Boeing has ‘decoupled’ production from certification on 737 Max, Spirit CEO says

Spirit AeroSystems will resume work on the Boeing 737 Max next month before the airplanes have been cleared to safely return to flight.

The Boeing 737 Max has been grounded worldwide for almost a year, after two crashes killed 346 people.

Spirit’s return to production will be cautiously slow and shrouded in uncertainty until the planes are recertified. If things go according to plan, Spirit will return to last year’s production rate — 52 shipsets a month — by the end of 2022.

Until then, Spirit CEO Tom Gentile said he wants laid-off workers to stick around so they can be rehired when work picks back up, he told investors Friday morning during Spirit’s quarterly earnings call.

“Our first obligation and commitment and desire is to bring back all of the 2,800 people in Wichita and the 400 people in Oklahoma that were part of the layoffs earlier this year,” he said.

Gentile said he’s been helping organize job fairs to keep laid-off workers in the area.

“The people who live here in Wichita really like living in Wichita,” he said. “So when we have jobs, we’re confident we can get a lot of them back.

“But even if we can’t, this area has always been a fertile ground for experienced aircraft mechanics and engineers. And so we’re confident that we’ll be able to tap the area and get the people we need as we go back up in rates.”

Boeing expects the planes to be cleared to return to service by mid-year. But first they have to get approval from safety regulators with the Federal Aviation Administrator, who — under increased pressure from lawmakers and the public — have not given a timetable.

In plans described Friday, Spirit CEO Tom Gentile said the company will deliver 216 shipsets by the end of 2020. That’s about a third of the 606 Spirit delivered to Boeing last year.

Gentile said its planned production rate is not tied to specific milestones in the recertification process.

“We will restart production slowly in the coming months, ramping up delivery through the year to deliver about 70% (of those 216 shipsets) in the back half of 2020,” he said.

The return to production signals Boeing’s confidence that the planes will be approved this year and its need to keep its supply chain intact. Besides Spirit, several other Wichita companies supply parts for the 737 Max.

“Boeing has decoupled the production from the recertification,” Gentile said, adding that “there’s all sorts of assumptions that will be built into this.”

Partially to blame for Spirit’s planned slow return is its sizable fleet of undelivered planes.

Spirit, maker of 70% of the Max, continued producing 52 aircraft a month for 9 months after the planes were grounded, until late December when the company halted production. Now, 160 shipsets sit in storage adjacent to McConnell Air Force Base in south Wichita.

Gentile said Spirit will “burn off” that supply as it increases production. Those surplus planes will leave Spirit lagging Boeing as it increases production rates, he said.

Mark Suchinski, Spirit’s senior vice president and chief financial officer, said he remains optimistic about Spirit’s future, despite the 737 Max crisis. But the company is stopping short of looking too far ahead.

During the quarterly earnings report, Spirit officials declined to give an outlook on the year.

“There is still a lot of uncertainty surrounding the timing of the Max’s return to service, and as a result, we will not be providing full year 2020 guidance at this time,” Suchinski said.

“This is a very challenging time for Spirit, and we have a lot of work to do. But ... I’m confident that we are prudently managing the situation in the right way, and I feel very optimistic about our future,” he said.

This story was originally published February 28, 2020 at 4:34 PM.