Boeing in talks to buy supplier
Boeing is in talks to buy its former subsidiary Spirit AeroSystems and the plane maker is also delaying plans to ramp up 737 jetliner production as it tries to get control of a sprawling crisis sparked by a mid-air panel blowout.
US aviation regulators have already curbed production and air carriers have been in discussion for more aircraft deliveries with its rival, Airbus.
“We believe that the reintegration of Boeing and Spirit AeroSystems’ manufacturing operations would further strengthen aviation safety, improve quality and serve the interests of our customers, employees, and shareholders,” Boeing said in a statement on March 1. Spirit AeroSystems confirmed the discussions.
In a related development on Friday, Reuters was the first to report that the company told suppliers it was delaying expected increases in plane production as it tried to regain the confidence of the industry and satisfy regulators’ desires for better oversight of its safety and quality control systems.
Reuters reported in February that years of decentralisation of Boeing’s plane-making capacity along with an exodus of experienced workers and aggressive cost-cutting had affected quality. Two crashes a few years ago dented the confidence of both the public and regulators in Boeing’s safety record.
The first crash, a Lion Air flight in Indonesia, occurred in October 2018 and killed all 189 people aboard. The second, an Ethiopian Airlines flight in March 2019 killed 157 people.
Boeing spun off Spirit in 2005 and in recent years has struggled with cost pressures and problems that have slowed aircraft deliveries and thinned its balance sheet. Bringing Spirit
back into the fold could address some quality issues as it would give Boeing more control over manufacturing.
The preliminary talks were reported early on March 1 by the Wall Street Journal, which said Spirit had hired bankers.
Such a move could also help Boeing lower Spirit’s production costs, a senior industry source said. Boeing had previously considered repurchasing Spirit AeroSystems, but the optics of buying back at a higher price discouraged such a move, the source said.
However, Spirit’s shares have fallen 70% over the past five years, and its $3.3bn market value is far short of Boeing’s $124bn. “Boeing probably realises that divesting its Wichita operations that make up the core of Spirit AeroSystems was a strategic mistake,” Scott Mikus, equity research associate at Melius Research said. Shares of Spirit AeroSystems closed up 15% on March 1.