KANSAS- Spirit AeroSystems, a key supplier for Airbus and Boeing and responsible for producing fuselages for the Boeing 737 program, has successfully addressed the vertical fittings issue for the 737s at its facilities.
Tom Gentile, the company’s President and CEO, mentioned that they had resolved all rework associated with the vertical attach fittings issue on the existing Boeing 737 units in Wichita.
Nevertheless, in Q2 2023, the company had to allocate a $23 million charge to cover a potential claim from Boeing for the repair work done at their facility.
Spirit AeroSystems Boeing 737 Rework and More
“The provided estimate signifies the lower end of the potential liability range that Spirit envisions, and the Company is not in a position to reasonably predict the full scope of potential claims it might receive from Boeing for the completion of necessary repairs,” as highlighted in the Q2 2023 release by the company.
In Q2 2023, Spirit AeroSystems encountered a complete work stoppage due to the expiration of its contract with District 70, Local Lodge 839 of the International Association of Machinists and Aerospace Workers (IAM) union on June 24, 2023.
As a preemptive measure, the manufacturer decided to halt production at its Wichita, Kansas, facility on June 22, 2023.
Following renewed negotiations and the ratification of the contract by IAM, representing 55% of Spirit AeroSystems’ US workforce, on June 29, 2023, the company commenced the gradual restoration of operations the following day.
By July 5, 2023, the company had fully resumed operations at its regular capacity.
Second Quarter Results
During the second quarter of 2023, Spirit AeroSystems recorded charges amounting to $28.3 million.
These charges were associated with increased wages and other employee benefits linked to the new contract and strike-related disruptions amounting to $7.3 million, which were categorized under other operating expenses in the Consolidated Statements of Operations.
Consequently, the work stoppage will reduce the annual deliveries of Boeing 737 fuselages, projecting them to fall within the range of 370 to 390 units. This will subsequently have a negative impact on the company’s revenues, earnings, and cash flow.
IAM Negotiations
“As we have concluded the IAM contract negotiations and successfully addressed the vertical fin attach fittings issue, we are eager to fulfill our customer obligations for the remainder of the year,” Gentile further commented.
The company achieved a revenue of $1.4 billion in financial performance, marking an 8% growth compared to the second quarter of 2022.
This growth was primarily attributed to increased deliveries of the 737 and the 787 and higher revenue from Defense and Space operations.
Nonetheless, the positive financial effects from the two Boeing commercial programs were partly offset by reduced revenues from the Airbus A220 program.
In the second quarter of 2023, Spirit AeroSystems delivered 342 shipsets; by the end of the quarter, its backlog amounted to approximately $40.5 billion.
The company concluded the quarter with a net loss of $206 million. For the first half of 2023, it recorded a net loss of $488 million.
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