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Photo of RV-14 from Van's Aircraft Facebook pageVan's Aircraft announced Monday that it filed for protection under Chapter 11 of the federal bankruptcy code as part of the reorganization of the company following financial difficulties. The company shared it would continue to source, produce and provide its parts, services and support for customers along with crating and shipping kit orders.
Founder Dick VanGrunsven released a video in October to speak directly to Van's Aircraft builders and overs, sharing the challenges has faced and its plans to move forward. Due to "a number of factors" the company shared it faced serious cash flow issues. In a questions and answers portion, Van's shared that a combination of events over a short period of time increased costs, doubled inventory levels, slowed deliveries and strained cash flow to a breaking point. To ensure ongoing operations, Van's addressed the situation promptly, assembling a team of advisors to help with financial analysis, planning and operational improvements. In the October update, the company shared that it would focus on necessary internal changes until mid-November.RELATED STORY:Van's Aircraft reveals financial difficulties, production changes
Van's has shared the unprecedented supply chain challenges during COVID, a faulty primer that led to corrosion problems on quick built kits and problems with laser-cut parts manufactured in response to high demand led to cash-flow issues that the company could not recover from under normal operations. During the past few years and while facing these challenges, Van's built a significant and high-value parts inventory. As the company manufactures the additional parts needed to balance the inventory, Van's will use it to fulfill orders for kits and parts over the next 12 to 18 months.
By filing Chapter 11, Van's may continue to provide support for customers, suppliers and employees for years to come.Founder Dick VanGrunsven
"We understand that this situation creates a hardship for everyone involved," the company said. "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."
Over the last several weeks the team has developed plans for each of the impacted groups of customers. This includes customers who needed laser-cut replacement parts, those with deposits on kit orders and the customers with deposits on engine, propeller and avionics orders. Through these hardships, Van's has been open with customers about the challenges faced and the process to move forward. This transparency lets customers know what their options are.
Customers who received laser-cut parts
A team at Van's completed an extensive review that outlines the specific list of laser-cut parts for each customer kit order. After gaining approval from the court, Van's will begin contacting customers to provide information about the laser-cut parts that may have been included in their individual kits and information about the parts replacement program and how it works. Van's will send communication to each customer with a detailed list of laser-cut parts in-scope for their kits, based on the date the kit was crated and the laser-cut parts available at that date.
The goal is to begin the process of shipping replacement parts to customers in December and complete deliveries to all impacted customers before the end of 2024. More than 1,800 customers are affected by the issue and some have more than one affected kit. The cost to manufacture and ship replacement parts is high and it will take time to provide a replacement part to each affected customer.
Customers with deposits on engines/powerplants, propellers, and avionics
Van's shared it was working with its engine, propeller and avionics partners to develop a plan for these products and customers as swiftly as possible. The company said it will update customers with these orders when a specific plan has been established with each partner.
"Due to the volume and nature of these orders, we do not expect to have answers for these customers before mid-January," Van's said. "If we have meaningful information to share, we will update you sooner."
Customers with open parts orders
Van's is reviewing all of its open parts orders. Price increases will need to be applied to some orders and the customers with orders requiring updated pricing will be contacted soon. These affected customers will receive access to a website to review and act on the details of their existing orders and Van's proposed order modifications. Orders that do not require any modifications will be processed and shipped during the normal course of business.
Customers with deposits on aircraft kits manufactured by Van's Aircraft
Van's will begin to contact the customers with open kit orders placed before the filing date within the next seven to 10 days with an offer to apply the full amount of their existing deposits toward the purchase of the same kit, under the new terms and conditions and with the price increase. These customers will receive an email, directing them to a website to view the details of their existing order, the amount of their deposit and Van's proposed order modifications. Customers can choose to accept these modified orders on the website.
The company anticipates resuming shipments of in-stock kit orders within the next seven to 10 days and will do its best to prioritize those that have waited the longest. The kit fulfillment schedule must be financially acceptable to the court, based on cash flow over the traditional and historical method of order fulfillment known to Van's customers 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," Van's shared. "Where we are able to do so, we will also consider the age of the original customer order."
Vendors with open invoices
Van's is working with suppliers to establish plans to ensure it maintains continuity in manufacturing and production as needed.
The company will regularly communicate its progress throughout the whole reorganization process on its website. The day that a company files Chapter 11, known as the petition date, it places itself under the jurisdiction of the bankruptcy court. Van's will file its plan for reorganization within the next 90 days to explain how the company will operate in the future and how its financial obligations that existed at the time of the filing will be handled. The company will continue to operate under the court's supervision in the normal course of business and build and sell its airplane kits.
Van's will be increasing the cost of kits and parts and all post-petition financing requires court approval. The payments of debts, other financial obligations and any litigations are frozen as of the petition date. The formal plan of reorganization will be circulated to Van's unsecured creditors for a vote and after, the court is asked to approve the plan. Once given approval, Van's will emerge from bankruptcy. After emerging, the company will pay down its debt to pre-petition creditors according to the plan.
Founder VanGrunsven released another video outlining the Chapter 11 filing. He shared the company's commitment to reorganization. VanGrunsven also noted that he and his wife have provided a multi-million dollar loan to the company to help bring it out of financial distress.
"We are absolutely committed to success and are confident with your understanding and help, we will all benefit," he said.
In closing, VanGrunsven said "Van's is very much alive and vigorously operating on a daily basis. We have a large inventory with many kits ready and waiting to be shipped. The entire staff at Van's is reinvigorated by the challenge of restructuring and growing stronger."
"We are more dedicated than ever to offering you the best kits and services possible," VanGrunsven said, "We look forward to updating you regularly on our progress as we move through this recovery phase."