Boeing announced on Monday its plans to acquire Spirit AeroSystems, the struggling fuselage maker, in an all-stock deal aimed at improving safety and quality control. The deal involves Boeing paying $37.25 per share in Boeing stock for Spirit, giving the aerospace company an equity value of $4.7 billion. Including Spirit’s debt, the transaction value amounts to $8.3 billion.
The decision to acquire Spirit comes after a fuselage panel blew out midair from a nearly new Boeing 737 Max 9 on an Alaska Airlines flight earlier this year. This incident sparked a fresh crisis for Boeing and highlighted the need for improved safety measures. Spirit AeroSystems is responsible for manufacturing the fuselages for the 737 and other parts, including sections of Boeing’s 787 Dreamliners.
Boeing has been a major source of revenue for Spirit, accounting for approximately 70% of its revenue last year. The remaining quarter came from producing parts for Airbus, Boeing’s main rival. By bringing Spirit in-house, Boeing aims to align their production systems and workforces, ensuring better coordination and quality control.
Boeing CEO Dave Calhoun, who is set to step down at the end of the year, emphasized the significance of this acquisition in strengthening quality and reaffirming Boeing’s commitment to being a reliable company. The deal is expected to close in mid-2025, pending approval from regulators, Spirit shareholders, and the sale of Spirit’s operations dedicated to Airbus planes.
Pat Shanahan, CEO of Spirit AeroSystems, is considered a potential successor to Calhoun. Meanwhile, Airbus has reached an agreement with Spirit, whereby Spirit will compensate Airbus $559 million for acquiring its manufacturing lines dedicated to Airbus planes.
The Alaska Airlines incident and other production issues have put mounting pressure on Boeing. A preliminary report from the National Transportation Safety Board highlighted problems with bolts that hold the door plug in place on the Max 9. Other production problems included misdrilled holes and misconnected fuselage panels. Boeing has been working to improve quality by only accepting defect-free fuselages, reducing the chances of errors.
The safety crisis resulting from the door plug blowout has caused delays in Boeing’s plane deliveries and financial setbacks for both Boeing and Spirit. Boeing’s CFO stated earlier this year that the company would burn cash rather than generate it, with a loss of around $8 billion in the first half of 2024. Boeing’s shares have also taken a hit, declining by more than 30% this year.
The Federal Aviation Administration has made it clear that it will not allow Boeing to expand production until it is satisfied with the company’s production lines. Calhoun faced scrutiny from lawmakers in a Senate hearing regarding Boeing’s safety record and perceived lack of improvement following the two deadly Max crashes.
In conclusion, Boeing’s decision to acquire Spirit AeroSystems is a strategic move aimed at addressing safety concerns and improving quality control. By bringing Spirit in-house, Boeing hopes to align their production systems and workforces, ensuring better coordination and reducing the chances of errors. This acquisition comes in the wake of incidents and production problems that have affected both companies financially. Approval from regulators, Spirit shareholders, and the sale of Airbus-dedicated operations will be necessary for the deal to be finalized.
