Boeing announced that it is in talks to acquire Spirit AeroSystems, a significant supplier that was part of Boeing until its 2005 sale and was also implicated in an Alaska Airlines mid-air door plug explosion.
The Wall Street Journal and the Seattle Times reported on the negotiations earlier Friday. Spirit shares rose 15% in Friday trading on the reports. However, shares were down 10% from the Alaska Air incident in early January to Thursday’s close and 70% since a March 2019 tragic crash of a Boeing 737 Max, which resulted in a 20-month banning of the jet.
Boeing Wants To Buy Back The Company That Builds The Body Of Its Troubled Max Planes
Boeing sold Spirit in 2005 for $900 million in cash. Spirit AeroSystems, headquartered in Wichita, Kansas, manufactures critical components for several Boeing aircraft, notably the 737 Max fuselage. The pieces are subsequently shipped by train to Boeing’s facility in Washington state.
“We believe that the reintegration of Boeing and Spirit AeroSystems’ manufacturing operations would further strengthen aviation safety, improve quality and serve the interests of our customers, employees, and shareholders,” the company stated late Friday night. “Although there can be no assurance that we will be able to reach an agreement, we are committed to finding ways to continue to improve the safety and quality of the airplanes on which millions of people depend each and every day.”
Spirit has faced its own set of quality control challenges in recent years. The problems had gotten serious enough that Boeing agreed to give it more money to remedy Spirit’s quality and reliability issues, affecting Boeing’s output. The payments resulted in an additional $60 million in revenue last year and $395 million in 2024 and 2025.
These payments indicate Boeing’s incentive for a contract with Spirit. It can only return to profitability if the problems at Spirit are also resolved. And it will cost Boeing money to resolve those issues, whether it is the largest client or the owner of those businesses.
Boeing Wants To Buy Back The Company That Builds The Body Of Its Troubled Max Planes
Last year, Boeing contributed $3.9 billion to Spirit AeroSystems’ revenue, accounting for approximately 64% of total revenue. Spirit’s second largest customer is Airbus, which competes with Boeing. If Boeing repurchases Spirit, it will unlikely be able to retain that portion of the business.
After reports of a prospective sale raised shares, Spirit’s market capitalization at the close of trade Friday was $3.7 billion, or a little less than what Boeing paid Spirit as its largest supplier last year. However, after five years of net losses totalling $31.5 billion, Boeing’s balance sheet finished 2023 with only $12.7 billion, a decrease from $14.6 billion the previous year.
An initial study from the National Transportation Safety Board on the January incident with the door plug blowing out aboard the Alaska Airlines aircraft discovered that the jet left Boeing’s plant in October with four bolts missing that were required to secure it in place.
However, Boeing replaced the door plug and the missing bolts since the fuselage arrived at the factory with issues with five rivets installed by Spirit AeroSystems. Even if Boeing was ultimately to blame for the mishap, quality flaws at Spirit could have played a role.
The NTSB has yet to assign blame for the event.
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Boeing Wants To Buy Back The Company That Builds The Body Of Its Troubled Max Planes
However, the bolts are only one of several quality difficulties that Spirit AeroSystems has faced in recent years. Fuselages were supplied to Boeing with work remaining on them, resulting in “out-of-sequence” work, which may have contributed to Boeing’s quality difficulties.
In 2023, it used a “non-standard manufacturing process” to attach pieces of the fuselages, halting deliveries of 737 Max jets. Just a month earlier, a Spirit employee informed Boeing that two holes may not have been drilled strictly to Boeing’s specifications, forcing Boeing to repair approximately 50 planes that still needed to be delivered.
SOURCE – (CNN)
