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autoreply

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I do. The smaller the operation, the bigger the issue. Many small businesses have run out of cash with a closet full of unsold inventory. The bankruptcy courts generally order the inventory liquidated to pay creditors and that's that, no more business.

That was exactly my point. Even Boeing doesn't, you certainly wont, and ALL inventory is expensive. As a small kit maker you want zero, or as close to zero as possible, inventory. I gave an example of throwing away 50,000 parts but it can be just as financially disastrous to throw away five, or one.

However, low volume outsourced fabrication will push you to holding inventory. Fabricators of all types charge setup fees that push you to buy in lots. Quality control issues will push you to buy a bunch when you find someone who gets the parts right. That was the point of the 50,000 part story; not that we ever should have bought 60k parts at a time (the product that used the closure was selling under 100 a month and holding 500 months of inventory for a product with a lifespan of maybe 120 month production is iffy at best), but volume pricing, frustration with consistency issues, and a big slice of wishful thinking caused someone to rationalize seriously overbuying. In a small kit plane business one mistake like that can mean closing the doors.
There's a bigger underlying issue with kit manufacturers and GA companies that trumps the others but I didn't mention.

The big majority of expenses at a kit company is overhead, being salaries (and a much smaller fraction being a workshop/building).

The price of small bough-in hardware, if done right (see below) is tiny.
It is funny how two people can take the same facts and, based on different experience, come to polar opposite conclusions.

My point was that the volumes are extremely limited. We aren't going to overtake Van's. Van's is in a much better position to outsource because their sales volume is higher and more predictable. As a new kit maker you may go months between kits. Each time you get an order you start making and buying parts for that kit. You don't invest your own money there, the builder's deposit pays for materials.

So you get a check from a builder. It clears the bank. You call your fabricators and line up people to have one set of parts made. Except the machine shop you used last time you sold a kit is out of business, the welders have a huge order and can't get to you until next February. The sheet metal shop is happy to have your business and turns around a set of cut and drilled parts in a week, but the rib blanks are cut from 6061-t6 instead of 2024. Aircraft Spruce gives you all the AN hardware you need so no problem there, but even they would give you a 10% discount if you bought enough for two kits and of course you will sell another kit right so some of your own money goes out the door to allow a higher profit on the next sale....that stuff is going to happen, and because the volume is so low you may well be dealing with that stuff for every single sale.

Or you have one basic CNC tool in your garage, and design your whole plane around what it can produce. Then when you get an order you buy material (itself a challenge at times) and everything else is in your control.
But, those last two lines are what you should do anyway. That allows you to outsource everything from a single source.

Combining a welded airframe, with machined parts, sheet metal skin and some composite parts and outsourcing all that is asking for trouble. Make it fully sheet-metal instead and outsource it to a single shop.

Even if you outsource the whole primary structure however, it's laughable how little it costs to outsource that. How much would it cost to waterjet-cut a complete Sonex kit. 5K? Sell 20 a year and order the cut sheets twice a year and compared to the size of your company, that's a tiny portion of your cash flow. Even at that volume, it'll be considerably more expensive to do that in-house.

If you were talking about making most products, even really niche consumer products like high end mechanical computer keyboard kits or similar, I'd be 100% behind the idea of concentrating on the part you do best...but for something like kit airplanes I think you need to operate defensively. You need more control than outsourcing allows, and that means bring the tools in house if at all possible. Not because it is cheaper in itself, but because it allows you to run your business leaner.
I've worked (as chief engineer) for a small manufacturer.
For metal hard points it's a no-brainer. You get a 3.2 (or a declaration of it being 2024T3) plus absolutely perfect parts. Easy to check and many shops - at least here - give a significant discount if you have 4-8 weeks before you need them (nice in-between job). Much better quality than trying to do it internally, cheaper as well.

Adjustable rudder pedals were maybe a good example. We tried the sailplane setup. Great, but welded and machined parts with all the trouble you describe. Two alternative ones worked way better. Two square extrusions sliding over each other (with a nylon slide plate inside) and rudder hinge blocks that were hinged in a molded-in line in the floor and locked with a std locking pin. We could only do that by taking the pedals themselves out of the mix, pulling a mold with all the hard points and making those ourselves.
Instead of those 1500 bucks, we went to 2-3 hours of labor plus extrusions any supplier can deliver and us cutting it to the correct length and drilling a few holes in it.
And BeLite does...but think about this one: My plane has disc brakes. The wheel is a standard Azusa nylon ultralight aircraft split rim, which is held together by three screws that go into nuts that drop into hexagonal pockets so they can't turn. The mount for the disc is a belite-designed and machining outsourced tripod that replaces the nuts. You reuse the screws. BeLite has been selling this setup for years. So...when I went to put together my wheels and disc brakes...the screws wouldn't thread in properly. Turns out the wheel came with inch size screws and the disc mount had metric threads. BeLite had no idea and sounded genuinely surprised by that. So...did the machine shop install the wrong tap when they made parts this time? Did Azusa go from metric to inch? Is there a metric and an inch version of the wheel and BeLite's supplier switched them? Something else? I don't know, and I don't think you can eliminate all of that, but you can eliminate it in your skins and other simply cut parts.
And that's why many kits just have a complete unit from Beringer or Tost. More expensive, but it works right out of the box. In the end it's cheaper to get it right the first time.

In a broader sense, this is why it's pretty much impossible to make money at the lower end of the aviation market. People won't put up with Van's RV-pricing, or even the Sonex price points. But much lower than that and it's pretty much impossible to make break even without cutting a lot of corners or doing the large volumes that aren't going to happen.

And there we're back at square one. It's the huge amount of labor, development cost and time and overhead that drives aircraft pricing. Not the price of carbon, or outsourcing some metal parts.
 

Them

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I had a long reply written up but hit a wrong button, so you'll have to suffer with this....


From my point of view what you are proposing sounds like a good way to turn a $5m initial investment into a shot at $200k/yr in revenue. I don't see that as practical. I think you need to work within the limits of what one person can do at the start. If she can build sales up to $300k she could maybe afford one full time employee.

Re: brakes...from the research I just did your suggestion would add at least 2.4 pounds to my plane, all else equal. As I have about a 13lb margin between the lightest theoretical build and the legal max weight.... burning 20+% of that margin on brakes sounds iffy to me. I wouldn't do it.
 

rdj

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From my point of view what you are proposing sounds like a good way to turn a $5m initial investment into a shot at $200k/yr in revenue.
Question: How do you make a small fortune in aviation?

Answer: Start with a large one.

I thought everyone knew that :)
 

cheapracer

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Question: How do you make a small fortune in aviation?

Answer: Start with a large one.

I thought everyone knew that :)
I don't.

This comment gets tossed around for any 'X', 'Y' or 'Z' product, not exclusive to aviation, and if one murmurs it to oneself then one of the secrets of successful business should probably be considered immediately, i.e. knowing when to stop.
 

autoreply

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I had a long reply written up but hit a wrong button, so you'll have to suffer with this....


From my point of view what you are proposing sounds like a good way to turn a $5m initial investment into a shot at $200k/yr in revenue. I don't see that as practical. I think you need to work within the limits of what one person can do at the start. If she can build sales up to $300k she could maybe afford one full time employee.
"Practical"?

We're not talking about say 5M. Just tons of manhours and maybe 1-2 times the sales value of the plane in tools, kits, material and the first airframe. But putting in a ten thousand or so manhours is about right..

You might not like it, but that's the way it works. You've been exposed to what doesn't work, cutting corners. In the long term, I think that's going to cost you profitability first and your customers after that...
Re: brakes...from the research I just did your suggestion would add at least 2.4 pounds to my plane, all else equal. As I have about a 13lb margin between the lightest theoretical build and the legal max weight.... burning 20+% of that margin on brakes sounds iffy to me. I wouldn't do it.
At least Tost has some incredibly light wheels. Which ones did you find (which added 2.4 lbs)?
 

Them

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"Practical"?
It was a way of saying you would go broke and out of business . . . like most aviation start-ups do.

We're not talking about say 5M. Just tons of manhours and maybe 1-2 times the sales value of the plane in tools, kits, material and the first airframe. But putting in a ten thousand or so manhours is about right..
You were just talking about staffs of engineers and all their salaries. Now you are talking about a five year hobby project for one guy. Which is it?


You might not like it, but that's the way it works. You've been exposed to what doesn't work, cutting corners. In the long term, I think that's going to cost you profitability first and your customers after that...
Actually we did just fine. Profitably sold retail and specialized vertical niche products for years, and the company is still in business though I'm no longer involved.

As for "cutting corners"...I gave you no indication we were cutting corners, only that we were dealing with the real world where suppliers come and go and Chinese businesses are untrustworthy.

At least Tost has some incredibly light wheels. Which ones did you find (which added 2.4 lbs)?
Actually Tost adds more than that. The lightest same-size solution Tost sells is 1,6kg per wheel vs ~0,5kg. If you want to downsize, Tost can get you down to ~0,4kg/wheel, but doing the same with the brands currently in use would get down to ~0,35kg per wheel...and I don't want to downsize.
 

autoreply

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Actually we did just fine. Profitably sold retail and specialized vertical niche products for years, and the company is still in business though I'm no longer involved.

As for "cutting corners"...I gave you no indication we were cutting corners, only that we were dealing with the real world where suppliers come and go and Chinese businesses are untrustworthy.
My bad, I was talking about your experience with Belite, not with your former dayjob (?) which I don't know enough to say anything meaningful about.

But there's a bigger point in that. Aviation really is different. Low volume, very high amount of engineering compared to manufacturing cost etc, like virtually no other branch of work.

Hard to explain until you've actually been there yourself. Business perspectives from other branches don't always work out. In fact they often don't and it's a recurring theme on HBA. That also brings us full-circle to Icon who's essentially doing exactly that. I'm sure their approach would have worked great for say a campervan or a jetski...
Actually Tost adds more than that. The lightest same-size solution Tost sells is 1,6kg per wheel vs ~0,5kg. If you want to downsize, Tost can get you down to ~0,4kg/wheel, but doing the same with the brands currently in use would get down to ~0,35kg per wheel...and I don't want to downsize.
Which size and type of wheel?
 
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BoKu

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...There's not a single piece of CNC-equipment that makes sense to buy, unless we're talking about a waterjet router for say a Van's...
Somewhat off-topic:

If somebody would write an article about the period of time from when Vans was installing their first CNC hole punching machine through the time when they started shipping their first matched-hole kits, I would buy a one-year subscription just for that one article. Eric Stewart, are you lurking this? What was it like, taking a bet that a huge half-million-dollar machine would pay for itself? What trials and tribulations did they go through while arriving at the techniques required to make matched holes actually match up? Did they have a sense that they were reinventing the homebuilt airplane in a way that would make moldless foam core construction look like a passing fancy?
 

BBerson

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Somewhat off-topic:

If somebody would write an article about the period of time from when Vans was installing their first CNC hole punching machine through the time when they started shipping their first matched-hole kits, I would buy a one-year subscription just for that one article. Eric Stewart, are you lurking this? What was it like, taking a bet that a huge half-million-dollar machine would pay for itself? What trials and tribulations did they go through while arriving at the techniques required to make matched holes actually match up? Did they have a sense that they were reinventing the homebuilt airplane in a way that would make moldless foam core construction look like a passing fancy?
Did you see the article about Van's on page 9 of August Kitplanes?
 

Battson

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It's simple math.

100 million of investments. Just to cover the interest you need 6 million a year. Even with good profit margins and without interest accrued so far, it's beyond me how they intend to earn that back...
^ Its just this simple

Whoever was/is in charge either:
1) is deluded
2) had no idea what they were doing
3) got put in charge of a massive loss-making tax write-off business, as part of a wider portfolio, which was never intended to do anything but lose money.

There is no way you can pay dividends and return profits on that kind of investment in the light aircraft business with just one model to sell and so many problems / restrictions in play. Period.
 

cheapracer

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Whoever was/is in charge either:
1) is deluded
I imagine that "deluded" person is driving a rather nice car, owns a pretty large house in a nice area and has a envious bank account ... or 2.

I wouldn't mind being that deluded.
 

BJC

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You are assuming that they actually intend to make money by building and selling airplanes. I do not believe that their business plan actually involved making a profit from manufacturing and sales. It would be instructive to see what salaries and benefits, including perks, the top people in ICON have reaped over their existence.


BJC
^ Its just this simple

Whoever was/is in charge either:
1) is deluded
2) had no idea what they were doing
3) got put in charge of a massive loss-making tax write-off business, as part of a wider portfolio, which was never intended to do anything but lose money.

There is no way you can pay dividends and return profits on that kind of investment in the light aircraft business with just one model to sell and so many problems / restrictions in play. Period.
I still contend that the top people in th company know exactly what they are doing, are good at it, are reaping the rewards, and will have nice investment portfolios when that compay goes bankrupt.

It is the investors who are deluded, and will have been defrauded when it is over.


BJC
 

BBerson

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I still contend that the top people in th company know exactly what they are doing, are good at it, are reaping the rewards, and will have nice investment portfolios when that compay goes bankrupt.

It is the investors who are deluded, and will have been defrauded when it is over.


BJC
Tough to prove fraud, I think. My concern is that investors are not really connected to their investments anymore. Not just ICON, but all mutual and other funds.
Money managers make these decisions with no recourse.
 

Victor Bravo

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Watch the movie "The Big Short" if you have not already seen it. It has nothing to do with aviation, but it shows the modern disconnect and institutionalized misinformation that probably is also at play here in the ICON story.

Like I mentioned before in this thread, watch where the key assets, tooling and IP goes. Betcha dollars to donuts that as soon as the ship starts to take on water the production tooling will be stored in closely controlled, proper, protected, dry storage.

But some other key critical element will not be made available at the BK auction (the file cabinet containing the FAA certification, production certificate, IP, etc). This makes the physical tooling worthless or de-valued considerably.

And guess who will be right there to buy the "worthless, un-usable without the FAA paperwork" tooling at the bankruptcy auction... and guess who will have separately purchased or gained possession of the "useless without the tooling" FAA and IP paperwork previously ?
 

cheapracer

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I would. I'd rather my conscience let me sleep at night.

Dana
Very romantic and that's what many people say ... until they find their bank account swollen, then not many will let go of it. Human nature.

By the way, not condoning ICON's method, I have been clear with my position on that sort of sca... err, investment style, just arguing the "deluded" comment.
 

Pops

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I still contend that the top people in th company know exactly what they are doing, are good at it, are reaping the rewards, and will have nice investment portfolios when that compay goes bankrupt.

It is the investors who are deluded, and will have been defrauded when it is over.


BJC
I agree. In today's world this is normal, not so normal in the past . IF, I have to cheat and steal , I'll just stay poor. And don't anyone tell me I don't know what being poor is like.
 

Wayne

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How cool would it be if Icon actually delivered?

On that note I did get to smell a NEW airplane this week which was a huge first. SimplyFLY just got a new Remos demo (see it at Oshkosh and contact me for a great deal!) and we also got a replica aircraft with no engine so that we can continue our offsite promotions (we currently take the folding wing Remos to local fairs/STEM events) and not have to take a plane off the line. There's an awesome ROI there - it's nice when a business case actually works.

Don't give up on GA and flying - we are reversing the trend one student at a time :)

If you guys are interested I'll take some pictures and do a little write up of the new Remos. I won't do it unless someone asks - this is a Homebuilt site after all.

Wayne
 

radfordc

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I agree. In today's world this is normal, not so normal in the past .
If you study how the industrial tycoons of the 1800's made their money you won't find much different today. Greed and corruption aren't modern ideas.
 

BBerson

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Is there a book about how to delude investors?
It just seems seems so common, how do they learn this?

I remember the founder of Cirrus speaking at Oshkosh. He was ranting about how hard it is to get investors for his next turboprop. It was almost like he had disdain for investors. I asked if product liability and FAA regulations were a problem and he said no, surprisingly.

The method seems remarkably similar.
Put up a nice display at Oshkosh with a non-flying mockup. Take advance orders before test flight. Report huge interest with a thousand orders sold at impossible low price. (Or maybe they infllate orders numbers).
Then delay year after year.
Go bankrupt.
What else do they do?
 
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