Key Points:

  • Spirit AeroSystems has requested Boeing and Airbus to assist in mitigating financial strains caused by rising inflation and other challenges, stating that the current contracts are "not sustainable."

  • In the first half of the current year, Spirit incurred about $215 million in charges linked to a range of issues including wage inflation, parts shortages, and greater regulatory scrutiny.

  • Spirit's CEO Tom Gentile highlighted the disappointing production rates of Airbus A220 and conveyed the urgent need for discussions with both Boeing and Airbus to revisit the contractual terms and expectations.

Spirit AeroSystems Seeks Financial Relief from Boeing and Airbus Amid Inflation Pressures

WICHITA —Spirited discussions about the economic pressures are underway between Spirit AeroSystems, Boeing, and Airbus. Spirit's CEO Tom Gentile revealed on Thursday that the company is urging the two aerospace giants to share the financial burden heightened by inflation, which has rendered the existing contracts unsustainable.

The concerns are emanating from an acute financial stress experienced in the first half of the year, with Spirit absorbing roughly $215 million in charges. The substantial financial hit is attributed to a host of challenges including wage inflation, parts shortages, and heightened regulatory scrutiny, detailed Gentile at an investor conference. The charges pertain to the Boeing 787 Dreamliner and Airbus A220 and A350 programs.

Gentile expressed that it is crucial to have a dialogue about the way forward, highlighting that the financial stressors are too grand to be managed by Spirit alone. "All of those programs are under pressure," he emphasized, noting the imperative nature of arriving at a solution through discussions with Boeing and Airbus.

Focusing on the Airbus A220 production rates, Gentile expressed dissatisfaction, terming the output as "disappointing." The CEO noted that the production of Airbus A220 would probably see only 65 to 70 jets rolling out this year, a considerable decline from the initially projected production of 100 units, for which Spirit had geared up to manufacture wings and other components.

The sentiment of disappointment extended to the discussion surrounding the Airbus A350. Gentile alluded to a pressing need for a discussion with Airbus to address the apparent delays, throwing a spotlight on the revised forecasts regarding the break-even point for the program. Initially, Spirit had forecasted reaching a profitable or break-even point in 2025, assuming a stable production of 14 A220s each month, a target that now seems delayed.

The discourse with Boeing revolves substantially around the Dreamliner program, with Spirit grappling with $1.4 billion in reach-forward losses. Gentile emphasized the necessity to reassess the dynamics to facilitate an escalation in the production of 787 to match Boeing's ambitious target of manufacturing 10 units monthly by 2026.

Spirit had begun articulating the concerns about the sustainability of the contracts in August, indicating the initiation of a phase where contract negotiations would be pivotal in sustaining the partnerships and ensuring the financial viability of the programs involved.