Cash and inventory woes mount for Boeing supplier Spirit AeroSystems

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The manufacturer of the fuselage for Boeing’s 737 Max said it is burning through cash, as tighter quality controls at its main customer led Spirit AeroSystems to delay deliveries.

Spirit said it and Boeing were jointly inspecting Max fuselages at Spirit’s factory after a door panel blew out of a 737 Max flown by Alaska Airlines in January.

That change has caused fuselages to accumulate in the factory in Wichita, Kansas, and resulted in Spirit using $416mn in cash for operations during the first three months of 2024, compared to $46mn in the year ago quarter. The company’s net loss widened to $617mn in its first quarter from a net loss of $281mn a year earlier.

Spirit chief executive Pat Shanahan called the increased inspections in Wichita “a significant accomplishment that we believe will enhance quality, eliminate rework and benefit the entire production system” between Boeing and Spirit.

But they have also heaped financial and operational pressure on Spirit. The company said on Tuesday its “ability to align factory costs, which include both internal and supply chain-related spending, and to react to sudden changes in production rates will have a material impact on results of operations and cash flows throughout 2024”.

Spirit also said executives had “developed plans to pursue various options to improve liquidity as needed and expects these plans will sufficiently improve the company’s liquidity needs,” without giving further details. Spirit had $352mn in cash at the end of the first quarter, compared to $824mn a year ago.

Spirit, like Boeing, has been under regulatory scrutiny since the Alaska Airlines incident earlier this year. A preliminary report by the National Transportation Safety Board found that four bolts meant to secure the panel to the aircraft were missing, and an audit of Boeing and Spirit by the US Federal Aviation Administration found “multiple instances” where the companies failed to meet manufacturing and quality control requirements.

Once an arm of Boeing, Spirit AeroSystems was spun off by its parent two decades ago. Boeing is currently in talks to reacquire the supplier as it seeks to assert more control over operational quality. But Boeing’s chief financial officer Brian West told investors last month the companies must first agree on pricing, financing and how to divest the work Spirit does for others, like Boeing rival Airbus.

“The death throes of Spirit are hard to watch,” said Rob Stallard, an analyst at Vertical Research Partners. “Ultimately we don’t expect Spirit to be a public company for that much longer.”

Spirit declined to offer guidance for the full year “until there is further clarity on the acquisition discussions with Boeing, 737 Max delivery and production timing, as well as ongoing commercial negotiations with Airbus”.

The company said it expects to build about 31 737 Max fuselages each month for the rest of the year, below the 38 per month that Boeing had targeted before the door panel blowout.

Spirit said it expects to post a so-called forward loss of $50mn to $60mn in the second quarter on the fuselage and wing components it makes for the Boeing’s 787 Dreamliner. The company “received indications” that Boeing would increase its production rate of the wide-body jet at a slower rate.

The FAA said on Monday that it had opened its second investigation into Boeing this year after the company found employees had falsified inspection records on some 787s.