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Photo credit: REUTERS/Peter Cziborra

Boeing Buys Back Spirit AeroSystems for $8.3 Billion

Boeing is planning to buy back its past fuselage manufacturer, Spirit AeroSystems, in stock totaling $4.7 billion or $37.25 per share. The total transaction, considering Spirit’s debt, reaches an estimate of $8.3 billion. Based in Kansas, Spirit AeroSystems is a key supplier, making important parts like cockpit fuselages and wing sections.

Spirit AeroSystems was first started in the late 1920s by aviation engineer Lloyd Stearman and was once owned by Boeing for almost 80 years before being sold to private equity for $900 million in 2005 when it became an independent company. Since that time, Spirit has remained a major supplier for Boeing. The goal of repurchasing Spirit is to boost safety and better control the quality within Boeing’s manufacturing.

Boeing’s decision to buy back Spirit arrives at a critical moment due to accumulated financial difficulties and damage to its reputation over recent years. One notable event involved a door plug on an Alaska Airlines Max 737 plane blowing out during flight, prompting an investigation by the National Transportation Safety Board (NTSB). Discoveries of safety protocol breaches further affected Boeing’s reputation and led to huge financial losses above $32 billion from 2019 through 2024.

Dave Calhoun, CEO of Boeing, underlines the plan, stating that this recapture will align both companies’ production systems and workers completely. “Importantly, this action shows our unwavering dedication to improving quality assurance, confirming that Boeing can meet global needs,” Calhoun stated in an employee communication, ensuring this deal should be finalized by mid-2025, provided approval from regulatory bodies as well as shareholders of Spirit AeroSystems.

A possible replacement after Calhoun steps down is Pat Shanahan, Spirit’s current CEO. On an associated note, Airbus has struck a deal with Spirit that secures $559 million as compensation for the purchase of Spirit’s production lines dedicated to Airbus planes. This includes facilities in Belfast, Northern Ireland, Wichita, Kansas, and North Carolina.

The preliminary NTSB report on the Alaska Airlines situation stressed significant production issues like bolts meant to secure the door plug not being attached correctly prior to leaving Boeing’s factory, a reflection of a larger problem framework including misdrilled holes and misconnected fuselage panels on Spirit-made fuselages. Boeing aims to ensure quality improvement by accepting flawlessly constructed fuselages, lowering error occurrence possibility and the requirement for any rework.

This extensive safety crisis and production challenges have delayed deliveries of new planes by Boeing, affecting both companies’ financial standing. Boeing’s CFO disclosed that expected losses for the company could amount to approximately $8 billion in the initial six months of 2024 instead of generating revenue, consequently causing a drop in shares value by over 30% this year.

Regaining ownership of Spirit AeroSystems is an important move that indicates Boeing’s focus on recovery from these recent issues, with an aim to reinforce its standing within aerospace industry circles.

Jonas Muthoni
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