Spirit AeroSystems, the main US supplier for Boeing’s troubled 737 MAX plane, posted a second quarter net loss of US$256 million compared to a net profit of US$168 million a year ago. The company announced on Tuesday (4 August) that it will be severely cutting the number of fuselages or shipsets it delivers to Boeing for the MAX as the plane remains grounded and may not fly again until 2021. The plane was grounded following two crashes that killed 346 people.
The company, based in Wichita, Kansas in the US, said it has been “directed” by Boeing to produce a total of 72 737 shipsets in 2020, which is an 88 percent reduction from the 606 shipsets it delivered in 2019. The company also said it has recorded forward losses of US$194 million, primarily on its B787 and A350 programmes “due to greater customer production rate reductions than previously assumed”. As a result of the slowdown in global aviation and the major troubles facing Boeing, Spirit said it has also been force to cut its workforce by 8,000 so far and cut costs by at least US$1 billion. The company said it has closed one of its facilities located in San Antonio, Texas and it may close others if the crisis facing the industry continues.
“The dual challenges of the MAX grounding and COVID-19 continue to have a significant negative impact on the global aviation industry,” said Tom Gentile, Spirit AeroSystems president and CEO. “Spirit production levels in the quarter fell 65 percent from last year and 51 percent from the first quarter. We continue to adjust our cost base to align with the lower levels of production and to preserve liquidity. While the production outlook remains volatile, our current projections demonstrate that we will maintain sufficient liquidity for operations over the next 12 months. During this slow period, we continue to make productivity improvements throughout our production system and continue to win new work in an effort to diversify our business so that we can emerge as a stronger company once production rates on commercial aircraft return to higher levels.”
Spirit’s second quarter revenue was US$644.6 million, down from the same period of 2019, primarily due to the significantly lower 737 MAX production resulting from the grounding of the programme and the impacts of COVID-19. Deliveries decreased to 159 shipsets during the second quarter of 2020 compared to 449 shipsets in the same period of 2019, including Boeing 737 MAX deliveries of 19 shipsets compared to 147 shipsets in the same period of the prior year. Spirit’s backlog at the end of the second quarter of 2020 was approximately US$41 billion, with work packages on all commercial platforms in the Boeing and Airbus backlog.
Spirit said the Q2 financial results “do not contemplate the anticipated impacts of lower production rates by Boeing and Airbus that have developed after the end of the second quarter. The company is currently evaluating the potential impacts to the Boeing 787 and Airbus A350 programmes. Based on preliminary assessments, the company expects to incur incremental forward losses in the third quarter of 2020 of approximately US$25 million to US$35 million on the Boeing 787 programme and US$13 million to US$20 million on the Airbus A350 programme. As a result of the uncertainty that exists regarding customers’ specific production rates and duration for such rates, and the actions the company may take to recalibrate its cost structure in response to our customers’ decisions, the amount of forward losses recognised in the third quarter of 2020 may be materially different than the ranges provided.”