Spirit AeroSystems completes rework of Boeing 737 vertical fittings

Spirit AeroSystems, a Tier 1 supplier for Airbus and Boeing, which also provides fuselages for the Boeing 737 program, said that it has reworked all vertical fittings for the 737s at its facilities.

The company’s president and chief executive officer (CEO) Tom Gentile said that the company had “resolved all rework related to the vertical attach fittings issue on available Boeing 737 units in Wichita”. However, the supplier had to book a $23 million charge in Q2 2023 “to account for a potential claim from Boeing for repair work to date at their facility”.

“This estimate represents what Spirit believes to be the low end of the range of potential liability and the Company cannot reasonably estimate the total potential claim it may receive from Boeing to complete the required repairs,” the company noted in its Q2 2023 release.

During Q2 2023, Spirit AeroSystems also had to deal with a complete work stoppage, as its contract with the District 70, Local Lodge 839 of the International Association of Machinists and Aerospace Workers (IAM) union expired on June 24, 2023. In a preemptive move, the manufacturer chose to suspend production at its site in Wichita, Kansas on June 22, 2023.

After the two sides went back to the negotiation table and the contract was ratified by IAM, representing 55% of Spirit AeroSystem’s workers in the US, on June 29, 2023, the company started the slowly restoring operations the next day.

By July 5, 2023, it was back working at full capacity.

In Q2 2023, Spirit AeroSystems booked a total of $28.3 million of charges, “related to higher wages and other employee benefits resulting from the new contract and strike disruption charges of $7.3 million recorded to other operating expense on the Consolidated Statements of Operations”. Overall, the work stoppage will reduce full-year deliveries of Boeing 737 fuselages to the range of between 370 and 390 units with a subsequent negative impact on the company’s revenues, earnings, and cash flow.

“With the IAM contract negotiations and our rework of the vertical fin attach fittings behind us, we look forward to executing on our customer commitments for the rest of the year,” Gentile continued.

Overall, the manufacturer earned $1.4 billion in revenue, an increase of 8% compared to Q2 2022, driven primarily by higher deliveries of the 737 and the 787, and increased Defense and Space revenue. However, lower Airbus A220 program revenues partially offset the positive financial impact from the two Boeing commercial programs.

During Q2 2023, Spirit AeroSystems delivered 342 shipsets, with its backlog worth around $40.5 billion at the end of the period.

The supplier ended the quarter with a net loss of $206 million and recorded a net loss of $488 million in H1 2023.