Boeing wants to buy back the company that builds the body of its troubled Max planes

Mar 1, 2024, 5:53 PM

Boeing fuselages leave the supply line for further construction....

Airplane fuselages bound for Boeing's 737 Max production facility await shipment in Wichita, Kansas, in December 2019. Boeing wants to buy back the company that builds the body of its troubled Max planes. (Nick Oxford/Reuters/FILE via CNN Newsource)

(Nick Oxford/Reuters/FILE via CNN Newsource)

CNN —Boeing said it is in talks to buy Spirit AeroSystems, a major supplier that was part of Boeing until a 2005 sale and one that was also involved in an Alaska Airlines mid-air door plug blowout.

Negotiations were first reported earlier Friday by the Wall Street Journal and Seattle Times. Spirit shares soared 15% in trading Friday on the reports. But shares had been down 10% from the time of the Alaska Air incident in early January through Thursday’s close, and down 70% since a March 2019 fatal crash of a Boeing 737 Max , which led to a 20-month grounding of the jet.

Boeing sold Spirit in 2005, receiving $900 million in cash for the sale. Wichita, Kansas-based Spirit AeroSystems makes major parts of several Boeing models, including the fuselages for the 737 Max. The parts are then shipped to Boeing’s factory in Washington state via rail.

“We believe that the reintegration of Boeing and Spirit AeroSystems’ manufacturing operations would further strengthen aviation safety, improve quality and serve the interests of our customers, employees, and shareholders,” Boeing said in a statement late Friday. ”Although there can be no assurance that we will be able to reach an agreement, we are committed to finding ways to continue to improve the safety and quality of the airplanes on which millions of people depend each and every day.”

Spirit has had its own series of quality control issues in recent years. The problems had become serious enough that Boeing had agreed to give it more money to try to improve Spirit’s quality and reliability issues there hurting Boeing’s own output. 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 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.

About $3.9 billion of Spirit AeroSystems’ revenue last year came from Boeing, making up about 64% of its overall revenue. Boeing rival Airbus is Spirit’s second largest customer. It is unlikely that Boeing would be able hold onto that part of the business were it to reacquire Spirit.

Spirit’s market cap at the close of trading Friday, after shares had been lifted by the reports of a possible deal, stood at $3.7 billion, or just slightly less than what Boeing paid Spirit last year as its major supplier. But after five years of net losses totaling $31.5 billion, Boeing ended 2023 with only $12.7 billion on its balance sheet, down from $14.6 billion the year before.

An initial report from the National Transportation Safety Board on the January incident with the door plug blowing out aboard the Alaska Air flight found that the jet had left Boeing’s factory in October with four bolts missing that were needed to keep it in place.

But the reason that the door plug, and the missing bolts, were removed by Boeing was that the fuselage arrived at Boeing’s factory with problems with five rivets that had been done by Spirit AeroSystems. So even if Boeing was ultimately responsible for the problem, quality issues at Spirit may have also played a part.

The NTSB has yet to assess blame for the incident.

But the bolts have been just one of a series of quality issues at Spirit AeroSystems in recent years. Fuselages have been delivered to Boeing with work still needing to be done on them, which caused what is known as “out-of-sequence” work, which may have caused some of Boeing’s own quality issues.

In 2023 it used a “non-standard manufacturing process” when joining parts of the fuselages, causing a halt in deliveries of 737 Max jets. And just a month ago, 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.

This story was updated with additional reporting and context.

The-CNN-Wire™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

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Boeing wants to buy back the company that builds the body of its troubled Max planes