Boeing Engages in Discussions to Repurchase Spirit AeroSystems, Manufacturer of Fuselages, Following a Series of Quality Flaws

Boeing is in discussions regarding the potential acquisition of Spirit AeroSystems, a company responsible for manufacturing fuselages for Boeing’s 737 Max aircraft, as announced by both entities on Friday. This move comes amidst the manufacturers’ efforts to rectify production issues with the highly popular aircraft.

On Friday, Spirit’s shares surged by 15%, while Boeing experienced a nearly 2% decline in its stock value. Spirit AeroSystems boasted a market capitalization of $3.8 billion at the close of trading on Friday.

The roots of Spirit AeroSystems trace back to Boeing’s decision to divest its operations in Kansas and Oklahoma in 2005, which later evolved into the present-day company. According to a securities filing, approximately 70% of Spirit’s revenue in the previous year was derived from Boeing, with around a quarter stemming from supplying parts to Boeing’s primary competitor, Airbus. Airbus refrained from commenting on the ongoing discussions about the deal.

Spirit AeroSystems
Quality defects prompt Boeing to discuss repurchasing Spirit AeroSystems, its fuselage supplier.

In a statement released on Friday, Boeing expressed its belief that the reintegration of Boeing and Spirit AeroSystems’ manufacturing operations would enhance aviation safety, elevate quality standards, and cater to the interests of stakeholders including customers, employees, and shareholders.

However, Boeing emphasized that reaching an agreement was not guaranteed, yet the commitment remained steadfast to enhancing safety and quality standards for the millions of passengers who rely on their airplanes daily.

Spirit AeroSystems also confirmed the existence of the discussions.

Boeing’s CEO, Dave Calhoun, acknowledged the possibility of overreliance on outsourcing production during an interview with CNBC in January, stating, “Did it go too far? Yeah … probably did, but now it’s here and now I gotta deal with it.”

Spirit has encountered financial challenges, with its last profitable year predating the pandemic in 2019. In October, the company appointed Pat Shanahan, a veteran of Boeing with approximately three decades of experience, as its interim CEO.

Amidst quality concerns, Boeing explores repurchase of Spirit AeroSystems, maker of critical fuselage components.

The negotiations come shortly after an incident where a section of a Boeing 737 Max 9 aircraft experienced a rupture during an Alaska Airlines flight less than two months ago. Subsequently, the Federal Aviation Administration (FAA) issued a temporary grounding of all such planes in January, initiating investigations into the incident and scrutinizing Boeing’s production processes.

This incident adds to a series of concerns regarding the Boeing 737 Max, the corporation’s flagship aircraft. According to a preliminary report by the National Transportation Safety Board, the bolts on the door plug of the Max involved in the January incident seemed to be unattached when it left Boeing’s Renton, Washington, factory.

Boeing has acknowledged various production issues and quality deficiencies concerning the fuselages manufactured by Spirit, including incorrectly drilled holes and misaligned fuselage components, which have impeded the timely delivery of new aircraft to airlines.

In response to the January 5 accident, the FAA, responsible for overseeing Boeing and certifying its aircraft, has pledged heightened scrutiny of the company’s production lines. Following a meeting with Calhoun earlier this week, Mike Whitaker, the FAA’s administrator, announced that the agency had given Boeing a 90-day ultimatum to devise a plan for enhancing its quality control and safety systems.

The Wall Street Journal initially reported the ongoing negotiations between Boeing and Spirit AeroSystems.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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