Van’s enters Chapter 11 bankruptcy
Van’s Aircraft, the world’s largest manufacturer of experimental aircraft kits, has entered Chapter 11 bankruptcy court protection with a business plan in place to continue operations.
“I realize that the term ‘bankruptcy’ is shocking,” Van’s Aircraft founder Richard VanGrunsven said in a video released December 4. “However, the key word here is reorganization, which implies continued operation and improvement. Our doors will remain open and we will continue to work hard to serve our customers.”
Customers with kits on order will have the option of paying the new higher prices, or canceling their orders and seeking refunds through the bankruptcy court process as unsecured creditors. Such creditors typically receive only partial refunds.
Hamstreet and Associates founder Clyde Hamstreet, the leader of a “team of turnaround specialists,” said in the December 4 video that customers who have placed orders “will be sent an email that will take them to a portal with the details of their existing order, the amount of their deposits, and Van’s proposed modifications. Van’s will apply the full-prior dollar amount of deposits and payments to the modified kit orders. Treatment of deposits made on engines, propellers, and avionics will be determined later.”
Hamstreet said he is optimistic the court will approve a reorganization plan, which the company expects to file in the next 90 days. “This is expected to be a short, quick case.”
The current interim management team headed by Mikael Via, former CEO of kit manufacturer Glasair, will remain in place at Van’s Aircraft. Via headed Glasair from 2001 to 2011 when the firm was sold to a Chinese conglomerate, and he has worked as an independent consultant since then. Via is credited with turning Glasair around with the Two Weeks to Taxi program that brought customers to the company’s Washington factory to build airplanes rapidly under expert supervision. Since then, the program has been emulated by other kit aircraft firms.
Van’s was founded in 1972 by VanGrunsven, a plain-spoken and widely respected pilot and engineer who designed and flew a series of all-metal, low-wing aircraft with unmatched versatility. More than 11,250 Van’s “RV” kits have been finished, registered, and flown around the world, and the company’s latest model, the high-wing RV–15 made for backcountry flying, has created a great deal of interest among potential builders and pilots.
Van’s seemed poised to grow rapidly during and after the 2020 COVID-19 pandemic when kit orders surged by 250 percent. The company hired many new employees, purchased new equipment, and enlarged its network of subcontractors around the world to meet surging demand. But quality control appears to have suffered.
First, many Van’s quick-build kits assembled in the Philippines had to be recalled when a new type of primer was found to cause corrosion. Then a switch from physically drilling holes in metal parts to cutting them with lasers led to cracking in some instances and a crisis in confidence among builders—many of whom demanded refunds or replacement kits.
The famously conservatively managed firm faced an unprecedented cash crunch as it doled out massive refunds while its costs ballooned, its backlog swelled, and new kit deliveries languished.
VanGrunsven, who had long since retired from day-to-day management, personally loaned the company money in an effort to get it through the crisis. But on October 27, the founder announced more drastic steps had to be taken to put the company back on a path to profitability. The new Van’s management team made a two-week assessment of its financial position, held a companywide meeting on December 4, and announced its Chapter 11 reorganization plan.
The Chapter 11 filing is sure to be a bitter disappointment to its founder, employees, customers, suppliers, and creditors. But if bankruptcy protection works, as it has for many other aviation firms, Van’s Aircraft can gain breathing room, attract new investors, and survive and even prosper.
Several Van’s Aircraft models are likely to fall under the FAA’s proposed new MOSAIC rules in which they can be flown by sport pilots, a change that could significantly enlarge their market.
“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 years to come,” the company said in a written statement. “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.”
