Q3 Net Loss of $477 Million

Spirit AeroSystems, a Tier 1 supplier for Boeing, which is in the process of merging with the latter, has continued posting losses in a difficult operating environment.

Solid momentum

Patrick Shanahan, the president and chief executive officer (CEO) of Spirit AeroSystems, said that the company has remained on track to be acquired by Boeing in mid-2025.

At the same time, it has continued to focus on the safety, compliance, and quality of its production systems, with the company producing the Boeing 737 fuselages, including the one that was involved in the Alaska Airlines mid-air door plug blowout in January.

Irene Esteves, the executive vice president and chief financial officer (CFO) of Spirit AeroSystems, added that its processes improvement initiatives helped cut the company’s Q3 free cash flow usage by half from Q2.

As such, Esteves remarked that Spirit AeroSystems was demonstrating solid momentum heading into Q4.

Unfavorable adjustments

Quarterly net revenues increased slightly to $1.47 billion, but the aerospace supplier ended the period with an operating and net loss of $350 million and $477 million, respectively.

In Q3, Spirit AeroSystems delivered 64 Boeing 737 shipsets, compared to 83 in Q3 2023. Total Boeing deliveries fell from 108 to 88, while Spirit AeroSystems shipped 13 more shipsets to Airbus, ending the quarter with 178 deliveries to the European plane maker.

During the quarter, it used $276 million of cash in operations, while Spirit AeroSystems’ free cash flow was -$323 million. In Q2, Spirit AeroSystems used $566 million of cash in operations, with its free cash flow being -$597 million.

The company detailed that its Q3 operating loss was higher year-on-year (YoY) because of higher unfavorable changes in estimates during the period.

“Total change in estimates in the third quarter of 2024 included net forward losses of $217 million and unfavorable cumulative catch-up adjustments for periods prior to the third quarter of $26 million.”

Net forward losses were primarily related to the Airbus A220 ($64 million) and Boeing 787 ($109 million) programs. Unfavorable cumulative catch-up adjustments were related mainly to the Boeing 737 and Boeing 777 programs, which were $24 million and $16 million during the quarter, respectively.

Spirit AeroSystems reiterated that it will furlough around 700 employees working on the 767 and 777 programs for 21 days starting October 28.

The supplier specifically targeted the 767 and 777 programs due to “the buildup of a significant inventory buffer on those programs.” Spirit AeroSystems warned about further furloughs and potential layoffs if the strike at Boeing continues beyond November.

On October 23, Boeing’s machinists, represented by the International Association of Machinists and Aerospace Workers (IAM) District Lodge 751 and District W24, rejected the latest tentative agreement (TA).

IAM said that it has sent its proposals for the next round of negotiations following the failed vote.

Merger update

Spirit AeroSystems did not have much to add about its pending merger with Boeing. The former said that both companies received a request for additional information from the Federal Trade Commission (FTC) as part of the regulatory review of the deal.

Boeing announced that it would acquire Spirit AeroSystems on July 1, with the deal between the two companies being finalized a day prior. At the time, David Calhoun, the now-former president and CEO of Boeing, said that the transaction should close in mid-2025.