This month, some major announcements have been made across the aerospace sector. Boeing recently announced that it inked a deal with Spirit Aerospace which would enable the firm to re-acquire parts of its manufacturing chain that were outsourced. The news follows several steps Boeing has taken to try and reassure the public and shareholders of its return to quality standards following a string of untimely incidents.
Spirit AeroSystems
Spirit AeroSystems, founded in 2005, has its headquarters in Kansas. The firm came about after Being decided to break down its supply chain and sell it off to raise funds. The maneuver turned these operations into smaller investment opportunities but has since proven to have affected quality standards.
Spirit AeroSystems is responsible for a variety of parts that Boeing uses in these aircraft, specifically the 737 and 787 fuselages. The firm also manufactures the flight deck and wings for the Airbus A350 and other craft. Currently, Spirit Aerospace operates a fleet of A320 and A320neo. According to company statements, the firm seeks to expand this fleet to almost 300 aircraft in the next three years.
Source – Leeham News and Analysis
Spirit Aerospace reported only $1.813M in revenue in 2023. However, the company has $6.95M in assets under its control and currently employs 18K skilled professionals. This re-acquisition will bring the portions of Spirit Aerospace that handle Boeing manufacturing back under the company’s corporate umbrella.
Reacquire Parts Spirit AeroSpace Terms
Boeing and Spirit Aerospace released statements this month in which they detailed the terms of the agreement. According to their documents, the total value of the acquisition is roughly $8.3B. This agreement would have Boeing assume Sprint Aerospace’s net debt and its money-losing operations.
Boeing Common Stock
Boeing has agreed to make $4.7B in all-stock transactions at $37.25 per share. This rate is 30% higher than Spirit’s stock price on 6-29-24. Spirit shareholders are set to receive 0.25 shares of Boeing common stock for each of their shares of Spirit common stock. This arrangement is dependent on the daily close, which would see the arrangement fluctuate based on a close between $149.00 and $206.94, respectively.
Boeing Terms for Spirit AeroSpace
Boeing executives stated that the definitive merger agreement would depend on the completion of another major deal with Airbus that Spirit Aerospace has in the works. Additionally, regulatory approvals must be obtained for the merger to be completed.
Best Interests
The maneuver is seen by many as in the best interests of shareholders, clients, and anyone taking to the skies in the coming years. A recent statement by Boeing President and CEO Dave Calhoun explained how the maneuver aligns the supply chain and drives efficiency. He also stated how Boeing’s pivot towards safety improves quality control and makes it easier to implement new stricter standards.
Spirit Aerospace President and Chief Executive Officer Patrick M. Shanahan also took a moment to highlight some details of the acquisition. He explained that the move enhances manufacturing and engineering capabilities, which, in turn, will help to improve the reliability and durability of their aircraft.
Part of a Larger Strategy
The acquisition of Sprint is part of a larger strategy reversal that saw Boeing go from outsourcing and selling off its manufacturers to actively re-acquiring these manufacturers. The goal is to bring the supply chain back in-house and then introduce supply chain-wide quality control mechanisms.
Another part of Boeing’s new strategy is to pivot toward employee well-being. The company has faced scrutiny for a combination of product failures and employee injuries that occurred across its network of manufacturers. Specifically, the firm’s Go4Zero program seeks to bring workplace injuries to 0 for the year.
The Boeing Company 
Boeing is an international aerospace firm that has products across the market ranging from aircraft, missiles, satellites, rotorcraft, drones, and more. The firm has been in operation since 1916 and has played a pivotal role in multiple global conflicts. It’s based in Arlington, VA, and is recognized as a global leader.
Boeing Company merged with McDonnell Douglas in 1997 and remains one of the premier aircraft providers for the US military. Boeing has been under increased scrutiny following a variety of highly publicized incidents and plane crashes.
Boeing’s stock has suffered some losses due to controversies and accidents. The added regulator scrutiny has added to the downward pressure shareholders face as well. Despite these obstacles, Boeing is still considered a strong “hold” for traders. The company’s positioning and the looming prospect of global conflict have made this stock a smart add.
Spirit Aerospace in Talks with Aerobus to Buy EU Manufacturing
Spirit Aerospace already inked a deal with Airbus, the largest aircraft manufacturer in the EU. The deal has some components that mirror Boeing’s, in that the manufacturing would be brought under Airbus’s control. Like Boeing, Airbus would assume the money-losing plants and company debt.
The acquisition would enable Airbus to better control the quality of its premiere craft, the A220 and A350. Sprint Aerospace agreed to pay an additional $559M to Airbus as part of the deal. Other terms still require Sprint shareholders to sign off and the entire deal is subject to the concurrent closing of the Boeing acquisition.
Airbus SE
EU aerospace giant Airbus entered the market in 1970. Since that time, it has grown to become the largest aerospace manufacturer in the EU. It competes with Boeing directly on the global aerospace market and is regarded as the more reliable of the two following the recent Boeing incidents.
Similarly to Boeing, Airbus has thousands of suppliers located globally, with analysts estimating a third of their suppliers are located in the US. Airbus employs +130K professionals and has seen continued growth during the Boeing fiasco.
Boeing Under Increased Scrutiny
Boeing has seen increased scrutiny following a long string of embarrassing and sometimes fatal accidents. The company has claimed many of its issues derived from its suppliers and an inability to enforce effective quality control across firms. However, further investigations have revealed a dangerous climate of neglect with minimal quality checks.
Plea Deal
This month, Boeing was offered a plea deal by the Justice Department following a violation of an agreement regarding 2018 and 2019 incidents. Boeing has yet to agree to the deal, and it would still need to see the judge sign off. Notably, the families of those who died in the incident have stated they will fight the deal if it comes into effect.
Whistleblowers Come Forth
Recently, a large group of whistleblowers came forth to share their experiences dealing with Boeing. This group stated they could testify to manufacturing defects and quality control issues witnessed during their time employed at the manufacturer. The group alleged serious misconduct by management, who, on multiple occasions, ignored or dismissed quality control concerns brought forth by employees.
Mysterious Deaths
The whistleblowers became headline news as two of them seemingly died under mysterious circumstances before their testimonies. Joshua Dean was the quality auditor at Boeing supplier Spirit AeroSystems for years before leaving the firm due to concerns over the management’s handling of core issues. Notably, he died after getting a rare illness.
John Barnett was another Boeing whistleblower who met an untimely end before being able to testify in the case against Boeing. According to reports, Barnett committed suicide. However, his friends, close family, and the circumstances surrounding the timing of his death have left many to question if there was foul play.
Boing Incidents
Boeing is in the midst of a quality control meltdown. The firm seems to be in the news weekly due to new product failures. Here are some recent incidents that have led to Boeing falling under the watchful eyes of regulators, their planes being grounded, and serious changes within the upper management occurring.
January 5, 2024
An Alaska Airlines 737 Max 9 had a door plug fall off, resulting in a loss of cabin pressure and an uncomfortable and dangerous situation. The incident occurred on January 5, 2024. Nobody was injured but the flight had to be diverted to avoid further risk.
April 2024
In April 2024, a Boeing 737 Max had its flight deck door fly off during decompression for landing. The plane managed to successfully land, but passengers were understandably shaken up from the ordeal. A video of the incident was circulating on Reddit which showed the moment the door flew off and the chaos that ensued in the cabin.
April 7, 2024
Another incident occurred on April 7, 2024, on Southwest Airlines Flight 3695. The flight which was bound for Denver, Colorado from Houston, Texas needed to return to Denver after the engine cowling snapped loose and damaged the wing flap during take-off. In the now-popular video, the shroud begins to rip like paper before completely flying off.
The flight’s landing caused 3-hour delays for passengers, who were mostly thankful the craft landed safely. Southwest apologized for the incident. Interestingly, Boeing reached out to Southwest following the news. Additionally, an FAA investigation into Boeing’s manufacturing process was launched.
March 2024
A United Airlines Boeing 777-200’s tire came loose during its takeoff in March 2024. The flight was on its way from San Francisco International Airport (SFO) to Osaka, Japan, before the pilot had to make a U-turn and land the craft. This incident raised scrutiny for the firm.
The tire fell to the ground, then bounced through a fence, and ended up in a Hertz parking lot. At the time, a worker was only a few vehicles away. Thankfully the vehicle has six tires on two main landing gears and was designed to land safely missing a single tire.
July 8, 2024
United Flight 1001 from Los Angeles International Airport (LAX) to Denver, Colorado had to turn around and make an emergency landing after the main gear fell off. The plane was on the way to Iowa to make a connecting flight when the incident occurred. The United Airlines Boeing 757-200 landed safely but it marked the second time this year a wheel has fallen off a Boeing aircraft.
Describing the incident, the pilots stated the landing wasn’t the smoothest but were grateful for their luck. Passengers were scared as the pilot told them to “brace” multiple times. The skilled pilot was able to put the plane down with only a small bump. Thankfully, the fallen tire, which landed in LA, destroyed only an empty vehicle.
Too Big to Fail
Boeing is the largest aerospace firm in the US and one of the biggest revenue generators for the US military. Boeing is one of the top-performing firms in the country and has shareholders that include representatives, senators, and other government officials. Consequently, it has seen scrutiny from the public for its cozy relationship with the government.
This positioning has led to some very interesting incidents in which presidents have spoken freely about their support and even admiration for the company. In one incident, then-president Obama remarked about how he expected a gold watch from Boeing after completing a large sale of military assets. President Trump was once quoted saying “God bless you, may God bless the United States of America, and God bless Boeing,”
This relationship has brought to light some serious trust issues within the current system. Specifically, it is believed that Boeing can provide reliable oversight to its manufacturers. However, considering that Boeing has no US rivals, it’s unlikely that much will change in the coming months.
Re-Acquiring Spirit AeroSpace Could be Part of the Solution
Boeing’s decision to reacquire Sprint Aerospaces US manufacturing is a wise move. It could help to build consumer confidence in the company, pending no further incidents. For now, the company remains under heavy pressure to provide more transparency and improve quality moving forward.
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