Confirming an expected move, Boeing and Spirit AeroSystems today announced that the OEM will acquire its largest supplier 19 years after the aerostructures manufacturer was divested from Boeing.

Boeing Set to Acquire Spirit AeroSystems

Following a significant incident on January 5, 2024, involving an Alaska Airlines MAX aircraft, attention was drawn back to the quality issues in the production of the Boeing 737 MAX aircraft. This incident played a pivotal role in Boeing’s decision to reacquire Spirit AeroSystems.

Established 19 years ago in 2005, Spirit AeroSystems emerged from Boeing’s Wichita, Kansas and Tulsa, Oklahoma divisions, responsible for the aerostructures of its commercial aircraft. Spirit’s contribution is significant, providing 70% of the input for the 737 Aircraft. As an independent entity, Spirit also expanded its influence by working for Airbus, manufacturing various components for the European aerospace giant.

Boeing has now agreed to acquire its largest supplier, Spirit AeroSystems. The deal will be an all-stock deal, with an equity value of USD 4.7 billion (USD 37.25 per share) and a total enterprise value of USD 8.3 billion for Spirit Aero. The transaction is expected to close in mid-2025.

Spirit AeroSystems will spin off Airbus manufacturing facilities.

In the meantime, with Spirit AeroSystems heading back to Boeing, it means that the Airbus facilities had to be excluded. Airbus has also entered into a “binding term sheet agreement” with Spirit AeroSystems about a potential acquisition of significant activities related to Airbus, notably the production of A350 fuselage sections in Kinston, North Carolina, U.S., and St. Nazaire, France; of the A220’s wings and mid-fuselage in Belfast, Northern Ireland, and Casablanca, Morocco; as well as of the A220 pylons in Wichita, Kansas, U.S.

However, it will be paid rather than Airbus paying for these facilities to be acquired. Airbus will be compensated by payment of USD 559 million from Spirit AeroSystems for a nominal consideration of USD 1.00, subject to adjustments.

Why is this needed?

Spirit was once a part of Boeing. However, the spinoff caused it to take a more commercial approach towards the business. With the exit from the pandemic, Spirit has found itself struggling with quality output for Boeing aircraft. On the other hand, as discussed last week with a select group of media, including LiveFromALounge, Boeing has increased scrutiny over the input it gets from Spirit AeroSystems, stationing its inspectors and increasingly refusing to accept defective work from Spirit. This transaction is being looked at as one way of bringing the expertise back in-house and the quality accountability for the aircraft.

Boeing President and CEO Dave Calhoun commented on this deal and said,

We believe this deal is in the best interest of the flying public, our airline customers, the employees of Spirit and Boeing, our shareholders and the country more broadly. By reintegrating Spirit, we can fully align our commercial production systems, including our Safety and Quality Management Systems, and our workforce to the same priorities, incentives and outcomes – centered on safety and quality.

Bottomline

After various issues with the Boeing 737 MAX aircraft, Boeing is now bringing back in-house its aerostructures supplier, Spirit AeroSystems, 19 years after it was divested. Spirit will carve out the Airbus side of the business and hand it over to Airbus, along with compensation. Boeing will complete the deal by mid-2025.

What do you think of Boeing’s attempt to address all the quality issues it is grappling with now?

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