Spirit AeroSystems, a key supplier to Boeing and Airbus, has secured significant financial support from its major clients to bolster its weakening financial position. This move comes as Spirit issued a "going concern" warning, indicating potential trouble in meeting its financial obligations shortly, following four consecutive years of losses. On Tuesday, November 12, 2024, Spirit announced that Boeing would provide up to $350 million in advance payments to aid the supplier's liquidity.
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This financial assistance is aimed at supporting Spirit's high inventory levels, exacerbated by production delays and quality control issues with the fuselages it supplies for Boeing’s 737 MAX. Similarly, Airbus has agreed to give Spirit up to $107 million in advance payments, linked to parts deliveries for Airbus aircraft, showcasing a collaborative effort to stabilize Spirit's finances. The need for this support arose after a series of production setbacks. A significant blow was the quality issues that led to a mid-air panel blowout on an Alaska Airlines 737 MAX 9, which triggered rigorous scrutiny and changes in the production process.
This incident, along with a subsequent workers' strike at Boeing, has put considerable strain on Spirit's operations. The company has been facing cash flow problems due to its inability to keep up with deliveries for the 737 MAX, leading to a backlog of completed fuselages and financial distress. This financial aid package from Boeing and Airbus not only provides immediate liquidity but also signals a commitment to maintaining a stable supply chain, crucial for both manufacturers' production schedules. The agreement with Boeing involves not just financial relief but also includes revised pricing for 737 and 787 deliveries, aiming to address the unsustainable financial model Spirit was operating under.
Spirit's CEO, Pat Shanahan, previously noted the urgency of addressing these financial strains, stating that the company's contracts were not sustainable under the pressures of inflation and production delays. The support from Boeing and Airbus is expected to help Spirit manage its cash burn projected at $450 to $500 million over the end of 2024 and into 2025, providing some breathing room for strategic restructuring and operational improvements. This assistance from Spirit's major customers highlights the interdependent nature of the aerospace industry and the lengths to which companies will go to ensure the stability of critical supply chain partners, especially in challenging times.