US aerospace giant Boeing announced on Monday that it has reached a “definitive deal” to acquire its longtime subcontractor Spirit AeroSystems in an all-stock transaction valued at approximately $4.7 billion, or $37.25 per share. The merger reflects Boeing’s effort to streamline its commercial production processes and address recent quality control issues.
Boeing and Spirit Merger Details
Boeing President and CEO Dave Calhoun stated that the acquisition will “fully align our commercial production systems,” focusing on safety and quality management. The merger is set to reintegrate Spirit AeroSystems, which Boeing originally spun off in 2005 to cut costs. By bringing Spirit back into the fold, Boeing aims to synchronize its workforce and production priorities to better meet safety and quality standards.
“Reintegrating Spirit will help us align our priorities, incentives, and outcomes around safety and quality,” Calhoun said.
Spirit AeroSystems, which manufactures fuselages and major components for both Boeing and Airbus, generates around 70% of its revenue from Boeing. This acquisition will allow Boeing to consolidate its control over the production of critical aircraft components.
Airbus’s Strategic Move
In a related development, Airbus announced that it would purchase Spirit AeroSystems’ facilities that produce parts for its aircraft for a nominal fee of $1. This acquisition includes production sites involved in the A350 program in North Carolina and France, the A220’s wings and mid-fuselage in Belfast and Casablanca, and the A220 pylons in Kansas.
Airbus will also receive $559 million from Spirit AeroSystems as part of the deal, which aims to stabilize supply for Airbus’s commercial aircraft programs and ensure a more sustainable operational and financial future.
Production Quality Concerns
Both Boeing and Spirit AeroSystems have been under scrutiny due to recent safety issues. A significant incident occurred in January when a fuselage panel from a Spirit-manufactured 737 MAX blew off mid-flight on an Alaska Airlines flight. Investigations revealed issues with missing bolts on the door plug, raising concerns about Spirit’s quality control processes.
This incident compounded Boeing’s ongoing challenges, including regulatory pressures from the Federal Aviation Administration (FAA) following two fatal 737 MAX crashes in 2018 and 2019. The crashes, which resulted in 346 deaths, have led to intense scrutiny and legal challenges for Boeing.
In May, the US Department of Justice (DOJ) indicated that Boeing might face prosecution for violating a deferred prosecution agreement related to the 737 MAX crashes. The DOJ’s findings could lead to a plea deal, which would require Boeing to pay a fine and adhere to enhanced oversight measures.
Legal and Financial Implications
As Boeing navigates these legal troubles, the merger with Spirit AeroSystems is seen as a strategic move to regain control over its supply chain and address production challenges. However, the company remains under the threat of criminal prosecution, which could further impact its financial stability.
Ongoing Efforts and Future Outlook
Boeing’s recent operational changes aim to improve its oversight of Spirit AeroSystems and address quality control issues. Following the Alaska Airlines incident, Boeing slowed 737 production to focus on resolving these issues, impacting its financial performance.
Looking forward, Boeing and Spirit AeroSystems will work to overcome these challenges while preparing for the integration of their operations. The merger and Airbus’s acquisition of Spirit facilities represent significant developments in the aerospace industry, highlighting the complex interplay of corporate strategy, safety concerns, and legal accountability.
