Aerospace supplier
Spirit AeroSystems
said Wednesday that its key customer,
Boeing,
has agreed to help it through its production problems.
Spirit AeroSystems
stock (ticker: SPR) was flying as a result, surging 20% to $20.70 in early Wednesday trading. The
S&P 500
and
Dow Jones Industrial Average
were down 0.5% and 0.4%, respectively.
Help from
Boeing
(BA) is a big deal for Spirit AeroSystems, which supplies fuselage sections for many Boeing jets. Boeing accounted for about 65% of Spirit Aero’s revenue in 2022.
“Our collective teams will focus on further generating supply chain performance and resiliency,” Spirit Aero CEO Patrick M. Shanahan said in a news release Wednesday. “This united effort to synchronize our production systems will enable greater market responsiveness and delivery assurance.”
The deal includes a lot of financial help, too. According to a filing with the Securities and Exchange Commission, there are “recurring price increases” for 787 “shipsets” as Spirit calls the parts that it sells to Boeing. There will be price decreases for 737 shipsets starting in 2026.
Price reductions tend to come with higher volumes. The result of all the changes should be more revenue in the near term. Spirit Aero estimates $60 million more revenue in 2023, $395 million more in aggregate between 2024 and 2025, followed by $25 million less between 2026 and 2028 and $240 million less between 2029 and 2033, according to the SEC filing.
Overall it’s an increase of $190 million in sales over the next decade, but with benefits coming now.
Along with the pricing changes, the deal includes money from Boeing for tooling, changes to product liability claims, and restructured finance payments due from Spirit Aero to Boeing.
It has been an incredibly difficult time for Spirit Aero. First came Boeing’s issues with the 737 MAX jet, which crashed twice in a span of five months, grounding the plane worldwide between March 2019 and November 2020. Then came Covid-19, which hit demand for air travel and caused seemingly endless manufacturing supply-chain problems. After that, there have been quality problems on some 737 MAX products because of Spirit Aero-generated defects.
Spirit Aero’s shares are still down about 16% over the past year and 75% over the past five years. The new agreement is part of the process of making Spirit Aero stock investible again. It should also benefit Boeing, which wants to increase production of the 737 MAX. Having a healthy supply base is part of that process.
“Boeing is pleased to have reached a mutually beneficial agreement with Spirit AeroSystems,” said the company in an emailed statement. “This agreement with our valued supplier will enhance operational stability in our production system and help us deliver on our customer commitments.”
Boeing stock was up 0.7% in early trading.
Write to Al Root at [email protected]
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