Spirit Aero CEO: ‘We’re still not consistently getting the (737) fuselages out’

The good news for Spirit AeroSystems is it’s caught up on delivering Boeing 737 fuselages.

But it still faces some production challenges on its most valuable product, CEO Tom Gentile said.

After missing its delivery schedule with Boeing in the first quarter of 2018, the Wichita aircraft supplier ramped up 737 fuselage production in the second quarter and delivered 169 fuselages from April through June to Boeing.

On a conference call with analysts Wednesday to discuss the company’s second quarter 2018 earnings, Gentile said there are instances where some fuselages still aren’t getting out the door on time.

“We’re still not consistently every day getting the fuselages out,” he said. “There have been instances where we find quality issues at the end so we might miss a midnight (shipment).”

But, he added, “we expect that to be reduced substantially in the second half” of the year.

The 737 is Spirit’s biggest airplane program. Last year, the sale of 737 components to Boeing — including the fuselage and parts of the passenger jet’s wings and engines — accounted for nearly half of Spirit’s $6.9 billion net revenue, according to its 10K filing with the Securities and Exchange Commission.

Gentile has said Spirit’s troubles with the 737 have been related to Boeing’s rising production rates on the plane, as well as the fact that it’s building parts of two different versions of the plane: the older 737 Next Generation and the new 737 Max. To adjust to the higher production rates, Spirit has had to hire and train more production workers. At the same time it has to rely on hundreds of other smaller manufacturers to supply the parts it needs to deliver the 737 fuselages to Boeing.

Spirit announced plans last December to hire 1,000 more workers over two years. Gentile said on the call that many of the new workers it has hired are “starting to get down the learning curve on the Max system in the factory and are performing much better and efficiently.”

“We’re going to get more consistent and efficient as we get into next year.”

There are fewer disruptions, too, in Spirit’s 737 supply chain, Gentile said. But there remains “a small number of suppliers” that have had difficulty adjusting to the higher 737 production rates, he said.

Spirit has sent teams of workers to 15 or so suppliers that have struggled on deliveries to “help them get back on track,” he said.

In a few instances, Spirit has “offloaded” some of the work from one supplier to another in order to stick to delivery schedules, Gentile said.

Gentile said the upside of the 737 production ramp in the second quarter is how many fuselages it produced — a little more than 56 fuselages a month.

Next year, Boeing is expected to increase the rate from 52 a month to 57.

Because of the second quarter ramp, “we know we can do it,” Gentile said. “That gives us a lot of confidence as we go into 57 next year.”

This story was originally published August 1, 2018 at 11:27 AM.