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Boeing 737 MAX aircraft fuselage shipment from Spirit AeroSystems.

Spirit Aero Seeking to Renegotiate with Boeing, Airbus

Sept. 11, 2023
Rising labor costs, parts shortages, and regulatory obligations are factors making business “unsustainable,” causing the airframe builder to turn to its customers for relief.

Airframe builder Spirit AeroSystems is seeking relief from its major customers over the terms by which it supplies structural elements for several major commercial jet series, including the Airbus A220 and A350, and the Boeing 737 MAX and 787 Dreamliner. At a recent investor’s conference Spirit Aero CEO Tom Gentile said his company is under pressure to deliver airframes while absorbing the high costs of wage inflation, parts shortages, and regulatory oversight.

“And it really is not sustainable for Spirit,” according to Gentile. “So, we are having discussions with our customers, with Boeing and Airbus, about these pressures that we’re facing and how we address them. “Sometimes it involves price, sometimes it involves change in terms. Sometimes it might involve extending contracts, or adding new work, or offloading some things.”

He continued: “With both Boeing and Airbus, we’ve been an open book in terms of sharing all of the cost data so they understand and know that we’ve been working on different (cost-saving) opportunities – and have exhausted those,” he added.

Neither Airbus nor Boeing has offered any comment on Gentile’s remarks. However, any discussions about Spirit’s costs for supplying 737 MAX fuselage structures is likely to be complicated by an ongoing manufacturing error, which the supplier has acknowledged.

Spirit reported last month it had identified defective fastener holes on the aft pressure-bulkhead for 737 MAX 8 fuselages. The problem require inspection and correction for a majority of 220 completed aircraft awaiting delivery by Boeing to the jets’ buyers. It’s unclear how many 737 MAX 8s already delivered may be affected by the problem.

The manufacturing defect presents no risk to flight safety, according to Boeing and Spirit, however it is the second problem this year involving the supplier’s products for the 737 MAX program, following the revelation in April that some fittings that attach the jet’s vertical tail fin to the fuselage were badly produced by a Spirit subcontractor.

At the same investment conference where Gentile spoke, Boeing chief financial officer Brian West said the current round of inspections and repairs is a very complicated undertaking – and a costly one. “We’ve got literally armies of people from Boeing and the supplier working on this issue,” West told the attendees. “It is 100% the most important thing we’re working on right now.”

The broader problem for Boeing is that the protracted repair process will continue to delay deliveries of finished 737 MAX 8 jets, and that will reduce revenues and free-cash flow for Boeing.

West told his audience of investors that Boeing maintains its forecast goal of delivering 400 to 450 of the narrow-body aircraft this year.

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