On Tuesday, Spirit AeroSystems (NYSE: SPR) said it would receive up to $350 million in advance payments from its largest customer Boeing (NYSE: BA), and up to $107 million from Airbus, giving the struggling supplier a lifeline as it burns cash after four consecutive years of losses.
Plans for a funding agreement with Boeing, first reported last week by Reuters, come days after Spirit issued a “going concern” warning – effectively putting investors on notice that it may be unable to pay its bills within the next 12 months.
A key supplier to both Boeing and Airbus, as well as smaller jetmakers like Bombardier, Spirit AeroSystems (NYSE: SPR) has seen inventory pile up and deliveries slump in recent weeks following a recently settled strike at Boeing.
Airbus agreed to give Spirit up to $107 million in advanced payments in connection with deliveries of parts for the European planemaker.
Boeing (NYSE: BA), which plans to buy back its one-time subsidiary, needs Spirit AeroSystems (NYSE: SPR) to remain on its feet as it seeks to revive jet production following the 53-day strike by most of its machinists, who are set to return to their jobs Tuesday.
Airbus also depends on Spirit AeroSystems for important parts for its A350 and A220 jets and has warned that delays in receiving parts from Spirit could hurt A350 deliveries in 2025.
The supplier of fuselages for the Boeing 737 MAX and significant parts of the 787 and other models has said it expects to burn around $450 million to $500 million over the last three months of 2024 and the first half of 2025.
“This agreement helps improve our liquidity. We continue to pursue a range of options to address our financial and spacing storage constraints and are working with our customers on these matters,” Spirit spokesperson Joe Buccino said.
Boeing said it continued to work closely with Spirit AeroSystems (NYSE: SPR) to “stabilize our production system and help us deliver for our customers”.
Spirit Aero’s finances suffered when Boeing MAX production slumped after a January 5 mid-air blowout on a new model.
A new process for vetting fuselages for flaws introduced in March further delayed Spirit’s deliveries, leading to a pile-up of fuselages inside and outside the supplier’s sprawling Kansas factory.
BOEING SHARES FALL
Spirit said the advances from Boeing would help it produce at rates required by the planemaker and tackle excess inventories and lower cash flows. It also cited “lingering effects brought on by the recent strike by Boeing employees”.
It must technically repay the $350 million in 2026, though the takeover by former parent Boeing is tentatively expected to happen well before then, in mid-2025.
Spirit AeroSystems (NYSE: SPR) shares, which were down 1% earlier, closed up 0.1%, while Boeing (NYSE: BA) fell 2.5%.
It is not the first time planemakers have been forced to inject cash to support Spirit, whose earliest financial troubles date back well before the recent Boeing strike.
In April, Boeing agreed to pump in $425 million in customer advances followed by another $40 million. But although the smaller sum was promptly repaid, a deadline for the main amount passed without it being repaid, according to Spirit filings.
In 2023, Airbus advanced $100 million to Spirit to be repaid in kind by taking the amount owed off the value of fuselage parts to be sent to Airbus over the course of 2025.
If shipments fell short of expectations, Spirit would have to repay anything it still owed in cash at the end of 2025, though this is also expected to become moot after the merger.
Tuesday’s new funding accord appeared to bring the total amount of customer advances from Boeing to $775 million.
Spirit also previously drew down a $350-million bridge loan set up when Boeing agreed to acquire the supplier.
