Spirit AeroSystems offers voluntary layoffs amid Boeing 737 Max uncertainty

Wichita’s largest employer Spirit AeroSystems is offering voluntary layoffs to employees, saying the company does not know how long production of the troubled 737 Max will remain on hold.

Spirit President and CEO Tom Gentile announced the move Monday afternoon in a letter to employees. It’s “a first step” in cost-cutting measures the company is taking after Spirit halted production of the 737 Max on Jan. 1.

To deal with the stop in production, Spirit will likely have to reduce its workforce, Gentile said in the letter. He did not say how many jobs will be lost but warns of “many difficult decisions in the days and weeks ahead.”

The buyouts will be offered to all eligible employees in Wichita, Tulsa and McAlestar, consistent with applicable collective bargaining agreements.

“If you are one of these employees, you will be provided with your options and the detail on what it means for you,” Gentiles wrote.

Spirit’s economic success has been tied to that of Boeing — and the 737 — since the company formed as a spin-off of Boeing Commercial Airplanes.

More than half of Spirit’s revenue comes from the production of 737 aircraft components. The 737 Max was grounded worldwide in March after a pair of deadly crashes in Indonesia and Ethiopia killed 346 people.

Spirit employs approximately 12,500 in Wichita, according to the Greater Wichita Partnership.

“Going forward we will need to make additional decisions to align our cost structure with new production rates, which have not yet been established but we anticipate will be lower for an extended period of time,” Gentile wrote.

More potential problems for 737 Max

Before the 737 Max was grounded, Spirit was in the midst of an economic boom. In the past two years, the company has announced plans to add thousands of jobs and invest $1 billion in its Wichita factory.

In return, Wichita and Sedgwick County agreed to pay $14.5 million for a building at Spirit’s factory on South Oliver. The state of Kansas pitched in $23.5 million and agreed to allow the company to keep 95 percent of its new workers’ state income taxes for up to 10 years. To fill those jobs, area organizations and universities have placed an increased focus on jobs training and scholarships.

The company planned to increase monthly production of the jets from 52 to 57 as early as June of this year. But that plan was taken off course by the 737 Max crashes.

After the crashes, Boeing reduced its production to 42 of the jets a month. But Spirit continued building 52 fuselages a month in anticipation of a quick fix.

That hasn’t happened.

Boeing has continued to push back its target date for returning the 737 Max to the sky. The commercial and defense aviation giant faces re-certification obstacles and a change in leadership after former CEO Dennis Muilenburg was ousted last month.

Earlier in December, Boeing announced it would suspend production of the 737 Max. Before it can return, it must gain approval from the U.S. Federal Aviation Administration.

Spirit has taken several measures to cut costs while the company waits, including shortened work weeks, hiring freezes, reducing overtime and decreasing its use of contractors.

“We do not know how long the production rate pause will last, and what the production rate will be when it does resume,” Gentile said in his letter to employees.

Gentile said in his letter that he hopes to have more information to share by the end of this week.

“The MAX situation we are in is due to factors outside of our control, and while we will always attempt to do our best with what we can control, uncertainty will continue until the MAX is re-certified by the global regulatory authorities and returns to service,” Gentile wrote.

The 737 could face new concerns following an internal audit by Boeing.

The New York Times reported Sunday afternoon that the audit found the 737 Max’s problems run deeper than a software glitch that played a role in two deadly crashes that have grounded the planes.

Boeing initially determined that a software fix would likely correct a problem with an automatic safety feature blamed for the crashes. But an audit ordered by the U.S. Federal Aviation Administration found “previously unreported concerns” with wiring that helps control the tail of the Max, according to the Times report. The company is looking at whether two bundles of critical wiring are too close together and could cause a short circuit.

The Times reported that the company has said that even if it needs to fix the wiring issue, it would only take one to two hours per plane to separate the wiring bundles on the Max using a clamp.

This story was originally published January 6, 2020 at 3:26 PM.