Spirit AeroSystems swung deeply into the red during the first quarter of 2024, losing $617 million – which nearly matches its full-year 2023 loss – amid sharply reduced 737 fuselage deliveries and hefty charges against its Airbus A220 and A350 work.
In disclosing its first-quarter results on 7 May, the Wichita-based aerostructures manufacturer also warned that Boeing may delay plans to increase 787 production, affecting Spirit’s fabrication of the widebody’s forward fuselage sections. Spirit now anticipates delivering structures for 50 787s this year, down from its original expectation of 80.
Additionally, Spirit says it remains “engaged in discussions with Boeing on the possible acquisition of Spirit”. The airframer earlier this year disclosed interest in acquiring the firm to fix quality and supply chain issues.
Spirit’s $617 million first-quarter loss compares to losses of $281 million in the first quarter of 2023 and of $633 million for the whole of last year.
“Spirit’s [737 fuselage] deliveries to Boeing have been delayed, and undelivered units have been built-up in Wichita, Kansas, resulting in higher levels of inventory and contract assets and lower operational cash flows,” Spirit says.
The delays result from a change by Boeing, which since 1 March has been inspecting, with Spirit, 737 fuselages prior to their shipment to its Renton, Washington assembly site. Boeing wants to avoid having to fix 737 fuselages on its own production line.
The change is a response by the airframer to the 5 January in-flight failure of a 737 Max 9’s mid-cabin door-plug.
As a result of the inspections, “Spirit’s current Boeing 737 production rate is approximately 31 aircraft per month, which the company anticipates remaining at through the end of this year.”
It will likely deliver 350 737 fuselages this year – equating to an average of 29 monthly – says Spirit chief financial officer Mark Suchinski.
That is far fewer 737 fuselage deliveries than Spirit had previously planned. In February, Spirit chief executive Pat Shanahan said the company was building 38 737 fuselages monthly and working to hit 42 monthly.
Spirit’s first-quarter loss reflects more than $500 million in charges and costs associated with troubles across its commercial aircraft programmes: $39 million in additional 737 programme costs, plus forward losses of $34 million against 787 work, $281 million against A350 work and $167 million against A220 work.
In the latter two cases, those forward losses partly reflect Spirit’s “inability to reach a conclusion to pricing negotiations with Airbus”.
Spirit’s work for the European firm – it makes A350 composite centre fuselage sections and the A220’s composite wings – have proved financially draining, prompting it to seek revised terms.
Spirit warns that first-quarter events – including new 737 fuselage inspection requirements – have left it with “significant reductions in projected revenue and cash flows this year”.
The company does not provide financial guidance, saying it will hold off until it has “further clarity” about production rates, the outcome of negotiations with Airbus, and acquisition talks with Boeing.
“Management has developed plans to pursue various options to improve liquidity as needed and expects these plans will sufficiently improve the company’s liquidity needs,” Spirit adds.
It ended March with cash and cash equivalents valued at $352 million, down from $824 million at end-2023.
Though its cash continues dwindling, raising more money should “not be an issue” for Spirit due to the “importance of Spirit operations to Boeing”, says a 7 May report from JP Morgan.
Story updated on 7 May to note that Spirit now anticipates delivering components for 50 787s this year, not for 80.
