Spirit AeroSystems reports $281 million in Q1 losses after Boeing 737 MAX defect
A recently identified defect on the Boeing 737 MAX disrupted Spirit AeroSystems’ first quarter as net losses ballooned to $281 million, up from $53 million during the same period in 2022.
The Wichita-based manufacturing giant reported Wednesday that revenues were up 22% compared to last year, but expenses also surged by 25%.
The company delivered 346 shipsets between January and March — 25 more than during the first three months of last year — including 95 737 MAX deliveries.
In a news release and subsequent earnings call, Spirit executives reiterated that the Federal Aviation Administration has determined the defective fittings at the vertical tail of the 737 MAX do not pose an immediate safety or flight issue. Deliveries will, however, be slowed in Q2 while repairs are made, and Spirit has secured $280 million in cash advances from customers, including $180 million from Boeing, to support “near-term liquidity” during the rework.
Spirit said last month that the parts problem may date back four years, meaning it could affect most planes built since the jet was grounded in 2019 after two fatal crashes. MAX units currently in airline fleets will undergo regular inspections to determine if repairs are necessary.
On Wednesday, the company said about 60% of MAX units in Wichita contain the defect and that repairs on site should be completed by the end of July at a cost of $100,000 to $150,000 per unit.
“Additional costs are expected, including costs Boeing may assert to repair certain models of previously delivered units in their factory and warranty costs related to affected 737 units in service,” the release states.
CEO Tom Gentile said the company is implementing “additional protocols to reinforce our quality systems” and prevent similar issues in the future.
Spirit expects the defect will cost it $31 million in 2023, including $17 million in Q1.
Spirit reported a loss of $2.68 per share for investors.
Operating losses of $95.1 million in Q1 more than doubled losses for the same period last year, partially due to the absence of income related to the Aviation Manufacturing Jobs Protection program.
“The Airbus A220 program forward loss of $80.9 million was driven by increased costs driven by production schedule changes, foreign currency movement, and $46 million of non-recurring supply chain costs,” the release states.
Revenue for Spirit’s commercial segment was up 22% year-over-year to $1.1 billion. Defense and space revenues increased 19% to $188.4 million and aftermarket revenues were up 22% from Q1 of 2022, totaling $94.5 million.
Spirit, Wichita’s largest employer, entered contract negotiations with its machinists on May 1. Machinists have worked under the same contract for 13 years. Union members voted in March to sanction a strike option if agreeable terms cannot be reached.
“Our primary objective is to reward our IAM colleagues with a fair and competitive contract as we meet the increased demands from our customers,” Gentile said during Wednesday’s earnings call.
This story was originally published May 3, 2023 at 8:35 AM.