Boeing Extends $425 Million to Aid Ailing Supplier Spirit AeroSystems

Boeing provides a $425 million advance to bolster struggling supplier Spirit AeroSystems. This financial support aims to alleviate financial pressures on Spirit, which has faced challenges amid the aerospace industry's downturn. The advance underscores Boeing's commitment to maintaining a stable supply chain and supporting key partners during challenging times, ensuring continuity in aircraft production and delivery schedules.

Spirit has agreed to pay back the $425 million advance from Boeing by the end of October 

Boeing has announced a $425 million advance payment to Spirit AeroSystems in a bid to stabilize its troubled supplier in the near term.

As per a regulatory filing on April 23, the agreement aims to tackle "Spirit’s higher levels of inventory and contract assets, lower operational cash flows, decrease in expected deliveries to Boeing, and higher factory costs to maintain rate readiness," Spirit reports.

The Wichita-based company has highlighted additional short-term financial pressures, including the relocation of its product-quality verification process from Renton to Wichita, Boeing's discontinuation of travel work on the 737 fuselage, and the Federal Aviation Administration's limitation on Boeing's 737 production.

Spirit is mandated to utilize the cash advance "exclusively for the purpose of sustaining readiness to manufacture products... at the rates demanded by Boeing," it states. The company is set to repay the sum to Boeing through a series of installments, commencing on June 12 and concluding on October 31.

Boeing is currently exploring the potential acquisition of Spirit as a strategic move to bolster a crucial segment of its supply chain. This potential acquisition would mark a reunion nearly two decades after Boeing originally divested from Spirit in 2005. However, the complexity of such a deal is heightened by Spirit's existing working relationship with Airbus.

During Boeing's quarterly earnings call on April 24, Brian West, Boeing's chief financial officer, mentioned that discussions with Spirit are ongoing. He emphasized the need to work through various terms and issues, including price, financing, and the management of certain work that Spirit conducts for other customers. West highlighted the importance of ensuring that all aspects of the deal are carefully addressed before proceeding.

West further stated that the majority of the $425 million advance provided to Spirit is expected to be repaid in the third quarter and will be accounted for as investing cash.

Boeing's CEO, Dave Calhoun, noted that Boeing's 737 production rates will remain inconsistent through the second quarter. He emphasized the importance of the new inspection protocol for fuselages from Spirit, indicating that this will be a pivotal factor moving forward. In the interim, efforts are underway to address existing issues in the production pipeline that have not yet undergone the new inspection process.

Boeing reported a $355 million loss in the first quarter, largely attributed to the slowdown in 737 production mandated by the Federal Aviation Administration following the door plug blow-out incident on Alaska flight 1282 in January.

As for Spirit, there has been no announcement regarding the date of its first quarter call with investors.

Source: Flight Global‍