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Boeing orders Spirit AeroSystems to stop work on parts for 20 737 MAX aircraft



It’s been more than a month since that Boeing (NYSE: BA) announced plans to restart production of the troubled 737 MAX aircraft, but things don’t seem to be going well.

Yesterday’s supplier of Boeing 737 parts Spirit AeroSystems (NYSE: SPR) announced that Boeing has targeted “pause” work on four 737 MAX vessels. (A ship consists of all parts that Spirit would normally contribute to the production of an individual 737 MAX). In addition, Spirit says, it has been instructed to “avoid starting production on sixteen 737 MAX vessels to be delivered by 2020, until Boeing has directed otherwise.”

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From Boeing’s point of view, these breaks and avoidances are necessary “to support Boeing’s adaptation of the nearest delivery schedules to their customers’ needs in light of COVID-19’s impact on air travel and flight operations”, which remains significantly depressed by the coronavirus pandemic. But for Spirit, this is very bad news.

Collage of an airplane, coronavirus and a world map

Image source: Getty Images.

As Spirit notes in its latest 10-K filing with the SEC, vessels for production of Boeing’s 737 aircraft account for “about 53% of our net revenue” for a given year. Now production of as many as 20 such ships has been postponed, and “Spirit believes there will be a reduction to Spirit’s previously revealed 2020 737 MAX production plan with 125 vessels” – perhaps even more than the 20 vessels already described.

What does it mean for Spirit? Probably as much as 16% of revenue this year – and maybe even more than that.




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