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In a significant development within the aerospace sector, Boeing Co. (NYSE:BA) and Airbus SE (OTC:EADSY) are reportedly on the verge of finalizing a deal that would see them split the operations of Spirit AeroSystems Holdings Inc. (NYSE:SPR), a major supplier to both companies.
What Happened: Boeing and Airbus are close to an agreement to split the operations of supplier Spirit AeroSystems, Reuters reported on Thursday. This deal could signal the end of Boeing’s 20-year outsourcing strategy.
The discussions, which involve the two leading aircraft manufacturers, are aimed at dividing Spirit’s assets essential to their respective jet programs. The talks are delicate due to the companies’ rivalry and antitrust concerns, with the format of the discussions still being unspecified.
Boeing’s recent crisis, triggered by a mid-air incident in January, has pressured the company to reconsider its supply chain strategy. The potential agreement would see Boeing and Airbus taking over plants that are crucial for their operations, although the specifics of the assets under negotiation remain undisclosed.
While Boeing has been contemplating reacquiring Spirit in its entirety, the new approach could involve a more coordinated division of assets. This would require regulatory approval and is far from a finalized deal, with the valuation of Spirit’s Airbus-supplying plants still being a point of contention.
Industry insiders suggest that Airbus might need to invest heavily, possibly over $1 billion, to optimize the production of A220 wings in Belfast, aiming to make the jet more cost-effective. The fate of Spirit’s smaller facilities in Morocco, Scotland, and Malaysia is yet to be determined, with the possibility of third-party interest in some assets.
Why It Matters: The potential division of Spirit AeroSystems between Boeing and Airbus comes at a critical juncture for the aerospace industry. Earlier in March, Boeing was considering the reacquisition of Spirit AeroSystems amid concerns over production challenges and quality control. This move was seen as a strategic pivot to reinforce Boeing’s manufacturing capabilities.
Subsequently, both Boeing and Spirit AeroSystems came under scrutiny by the Federal Aviation Administration (FAA) for non-compliance with quality control regulations. The scrutiny highlighted the need for Boeing to tighten oversight of its supply chain, potentially influencing the decision to split Spirit’s operations with Airbus rather than a full acquisition.
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