Van’s Aircraft, facing multiple crises and a serious cash crunch, filed for Chapter 11 bankruptcy protection today. According to the company, this is ”a key step in the reorganization of the company. During this period of reorganization Van’s will continue to source, produce, and provide parts, service, and support to our customers. We will also be crating and shipping kit orders,” the company said in a statement. It is expected to file its proposed reorganization plans within 90 days but will operate “under court supervision in the normal course of business.”
“Over the past few years, the company has faced a handful of complex issues, including unprecedented supply chain challenges throughout COVID, faulty primer that led to corrosion problems on quick build kits, and problems with laser-cut parts that were manufactured in response to high demand. As a result of this combination of issues, the company experienced serious cash-flow problems from which it could not recover through the normal course of business. During that time, Van’s built up a significant and high-value parts inventory. As we manufacture the additional parts needed to balance this inventory, we will leverage it to fulfill orders for kits and parts over the next 12 to 18 months.
“The purpose of the Chapter 11 filing is to allow Van’s to continue to provide ongoing support for its customers, suppliers, and employees for many years to come. We understand that this situation creates a hardship for everyone involved. However, without these changes we do not see a viable path forward that would allow Van’s Aircraft to remain in business and support its customers,” the company said in a statement.
This news follows recent updates from Van’s on its internal programs to get to the bottom of inventory control, manufacturing delays and a way out for builders provided with laser-cut parts that were prone to cracking during builder assembly. In late October, Van’s founder Dick VanGrunsven announced immediate changes to some of the company’s programs and said it would undertake a detailed analysis of the business to run through mid-November. More recently, Van’s announced that it had been able to narrow the window of likelihood of any given kit containing laser-cut parts and had begun notifying builders. A program to identify laser-cut parts and to provide recommendations on their replacement has been going on since summer.
“Over the past several weeks the team at Van’s has been developing plans for each impacted group of customers. These include customers who need laser-cut replacement parts; customers with deposits on kit orders; and customers with deposits on engine, propeller, and avionics orders. We want to provide meaningful information to each of our customers as soon as possible, so they know what their options are,” the company says.
Customers who have received laser-cut parts will be contacted with a “detailed list of laser-cut parts in-scope for their individual kit(s), based on the actual date their kit was crated, and the laser-cut parts that were available as of that date. Our goal is to start the process of shipping replacement parts to customers this month, and to complete the delivery of replacement parts to all impacted customers before the end of 2024.”
For builders who have placed deposits on kits, “Van’s will begin contacting customers with open kit orders that were placed prior to the filing date within the next 7 to 10 days with an offer to apply their existing deposit toward purchase of the same kit, under new terms and conditions including an increase in price. These customers will receive an email that will direct them to a website where they will be able to view the details of their existing order, the amount of their deposit and Van’s proposed order modifications. Customers can then choose to accept their modified order(s) on the website.
“Van’s expects to resume shipping in-stock kit orders within the next 7 to 10 days. We will do our best to prioritize those who have waited longest, but our kit fulfillment schedule must be one that is financially acceptable to the court, based substantially on cash flow rather than the traditional and historical method of order fulfillment that Van’s customers have experienced in the past. We will be constrained by – and will make prioritization decisions based on – the rate and timing of order renewal, availability of in-stock parts, and our need to ship kits that generate positive cash flow. Where we are able to do so, we will also consider the age of the original customer order.” Similarly, customers with deposits on engines, propellers and avionics will be contacted regarding next steps, though the company says that “Due to the volume and nature of these orders, we do not expect to have answers for these customers before mid-January.”
Prices are expected to increase across the board, including parts. “Customers with open parts orders that require updated pricing will be contacted soon and will receive access to a website where they will be able to review and act upon the details of their existing orders and Van’s proposed order modifications. Orders which do not require modification will be processed and shipped in the normal course of business.”
Van’s founder, Dick VanGrunsven, has already stepped in to help the company financially. The declaration submitted by Clyde Hamstreet of Hamstreet & Associates for Van’s reads, in part, “The founder, Mr. Richard VanGrunsven…who is now in his 80s, has been essentially retired from Van’s. However, the management team recently made him aware of the dire financial situation that the company and he has come in to do all he can to rescue Van’s from this financial crisis for the long-term benefit of its customers, employees and vendors.” According to the declaration, VanGrunsven and his wife, Diane, have loaned the company more than $10 million over the last two years to help stabilize the situation. Moreover, the declaration states that Van’s “will also be seeking court approval for a post-petition loan from the [VanGrunsven] Trust in an amount up to $6,000,000 to help fund post-petition operations.”