Spirit, Boeing agreement firms up pricing on jetliner parts

Spirit AeroSystems has reached agreement on how much it will be paid to make major parts of most of Boeing’s airliners.

The Wichita-based supplier of fuselages and other major aircraft structures said in a news release it has completed negotiations and definitive agreements with Boeing through 2022 on most of its passenger jets.

“We can now focus 100 percent of our time and attention on executing on our existing commitments and growing our business,” Spirit president and CEO Tom Gentile said in the release. “This agreement reduces a great deal of uncertainty, solidifies our relationship with Boeing and positions us to meet our long-term financial goals.”

Last month, Gentile announced the two companies had reached a tentative agreement on the nearly 3-year-old issue. Both companies had been working since November 2014 under a temporary pricing agreement.

Spirit didn’t disclose specifics of the agreement, which covers a significant amount of the work its 10,800 employees in Wichita perform.

On an Aug. 1 earnings call with investors, Gentile and chief financial officer Sanjay Kapoor said the then-tentative agreement covered pricing on the 787-9 and 787-10, the 737 and the 737 Max, and “legacy twin-aisle programs,” which would include the 747, 767 and 777. It didn’t cover the 777X, production of which hasn’t started.

The memorandum’s pricing on the 787-9 and -10 was lower than Spirit had accounted for in the future, which prompted the company to announce it would see a forward loss of $353 million on the 787 program.

Spirit manufactures 75 percent of the 737, including the fuselage, while it manufactures forward-fuselage sections and other structures of nearly all other Boeing models.

In the Spirit news release, Boeing Commercial Airplanes chief financial officer Kevin Schemm said the agreement “brings stability to both companies.

“ … And it locks in on cost reduction and improved efficiencies,” Schemm said. “These are at the heart of our Partnering for Success efforts.”

Partnering for Success is a Boeing initiative to bring down its cost of producing airplanes, both within the company and throughout its supply chain.

This story was originally published September 26, 2017 at 3:20 PM with the headline "Spirit, Boeing agreement firms up pricing on jetliner parts."