Spirit AeroSystems CEO says Boeing, Airbus contracts ‘not sustainable’

By Valerie Insinna

WASHINGTON (Reuters) -Spirit AeroSystems, a major supplier of parts for jetliners, has asked Boeing and Airbus to absorb more of the financial pain caused by inflation that makes its contracts “not sustainable,” Spirit CEO Tom Gentile said on Thursday.

In the first half of the year, Spirit took about $215 million in charges on the Boeing 787 Dreamliner and Airbus A220 and A350 programs, due to wage inflation, parts shortages and greater regulatory scrutiny, he said at an investor conference.

“All of those programs are under pressure,” he noted. “And it really is not sustainable for Spirit. So we are having discussions with our customers, with Boeing and Airbus, about these pressures that we’re facing and how we address them.”

Spirit shares closed down 7.3%.

Spirit executives first alluded to the need to reopen contract negotiations with Boeing and Airbus in August.

Gentile on Thursday pointed to “disappointing” Airbus A220 production rates, noting that only 65 to 70 jets are likely to be made this year instead of the 100 Spirit had expected to build wings and other parts for.

Spirit previously forecast the program would break even or begin to be profitable in 2025 after hitting a monthly production rate of 14 A220s per month.

That timeframe appears to have been delayed “and we need to have that discussion with Airbus,” he said, noting similar talks about the A350.

Spirit is also discussing the Dreamliner program with Boeing, Gentile said, as the parts maker has logged $1.4 billion in reach-forward losses and needs relief to ramp up 787 production to Boeing’s target of 10 per month by 2026.

“With both Boeing and Airbus, we’ve been an open book in terms of sharing all of the cost data so they understand and know that we’ve been working on different opportunities (to cut costs) and have exhausted those,” he said.

(Reporting by Valerie Insinna and Pratyush Thakur; Editing by Richard Chang)