Spirit AeroSystems intends to keep pursuing its acquisition of Asco Industries and certain aerostructure assets from Bombardier, despite retrenchment in the company’s key revenue streams.

“We continue to see the long-term strategic value in both the Asco and Bombardier aerostructures acquisitions and remain engaged in discussions with both parties on the conditions needed for closure of those deals,” said Spirit CEO Tom Gentile. Spirit continues to look to diversify beyond Boeing—responsible for more than three-quarters of its annual revenue—to include Airbus and more defense work, and those deals help do that, he reiterated.

Both deals face “long-stop dates,” or deadlines, in October. Since they are based in signed agreements, Spirit is obligated to close them if conditions are met, Gentile told financial analysts while discussing 2020 second-quarter results Aug. 4. Still, analysts pressed the Spirit CEO on whether changes could occur due to direct and indirect COVID-19 effects, including a June decision by Airbus to in-source A320neo engine nacelle work that would have been supplied by Bombardier’s Belfast, Northern Ireland unit that would go to Spirit.

Asco’s annual revenue was about $400 million pre-pandemic, and Bombardier aerostructures’ was $1 billion. “Obviously, like the rest of the aviation industry, with COVID those numbers will be impacted,” Gentile said. “We continue to monitor it, but it’s in line with what you’d expect in terms of the COVID impact, but with the opportunity to recover as production rates recover.”

“With regard to specific work packages, we’ve obviously—we keep track of everything,” Gentile continued. “Airbus hasn’t made everything completely public yet, so we’re watching it carefully and talking to Bombardier about what the potential impact could be.”

For the Bombardier assets, at least, there are widespread expectations that Spirit will pursue a discount as it did earlier with Asco. “The fact that [Spirit] mentioned the long-stop dates suggests it’s pushing for concessions to the $920 million currently agreed-upon price for both,” noted Cowen analysts.

The comments came as Spirit announced some of the worst quarterly results in its 15-year history, due to the double-whammy of COVID-19 and the Boeing 737 MAX crisis. Sales were down nearly 70% across each of the Wichita giant’s divisions, with each recording an operating loss in the quarter, according to Spirit data and Vertical Research Partners analysis. The company reported a quarterly loss of $2.46 per share, compared with Wall Street expectations for a loss of just $1.25.

Boeing recently told Spirit to produce just 72 737 shipsets this year, 88% off the 606 delivered last year. Days before, Boeing announced it now did not expect to achieve a monthly production rate of 31 new 737s until early 2022, later than an earlier 2021 goal. In turn, Spirit announced it expects to lag Boeing’s rate by five aircraft a month for two years as the two companies work-down the inventory of stored narrowbodies from 130 now to about 20.

At the same time, Spirit will be reducing its 787 shipset production to six a month and Airbus A350 shipsets to five by early next year, while easing Boeing 777/777X to around two per month. Breakeven on production costs for 787 will not be reached until 2024, a year later. Several analysts said they fear Spirit could have to report more forward-losses on those programs in coming quarters.

Spirit managers said they have enough liquidity for the next year, including paying for the Asco and Bombardier acquisitions. Still, they have implemented $1 billion worth of cost-cuts, roughly 40% of the non-material base of its business, including cutting around 8,000 workers or 28% of its 2019 year-end level.

Many analysts recognized that Spirit was streamlining itself for survival, but they remained concerned that conditions could worsen, with several calling the overarching plan for the MAX still too aggressive.

“While the magnitude of the loss this quarter was significant, it was not entirely unexpected,” Vertical analysts said. “On the plus side, the aerospace OE industry looks to now have a more realistic outlook and baseline for build rates over the next 12-18 months, and Spirit seems positioned for it. However, a return to free cash flow breakeven looks to largely rest on a return to MAX at 31/month, and we think there remains the risk that this could slip further to the right.”