airplanes they receive will be the product Icon promised, he said, and “that’s what matters.”

“We’re not trying to spin a production slowdown as a good thing,” he said. “But it ultimately may be a good thing. It is the responsible thing to do.”