Boeing just committed to buying Spirit (no, not that one)

Outgoing Boeing CEO Dave Calhoun said the deal is in the "best interest of the flying public."

Jul 1, 2024 - 19:30

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Boeing just committed to buying Spirit (no, not that one)

While many travelers immediately associate the name Spirit with the budget airline Spirit Airlines (SAVE) , this is also the name of a Kansas-based company that manufactures plane parts such as cockpit fuselages and wing sections.

Spirit AeroSystems Holdings (SPR) was started by early aviation engineer and advocate Lloyd Stearman in the late 1920s and owned by Boeing (BA) for nearly eight decades before it was sold to private equity for $900 million and spun off as its own company in 2005. Since then, Spirit Aerosystems has remained one of Boeing's primary suppliers.

On July 1, the airplane manufacturing giant announced that it will re-acquire Spirit Aerosystems in an all-stock deal valued at $4.7 billion or $37.25 per share. The total worth of the deal deal, which includes Spirit's debt, is estimated at $8.3 billion.

'We believe this deal is in the best interest of the flying public'

A few weeks prior to the official announcement, reports started to swirl that Boeing was looking toward Spirit as a way to turn its finances around following the troubles of the last year. After a door plug on an Alaska Airlines (ALK) Max 737 plane blew out during a flight from Portland to California, Boeing has faced a National Transportation Safety Board (NTSB) probe that shattered its reputation over unveiled violations of basic safety protocols and sent its revenue down even further amid production delays.

One calculation shows that the airplane manufacturer lost more than $32 billion between 2019 and 2024.

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"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," Boeing President and CEO Dave Calhoun said in a statement. "By reintegrating Spirit, we can fully align our commercial production systems, including our Safety and Quality Management Systems, and our workforce to the same priorities, incentives and outcomes – centered on safety and quality."

As Spirit had also been manufacturing some Airbus (EADSF) fuselage parts, the acquisition will hand Airbus that section of the business for a nominal $1 as well as $559 million in compensation from Boeing. The "major activities" of which control will be ceded include A350 production plants in North Carolina and France as well as the rights to make of A220 parts in Northern Ireland, Morocco and Kansas.

Boeing commits to 'working Department of Defense and Spirit defense customers'

"Boeing's acquisition of Spirit will include substantially all Boeing-related commercial operations, as well as additional commercial, defense, and aftermarket operations," the manufacturer said further. "As part of the transaction, Boeing will work with Spirit to ensure the continuity of operations supporting Spirit's customers and programs it acquires, including working with the U.S. Department of Defense and Spirit defense customers regarding defense and security missions."

At $182 USD, shares of Boeing have fallen by more than 70% since the start of 2024 and the Boeing 737 Max incident. The announcement of the deal has not helped so far as stock dropped another 1% in Monday premarket trading. Spirit shares, in turn, rose 5% to just under $33 USD.