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.


Related article


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

Read more

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

Subscription required

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

Read more

UPDATE: Spirit says 737 manufacturing errors will disrupt deliveries through July

By Bryan Corliss 

March 3, 2023 © Leeham News – The manufacturing errors its team made on Boeing 737 MAX fuselages will cost Spirit AeroSystems at least $31 million to fix, with work on the units still at the Wichita factory going on until the end of July, the company reported this morning.

But that’s just the start, Spirit executives warned.

“Additional costs are expected, including costs Boeing may assert to repair certain models of previously delivered units in their factory and warranty costs related to affected 737 units in service,” the company said in its quarterly earnings release.  

The time and cost to make those repairs will have to be determined on “a unit-by-unit analysis,” Spirit said, adding that it “cannot reasonably estimate the remaining potential costs at this time.”   

Repairs to the fuselages on hand in Wichita will cost $100,000 to $150,000 each, the company estimates. Spirit has revised its manufacturing process and implemented new quality controls, the company said.

Overall, Spirit reported an operating loss of $95 million for the quarter, which more than doubled its losses in the first quarter of 2022. The growing losses came even though Spirit increased revenues by 22% year-over-year, to $1.4 billion. 

Spirit said that since the close of the quarter on March 30, it has received $230 million in cash advances from customers, of which $180 million has come from Boeing. It will receive another $50 million in advances later this year. Spirit is to repay those advances in 2024 and 2025.

  • Some 750 737s to be inspected, may need rework
  • Spirit to increase 737 rates in August, October
  • Deliveries to Airbus to be down this year
  • ‘Fragile’ supply chain remains an issue  
  • ‘Primary object is to reward our IAM colleagues’

Read more

UPDATED: Boeing says it still will deliver up to 450 737s this year

Boeing Co. photo

By Bryan Corliss

April 26, 2023, © Leeham News — Boeing says it will increase rates on the 737 line in Renton to 38 a month to maintain its plan to deliver between 400 and 450 737 MAX jets to airlines this year.

That was the first line of the company’s first-quarter earnings release, which showed Boeing lost $149 million on the quarter, on revenues of $17.9 billion.

Boeing had optimistically aimed for jumping MAX rates from the current 31 a month, as soon as June. However plans for the 737 line had been in question, after recent revelations that manufacturing problems and a software issue would cause delays in deliveries.

  • ‘Gnarly’ 737 defect to take weeks to fix
  • Boeing commits to MAX increases
  • Improving numbers at BCA
  • Supply chain issues continue, Boeing says

Read more

Spirit gearing up to produce 42-a-month on 737 program by the end of 2023

Subscription required

By Bryan Corliss

Feb. 8, 2023, © Leeham News – Spirit AeroSystems plans to deliver 42 new-built 737 MAX fuselages a month to the Boeing Co. by the end of this year, executives said Tuesday. 

Whether that’s how many 737s Boeing is delivering to customers is not for Spirit to say, CFO Mike Suchinksi told analysts during the company’s year-end earnings call.

“What Boeing delivers to their customers is, we have no purview. That’s on the Boeing side,” he said. “We’re just trying to communicate to you what the contract schedules have been and what we expect to produce internally and what we expect to ship to Boeing and to get paid for.” 

But Spirit and its suppliers still have major challenges to overcome before they can get to those higher rates, Suchinski and CEO Tom Gentile warned. The company, which struggled through a tough year in 2022, is making major cash outlays in early 2023 to acquire the people and materiel it will need to reach those higher rates, and that will weigh on profitability for the next few quarters.

  • Losses doubled in fourth quarter
  • Outlook: 420 737s and 650 A320s
  • Some suppliers in ‘deep distress’
  • Spirit hiring, but new workers need time
Read more

Outlook 2023: Labor shortages continue to plague aerospace

Boeing 777 final assembly line in Everett (WA). Credit: Leeham News.

Subscription Required

By Bryan Corliss

Jan. 4, 2023, © Leeham News:  Some aerospace suppliers say the industry is dealing with a shortage of production workers, as well as engineers. Airbus, Boeing and other manufacturers, including engine companies, complain they can’t get to desired production rates because of, in part, a labor shortage.

It’s part of a broader phenomenon across all manufacturing, with one industry group saying there’s an immediate need for 2.1 million factory workers right now.

In some circumstances, this has meant raising wages. In Wichita, the “Aerospace Capital of the World,” there’s a bidding war going on for skilled aerospace mechanics.   In Puget Sound, Boeing had to go back to the bargaining table with the Machinists Union in 2019, to negotiate $4-an-hour pay increases for entry-level workers. In Charleston (SC), Boeing reportedly struggles with a higher-than-normal attrition rate as workers leave for higher-paying jobs.

It seems inevitable that the lack of experienced workers will make it harder for companies to deliver parts and finished goods on time, and the absolute need to raise pay will cut into margins. Both these factors could very well be a drag on profits, even as airlines clamor for new aircraft that will increase manufacturers’ revenues.

Summary:

  • Analysts warn of ‘labor headwinds’
  • Spirit faced with ‘dynamic’ labor environment
  • Boeing: 100 new mechanics a week?
  • New-hire pay about the same as retail
  • High turnover causes supply chain problems

Leeham News in addition to Twitter, Facebook and Linkedin, may now be found on Post.news here and on Mastodon here.


Read more

Suppliers expect Boeing to increase 787 rates next year

Subscription Required

By Bryan Corliss

Dec. 19, 2023, © Leeham News: Boeing suppliers are planning to increase their output to support the OEM’s plan to deliver five new-built 787s a month at some point in 2023.

Boeing wants to increase the production rate of the 787 to 5/mo by the end of 2023 and to 10/mo by 2025. The supply chain must hurry to prepare. Credit: Leeham News.

It will be challenging for the top-tier suppliers to scale up operations dramatically. They’ll have to train and maintain larger teams of workers, while also ensuring that their own lower-tier suppliers have the capacity to deliver parts and components on time.

One executive warned investors this fall that the challenges in the year ahead will be greater than the ones the industry faced delivering record numbers of planes before the pandemic.

Summary:
  • Howmet: ‘Back of the year, at around 5 per month’
  • Suppliers want more lead time given challenges
  • Whole supply chain is under stress

Leeham News in addition to Twitter, Facebook and Linkedin, may now be found on Post.news here and on Mastodon here.


Read more

Boeing faces exodus of senior engineers in tight market for talent

Subscription Required

By Bryan Corliss
Nov. 28, 2022, © Leeham News: Boeing’s engineering corps could become further depleted within the next few days, as union-represented engineers and technical workers at the company’s Puget Sound plants face a Wednesday deadline on filing their retirement paperwork.

If they don’t leave now, individuals could face retirement benefit losses in the hundreds of thousands of dollars.

The potential loss of several hundred of Boeing’s most experienced engineers comes at a time when the company is scraping together engineering teams to tackle production problems in Charleston, and in the midst of an industry-wide shortage of engineering talent.

Summary

  • Aggressive hiring sparks Brazilian lawsuit
  • Engineers face Wednesday deadline
  • All aerospace companies need engineers
  • Tech industry layoffs won’t help
Read more

UPDATE: Spirit close to breakeven in a ‘dynamic’ environment, CEO says

By Bryan Corliss

Nov. 3, 2022, (c) Leeham News: Spirit AeroSystems said today its third quarter revenues grew by 30% year-over-year, driven by an increase in deliveries for Boeing’s 737 MAX program.

The company posted positive operating income of $4.5 million for the quarter – its first positive income since 2019 – but reported an overall net loss it said was due mainly to charges connected with the cost of terminating an employee pension plan.

Spirit said it delivered 69 Boeing 737 shipsets during the third quarter — 23 a month — compared to 47 shipsets in third quarter 2021. 

Boeing deliveries are expected to be stable at 31 a month for the foreseeable future, Spirit President and CEO Tom Gentile said.

“Given that our production rate is set at 31 aircraft a month on the 737 program now, and we will likely remain at that rate for much of 2023, we are initiating a focused effort to reduce structural costs to enhance our profitability and cash flow in 2023,” Gentile said in the company’s earnings release.

The company faces challenges, however. “We continue to see disruptions in our factories due to part shortages, increased levels of employee attrition and volatile schedules,” Gentile said. 

Spirit, which had reduced its quarterly dividend to 1 cent a share in 2020, said it will suspend dividend payments entirely starting in the fourth quarter, “due to the current challenging macroeconomic environment.”

SUMMARY

  • Labor and supply chain issues ‘dynamic’
  • Spirit to slowly work through 737 backlog
  • Defense diversification helps bottom line
  • More demand for spares and maintenance

Read more