Spirit Aerosystems reported revenues of $1.7 billion for the first quarter of 2024 as the supplier continues to grapple with cash flow issues, with disruption to Boeing 737 production and delivery delays contributing to an overall cash spend of $416 million; up from $46 million in Q1 2023. The inability to reach a conclusion with Airbus regarding pricing negotiations has also adversely affected the company’s liquidity position.
Spirit’s deliveries to Boeing have been delayed in recent months as the two parties implemented a policy of joint product verification as of 1 March 2024. President and CEO of Spirit Aerosystems Pat Shanahan described this “transformative undertaking” as one which was “industrialised in 34 days,” including a “standardized 26 zone product verification process”. However, this increased joint verification processes resulted in higher levels of undelivered units in Wichita, negatively impacting the supplier’s operational cash flows.
“Spirit’s ability to align factory costs… and to react to sudden changes in production rates will have a material impact on results of operations and cash flows throughout 2024,” notes the company. Despite producing 89 737 fuselage units during the quarter, Spirit was only able to deliver 44 in Q1 2024, under half of Q1 2023’s total of 95. To offset its ability to take imminent delivery, Boeing advanced Spirit $425 million to be repaid in the third quarter “as the production system returns to equilibrium”. Spirit states its current 737 production rate as 31 aircraft a month, which it expects to maintain throughout the year.
Although Spirit’s revenue for Q1 2024 increased 19% year on year, its operating loss also grew; negatively impacted by Boeing’s FAA-mandated schedule changes and increased quality audits. Net forward losses of $495.4 million were primarily driven by the Airbus A350 and A220 programmes “due to the inability to reach a conclusion to pricing negotiations with Airbus, additional firm orders, and production cost growth”. Spirit’s management says it has “developed plans to pursue various options to improve liquidity as needed”.
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