Two decades after Boeing sold its large aircraft subassembly plants in Wichita, Kan., and Tulsa, Okla., and created what became Spirit AeroSystems, the company announced late Sunday that it has reached an agreement to buy those Spirit core units and bring that work back home
In a memo to Boeing employees Sunday night, CEO Dave Calhoun said, “This is an opportunity to bring critical airplane manufacturing work on Boeing airplanes back to our factories — where world-class Boeing and Spirit engineers and mechanics can work no problems together”.
“Among the many actions we are taking as a company, this is one of the most important in demonstrating our unwavering commitment to strengthening quality,” he added.
Boeing said the merger is an all-stock transaction with an equity value of about $4.7 billion, or $37.25 per share.
Boeing will also take on Spirit’s last reported net debt of $3.6 billion, bringing the total value of the transaction to about $8.3 billion.
Spirit shareholders will receive between 0.25 and 0.18 Boeing shares for each of their Spirit shares, depending on Boeing’s stock price when the deal closes.
Since Boeing sold the business, Spirit has diversified to build parts for European rival Airbus and other plane makers. So its sale required complex three-way negotiations that would destroy the Spirit.
Last year, 70% of Spirit’s revenue came from Boeing and 23% from Airbus.
Airbus has simultaneously entered into a binding agreement to potentially acquire Spirit’s units in the US, France and Morocco that make main sections for its A350 and A220 aircraft. The acquisition of Boeing is conditional on the completion of the acquisition of Airbus.
But Airbus won’t pay anything to buy its Spirit parts.
The European aircraft maker “will be compensated by the payment of $559 million by Spirit AeroSystems, for a nominal consideration of $1.00,” subject to adjustments when finalized.
This makes it clear that the deal was designed to suit Boeing’s needs, with Airbus ready to go ahead provided it was paid to do so.
For Spirit, the facilities that make A350 and A220 parts have been bleeding money because of low prices from Airbus, so it makes sense to pay to get rid of them.
The deal will have to undergo regulatory review. Boeing said it is expected to close in mid-2025.
Boeing confirmed in early March its intention to take back Spirit in an effort to ensure continued supply of key aircraft sections.
Boeing can’t afford to let Spirit fail. The supplier makes the forward fuselage of every Boeing commercial airplane and the entire fuselage of the MAX. It also manufactures wing components, engine mounts and pylons for Boeing aircraft.
With this deal, Boeing buys a troubled company that is running out of money. In the first quarter, Spirit lost $617 million and at the end of March was $4.1 billion in debt with just $352 million in cash.
Spirit’s finances dragged in the past five years as delivery halts on the MAX and 787 programs and then the aviation downturn due to the COVID-19 pandemic cut into its revenue. It has also been bleeding money due to low prices on its contracts with Airbus and Boeing.
With Spirit in crisis, former Boeing executive Pat Shanahan was named interim CEO last September in an attempt to turn its fortunes around.
Since then, the explosion of the airframe on Alaska Airlines Flight 1282 shifted the focus from finance to manufacturing quality assurance.
Gaining more control over production quality was another incentive for Boeing to take on Spirit.
Major quality errors at Spirit’s 737 MAX fuselage building in Wichita last year had cut MAX deliveries to the airline for several months, first in April, then again in August.
This year, a steady stream of defective planes requiring minor rework at the MAX final assembly plant in Renton contributed to the Alaska Airlines incident in January.
“We believe this agreement is in the best interest of the flying public, our airline customers, Spirit and Boeing employees, our shareholders and the country at large,” said CEO Calhoun. “By reintegrating Spirit, we can fully align our commercial manufacturing systems, including our Safety and Quality Management Systems, and our workforce with the same priorities, incentives and outcomes – focused on safety and quality.”
Three separate news releases Sunday night from Airbus, Boeing and Spirit laid out their agreement on how Spirit will be split up.
Airbus will acquire Spirit’s critical manufacturing facilities that supply its aircraft, particularly in Kinston, NC and St. Louis. Nazaire in France who build part of the fuselage of the A350; in Belfast, Northern Ireland and Casablanca, Morocco, which build the wings and fuselage of the A220; and a facility in Wichita that builds engine mounts for the A220.
“With this agreement, Airbus aims to ensure stability of supply for its commercial aircraft programs through a more stable path forward, both operationally and financially, for the various Airbus work packages for which Spirit is responsible today AeroSystems,” the company said in a news release. release
In addition, Spirit proposes to sell three properties:
- The part of its Belfast operation that makes non-Airbus parts for business jets
- A parts factory in Subang, Malaysia, which among other components makes the door plug for the 737 MAX, the part that blew up the Alaska Airlines plane in January
- A facility in Prestwick, Scotland, that supplies smaller wing components for the A320 family of aircraft.
In addition to the main sections built for its commercial jets, Boeing will get some new defense work from Spirit’s military programs.
With these, Boeing becomes a supplier to Northrop Grumman on the Air Force’s B-21 bomber; at Sikorsky, now part of Lockheed Martin, with the Army’s CH-3 heavy helicopter; and in the Bell helicopter on the Army’s new V-280 rotor.
Boeing said it will “work with Spirit to ensure the continuity of operations that support the customers and programs Spirit acquires, including working with the US Department of Defense and Spirit’s defense customers.”
With the deal, Boeing adds just under 14,000 employees, from a total Spirit workforce of nearly 20,700.
About 12,600 are in Wichita, 1,100 in Tulsa and another 100 in Dallas.