Boeing in Talks to Reclaim Control of Key Supplier Spirit AeroSystems Amid Safety Concerns

Boeing announced today that it is currently engaged in discussions to take back control of Spirit AeroSystems, an essential supplier responsible for manufacturing fuselages for the 737 Max jets. The move comes in the wake of a recent midair blowout incident involving one of the 737 Max aircraft supplied by Spirit AeroSystems.

Preliminary Discussions for Potential Acquisition

In a released statement, Boeing referred to the ongoing "preliminary discussions" regarding the possibility of acquiring Spirit AeroSystems, the company that was originally spun off from Boeing nearly two decades ago. As of now, there is no assurance that an agreement will be reached between the two parties, as Boeing emphasized.

Focus on Safety and Quality

Boeing described the potential "reintegration" of Spirit AeroSystems as a strategic move aimed at enhancing safety and ensuring high quality standards in the production of its aircraft. Spirit AeroSystems became an independent entity following the spinoff in 2005, but it has remained closely interconnected with Boeing, contributing to approximately 70 percent of each 737 Max.

Challenges Faced by Spirit AeroSystems

Even prior to the midair blowout incident involving an Alaska Airlines flight earlier this year, Spirit AeroSystems was grappling with various challenges that led to disruptions in the delivery of 737 Max aircraft. These challenges included a labor dispute in June, during which manufacturing employees went on strike for a week before reaching a new contract. To address these issues, the company appointed former Boeing executive Pat Shanahan as its new CEO in October.

Increased Regulatory Oversight

Following the Alaska Airlines accident, the Federal Aviation Administration (FAA) has intensified its oversight by deploying additional inspectors to Boeing and Spirit factories. FAA Administrator Michael Whitaker has issued a 90-day deadline for Boeing to develop a comprehensive plan to enhance quality control, pledging to closely monitor the company's progress.

Potential Reintegration's Regulatory Impact

A potential reintegration of Spirit AeroSystems under Boeing's umbrella could serve to reassure regulators. According to Richard Aboulafia, a managing director at aerospace consulting firm AeroDynamic Advisory, bringing Spirit back under Boeing's control could help mitigate supply chain risks and demonstrate a proactive approach to regulators.

Complexities of the Deal

Despite the potential benefits, Aboulafia noted that the deal would be "enormously complicated," given that Spirit AeroSystems also supplies parts to Boeing's competitor, Airbus. The intricate nature of the transaction poses significant challenges for both companies involved.

Findings from the Alaska Air Blowout

The National Transportation Safety Board's preliminary report on the Alaska Airlines blowout revealed that bolts installed by Spirit at its Wichita factory were found to be missing upon further inspection at Boeing's Renton factory. The incident raised concerns about the oversight of production processes and quality control.

Financial Implications

Before reports of the potential sale surfaced, Spirit AeroSystems had a market capitalization of approximately $3.3 billion. Following the news, the company's shares surged by over 15 percent, while Boeing's shares experienced a decline of more than 1 percent on Friday.

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