Analysis: Jefferies presentations show industry hasn’t stabilized post-Covid

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By Bryan Corliss

Sept. 11, 2023, © Leeham News: Negative cash flow in the quarters ahead. Ongoing issues with the supply chain. OEMs struggling to meet high airline demand as Tier 1s wrestle with quality issues. New technology wearing out faster than the old systems it replaced.

The No. 1 takeaway from last week’s Jefferies Financial Group Industrials Conference presentations is that the aerospace industry is still a few years away from being in a stable state capable of meeting the demands of customers and shareholders alike.

“We know our customers really do want to make more,” said Howmet CEO John Plant, whose company casts fasteners and engine components for Tier 1s and OEMs. “The question becomes when can we achieve these improved rates?”

Plant went on to say that he believes both Airbus and Boeing will hit their goals for increased widebody production; Airbus at 9/mo  on the A350, Boeing at 10/mo for the 787. 

The question, he said, is whether the OEMs will hit those rates in 2025 or 2026.

Executives from Boeing, Spirit AeroSystems and Howmet all presented at the conference, and all agreed that there’s reason to be optimistic, given the strong demand from airlines for more planes. 

The issue, as Plant put it, is the industry’s ability to meet that demand. “We haven’t seen the real benefits of increased aerospace production.”

  • Companies discuss latest 737 quality issue
  • Spirit tries to get on track as refinance deadline looms
  • Gentile: Supply chain needs new contract terms
  • Boeing CFO projects losses for next quarter
  • Howmet talks about engine challenges
  • Takeaway: Fundamental demand is strong, but…

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Analysis: Spirit strike likely a sign of changing aerospace labor market

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By Bryan Corliss

Striking Spirit AeroSystems workers blow whistles in front of one of the factory gates./Wichita Business Journal photo

July 10, 2023, © Leeham News – In case anyone had slept through all the earlier alarms going off, the whistles and airhorns that sounded during the mercifully short-lived Machinists Union strike at Spirit AeroSystems should have been a wake-up call: 

This ain’t the 2010s aerospace labor market anymore. 

In the labor market of 2023, hourly workers don’t want to come in on weekends. They want raises, and they’re not interested in getting paid in stock. And don’t you dare think of cutting off payments for the prescription drugs their kids need to take to stay healthy.

All this is going to create a challenge for the aerospace industry. For the past two decades, executives have focused on growing profit margins by holding down marginal costs – especially labor costs. 

A decade ago, aerospace companies were able to win labor concessions by threatening to take work away

Today, it’s the workers who seem to have leverage, and OEMs are going to have to figure out how to keep them happy and productive, or explain to the Kirbys, O’Learys and Al-Baker’s of the airline industry why their planes aren’t getting out of the factories on time. 

  • Tide of outsourcing seems to have turned
  • Baby Bust: Fewer workers in the workforce
  • St. Louis, Wichita: Red state Machinists vote to strike
  • What’s next: SPEEA at Spirit, IAM at Boeing

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Machinists at Spirit vote to end strike; will return to work on July 5

Machinists Union members in Wichita, KS, wait in line to vote on a second contract offer from Spirit AeroSystems Thursday. The offer was approved with a 63% yes vote. Spirit will resume production of critical Boeing aircraft components on July 5./International Association of Machinists photo

By Bryan Corliss 

June 30, 2023, © Leeham News – Machinists Union members working for Spirit AeroSystems in Wichita, KS, will return to work on July 5, after ratifying a new four-year contract with the company.

Some 63% of Local 839 members voted in favor of the contract on Thursday, union officials said. Spirit’s first offer was rejected by 79% of union members voting. 

“This membership vote by the majority of 63% is a move in the right direction for our local,” said Cornell Beard, the president of IAM District 70, the parent organization of Local 839. “Let’s work hard to set ourselves up for the big win in four years too.”

In a statement, Spirit leadership welcomed the yes vote, and said they would “closely coordinate” with suppliers and customers as the company restarts production.

Workers will start today preparing for the production restart after the Fourth of July holiday, the company said. The plant has been closed since June 22, the day after Local 839 members rejected the first offer.

  • Strike closes plant for less than two weeks
  • Workers get 9.5% raise this year, plus bonus
  • Second offer ‘what we worked for’

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Striking Machinists to vote Thursday on revised contract offer from Spirit

Striking Machinists Union members outside the Spirit AeroSystems plant in Wichita, KS./ Wichita Business Journal photo

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By Bryan Corliss

June 27, 2023, © Leeham News – Striking Machinists Union members at Spirit AeroSystems in Wichita will vote Thursday on a new contract offer from the company.

“The parties have reached a tentative agreement with the unanimous support of the entire Local 839 bargaining committee,” the union said Tuesday.

The tentative deal, which comes after three days of meetings between Spirit and union negotiators with a federal mediator, replaces the original offer rejected on June 21. Spirit shut down production at the Wichita plant the next day, and the union began picketing outside the factory on Saturday.

Spirit CEO Tom Gentile said his team “listened closely and worked hard in our talks over the last several days to further understand and address the priorities of our IAM-represented employees.”

Senior regional leaders of the International Association of Machinists are strongly recommending the deal.

“The contract is an industry-leading agreement that should make our members extremely proud,” IAM Southern Territory General Vice President Rickey Wallace and his chief of staff, Craig Martin, said in a statement released by the union.

A quick resolution to the walk-out would benefit Boeing. The Spirit plant in Wichita provides 70% of Boeing 737 aerostructures, along with nose sections for all other Boeing aircraft. It also provides components for the Airbus A220.

Thursday’s vote would require a simple majority for ratification. If it fails to get majority support, the strike would continue.

  • Deal walks back unpopular health plan changes
  • Bigger raises, reduced signing bonus
  • Contract would end mandatory weekend overtime
  • Union announced vote after meeting with stewards

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Update: Spirit presents revised contract offer to striking Wichita Machinists

Striking workers outside the Spirit AeroSystems plant in Wichita, KS./Wichita Business Journal photo

By Bryan Corliss

June 21, 2023, © Leeham News – Spirit AeroSystems has presented a revised contract offer to striking members of the International Association of Machinists.

“We have delivered a revised offer to the IAM following days of positive discussions with IAM representatives, along with the assistance of the federal mediator,” the company confirmed to LNA. “We remain committed to reaching a timely and fair resolution.”

IAM District Lodge 70 in Wichita, which is the parent organization for striking members of Local 839, announced Monday night that it would hold a mandatory meeting for union stewards today to discuss a contract offer. However, from the statement, it wasn’t clear whether the meeting would be to cover a new offer, or review the one that workers rejected with a 79% no vote June 21.

This morning, however, Spirit confirmed to Wichita station KSN-TV, as well as the Wichita Business Journal, that it had presented a revised offer to the IAM. Any details would be released later in coordination with the union, Spirit said.

Spirit and IAM negotiators have been meeting with a federal mediator since Saturday.

If Spirit has presented a revised offer, it would not be surprising that the union’s negotiating team would want to review it with union stewards before deciding whether to take it to the entire membership for a vote. The union stewards are full-time employees of Spirit who volunteer as union representatives to assist their coworkers in resolving questions surrounding pay, benefits and other contract questions. As such, they will have the best sense of how their coworkers would respond to the new offer.

Picket lines went up around the factory just after midnight Saturday morning. Today, with thunderstorms in the forecast, Spirit invited strikers to take cover in the shacks manned by security guards at the factory’s various gates. “Our primary concern is for their safety,” the company said.



Analysis: What went wrong in Wichita for Spirit and IAM

Striking members of Machinists Union Local Lodge 839 outside the Spirit AeroSystems plant in Wichita, Kans./Photo by The Wichita Eagle

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By Bryan Corliss

UPDATE: The two sides will continue talks with a federal mediator on Monday. In a statement, Spirit AeroSystems CEO Tom Gentile said the negotiating teams “have been working hard and making good progress.”

“We will continue discussions this week and remain committed to a timely resolution on a fair and competitive contract that addresses the priorities of our employees and other stakeholders,” he said.

Local 839 negotiators told their members that “with the mediator’s help, we are progressing toward getting another offer to the membership for consideration.”

June 26, 2023, © Leeham News –
Strikers in Wichita broiled under a hot summer sun this weekend, as the International Association of Machinists’ strike against Spirit AeroSystems got under way.

The good news, for everyone who’s watching in the North American aerospace industry, is that the two sides resumed talks Saturday, with the help of a U.S. federal mediator.

This walk-out caught a lot of us by surprise. Insiders I talked with before the vote didn’t expect a strike. Equity analysts confidently projected the risk of strike as “very low.” Spirit itself must have been confident, because it sent much of its senior leadership team to Paris for the air show.

So what went wrong? Clearly both Spirit management and the union’s negotiating team misread the mood, and badly.

We took a deep dive into what workers are saying on social media about the contract. As we’ve noted in the past, social media posts aren’t the same as scientific surveys, but they do give some insight into the mood in Wichita.

And what they reveal is that there was a lot of frustration around some specific issues, which was exacerbated by the fact that IAM Local Lodge 839 had been locked into its recently expired contract for 13 years, during which pay and benefits stayed the same inside the factory, while literally the whole world changed outside it.

  • Workers didn’t like many contract specifics
  • No way to predict how long strike will last

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Spirit AeroSystems and Machinists Union return to negotiations Saturday

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By Bryan Corliss

June 23, 2023, © Leeham News — Negotiators for Spirit AerosSystems and International Association of Machinists Local Lodge 839 will resume negotiations Saturday, in hopes of reaching an agreement that would resolve a strike set to begin just after midnight tonight.

A Wichita Eagle photo of orange security fencing up around the Spirit AeroSystems plant in Wichita, Kan.

The meetings, which will include a federal mediator, will start about 10 hours after the walkout begins.

The strike, involving some 6,000 union-represented hourly workers at Spirit’s Wichita plant, threatens significant disruption to the wider aerospace industry — particularly at Boeing. The Wichita plant produces 70% of 737 aerostructures, along with the forward sections of all Boeing commercial jets.

It comes after workers rejected a proposed four-year deal on Wednesday, with 79% voting no and 85% voting to strike.

  • Company: Two sides have been talking
  • Worker: ‘Feathers on a dog don’t make it a chicken’

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Paris Day Four: Air show winds down as Spirit strike looms over industry

By Bryan Corliss

June 22, 2023, © Leeham News – The business portion of the Paris Air Show wound down today, with no new orders and news of a looming strike in Kansas that will soon grind Boeing aircraft production to a halt. 

It was a stark contrast to the high pre-show expectations. Some analysts were projecting we’d see between 2,000 and 3,000 new aircraft ordered this week in Paris. By our count, there were 1,084 – a sizable haul no doubt. However, 970 of those came from IndiGo and Air India, who had telegraphed their plans to place those orders before the show, and used Le Bourget as a backdrop for signing the papers. Read more

Update: Spirit shuts down 737 lines after Machinists Union votes to strike

By Bryan Corliss

June 21, 2023, © Leeham News – Machinists Union members at Spirit AeroSystems in Wichita have overwhelmingly rejected a proposed four-year contract, setting the stage for a strike.

The contract between Spirit and IAM Local 839 expires at 12:01 a.m. Saturday. However, Spirit said Wednesday night that it would shut down production starting with Thursday’s first shift.

IAM members were not to report to work Thursday, the company said. They will get paid for their regular shifts, but all overtime is canceled.

Local 839 said that 79% of union members who cast ballots voted to reject Spirit’s offer, and 85% voted to authorize a strike. 

“Most of our members have concluded the company’s offer is unacceptable,” union officers said.

Spirit leadership said it was “disappointed” by the outcome.

“We know that no one wins in a work stoppage; however, we respect the rights of our represented employees,” it said in a statement. “Despite this setback, we are not distracted from the task at hand. We look forward to continued meetings with IAM leadership.”

In a statement to Wichita-area news outlets, union officers said they would “regroup and begin planning the following steps to bring the company back to the table.”

There was no word Wednesday night whether the two sides had plans to meet.

A strike at Spirit would have significant ramifications throughout the aerospace industry. The company supplies Boeing with 70% of the aerostructures for the 737, and without those fuselages coming by train from Kansas, work at Boeing’s Renton factory will eventually come to a halt, impacting airlines who are expecting jets, as well as other suppliers who provide parts, components and subassemblies for Boeing’s best-selling commercial aircraft. Spirit also builds the nose sections for the 787, 767 and 777.

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The union’s negotiating committee had recommended approval on the Spirit offer, which it received on Friday.

However, the contract seemed in trouble during a Wednesday morning union meeting, prior to the vote. The Wichita Eagle reported that workers made paper airplanes out of the pages of the contract summary, and covered the floor of the arena where they were meeting with them. In addition, Wichita station KWCH-TV published a photo of its website of workers wearing t-shirts emblazoned with the message “That’s a Big No.” 

  • Contract offered 34% more pay over four years
  • Workers had gone 13 years without a new contract

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Machinists Union members at Spirit to vote on four-year contract this week

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By Bryan Corliss

June 19, 2023, © Leeham News – Roughly 6,000 Machinists Union members at Spirit AeroSystems in Wichita will vote Wednesday on a proposed four-year contract that would significantly increase pay for hourly workers.

The bargaining committee for IAM Local 839 is recommending that its members accept the deal. 

“This is not an easy decision, but it is one that we believe is a good one,” the committee wrote in a letter to members on Friday.

It noted, however, that “the decision to accept or reject this offer is up to the membership,” and added that however the vote goes, the leadership “stands 100%” behind what the members decide. 

At least some of those members are vocally urging the deal be rejected. 

“How on earth did you think this is an offer we should accept?” one worker wrote on Local 839’s Facebook page. “You have betrayed us.”  

The current contract expires just after midnight Friday, June 23. 

  • Offer on its face is generous
  • Comes after 13 years without a new contract
  • Industry-wide ramifications should a strike occur

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