Boeing Explores Buying Supplier Spirit AeroSystems: Insider Updates

Boeing is reportedly engaged in discussions to acquire its former subsidiary, Spirit AeroSystems, amid shared challenges of persistent quality issues and the need for cost containment in 737 MAX production, according to an industry insider. This potential merger signals a reversal from the 2005 spin-off, bringing Spirit back under Boeing’s umbrella. Boeing has encountered difficulties in recent years, including cost pressures and disruptions affecting aircraft deliveries. Simultaneously, Spirit is grappling with cash flow problems and quality concerns related to the fuselages it produces for Boeing’s 737 narrowbody jets, prompting strategic exploration and preliminary talks with Boeing.

Although both companies have refrained from commenting, an industry source has confirmed the ongoing discussions. Boeing had previously contemplated repurchasing Spirit, but concerns over optics and higher pricing dissuaded such a move. Subsequent to the news, Spirit’s shares experienced a notable 13% surge, while Boeing’s shares dipped by over 1%.

Bringing Spirit back under Boeing’s control could potentially alleviate quality concerns by providing Boeing with increased oversight over manufacturing. Additionally, the integration might enable Boeing to achieve cost savings through economies of scale. However, analysts caution that Boeing, currently contending with its own operational challenges, may encounter difficulties in resolving Spirit’s issues.

Spirit, a significant manufacturer of large aircraft structures, has grappled with financial woes and quality challenges concerning the fuselages it supplies to Boeing. Over the past five years, Spirit’s shares have depreciated by more than 70%. The company is also exploring the sale of its operations in Ireland, which manufacture parts for Airbus.

The Federal Aviation Administration (FAA) has imposed restrictions on Boeing’s expansion of 737 MAX production following a January 5 incident where a door plug blew off a 737 MAX mid-flight. During a visit to Boeing’s Renton, Washington factory, FAA head Mike Whitaker expressed concerns about the incident. Investigations are ongoing to determine responsibility, with Spirit producing the panel and Boeing subsequently removing and reinstalling it.

In October, Spirit appointed Patrick Shanahan, a former Boeing and Pentagon official, as its interim CEO. During the same month, Spirit 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 monitors the potential acquisition’s ramifications for both companies’ future operations and the resolution of their persistent challenges.