TECT Aerospace filed Chapter 11 Bankruptcy in the Wake of Ban on 737 Max Plane and Global Pandemic

On April 06, 2021, TECT Aerospace, an aerospace supply company based in Wichita was forced to file a Chapter 11 bankruptcy petition. The aerospace supply company claimed that it suffered from “catastrophic financial losses” due to the unexpected suspension of Boeing’s 737 Max production and the gruesome impact of COVID 19 on its financials. The company is headquartered in Wichita with facilities in Park City and Wellington. One of its locations in Kent, Washington, closed recently. Chapter 11 bankruptcy is well-known to rehabilitate a business and allow a company to reorganize its finances vide a court-approved reorganization plan. The bankruptcy procedure will protect the company from multiple creditor lawsuits while it allows the company to restructure itself.

The company, TECT Aerospace is engaged in the business of manufacturing of aircraft structural components, among other aviation parts. The aviation supply chain plays a major part in the local economy of Wichita. However, it had been struggling with the one-two punch of the grounding of the 737 Max plane and has also been affected by the recession brought by COVID 19 which forced the demand to decrease for aerospace production. As the 737 Max was grounded in the early 2019 following two catastrophic crashes, it largely affected Wichita as workers at Spirit AeroSystems build structure on the plane. Therefore, Boeing’s order to stop the production resulted in layoff of thousands of workers at Spirit.

According to the court documents, TECT owes around $18.3 million to Boeing and $4.2 million to Spirit AeroSystems.[1] Further, several companies engaged in aerospace supply chain companies and Wichita businesses have come forward as creditors in this bankruptcy case. The company had received claims from between a thousand to five thousand creditors. In fact, Spirit AeroSystems had sued TECT Aerospace in 2020 and alleged that the supplier demanded price increases for parts to help cover the costs owed to other vendors. The case of TECT Aerospace is a proof of the adverse effect of external facts and the global pandemic. It also highlights the importance and significance of Chapter 11 bankruptcy in protecting the companies and enabling them to remain an ongoing business.

[1] In re TECT Aerospace Group Holdings, Inc, Case 21-10670 (D. Del. Apr 5, 21), Petition, Pg 17 at https://www.csbankruptcyblog.com/wp-content/blogs.dir/375/files/sites/55/2021/04/petition-1.pdf

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