Leeham News and Analysis
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Leeham News and Analysis
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Shanahan: Spirit AeroSystems and Airbus need to have “family meeting”
By the Leeham News Team
May 7, 2024, © Leeham News: For a company actively negotiating its own dismemberment, Spirit AeroSystems managed to record first quarter losses even worse than Wall Street expected. The company recorded $617M in losses and burned through $444M in cash during the first three months of the year due to the ongoing Boeing 737 MAX crisis and unfavorable prices on its Airbus A530 and A220 work.
“The death throes of Spirit are hard to watch, as these 1Q numbers are pretty horrendous,” Rob Stallard, Vertical Research aerospace analyst, wrote in a research note after the company released its earnings report.
It recorded $495M in net forward losses, largely from the Airbus A350 ($280M) and A220 ($167M) programs.
Spirit’s executives have been trying for months to renegotiate pricing on the two programs to stop the bleeding and free up capital to spend on increasing production rates for Airbus. Those investments need to start in the second half of the year, Pat Shanahan, president and CEO of Spirit, said during a conference call with investment analysts on Tuesday.
Shanahan said Spirit would not use strongarm tactics, such as not shipping finished components, in order to force Airbus to agree to new pricing. But he indicated that the two companies need to have frank conversations about what it will take for Spirit to keep up with the aerospace giant’s plans to increase A350 production rate from six jetliners per month now to nine/month in 2025 (and 12/month by 2028).
“With these production rates, we’re going to have some of those, you know, family meetings” with Airbus officials, Shanahan said.
No updates on acquisition talks
Spirit executives did not have any updates on acquisition talks with either Boeing or Airbus. Boeing is considering buying back the Wichita, Kansas-based supplier, minus its Airbus operations and possibly defense work that would conflict with current Boeing programs. In 2005, Boeing spun off Spirit, which assembles 737 fuselages and ships them by rail to Boeing’s Renton and Everett plants in Washington.
Many industry watchers talk about Spirit’s break up as if it is a foregone conclusion.
“The key sticking point in the timing of when Boeing and Spirit can announce a deal, in our view, is when Spirit might reach a deal to return its Airbus content to that customer,” JP Morgan aerospace investment analysts Seth Seifman wrote in a note published Tuesday morning. “Airbus is reportedly seeking compensation to take on this work and Spirit does not have the resources to provide it.”
Much of the work is done at Spirit’s plant in Belfast, Northern Ireland, where it assembles the A220 wings. The supplier bought the operation from Bombardier on its way out from the commercial jet industry. However, it is a money loser now. According to financial documents filed with the United Kingdom, the Belfast operation lost £134 million (about $168 million) in 2022, the most recent year available.
In addition to adding production equipment, Airbus has to hire and train more people to keep up with Airbus’s production rate ramp, Spirit CFO Mark Suchinski said during the earnings call. “We’re staffed to meet the current pace.”
Across the company, Spirit slashed its workforce by 34 percent during the COVID-19 pandemic. Many of those who left were among its most experienced employees, Melius Research analyst Robert Spingarn wrote in a research note published in March.
Unlike most industry analysts, Spingarn is skeptical about the value of Boeing re-absorbing Spirit.
“A Boeing acquisition of Spirit AeroSystems makes little sense for anyone except Spirit’s shareholders,” he wrote in the March note. “A deal would be an optical and financial solution to an operational problem that will not be fixed by combining the two companies.”
Flailing for a financial lifeline
After a rougher-than-expected quarter, Spirit has $352 million in cash left. Its earnings announcement said that company executives have “developed plans to pursue various options to improve liquidity as needed and expects these plans will sufficiently improve the Company’s liquidity needs.”
While Spirit is close to checking beneath the couch cushions for loose change, it also holds almost $1.8 billion in inventory, mostly unshipped 737 MAX fuselages.
Boeing and Spirit recently overhauled quality inspection on the program, and Boeing is no longer taking fuselages with travelled work.
Shanahan said quality is improving and the supplier will start this month to work through its backlog of 737 fuselages.
Spirit plans to keep MAX production at 31/month through the end of the year even if Boeing increases its rate to 38/month. The supplier’s backlog inventory gives it a buffer, he said.
Spirit reported an adjusted loss per share of $3.93, which was far worse than analysts’ consensus estimate of -$0.59/share.
The supplier also booked a $34M loss on its 787 work and is expected to have another $50M to $60M in losses in the second quarter.
Mr. Spingam’s comments and others were noteworthy. I’ll continue following the Spirit situation with interest. 😉
Well I will take that as a compliment.
My analysis was the same.
I do go more in depth, Boeing will not improve anything in their operations (see note) but they can’t afford to have Spirit in chaos either. So, Boeing management put themsleves into the position and they need to bite the bullet, payback for self inflicted wounds.
Spirit does not have the resources to fix things and the ultimate end is going bankrupt and as we saw with GKN in (Missouri I believe) they just quit.
note: If Boeing gets a board and a CEO who can manage with the goal of recovery, then long term Spirit ops become parts of Boeing and its no different than any other Boeing operation that runs right.
Its a complex situation with no easy answers and that is what happens when you make a hash of things that Boeing management has.
Clearly Spirit is in serious aka Bankrupt class trouble.
Buying the A220 wing factory was a dumb move. You pay more for the operation than the contract generates. Hmmmm.
Airbus is being stupid, they have the cash and bad ops with Spirit are not in its interest. Its not like they don’t have the money. Of course they would want the founding 4 to give them the money. A350 may be profitable at some point but the A220 is a long ways off. A220 always was a bit of a poisoned chalice even getting it for nothing. Program production was a mess and …….
And while I agree Spirit does nothing for Boeing, having it in Chaos is not in their interest and acquiring it back merely puts it into Boeing management mess not compounded by a Spirit and Boeing mess.
Interesting adder, the A220 program would have no money into it from the founding 4. So it would be exempt from the nebulous we will pay it back at some secret number. Airbus has to manage it all on its own, it must be a lonely feeling.
A350 of course has a clause but again, the number is secret and its in Airbus interest (pun) to make it 1500 so that they don’t have to pay anything back in like forever.
Haven’t heard the “Airbus are deliberately reducing output so they don’t have to pay back launch aid” one in a while. Is there any sort of evidence for this ever happening, or even for that to make any sort of sense? The A380 was certainly the one programme that was cut short – but not so much to save on paying back launch aid, but simply because the plane wasn’t selling. For various reasons, but not because Airbus wasn’t trying to sell it.
They’ve paid back launch aid plus royalties on each single A32x they produce, same with the A330/A340 (which was launched as a single programme), which they gave a new lifeline with the NEO even after the A350 was launched. The A350 already has over 1300 orders, and it is absolutely in Airbus’ interest to keep the A350 going and probably do a next-gen version of it as well at some point, because guess what – the alternative to that is to not compete in that market sector any more, or to develop something new, which is definitely the more expensive option compared to just keeping the A350 going and paying back launch aid plus royalties on it.
As for the A220 – no, the original 4 weren’t originally involved, but Québec was. And in fact still is, as they hold 25% of the programme through a joint venture with Airbus. Originally, when Bombardier still held a minority share in the programme, but Airbus jumped in, “Airbus paid no money, incurred no debt and assumed no liability for its share in the programme”. That only changed in 2020, when Airbus paid just shy of 600m for Bombardier’s share. Everything since then has been shared according to the joint venture agreement – so when they announced a 1.2bn invest to ramp up production, that was shared between Québec and Airbus (Airbus paying 900m, i.e. their 75% share). So did Airbus basically get that programme for free? Yup. Not least thanks to Boeing’s actions to try and push the CSeries out of the US. Are they in that programme alone? Nope. They own 75% of it, and profits and any loans/losses are subject to their agreement with the holder of the other 25%.
Thanks for this well-informed comment.
“Airbus are deliberately reducing output so they don’t have to pay back launch aid”
You probably won’t be able to find any evidence to support such a ridiculous claim, no different than the mysterious “wing-joint” conspiracy.
In 2023 Airbus had already repaid the UK government an estimated £886 million on the A350 programme. The government’s initial loan was £350 million. Not a bad return and of course, the royalty payments are still coming through on this and other programmes.
Regarding the other programmes, on the A320 the original £250 million has so far returned £1,250 million to the UK, the A330/A340 has seen £350 million turn into £1,500 million. The A380 was the only loss with £530 million only seeing £400 million returned.
Boeing just can’t help itself from going from one screw-up to the next, and the Spirit mess just adds to it. Now with the Starliner getting a perpetual delay, it seems like Boeing is headed for a long road of pain.
Airbus is just being greedy; they should just tell Spirit they will absorb the A220 and A350 stuff back from Spirit at no cost and just move on. Airbus is in good shape (much better than the bean-counting bozos at Boeing) so why wouldn’t they get ahead of the problem now?
“..just being greedy..”
Mmm, really.
“Airbus is in good shape…”
Yeah…and not hastily buying loss-making, debt-ridden, investment-starved Spirit divisions will help keep them in good shape.
they will have to act in some way or other.
Airbus
needs the products
will have to invest to turn production of those products around.
external or internal, from new or “refurbish”.
Afaics Airbus interacting with a Boeing subdivision is ( due to moral impairment on the Boeing side ) out of the question.
Difficult. partnership with any US entity has a general knack of turning destructive.
Spirit wants to offload its money losing op. without fair compensation to the buyer? Who’s “greedy” here??
Might be much easier for Airbus to just sit back and let Spirit go bankrupt…that way, it can acquire assets (at attractive prices) without acquiring attendant debts.
***
Looks like US aerospace companies (Boeing, Spirit) make a sport of underbidding in order to secure fixed-price contracts…only to play “woe is me” at a later date, and start whinging about how they shortchanged themselves.
***
Nice to read Mr. Spingarn’s opinion of the matter: giving a blind man a lame guide dog is not going to improve matters for either.
My thoughts have wandered in that direction as well.
You do have Chaos in the transition and that is a uncertain factor.
So that could work for both Boeing and Airbus.
I was with a company that went bankrupt. It was interesting. Suddenly they had money. It sounds odd but with the debt relief, suddenly you are viable as you can pay back new debt and as long as the terms are decent, its actually quite nice.
In my case I hit them up for a way over due raise. I got it, they could not afford to let the core of performers walk or it all fell apart again.
I don’t know how functional things would continue in an industry like that as it is magnitude far more complex operation as a whole than mine was.
Mine was spot tech intense but the day in day out for most of the crews was routine equipment maint. I handled all the high tech end and did the assessment of what the issues were on the other parts if they became a tech issue.
They could hire the expertise I had, but that would have taken 5 major tech areas as well as time delays as some would have to come from the Continental US, there was no tech rep for a lot of the equipment in Alaska. It would have cost them big bucks and worse the time delay on something that threatened or was stopping operations.
Having the knowledge of the tech was important but knowing the equipment and its failure points was equally important. I could go to the problem quickly, anyone else would have to wade through a lot before they got down to where it hurt. System interactions also a problem if you don’t understand them and why X would be causing Y a problem.
Loose enough key people and then you have a cascading failure.
Spirit has gone down that path in a different way dumping the experienced and keeping the lower cost less capable.
The difference between being a supplier and an in-house facility is that Boeing’s relationship with suppliers is exploitative to the point of harvesting them. The article’s description of Airbus-Spirit negotiations is a modest case in point.
Ideally, an in-house facility could be part of a problem-solving culture where project management sets behavior instead of sub-optimizing on your separate profit margin.
When you manage a project, the mission of all in-house organizations is the success of the project. Project managers have [ideally] early awareness of when you’re going off plan, and [ideally] the authority to reallocate resources to get back on plan. You can [ideally] get better communication, coordination, and cooperation among internal organizations, and they can engage in joint problem-solving.
That does not happen with a supply chain where independent players manage their own private interests, and whose financial security has already been bled out to their monopsony customer.
Now, that said, …. Boeing has demonstrated very poor project management skills, so what I’m talking about above is sort of hypothetical.
As the joke goes, … if we had some bacon , we could have bacon and eggs, … if we had some eggs.
If Boeing had project management skills, Boeing could do better by bringing work in-house, … if the work you’re bringing in-house can be integrated into the larger program.
@Stan
Outstanding comment. Thank you.
The Boeing-GE management culture is inherently adversarial- everyone (suppliers, employees, regulators, customers) becomes an enemy to be bullied, rather than a partner with whom one might find a mutually beneficial accommodation.
They seem to have squeezed Spirit into near bankruptcy, but purchasing the dregs of Airbus was not an astute move either.
I assume Spirit is incentivized to extract everything it can out of Boeing and Airbus. Having no long term future there’s no point in accommodating.
IIRC survival of Spirit depends on advance borrowed from Boeing. Just last month Boeing agreed to send Spirit $425 million, after paying $280 million advance payments last year, to help it survive.
Its in Airbus accounts for 1Q24 too
‘Advance payments for suppliers’
I work @ spirit…it’s a fucking shitshow. Started in 2014… they let all old heads go…and hire 20 yr Olds that are lazy af…smoking weed oil in bathrooms… that’s what hiring off the street with a 3 k signon bonus gets u
Hmmmmm. Wichita is in Kansas, right?
‘Recreational use of weed is legalized in 24 U.S. states as of the end of 2023, while medical allowances have been made in many of those and several others. But Kansas is not among the bunch. Marijuana remains illegal in Kansas for medical and recreational use, but is legal in some bordering states.’
Dec 21, 2023
https://www.kansas.com/news/state/article283099023.html#:~:text=Recreational%20use%20of%20weed%20is,legal%20in%20some%20bordering%20states.
So there should be drug testing, right? Which means they’re fired.
https://www.spiritaero.com/uploads/site-documents/Spirit-Code-of-Conduct.pdf
To do our jobs safely and efficiently, we need to report to work
free from the influence of any substance that could impair our
work performance or that could create an unsafe working
environment. The use, possession, purchase, or sale of illegal
drugs is not permitted on Company premises, on Company
time, or when using Company equipment or funds.
Consuming alcohol or being under its influence during
Company time, on Company premises, or while operating
Company vehicles is prohibited. In limited circumstances, we
may consume alcohol in moderation at Company-sponsored
events or approved business functions. In these situations, we
need to use good judgment and avoid drinking to excess.
Remember, Spirit always reserves the right to conduct drug and
alcohol testing in accordance with applicable Company policy
or government laws and regulations
—————————-
So it’s just like any other state that prohibited drug use before any changes were made.
How did a structure come to be where a monopoly supplier in a booming constricted market could end up making a loss on both its main customers components?
Those who think Airbus is pushing Spirit too hard have it wrong,it’s Boeing that they are trying to extract money from
Read the story again
“It recorded $495M in net forward losses, largely from the Airbus A350 ($280M) and A220 ($167M) programs.”
They are quite specific about apportioning the loses to the widely separated production sites. As I understand it Spirit doesnt make Boeing and Airbus product at the same place
If Airbus helps Spirit,then Boeing effectively gets the money because they pay less for the bits they want
Think again. 🙂
Would Airbus borrow or invest?
ah yes, the Partnership for Success chickens have come home to roost.
this is entirely on the Neutron Jack wannabes running Boeing ever since the “merger”
“.. the Belfast operation lost £134 million (about $168 million) in 2022, the most recent year available.”
How much in % is than in relation to turnover ( A220 wingsets )
Uwe, Spirit uses estimates for revenues and expenses. I had a quick look in the Accounting Policies. That’s why it’s a reach forward loss.
I haven’t followed them too closely, but essentially you estimate how much revenue you are going to get over the life of the contract, how much it’ll cost you and you estimate the profit you’ll be making.
It’s quite possible that over the previous years, Spirit has been booking a profit that might not have been there. Or too much of a profit.
For example:
Let’s say they used the rosiest of estimates to book a $1 million profit per set of wings sent to Airbus. But the profit was actually $500k. An adjustment has to be made.
It’s also possible that they took on additional expenses when they were acquired. That’s a cost accounting function – allocating mgmt/office overhead to a division.
Who knows how the books are run. If it’s anything like Boeing…
So lemme get this straight;
The guy who is being tipped as one of the potential bosses of Airbus’ competitor, is telling Airbus they need to sit down for a ‘family discussion’ (read: more money please) to help the situation.
All the while, it’s the competitor to Airbus that has $1.8 billion of product sitting in Spirit’s yards, waiting for them to get their sh!t together.
But the problem is those darn Airbus contracts we signed…
+1
‘Shanahan said Spirit would not use strongarm tactics, such as not shipping finished components, in order to force Airbus to agree to new pricing. But he indicated that the two companies need to have frank conversations about what it will take for Spirit to keep up with the aerospace giant’s plans to increase A350 production rate from six jetliners per month now to nine/month in 2025 (and 12/month by 2028).’
——————————————
Firstly, everyone and his uncle knows Spirit is about to be broken up. And soon. And it’s not because of Airbus, it’s because of your shoddy workmanship and your pricing policies with Boeing and Partnering for Poverty. And BA’s production ‘escapes’. And their groundings.
You wanna strongarm Airbus? AB has a contract and the lawyers who drew it up would love to see you in court. I wonder if location for litigation has been set in the terms and if it’s in the EU or UK?
If Airbus sits tight, a trustee will be appointed when you can’t beg or borrow another cent, who will keep the unit running – while they pick over the carcass to lowball bid the pieces they need.
——————————————
Not shipping finished components. There’s a laugh.
Spend money to buy raw materials, spend money on labour to make a product, then let it sit in inventory while you try to leverage it for better pricing.
You have to have deep pockets, to make a strategy like that work.
Shanahan better hope that if he is negotiating with Boeing for the top slot there, that no one leaks the details of when it was ongoing. Imagine being a Tier 1 boss, supplying product to Airbus (and others), while arranging to move to Boeing at the same time? One could do a lot of good things for Boeing, on the way out the door from Spirit.
No conflict there….
The Airbus production by Spirit loses money – its detailed in their accounts as they have separate sites: Kinston NC for spars/panels, Belfast for wings, Prestwick for A320 type wing flaps/leading edges.
How is it Boeings fault that Airbus has screwed its outside suppliers so hard they lose money. Airbus has a lot of company owned suppliers so its not transparent if they are losing money on contracts
You’ve got a couple of non sequiturs residing within your comment.
What is your point other than a diversion.
How is it Boeings fault Spirit is being screwed over Airbus contract prices .
Even the title of the story says it, but no the usual comments move the topic to their bete noir no matter what .
‘shanahan-spirit-aerosystems-and-airbus-need-to-have-family-meeting’
How is it Airbus’ fault that Spirit has such bad contracts, as you purport? Ireland is not a communist dictatorship, is it?
No one held a gun to their heads and forced them to buy the plant, did they?
They had every chance to do their due diligence on the contracts that were in place, didn’t they?
Stop whining and crying, put on your big boy pants and perform the work you’re contracted to. It’s called capitalism.
You sign, on the line, that is dotted. You get paid, what you signed for.
No one saying it’s Boeing fault that Spirit is losing money producing Airbus parts. People are saying that it’s up to Boeing to resolve this issue if they want to take Spirit in-house again.
Spirit can sell back its *Wichita plant* to Boeing at any time and leave the carcases with the money losing Airbus production at Kinston, Belfast and Prestwick plants to wither on the vine. Notice the locations arent Wichita!
Belfast needs major capital investment to increase its production rate pretty soon too.
Spirit holds all the aces
Really? Antitrust laws are there for a reason.
You think West, Shanahan, all the lawyers, IB are that dumb? Because it’s going to be super expensive!! A ton of cash has to be left behind to fund the remaining operating company. Sigh. Not working.
How is it Airbus’ fault that Spirit underbid/mis-judged the pricing to produce said parts? Perhaps Spirit should have done it’s due diligence when buying the operation in the first place? Caveat Emptor.
Those contracts were negotiated BEFORE Spirit bought the operation. They knew what was in them. Sorry – that dog won’t hunt.
Do you think it is at all possible that Spirit cannot run a business profitably? How much are they paying the exec’s over in Belfast? How much of the Spirit head office expense is added to the Belfast production site? (A cost accounting function)
To the point about a reach forward loss:
Spirit is once again (a la BA) using estimates for revenues and expenses to account for it’s profitability. It’s right there in their financials – I had a quick look. If you like I can pull them up for you and post the pertinent parts.
Just happens to be the company that Boeing is trying to buy.
Anyways – if it’s such a money losing operation, then they should be happy to shed it and give it away to Airbus. Right?
BTW – how’s the FAA whistleblower thing going? Did you call them and give them the inside details you had, concerning Airbus and their illicit accounting procedures?
They are losing money on A350 structures – both centre fuselage panels and wing spars. read it in the main story
These have nothing to do with Belfast and the former Bombardier plant , in fact they are made in USA in new plant in North Carolina
Theres another Spirit plant in Prestwick Scotland for A320 wing ‘furniture’. That was bought in 2006 from BAE
Your claims are riddled with factual inaccuracies, classic case of GIGO
Heres a BBC story from a reporter in Belfast that actually digs into the background rather than the endless AI generated stories from ‘agencies’
https://www.bbc.com/news/articles/c6pyee10yjno
OK, so let’s have a look at what Spirit said:
Plane wing maker plans to hire more Belfast staff
“Spirit AeroSystems is to invest in its Belfast factory and hire more staff as it ramps up production for the Airbus A220.
However, the company said it was still in dispute with Airbus over how much it should be paid for A220 work.
Airbus wants to step up the production rate of the A220 by 50% in 2024, with another increase in 2025.
Spirit’s chief financial officer, Mark Suchinski, said that would require significant investment in equipment and machinery at the Belfast operation.
“That capital expenditure has to start to take place in the back half of this year and into 2025 so we can meet those production rate ramps,” he told industry analysts.
He said the company was hiring and training people to meet the higher production rates, adding there was “further hiring that will need to be done” into 2025 and 2026.
Mr Suchinski was speaking as the company announced a $167m (£133.5m) first quarter loss on its A220 work.
That was blamed primarily on the failure to reach agreement with Airbus on a revised financial deal for that work which also meant the firm had to reverse previous assumptions about what it would be paid.”
——————————————-
1) Is Spirit obligated to ramp up production? No. Not unless it’s in the contract. Which they got their hot little hands on, when they bought the plant.
2) Capex into the back half of this year and into 2025. So what does that have to do with Q1?
3) So they’re hiring, right? Which means…..they agreed to the production increase. Refer to #1
4) ‘had to reverse previous assumptions about what it would be paid.’ Why do you need to ‘assume’ anything? It should state in the contract, what you are to be paid for the work you do.
It says so right here, in black and white, in their financials:
https://s23.q4cdn.com/405433451/files/doc_financials/2023/Spirit-Aerosystems-2023-Annual-Report-FINAL.pdf
‘The transaction price for a contract reflects the consideration the Company expects to receive for fully satisfying the performance obligations in the contract. The Company’s contracts with customers are typically for products and services to be provided at fixed stated prices but may also include variable consideration. Variable consideration may include, but is not limited to, unpriced contract modifications, cost sharing provisions, incentives and awards, non-warranty claims and assertions, provisions for non-conformance and rights to return, or other payments to, or receipts from, customers.’
———————————————-
But here is what else was in the article, yet you failed to mention:
“Spirit has been in Northern Ireland since 2019 when it bought Bombardier’s operations, ending a long period of uncertainty for the workforce.
However, the ownership of the Belfast operation is now in question again because of problems in Spirit’s US business.
Boeing wants to buy Spirit as a way to deal with its production problems and any deal is likely to involve spinning off the parts of the Spirit business which supply Airbus.”
***ownership of the Belfast operation is now in question again because of problems in Spirit’s US business***
“Some of its work for the company has suffered from delays and quality issues, which has exacerbated problems at Boeing.”
But yah – Airbus is the problem…lol
————————————————
Looks like they have all the details nailed down and know what going on in their contracts.
Maybe, just maybe – Spirit, like the parent company they were spun off from, is just a sh!tshow who can’t seem to get the work done properly and can neither do it profitably, because they screw up so much?
GIGO – garbage in, garbage out, you say? Sounds like everything Boeing & Spirit touch.
————————————
So how’s the whistleblower thing going? You had some super secret info on Airbus that was going to blow the lid off of things. What did they say, Duke? They looking into things?
I gave the link so readers can find out for themselves . No need for large scale copy and paste
The ownership of Belfast and Kinston plans are under review because they lose money as a supplier to Airbus.
Thats a case of Airbus paying too little for its product, the whys and when’s dont matter. Perhaps Belfast when Bombardier had the Sale sign up was expecting more government funding for its technology increments and it didnt come through. As we havent heard the real info who knows. It clearly cant continue no matter whats happening in Wichita
It has nothing to do with Boeing who are only interested in Wichita site. Whether Spirit keeps or sells its far flung other operations has nothing to do with Boeing.
Remember Spirit didnt buy all of Bombardiers aero structures business, Airbus bought the Montreal sites separate to the $1 deal for the Cseries IP and final assembly building, so the separate locations can be sold off separately as well.
‘I gave the link so readers can find out for themselves . No need for large scale copy and paste’
That’s the problem. What you say and what the article says, are two different things.
—————————————-
‘Thats a case of Airbus paying too little for its product’
Sorry – if you can’t run your business efficiently, having known what the contracts are going on, that’s a Spirit problem.
——————————————
‘It has nothing to do with Boeing who are only interested in Wichita site. ‘
If you postulate that Spirit is ‘in the driver’s seat’, then they own the whole blasted bus, with Boeing, don’t they?
Seems to me that given how Boeing has come forward and ponied up cash and advances for Spirit to keep Wichita open, that they are in a much more dire position, than Airbus is.
—————————-
But here’s the thing – Spirit mgmt is supposed to act in the best interests of Spirit, not Boeing. Doing so would be a conflict. Spinning off just Wichita is essentially the end of Spirit, given the size of revenue it represents.
Which means, it’s an all or nothing deal. No way that Spirit breaks itself up.
“How is it Boeings fault that Airbus has screwed its outside suppliers so hard they lose money.”
Frank P pointed out that you have to look at how those losses are incurred. if Spirit does anything like Boeing bookkeeping those
losses may well have come about by moving profits accounting to the left. ( while much money was stopped up on the B side of things.)
Funny thing though – the comments have been that Airbus has had to take on onerous contracts on the A220.
‘BBD had to let lucrative contracts to get the product they needed for the C series. If I was the parts suppliers either stick to it or leverage it into other good contracts.’
and in an article:
“Market intelligence indicates that Airbus is having difficulty cutting costs. Raytheon Technologies units Pratt & Whitney and Collins Aerospace are said to be especially difficult. So, other intelligence indicates, Airbus is raising the sales price of the A220 to around $40m.”
and
‘I would say there are 2 areas causing Airbus issues. 1) the avionics are not in house so, they bleed money. 2) the composite wing is a questionable choice in this class of plane. It is a pricy piece that provides little benefit.’
(not that Airbus makes it own avionics, but…)
and
“The A220 is unique in that under BBD aka C Series, the suppliers were risk sharing and essentially own their bit of the program.
In return for the high risk of the C series, they were given high margins.
Contractually Airbus cannot unilaterally cut those and they can’t go elsewhere as its written into the contract as sole source.
Once Airbus committed to the now A220, the suppliers were in the drivers seat.
So yes you can discuss but Airbus can’t drop them. Airbus would have to offer some very good terms. Give them part of other programs but also guaranteed in that.”
————————————–
Sounds to me like the suppliers were in the drivers seat, hardly 2 years ago – but NOW, since Spirit is in trouble, it’s big bad Airbus who are the meanies.
Ok…
One would think Spirit would’ve thought all that
through before buying the Northern Ireland facilities..
An incompetent company that lost money left and right. Why are you surprised? What’s the worst? $1.4 accumulated losses on Boeing’s 787 “Dreamliner”. 😱
280M€ loss for A350 : big issue for Airbus when you want to ramp up.
Airbus has money. Why do not build in Europe a second factory for composite fuselage panels in order to secure their ramp up and avoid a stronger arm family meeting on the long term ?
Airbus has multiple suppliers for its fuselage panels in Europe
Spirit builds the centre section panels *plus the wing spars* at a fairly new factory in Kidston North Carolina.
Losses are for both products and the factory overheads
305M means approx 4M per shipset. Many questions behind this figure:
How is Kinston’s tooling sized: for the target cadence of 16 aircraft, or is there a clause in the contract for passing thresholds?
If overheads are behind this figure, the increase in output should help.
I find the tone of Spirit’s boss in PR a little questionable, and the question of dual sourcing for central fuselage panels sent to Saint Nazaire facility seems to me to be a valid one. It may indeed be more difficult for a part like the wing spar, which was rarely double-sourced.
When Enders took this decision to outsource those (T15 and wing) important parts ( which were for previous program built in Europe )to a US company there was internaly a debate. Now AB has to manage .
It’s $280m USD* not € for the A350 program.
It’s called “forward losses”, i.e. not for the current period and has nothing to do with products delivered in the period, rather, it’s about the future, because a change of management estimates, expected losses in a long-term contract has to be recognized due to prudence of accounting.
Layoffs at BA
According to the WARN List of Made in Alabama, a site that lists Alabama plant closings and layoffs, Boeing plans to lay off 128 workers beginning June 28, 2024.
In a statement sent to Alabama news outlet WSFA12, Boeing said it had “notified some team members in Huntsville of a potential layoff” and will explore alternative placement opportunities within Boeing for affected employees.
https://www.aerotime.aero/articles/boeing-files-notice-to-lay-off-more-than-100-employees-in-huntsville-alabama
Iberia has just officially become the new global launch customer for the Airbus A321XLR, thanks to Aer Lingus’ ongoing pay dispute with pilots.
https://onemileatatime.com/news/iberia-airbus-a321xlr/
‘Iberia has even announced the first routes to get the A321XLR. Presumably after some crew familiarization flights, the jet will make its long haul debut flying from Madrid (MAD) to both Boston (BOS) and Washington (IAD). ‘
No messing around, across the pond – you go!
Very cool. I predict great success for the A321XLR.
You can’t have it both ways.
Many commentators, who shall not be named, have in the past been quick to point out how Airbus has been saddled with less than stellar contracts that Airbus took on, when they took control of the A220 program from Bombardier. Said individuals have mentioned how Airbus is losing some $4 million per aircraft because of these contracts.
But now….Airbus has (and I quote)
“Airbus has screwed its outside suppliers so hard they lose money. ”
But you just said they had onerous contracts they had to change on the A220 program to become profitable?
Which is it?
Does Airbus have pay too much because of those expensive contracts they took on OR is Airbus screwing it’s suppliers?
Please pick a side.
Both
The problem is Bombardier grossly underestimated the need to invest in the production tooling of what needs to be a high volume selling aircraft.Airbus has apparently made it known that they are thinking about putting the “wing of tomorrow “on the A220.A billion dollar investment to save a million dollars an aircraft in production costs and probably a better product as well. For me this is a no brainier as the A220 mk2 will easily sell thousands,but I don’t have tens of millions of this years bonus depending on this years earnings.Also Airbus needs to its engineers driving things forward for things like the A320 replacement.I would be interested (particularly as a British taxpayer) to know how long these long term production contracts are.It’s very important to keep the people of Northern Ireland busy and not fighting ,this is a serious tool of leverage
There’s more pain for Boeing as SEC opened an investigation about executives’ comments after the Alaska airline incident.
Fair. All the more reason to study what fits into these forward losses, as the initial contract should include clauses for investment in tooling in the event of increased production. …or double source to secure
It appears like previous management estimates used by Spirit are too optimistic and previously booked profits are now reversed, resulting in large losses. Clean up is the first step for the sale to Boeing to proceed IMO.
Fom FG:
He says this “impasse” as well as “continued pressure” on meeting delivery targets for the A350 and A220 has led to Spirit’s booking “significant losses” for the first quarter, the result of *reversing previously booked price assumptions* combined with net incremental losses for anticipated future performance obligations beyond 2026.
https://www.flightglobal.com/aerospace/spirit-aerosystems-chief-believes-airbus-partnership-will-remain-intact/158221.article
Negotiations with Airbus are clearly going on, pushing, pulling.
Shanahan interest/preferences are clear. But Airbus has the contrats & warchest. If they “help” Spirit, they want something back.
And they know Shanahan. During the infamous push to have US government kill the CSeries US business (2016), Shanahan was in the Boeing Executive Council.
United Airlines Rumored To Be ‘Undisclosed’ Customer Ordering 51 Additional Airbus A321neos
https://simpleflying.com/united-airlines-rumored-to-be-undisclosed-customer-ordering-51-additional-airbus-a321neos/
Boeing / Congress / Public can never blame United for not being loyal to Boeing. United adjusted, bend over, converted and forgave Boeing a thousand times to get in 737MAX. In the end they have to fill their fleet capacity plans.
It might go similar with WB. In the end UA needs a fleet of big aircraft that can cross the Pacific efficiently with lots of cargo, like their 772ER’s, 773ER’s. The 787-10 ain’t that aircraft and the 787-9 is smaller.
Clickbait article. It was just a speculation post on A.net. Simpleflying is a shameless reposting site.
COMAC has started working on designs for its C939 to be an A350/777 competitor
“COMAC pressing ahead with the ARJ21 and the C919 and now the C939 programs, its other product, the smaller wide-bodied C929 (which is being lined up to compete head-on with the Boeing 787 and the Airbus A330) is also making progress, according to the source. ”
https://www.aerotime.aero/articles/comac-designing-c939-widebody
Airbus in the West, COMAC in the East, Embraer in the Global South is how it’s looking to me. The moribund, nominally-American outfit is being milked and simultaneously dismantled, per certain geopolitical pressures. One tentative POV.
” .. per certain geopolitical pressures. .. ”
Sure, self applied per greed worked by US centric financial actors.
Other countries were to a part more successful in protecting
their resources. ( though there are enough companies here in the gutted, dismantled domain.)
Sounds about right. 😉
So the question is, who has the “first flight” Boeing 737 replacement or Comac C939?
As a point of reference CR929 was launched 2017…..issues with Russia JV delayed the program and lack of an engine. If the Chinese C929 engine can be upgraded for C939….my bet the C939 FF will be around 2039 (“39”)
As for Boeing, one need to consider their long term financial viability and how they just invested in new 737 wing riveters (6 with option for 2) line in Renton of $100m, Boeing 737 replacement FF in the 2040’s (remember Calhoun’s 100 year program strategy)
“Boeing’s death spiral worsens as it received just seven orders for planes in April – with 33 orders canceled – as rival Airbus delivers almost twice as many planes so-far this year”
https://www.dailymail.co.uk/news/article-13417701/boeing-death-spiral-planes-orders-canceled-airbus.html
The US DoJ has determined that Boeing violated their [sweetheart] Deferred Prosecution Agreement. No word yet on consequences, if any.
(From AP News; sorry, no link.)
I had a double take to be sure.
“Incident: United B789 near Singapore on May 14th 2024, uncontained engine failure
https://twitter.com/avherald/status/1790790098407051731