One of Boeing’s suppliers, TECT Aerospace, has become the latest casualty in the suffering aerospace sector. It filed for bankruptcy in the US on April 5th. This comes following growing losses over the past year. Production will continue, however, with support from Boeing.
Bankruptcy amidst COVID and 737 MAX issues
TECT Aerospace, a significant supplier to Boeing, filed for bankruptcy protection this week. According to reporting by the Puget Sound Business Journal, TECT Aerspace’s current debts are estimated at between $100 million and $500 million. And the company has estimated assets of between $50 million and $100 million.
The bankruptcy comes from a combination of the ongoing 737 MAX suspension and the slowdown due to COVID. Its bankruptcy filing explains how its operations and finances were already severely impacted by the slowdown in production in 2019 (and it has reached its maximum borrowing capacity). This was then worsened by the pandemic from 2020.
In a statement, the company said:
“Following fifteen months of diligent work with its lenders, customers, and suppliers and after exhausting all efforts to restructure out of court, TECT has concluded that an orderly and organized Chapter 11 proceeding is in the best interest of its creditors.”
TECT Aerospace and Boeing
TECT Aerospace is headquartered in Wichita and has production facilities in Park City, Wellington, and Everett. These production facilities are all included in the Chapter 11 filing. A further facility in Nashville is not included.
The company is a key supplier to Boeing, particularly in parts for the 737 MAX. According to the company website, it assembles “flight critical mechanical and structural assemblies.” This includes fuselage structures, wing components, landing gear structures, struts, and nacelles.
Production of the 737 MAX has, of course, slowed dramatically. It was grounded in March 2019 following the crashes in Indonesia and Ethiopia. Production slowed and was put on hold in January 2020. It resumed in May 2020 but remained well below its original rate. Before its grounding, production was 52 aircraft per month (with plans to increase it to 57).
Chapter 11 bankruptcy protection will allow the company to continue operations and reorganize its financial situation whilst protected from creditors’ claims.
The company will continue operations during its bankruptcy reorganization. According to the Wall Street Journal, it has secured $60.2 million in financing from Boeing to continue operations. Boeing is also assisting in finding a buyer for the Everett-based factory.
TECT Aerospace is not the only supplier suffering from the ongoing slowed production. In June 2020, we reported how Spirit AeroSystems had been told to stop work on 737 MAX fuselages. Like TECT Aerospace, Spirit AeroSystems is also Wichita-based with additional manufacturing locations. It had already offered voluntary layoffs after the 737 MAX was grounded. This further slowdown led to temporary furlough for many remaining employees.
Many companies are being affected by the ongoing slowdown in the aerospace industry. Do you think TECT Aerospace, and others, will get through this? Will Boeing be prepared to offer more support? Let us know your thoughts in the comments.