Boeing Considers Buyback of Spirit AeroSystems to Address Production Issues

By Quincy Cahilig

Mar 01, 2024 05:28 PM EST

Boeing is reportedly in talks to repurchase Spirit AeroSystems, the manufacturer responsible for crafting fuselages for Boeing's 737 Max jets.

This development comes as both companies aim to address manufacturing flaws in the highly popular aircraft. Spirit AeroSystems shares rose 13%, and Boeing fell 1% as of early Friday afternoon, per CNBC.

Spirit AeroSystems closed Thursday, Feb. 29, with a $3.3 billion market valuation. Neither firm's representative has reacted on the matter. In 2005, Boeing divested operations in Kansas and Oklahoma, giving rise to the independent Spirit AeroSystems.

Notably, approximately 70% of Spirit's revenue last year originated from Boeing, with around a quarter linked to producing components for Boeing's key competitor, Airbus. Airbus refrained from commenting on the ongoing deal talks.

In January, Boeing CEO Dave Calhoun addressed concerns about outsourcing airplane production components, acknowledging it might have gone too far and expressing the need to confront the current reality.

Financial struggles have plagued Spirit, with its last profitable year in 2019 predating the pandemic. In October, the company appointed Pat Shanahan, a Boeing veteran with three decades of experience, as its interim CEO.

(Photo : PATRICK T. FALLON/AFP via Getty Images)Alaska Airlines N704AL, a 737 Max 9, which made an emergency landing at Portland International Airport on January 5 is parked at a maintenance hanger in Portland, Oregon on January 23, 2024. One of two door plugs on the emergency exit door blew out shortly after the plane took off from Portland. No fatalities or injuries were reported. The US Federal Aviation Administration (FAA) announced January 11 it was launching a safety probe into Boeing's quality control.

These buyback discussions transpired after a Boeing 737 Max 9 experienced a section failure during an Alaska Airlines flight, prompting the Federal Aviation Administration (FAA) to ground all such planes temporarily in January. 

This incident led to thorough investigations into both the accident and Boeing's production lines, marking the latest and most severe in a series of flaws associated with the Boeing 737 Max, the company's best-selling jet.

Preliminary reports from the National Transportation Safety Board indicated that the door plug bolts on the Max involved in the January accident were seemingly unattached when it left Boeing's Renton, Washington, factory.

Boeing disclosed various production problems and quality flaws in the fuselages crafted by Spirit, including incorrectly drilled holes and improper spacing on some components. These issues have contributed to delayed deliveries of new jets to airlines.

Read Also: IOTA Foundation's $10 Million Investment Drive: Fueling Digital Trade and Tokenization 

FAA Issues 90-Day Ultimatum

In response to the heightened scrutiny following the January 5 accident, the FAA, responsible for overseeing Boeing and certifying its planes, pledged a more in-depth review of the company's production lines. 

After a meeting with Calhoun earlier this week, FAA Administrator Mike Whitaker announced a 90-day timeline for Boeing to devise a plan aimed at enhancing its quality control and safety systems.

FAA Administrator Whitaker stressed the imperative need for Boeing to implement substantial and immediate improvements to ensure compliance with safety standards. Whitaker emphasized the accountability of Boeing's leadership throughout this crucial process.

Boeing faces a stringent deadline of 90 days to formulate a comprehensive action plan to rectify systemic issues in quality control, as reported earlier by VC Post.

According to the FAA, the Aircraft Certification, Safety, and Accountability Act of 2020 requires that this plan incorporate findings from the upcoming FAA production-line audit and the most recent insights from the expert review panel report.

Boeing To Pay $51 Million Penalty

In a separate development, Boeing is set to pay $51 million to settle a US administrative charge for unauthorized exports of technical data related to various US military weaponry, including fighter jets and missile systems, to countries such as China.

Following a thorough compliance review that Boeing's disclosures between 2017 and 2022 sparked, this resolution addresses almost 200 violations of the Arms Export Control Act and the International Traffic in Arms Regulations laws., per the Financial Times.

Exports to China from 2013 to 2017 were found to have caused harm to US national security, while exports to Russia in the last decade had the potential for risk during restrictive measures on defense exports.

These violations occurred before President Joe Biden introduced export controls against Chinese technology access and predated Boeing's trade controls compliance program changes in 2020. 

Related Article: Virgin Galactic to Pause Space Flights to Focus on Developing Its Next-Generation Delta-Class Spacecraft 

© 2024 VCPOST, All rights reserved. Do not reproduce without permission.

Join the Conversation

Real Time Analytics