Boeing Engages in Talks with Spirit AeroSystems to Enhance Quality Standards
Boeing Co. has confirmed that it is in talks with supplier Spirit AeroSystems Holdings Inc., with the intention of buying the company. Boeing believes that this potential acquisition would strengthen aviation safety, improve quality, and serve the interests of its customers, employees, and shareholders. Spirit AeroSystems, which manufactures fuselages and plane components for Boeing, has recently been involved in several quality problems that have affected Boeing’s reputation.
While the talks between Boeing and Spirit AeroSystems have gained attention, analysts believe that this acquisition would not solve Boeing’s current quality issues, particularly concerning its troubled 737 Max airplanes. Ken Herbert of RBC Securities states that acquiring Spirit AeroSystems would not provide a near-term fix for Boeing. However, there could be long-term benefits for Boeing through greater integration and collaboration in areas such as tooling, supplier management, production best practices, and execution.
The aerospace industry has been trending towards more vertical integration after years of outsourcing, but the news of Boeing pursuing Spirit AeroSystems came as a surprise to many. Analysts suggest that the acquisition could add to Boeing’s near-term execution issues, despite Spirit AeroSystems having once been part of the aerospace and defense giant.
Spirit AeroSystems has faced its own quality problems, as it was involved in the mid-air blowout of a panel on an Alaska Airlines plane last month. Investigation findings revealed missing bolts on the plane. In response to these issues, aviation regulators have given Boeing 90 days to come up with a plan to address safety and quality concerns.
Analysts have also discussed the financial implications of the potential acquisition. Sheila Kahyaoglu of Jefferies notes that it could be dilutive to Boeing’s free cash flow by 3.6%, or $297 million, based on Jefferies’ 2025 cash flow estimates. However, if Spirit AeroSystems were to sell its assets connected with Airbus SE, it would not impact Boeing’s top line.
While the market has reacted negatively to Boeing’s recent challenges, analysts like Jason Gursky of Citi maintain buy ratings on both Boeing and Spirit AeroSystems shares. Gursky believes that efforts to improve operations will lead to improved earnings visibility for shareholders.
In the past year, Boeing’s shares have fallen by 1.8%, while Spirit AeroSystems’ shares have dropped by 4.5%. In contrast, the S&P 500 has gained around 30% during the same period.
Overall, the potential acquisition of Spirit AeroSystems by Boeing is seen as a move to enhance quality standards and strengthen aviation safety. While it may not provide an immediate solution to Boeing’s current challenges, it could have long-term benefits for both companies through increased integration and collaboration. Investors will be watching closely as the talks between Boeing and Spirit AeroSystems progress.
