Boeing Considers Acquisition of Major Supplier Spirit AeroSystems

Boeing is reportedly in discussions to acquire its former subsidiary, Spirit AeroSystems, as both companies grapple with persistent quality issues and seek cost containment related to the production of the 737 MAX, according to an industry source. Such a merger would reintegrate Spirit under Boeing’s umbrella, marking a reversal from the spin-off in 2005. Boeing has faced challenges in recent years, including cost pressures and problems affecting aircraft deliveries. Spirit, currently struggling with cash flow problems and quality issues surrounding fuselages for Boeing’s 737 narrowbody jets, has enlisted bankers to explore strategic options and held preliminary talks with Boeing.

While both companies declined to comment, an industry source confirmed the ongoing discussions. Boeing had previously considered repurchasing Spirit but was deterred by concerns over optics and higher pricing. Following the news, Spirit’s shares surged over 13%, while Boeing’s saw a more than 1% decline.

The move to bring Spirit back into Boeing’s fold could potentially address quality concerns, given Boeing’s increased control over manufacturing. Additionally, the integration could lead to cost savings for Boeing by leveraging economies of scale. However, analysts caution that Boeing, currently dealing with its own execution challenges, may face hurdles in resolving Spirit’s issues.

Spirit, a key manufacturer of large aircraft structures, has faced financial difficulties and quality concerns related to the fuselages it produces for Boeing’s jets. Over the last five years, Spirit’s shares have depreciated by more than 70%. The company is also exploring the sale of operations in Ireland that manufacture parts for Airbus.

The Federal Aviation Administration (FAA) has restricted Boeing from expanding production of the 737 MAX family following an incident on January 5, when a door plug blew off a 737 MAX plane mid-flight. FAA head Mike Whitaker expressed concerns about the incident during a visit to Boeing’s Renton, Washington factory. Investigations are ongoing to determine responsibility for the incident, where Spirit made the panel, but Boeing removed and reinstalled it.

Spirit appointed Patrick Shanahan, a former Boeing and Pentagon official, as its interim CEO in October. In the same month, the company reached an agreement with Boeing, securing immediate funding and revised prices for 737 and 787 production.

As discussions progress between Boeing and Spirit, the aviation industry closely watches the potential acquisition’s implications for both companies’ future operations and the resolution of their ongoing challenges.