Under Pressure On Plane Safety, Boeing Is Buying Stressed Supplier Spirit For $4.7 Billion

Arlington, Virginia  – Boeing has announced plans to acquire crucial supplier Spirit AeroSystems for $4.7 billion, claiming that the acquisition will boost jet quality and safety in the face of increased scrutiny from Congress, airlines, and the Department of Justice.

Boeing formerly controlled Spirit, and the acquisition would reverse a long-standing Boeing strategy of outsourcing critical work on its passenger jets. This technique has been criticized after problems at Spirit hampered the manufacturing and delivery of major Boeing jetliners such as the 737 and 787.

Boeing |Ap News Image

Under Pressure On Plane Safety, Boeing Is Buying Stressed Supplier Spirit For $4.7 Billion

“We believe this transaction is in the best interests of the flying public, our airline customers, the employees of Spirit and Boeing, our shareholders, and the country as a whole,” Boeing President and CEO Dave Calhoun said in a statement late Sunday.

Safety concerns arose following the January 5 burst of a panel on an Alaska Airlines 737 Max 9 at 16,000 feet (4,876 meters) over Oregon. The Federal Aviation Administration soon announced greater oversight of Boeing and Spirit, which supplied the plane’s fuselage.

There were no significant injuries in the Alaska Airlines door incident, which startled passengers, but the US Justice Department is pressuring Boeing to plead guilty to criminal fraud in connection with two catastrophic airline disasters involving its 737 Max jetliners more than five years ago.

According to three people who heard federal prosecutors outline a planned offer on Sunday, Boeing has until the end of the week to accept or reject the offer. The offer includes the major aerospace corporation agreeing to an independent monitor to oversee its compliance with anti-fraud rules.

In a May court filing, the Justice Department stated that Boeing breached the conditions of a 2021 settlement that allowed the corporation to avoid prosecution for its activities leading up to the Ethiopia and Indonesia crashes, which killed 346 people.

These crashes were caused by a defective sensor in a flight-control system, and the investigation is different from the one into the more recent Alaska Airlines blowout, which involved Spirit.

In 2005, Boeing spun off Spirit, a company based in Wichita, Kansas, unrelated to Spirit Airlines. In recent years, quality issues have arisen, such as fuselage panels that needed to fit together precisely enough and holes that were incorrectly drilled.

Boeing | AP News Image

Under Pressure On Plane Safety, Boeing Is Buying Stressed Supplier Spirit For $4.7 Billion

Spirit fired its CEO in October and replaced him with Patrick Shanahan, a former Boeing executive who served as temporary defense secretary during the Trump administration.

Things appeared to be going more smoothly until the Alaska Airlines incident. Investigators said a panel used to replace an extra emergency door was removed at a Boeing factory to allow Spirit workers to repair broken rivets, and bolts that keep the panel in place were missing following the repair. It is unclear who removed the bolts and neglected to reinstall them.

Spirit announced in May that it was cutting off approximately 450 workers at its Wichita factory due to a production slowdown following the January event. Its overall workforce numbered just over 13,000.

“Bringing Spirit and Boeing together will enable greater integration of both companies’ manufacturing and engineering capabilities, including safety and quality systems,” Shanahan told the media.

According to the aerospace business, the stock value of the acquisition is $4.7 billion, or $37.25 per share, while the total value of the transaction is roughly $8.3 billion, including Spirit’s most recent declared net debt.

Boeing said its common stock will be exchanged for Spirit shares using a variable formula based on a weighted average of the share price during a 15-day trading period that concludes on the second day before the transaction closes.

The businesses also announced a deal with Airbus to pursue the purchase of Spirit assets associated with the European aerospace firm’s programs. The Airbus agreement will take effect after Boeing’s acquisition of Spirit is completed, according to the two US businesses.

SOURCE – (AP)