The cash advance only further complicates what has been a chaotic year between Boeing and Spirit AeroSystems
Fuselage manufacturer Spirit AeroSystems (SPR) sounded the alarm last week that it might not be able to stay in business much longer. On Tuesday, it announced that former and future owner Boeing $BA (BA) would be coming through with a $350 million bailout.
“Boeing has committed to pay Spirit, as advance payments” totaling that amount “to produce Boeing products at the rates required by Boeing,” Spirit said in a news release touting the influx of cash. “Boeing intends these payments to address Spirit’s high levels of inventory and lower operational cash flows, decrease in expected deliveries to Boeing and higher factory costs to maintain rate readiness, and lingering effects brought on by the recent strike by Boeing employees.”
The transfer only further complicates what has been a chaotic year between the two companies. Boeing acquired Spirit for $8.3 billion earlier this year in large part because of a major manufacturing embarrassment.
In fact, Spirit used to be a Boeing subsidiary — the plane-maker spun it out in 2005. After the split, the two companies continued working together, but production delays for Boeing’s cash-cow 737 Max planes pushed Boeing to lean on out-of-step “traveled work,” where unfinished planes would be worked on piecemeal to help them get further along in the production process more quickly.
Regulators believe that practice led to a piece of fuselage used to cover unused emergency exit door openings falling off a 737 Max 9 mid-flight this January. Former Boeing CEO Dave Calhoun negotiated his company’s reunion with Spirit to help cut down on traveled work.
Though the deal is expected to wrap up by next summer, a Federal Aviation Administration-imposed slowdown in 737 Max production will make life difficult for Spirit until then. (Boeing has already advanced Spirit hundreds of millions of dollars.) Awkwardly, Spirit could be on the hook for the money if the deal somehow doesn’t go through by then.
“Per terms of the agreement, Spirit must repay 25% of the advance to Boeing on April 30, 2026, June 30, 2026, September 30, 2026, and December 31, 2026,” Spirit’s announcement said.
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