Van’s Aircraft has confirmed it will raise prices for parts, kits and accessories an average of 32 percent to stem the bleeding from its struggling enterprise. It’s also changing ordering processes and making a fundamental accounting change in the way it handles customer deposits. In a post on its website on Saturday, first reported by KITPLANES, the company said price increases will vary depending on the item and are key to Van’s overall recovery. “While these price changes are significant, they are also necessary,” the announcement said. “Over the past few years, the cost of producing airplane kits has soared substantially. Candidly, due to a number of factors we found ourselves operating the business at a loss.”
As for the kits themselves, Van’s has decided to drop the huge range of customization it previously allowed for kits, which it said was costly and inefficient. “Moving forward, Van’s is standardizing our kit offerings,” the announcement said. “We have reviewed what is included (or not included) in each kit and made a number of changes. In addition, we are implementing a no-deletions policy …” As for customer deposits, 35 percent of the kit’s cost will be required within 14 days of ordering and the money will go into a separate account until creation of the kit begins. Under the current process, customer deposits went straight into the company’s operating account to use as required.
What If Van’s Aircraft Asked Its Suppliers to Invest?
Invest in what? Subsidizing customer kits that had prices locked in at rates that are going to lose money? That way Van’s AND the suppliers could lose money together?
I would think the suppliers are in just as much trouble. If Vans were operating at a loss, then would suspect most of their suppliers did not raise prices either. I am convinced this inflation is solely caused by fuel costs sky rocketing and interest rates going up. Not by over spending of govt. And higher govt rates wont bring inflation down until fuel costs go down. So we are in for continued inflation. Which means Vans will probably have another price increase at the end of next quarter. JMHO
“If Vans were operating at a loss, then would suspect most of their suppliers did not raise prices either.”
I don’t follow this – if the suppliers did raise their prices, wouldn’t that directly contribute to Vans’ losses?
My sense is that since the suppliers most likely don’t themselves (unlike Vans) take deposits on items to be delivered a long time away in the future (and can therefore raise prices incrementally over time), they are not in the same boat as Vans vis a vis inflation. As we know, we haven’t had as long and as steep an inflation spike since the 1980s, long before Mr. V. was managing an operation the size and complexity of Vans.
While fuel prices certainly have ups and downs, they are incredibly stable over the long run. Gas today is a bit cheaper in constant dollars than it was in 1979. $1.01 in Nov of 1979 is the equivalent of $4.28 today. Actual reported for Nov 2023 is $3.91. Fuel was also more expensive 10 years ago. https://www.usinflationcalculator.com/ While recent fuel costs might have been a nail in the coffin for Van’s, their problems appear to run much deeper.
There’s a reason most aircraft company have just a few models that cover specific market segments or customer profiles. It’s really pricey to support everything from an RV-3 to an RV-15. Add on the number of options and customizations and the cost to maintain that support is through the roof. Expect to see the company cut back its lineup to the most popular models in the most common configurations. It might not be as exciting, but the business with be healthy and sustainable.
I understand the manufacturing process and acknowledge the significant costs involved for any company to sustain a large product line with a wide range of options and customizations. Consequently, most companies opt for a limited number of models that cater to specific market segments or customer profiles. Van’s Aircraft is likely to streamline its lineup to focus on the most popular models in the most common configurations. While this decision may not be well-received by a segment of their customer base, it is a necessary step for the company’s long-term success. Although Van’s has a loyal following, quick capitalization is imperative to provide the company with the time it needs for recovery. Given that the medium recovery rate for all Chapter 11 cases is 50%, urgent capitalization options are essential.
There’s a whole world of prior builders (me and my RV-7) and newcomers who eagerly await the release of the RV-15, so it would seem to me Van’s will focus on releasing that kit and in doing so collect a good stream of deposit cash. The 10, 12, and 14 would be the other models that would survive a possible cut.
Still, there are a lot of people in the process of building and some will not be able to absorb the 32% bump. There is also the critically important issue of the laser cut parts and assemblies that need to be purged from the system. Van’s has a lot of work to do.
There is a huge amount of interest in the RV-15. However, it is still in development and probably still needs a big amount of cash to get it in production. Doubt kits will see the light of day for many years if ever.
Given the accounting changes proposed, deposits won’t help with their cash flow. Also, please keep the 8!
The inflation we’ve experienced means prices must adjust. It’s just a fact of life. Since the airframe itself is frequently about half the price of the total build cost, the impact on the final aircraft cost isn’t out of line.
the details are important. I would assume that if you have a specific model and you damage a component, for instance the rudder, are you able to order the specific parts necessary to repair/build a new part? or do you need to order the whole thing?
exactly how they are going to streamline the order process is important.
You can order virtually any part of a kit on their site, so yes, you could infinitely replace components that require it.
Lots of manufacturers will support their prior designs back to the beginning of time. You can get virtually any part from Cessna for example. The catch is that you are gonna pay a lot for old parts, and some of them are going to be made-to-order which extends delivery times. Holding inventory without a specific customer is expensive. I would expect a third or even half the current designs are retired such that only existing airplanes get parts support.
Money does not solve money problems. This company has serious management problems. The same people that lead to the problem they are stuck with today are the same people that will solve the problem now? Good luck with that.
Yeah, the same people who have put over 11,000 planes in the air over a fifty year period. The same people who will be operating under the court’s supervision with a business plan acceptable to a majority of its creditors.
Who would you suggest replace them – maybe a crew from Boeing?
Dick had tried to be out of the business for some time. Obviously the managers they brought in and trained were not up to the challenge of first Covid and then a rapidly changing interest rate/materials prices. The fact that basic controls like segregating deposits from working capital were never put in place shows how lax the business side was. They might be able to fix this just by putting basic controls in and acting like a normal company.
Adding water to the mudhole!
Based on industry averages and available Googled data, a company with $30 million in annual revenues might expect Chapter 11 legal costs in the range of:
Lower Range: $500,000 to $1 million
Mid-Range: $1 million to $3 million
Upper Range: $3 million to $5 million
These estimates don’t include other costs associated with bankruptcy, such as financial advisors, restructuring experts, and administrative fees, and do not include potential litigation costs.
Crowdfunding?
That was my very first thought, enlist the long line of Van’s owners, kit buyers, and EAB enthusiasts to Crowdfund a recovery pot. They have a large pool to pull from. I am surprised some of the cottage industry that has spun off of Van’s (like forums such as vansairforce.net) has not stepped up to market a crowdfund.
About a year ago, I saw a Facebook story about an airport in WI seeking crowdfunding support. I rarely do that but I liked the story so I donated. Now — a year later — I’m seeing pictures of a rebuilt pilot lounge and many improvements to the small grass airfield. SO, your idea is valid, Raf. Maybe we pilots need to start helping in these sorts of ways to ensure the health and vigor of entities? Cubcrafters is going public for a similar reason.
Public equity offering. (Also not cheap to do.)
Customer Deposits aren’t being put into escrow and therefore are not any different than they were before Chapter 11 was filed. If they fail and end up liquidating, those deposits will go to secured creditors. The largest of which appears to be Dick VanGrunsven, who is providing DIP financing, secured by Van’s physical assets. He’s 83-84 years old, which better be addressed in the agreement should his health decline during this mess. His heirs might not be so keen about saving his legacy.
Where did this information come from, J Earnie?
The deposits for kits will be held in a new customer deposit account, which is not used for Van’s general operating expenses. The kit deposit will remain in the account until Van’s begins to manufacture, source and or assemble the kit components. Customers will receive a “Notice of Production Commencement,” after which the deposit will be transferred from the deposit account into the Van’s operating account. About 60 days before Van’s crates the kit, the customer will be given 14 days to submit the remaining balance due for the order.
Good post, Frank. That’s what I understood.
Saving Van’s Aircraft: A Call to Action
The recent Chapter 11 filing by Van’s Aircraft has sent shockwaves through the aviation community. This American icon has been empowering countless individuals to build their own dreams and take flight. But Van’s Aircraft needs our help. This is not just about saving a company; it’s about preserving a legacy, a spirit, and a vital piece of the American dream.
Here are 6 practical steps we can take to help:
1. Crowdfunding: Contribute directly to Van’s Aircraft through platforms like Vansairforce.net or AngelList. Your financial support will provide them with the resources they need to navigate this challenging period.
2. Government Grants: Advocate for government grants that support Van’s Aircraft’s mission. Focus on areas like aviation safety, technology development, or workforce education to unlock significant funding opportunities.
3. Strategic Partnerships: Collaborate with organizations like EAA, AOPA, avionics manufacturers, and other key players in the aviation industry to bring vital resources, expertise, and advocacy to the table.
4. Community Engagement: Spread awareness about Van’s Aircraft’s situation by sharing personal stories about the company’s impact. Engage in discussions on platforms like Vansairforce.net to build widespread support.
5. Policy Advocacy: Contact your elected officials and urge them to support policies that benefit American manufacturing and innovation in the aviation industry. Your voice can make a difference.
6. Support Organizations: Donate to or volunteer with organizations like AVweb or the General Aviation News that advocate for pro-aviation policies. Your contribution will support the broader cause.
Saving Van’s Aircraft is about more than just financial aid. It’s about preserving the values of self-reliance, creativity, and the sheer joy of flight. Share your stories, highlight the company’s significance, and stay informed about ongoing developments.
This is a time for action. Every effort, big or small, counts. By working together, we can ensure that the wings of American ingenuity continue to soar for generations to come.
Let’s rise to the challenge. Let’s save Van’s Aircraft. Let’s keep the American dream of flight alive. Together, we can make a difference.
Or something like that!
The challenge for Vans is they did not keep up with the cost increases in raw materials, parts, labor, insurance and operating costs.
I am an industrial distributor of bearings, fasteners and power transmission components. A 32% increase is about right. This reflects what we have seen since 2021.
You can not fault Vans for the price increase. The fault is that they were trying to do what they felt was right and hold the price to the customer and eat any increases in cost.
Some times it is damned if you do and damned if you don’t.
Don’t raise prices due to increased costs and lose profit. Or make no money. Or sell at a loss.
Raise prices and lose sales. Lose profit. Or fail to cover fixed costs.