Spirit AeroSystems reports first profits since 2022, eyes automation to help with quality

Spirit AeroSystems is withholding its financial outlook for 2024 amid swirling uncertainty.

In Tuesday’s fourth-quarter earnings report, the Wichita manufacturer announced that it is waiting for regulators to determine whether Boeing can ramp up 737 MAX production. The company is also in the process of renegotiating program costs with Airbus.

The Federal Aviation Administration barred production increases on the MAX after an Alaska Airlines flight had to make an emergency landing in January when a door plug blew out, leaving a gaping hole in the plane’s fuselage.

The FAA has given no indication how long the cap on production will last, and Boeing has said it plans to continue purchasing from its suppliers in the meantime.

“Speaking on behalf of everyone at Spirit, the quality and safety of the products we produce is paramount above all,” interim president Pat Shanahan said in a release. “Over the past month, we have been working shoulder to shoulder with our customer to take a series of actions to strengthen our systems and processes to accelerate the improvement of our operations.”

In a Tuesday earnings call, Shanahan told analysts the long-term solution for eliminating quality control issues will be a shift toward increased automation in the manufacturing process.

“The build is largely manual. Our eye is towards finding the right balance of using human-assisted technology and automated technology,” Shanahan said.

He said full-scale robotics is impractical, but human-assisted technology is performing well in the company’s research lab, and he hopes to accelerate its development.

“The short answer for us at Spirit as far as quality is, less manual, less interpretation and more inspections,” Shanahan said. “Medium-term and long-term, is more human-assisted equipment and technology, more automation.

He did not indicate the timeline for implementation of automated processes, and a Spirit spokesperson would not talk about the impact new technology could have on the size of the company’s Wichita workforce.

For now, at least, Spirit appears to be focused on hiring. The company’s website advertises a host of openings for mechanics, engineers and quality inspectors among other roles.

Q4 results

Spirit reported fourth-quarter earnings of $58.7 million compared to a net loss of $243.1 million over the same period in 2022. It is the company’s first adjusted quarterly profit since the first quarter of 2022.

Spirit attributed its profits in part to an October memorandum of agreement in which Boeing agreed to pay Spirit an additional $455 million through 2025, and to the reversal of a potential claim related to the vertical fin attachment defect on the MAX.

The manufacturer has been plagued with quality control issues over the past year, the most recent blow coming Sunday when news broke that employees had misdrilled holes on some undelivered 737 MAX aircraft, requiring a rework and delay in delivery of 50 fuselages to Boeing.

In a class action federal lawsuit, Spirit shareholders allege the company concealed serious defects to maximize production, disregarding safety concerns raised by former employees.

The sustained negative publicity has contributed to lagging stock prices.

Spirit on Tuesday reported a profit of 52 cents per share, failing to meet Wall Street expectations for earnings of $1.33 per share.

The company delivered 104 737 MAX shipsets in the fourth quarter of 2023 compared to 81 over the same period in 2022. Overall, Spirit delivered 398 shipsets between October and December, a 25-unit improvement from the prior year.

In the earnings call, Shanahan, a former Boeing executive, stressed the importance of the two companies working in lockstep to resolve quality control issues.

“We’re behaving as if we were part of Boeing,” Shanahan said.

“If you sat in one of our meetings, if people took off their badges, you would not be able to tell which company they worked for. I think because of the trust that’s been built recently, some of the feedback loops that existed in the past are being restored, and that should allow us to even work better together.”

In response to an analyst’s question, Shanahan said Spirit’s resolve to work tightly with Boeing should not jeopardize the company’s standing with Boeing competitor Airbus, another of Spirit’s major customers. He said he’s optimistic about ongoing contract negotiations with Airbus on pricing changes.

This story was originally published February 6, 2024 at 8:27 AM.