New Boeing Agreement Brings Relief For Spirit AeroSystems
The memorandum of understanding (MOU), signed Oct. 12 and made public Oct. 18, boosts 787 shipset prices for 421 units starting with line no. 1164 and reduces 737 pricing from 2026 through 2033. Spirit calculates the changes will boost sales by $455 million through 2025, but reduce sales $265 million from 2026-2033, it said in a regulatory filing.
The deal also provides Spirit funding “for tooling and capital through 2025 for certain planned and potential 737 and 787 rate increases,” the company said. Boeing will make the first payment of about $100 million within 10 business days of finalizing the MOU. The tooling includes materials for the 737-10 to support demand for the model. Boeing’s backlog of 4,420 737 MAXs includes 962 orders for the yet-to-be-certified 737-10.
The parties have agreed to hammer out the final details by Nov. 17.
“Our collective teams will focus on further generating supply chain performance and resiliency,” Spirit President and CEO Patrick Shanahan said. “This united effort to synchronize our production systems will enable greater market responsiveness and delivery assurance.”
Boeing in a statement called the deal “a mutually beneficial agreement” with its key airframe supplier that will “enhance operational stability in our production system and help us deliver on our customer commitments.”
The deal was struck 10 days after Shanahan, a former Boeing executive, was tapped from Spirit’s board to take over for Tom Gentile as Spirit AeroSystems Interim President and CEO. Getting a new, financially friendly deal done with Boeing was one of Shanahan’s top short-term priorities, according to analysts. With the framework of a deal in place, he can focus on the supplier’s nagging shop-floor execution problems that have hampered the 737 and 787 programs.
“While Spirit has conceded pricing on the 737 program from 2026, the $455 million adjustment on the 787 is a big plus,” Vertical Research Partners analyst Robert Stallard wrote in an investor note. “The company has never made money on this program, and that situation wasn’t going to change even as Boeing ramps back to 10/month. The additional Boeing financing and extended repayment dates will also be welcome, as the preliminary [third quarter] results show that Spirit is in very bad financial shape.”
Spirit’s filing provided a sneak peek at its 2023 third quarter results. Revenues are expected to come in at about $1.4 billion with a net loss of $50-60 million.