In the spotlight to improve its safety, Boeing is in discussions to acquire Spirit AeroSystems Inc., to reclaim control of its challenged former aerostructures unit and the main supplier that makes the bodies of the troubled 737 MAX planes.

A Step Towards Safety

The main goal of taking over Spirit is Boeing's purpose to restructure a troubled yet crucial partner. Spirit has been struggling with losses and quality control problems occurring within its systems for an extended period of time. The manufacturer's problems also affected Boeing's most popular commercial jet, the Boeing 737 MAX.

Spirit Aero was spun out of Boeing in 2005 and sold to private equity investors. This change marked the end of almost 80 years within the USA planemaker's fold. Through this move, Boeing aimed to shed assets in order to become more profitable. However, this disposal left the contractor without the protective cover of Boeing's balance sheet, which created problems during the pandemic period. Throughout 2020, Spirit cut 6,800 employees and placed salaries workers on a four-day workweek to preserve cash. The pandemic caused Spirit to lose $2.5 billion.

The investment firm that acquired Spirit — Onex, based in Toronto — put the company on the stock exchange. Spirit started earning consistent annual profits in the hundreds of millions of dollars. During the 2010s, after the financial crisis, the company suffered a setback. Planemakers like Boing and Airbus have pressured suppliers to cut costs even as jets have grown more complicated.
 

Last year, Spirit restructured key contracts with Boeing, their biggest customer. 

Boeing CEO Dave Calhoun told CNBC in January about if the big decision of the company to sell off assets had gone too far: "Yeah, it probably did. But now it's here and now. And now, I've got to deal with it."

Both companies have been under careful examination since January 5, when a panel on a 737 MAX blew out during an Alaska Airlines flight shortly after takeoff. The plane landed safely with no serious injuries. The outcome could have been different if the plane had a higher altitude with the passengers moving inside the cabin. 

The incident followed two crashes of MAX 8 jets in 2018 and 2019 killing nearly 350 people in total. The subsequent grounding of 737 MAX planes costed Boeing about $20 billion.

Acquiring the supplier gives Boeing easier access to change the policies and production measures of the company. In other words, Boeing can now be more involved rather than being an observer of the production. 

Considering the discussions of taking over Spirit, Boeing mentioned in a statement: "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," and added, "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."

However, acquiring Spirit could have some negative repercussions.  Regulators are demanding the company primarily to improve the quality control at its own plants. The Federal Aviation Administration gave the company 90 days to structure a plan to address its quality control issues this week.

Rob Stallard, an analyst at Vertical Research Partners, stated in a client note that selling its operations to Boeing would be a "coup" for troubled Spirit, giving the planemaker a chance to adjust and solve the problems that have plagued its key supplier. However, the merger could also cause major distraction from the company's work on enhancing the quality control and safety culture under intense pressure from regulators. 

Spirit and Airbus

Airbus is the second-largest customer of Spirit accounting for 19% of its consumer share. Spirit produces wing components for Airbus A380, and A350 while also supplying A350s' central section panels. They also contribute greatly to the production of Airbus A320 and A220.

Therefore, any deal between Boeing and Spirit will have branchings for Airbus, Boeing's most crucial competitor in the commercial plane business. Airbus, which is based in Toulouse, declined to comment on Friday on whether it would decide on acquiring the pieces of Spirit that supply the company with parts. 

Shares of Spirit rose 15% jump in the regular session giving it a market value of around $3.8 billion. Boeing fell 1.8% Friday and is down approximately 23% this year.