Monday, April 15, 2024

Boeing plans to repurchase the company responsible for making the bodies of their problematic Max planes

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Boeing is talking about buying Spirit AeroSystems, a big supplier that used to be part of Boeing until they sold it in 2005. Spirit was involved in a door plug issue on an Alaska Airlines plane.

News about the talks came out on Friday, and Spirit’s shares went up by 15%. But before that, their shares had dropped by 10% since the Alaska Airlines incident in January and by 70% since the fatal crash of a Boeing 737 Max in 2019.

Boeing sold Spirit for $900 million in 2005. Spirit makes important parts for various Boeing planes, including the fuselages for the 737 Max. These parts are then sent to Boeing’s factory in Washington.

Boeing thinks that bringing back Spirit’s manufacturing into Boeing could make aviation safer and improve quality. They’re not sure if a deal will happen, but they want to find ways to make airplanes safer.

Spirit has had its own issues with quality control. Boeing had to give them extra money to fix these problems, totaling $60 million in 2023 and $395 million in 2024 and 2025.

Boeing needs a deal with Spirit because fixing Spirit’s problems is crucial for Boeing to make a profit. About 64% of Spirit’s revenue last year, around $3.9 billion, came from Boeing. Airbus, Boeing’s rival, is Spirit’s second-largest customer.

After the reports of a possible deal, Spirit’s market value was around $3.7 billion. Boeing paid Spirit slightly less than this amount last year. Boeing had a tough year, with net losses of $31.5 billion in the past five years. Their balance sheet had only $12.7 billion at the end of 2023.

In January, an Alaska Airlines flight had a door plug blowout, and an initial report suggested missing bolts that should have kept it in place. Boeing was responsible, but Spirit’s quality issues might have also played a part.

The National Transportation Safety Board hasn’t blamed anyone yet. There have been other quality problems at Spirit, like fuselages arriving at Boeing’s factory needing more work, causing delays. In 2023, a “non-standard manufacturing process” caused a stop in deliveries of 737 Max jets. Recently, a Spirit employee told Boeing about holes not drilled to their requirements, leading Boeing to rework about 50 undelivered planes.

 

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