Boeing agrees to buy Spirit Aerosystems as part of plan to shore up safety
By David Goldman and Chris Isidore, CNN
New York (CNN) — Boeing has agreed to buy Spirit Aerosystems, one of its major suppliers and manufacturing partners, as part of its plan to overhaul the aircraft maker’s badly damaged safety reputation.
The all-stock deal, that values the supplier at $4.7 billion, or $37.25 per share, was announced Monday after months of discussions between Boeing and the company it spun off in 2005.
Boeing in March announced its intention to buy Spirit, saying recombining the companies would boost safety. Boeing’s current executives have admitted that the 2005 sale of Spirit to private equity buyers, which fetched only $900 million at that time, had proved to be a mistake for Boeing, hurting the reliability of its supply chain.
The total transaction value is approximately $8.3 billion, including Spirit’s last reported net debt.
“We believe this deal is in the best interest of the flying public, our airline customers, the employees of Spirit and Boeing, our shareholders and the country more broadly,” said Boeing President and CEO Dave Calhoun in a statement.
Spirit AeroSystems makes major parts of several Boeing models, including the fuselages for the 737 Max. The parts are then shipped to Boeing’s factories for assembly. The company also makes parts for Boeing’s rival Airbus, although Boeing is Spirit’s largest customer.
Spirit split up
The Boeing acquisition will mean breaking up Spirit. The supplier’s “major activities” related to Airbus will be bought by the European planemaker for a nominal $1, Airbus said in a statement Monday.
Those activities include production of A350 fuselage sections in Kinston, North Carolina, and St. Nazaire, France, and A220 wings and mid-fuselage in Belfast, United Kingdom, Airbus said in its statement. It will receive $559 million from Spirit as compensation.
Boeing had sought to get more money from rival Airbus for its part of Spirit, said Richard Aboulafia, a managing director at AeroDynamic Advisory, an aerospace industry consultant. Airbus’ business with Spirit accounted for $1.1 billion, 19% of its revenue in 2023, according to company filings, while $3.9 billion, or 64% came from business with Boeing. But Spirit was unwilling to contribute to the deal that Boeing was desperate to complete.
Spirit has had its own series of quality control issues in recent years, and Boeing had agreed to pay the company more money to try to improve Spirit’s quality and reliability issues, which had damaged Boeing’s output and reputation.
The payments came to an extra $60 million in revenue last year and $395 million in 2024 and 2025.
Those payments are an indication of Boeing’s motivation for a deal for Spirit. It can’t return to profitability itself, or fix its own quality issues needed to assure regulators, airlines and the flying public about the safety of its aircraft, unless problems at Spirit are also fixed. And it’s going to cost Boeing money to fix those problems, whether it is the largest customer, or the owner, of those operations.
Problems at Spirit Aerosystems
Spirit was involved in the January door plug blowout on an Alaska Airways 737 Max shortly after takeoff that left a gaping hole in the side of the aircraft.
Boeing said last week two different groups of employees were charged with doing work to the door plug, which is a part that is used in place of an emergency exit door. The first group of employees removed the door plug to address problems with rivets that were made by Spirit AeroSystems. But the Boeing staff didn’t generate the paperwork indicating they had removed the door plug, along with the four bolts necessary to hold it in place, in order to do that work. So the second group of employees replaced it, unaware the bolts were missing.
Since the Alaska Air incident, Boeing has placed a number of employees in Spirit’s factories to insure that its products were being made according to specifications.
Several whistleblowers have come forward since that incident, including some employees and contractors for Spirit. Last week, for example, a whistleblower from a contractor for Spirit Aerosystems said he notified the company of wide gaps in a key part of 787 Dreamliner planes that posed “catastrophic” danger to passengers.
Spirit has been involved in other safety problems for Boeing. In 2023 it used a “non-standard manufacturing process” when joining parts of the fuselages of 737 Max jets, leading Boeing to halt deliveries of the planes. Earlier this year, a Spirit employee notified Boeing that two holes may not have been drilled exactly to Boeing’s requirements, which required Boeing to rework about 50 planes that had not yet been delivered.
The US Justice Department is nearing an agreement with Boeing that would include a corporate monitor and a fine in exchange for a guilty plea to criminal charges, according to lawyers representing the families of victims of two fatal 737 Max crashes, who harshly rebuked the offer as a “sweetheart deal.”
Shares of Boeing (BA), which had already fallen 30% so far this year in the wake of the Alaksa Air incident, fell another 1% in premarket trading on news of the deal. Shares of Spirit (SPR) rose 5%, but to less than the $37.25 a share stated value of the deal, reflecting doubts about the future value of Boeing shares to be used in the purchase.
This story has been updated with additional developments and context.
CNN’s Diksha Madhok and Olesya Dmitracova contributed to this report.
The-CNN-Wire
™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.
