Boeing to Buy Major Contractor to Improve 737 Max Production Quality

Boeing has agreed to a deal to buy one of its key suppliers. On Monday, it was announced that the plane maker would acquire the majority of Spirit AeroSystems in a multi-billion dollar transaction. 

The deal values Spirit — not to be confused with the U.S. low-cost airline — at around $8.3 billion, including the company's debt, and $4.7 billion on a standalone basis.

Bringing Boeing and Spirit AeroSystems together is a ‘back to the future’ moment for the pair. The supplier was part of Boeing until 2005 when it was spun off to a private equity firm. Spirit later went public. In the years that have followed, Spirit has become an important contractor for the U.S. plane maker.

Whispers of a possible deal between the pair have intensified following statements released by the companies in early March.

What has Boeing Said?

In a statement, Dave Calhoun, the outgoing President and CEO of Boeing said: “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.

"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."

Patrick Shanahan, President and CEO of Spirit AeroSystems, added: “Bringing Spirit and Boeing together will enable greater integration of both companies’ manufacturing and engineering capabilities, including safety and quality systems.”

A Turbulent Relationship

In recent years the relationship between Boeing and Spirit has come under intense pressure.

In October 2018 and March 2019, Boeing 737 Max planes crashed killing a total of 346 people. The twin tragedies prompted the global grounding of the aircraft. While Spirit was not directly implicated, the accidents brought renewed scrutiny of Boeing’s production processes for its flagship planes.

Meanwhile, in August 2023, Boeing identified a 737 Max quality problem involving Spirit AeroSystems. The defect concerned improperly drilled holes, which the plane maker said would delay near-term deliveries.

Further challenges followed in January 2024 when a door plug blew out on an Alaska Airlines 737 Max shortly after takeoff. While all on board survived, the accident left a gaping hole in the side of the aircraft and resulted in another temporary grounding of the affected variant. Spirit was responsible for producing the door plug in question.

In June, FAA chief Mike Whitaker told a Senate panel that the agency had been “too hands off" in its oversight of Boeing before the Alaska Airlines blowout incident. 

What About Airbus?

While Spirit AeroSystems is best known for supporting the production of Boeing jets, it is also a key partner for Airbus. In a neatly coordinated announcement, Airbus - Boeing’s largest rival - said it had entered a separate agreement with Spirit relating to “a potential acquisition of major activities related to Airbus” for a token $1. 

In essence, it carves out Airbus’ exposure to the Spirit and will see the European company bring relevant manufacturing in-house. This includes the production of A350 fuselage sections in North Carolina and France. It also covers the A220’s wings and mid-fuselage production in Northern Ireland and Morocco; as well as other A220 parts made in Kansas.

"With this agreement, Airbus aims to ensure stability of supply for its commercial aircraft programs through a more sustainable way forward, both operationally and financially, for the various Airbus work packages that Spirit AeroSystems is responsible for today," Airbus said in a statement.

Airbus highlighted that the deal “remains subject to an ensuing due diligence process.” It added that while there is no guarantee that a transaction will be concluded, “all parties are willing and interested to work in good faith to progress and complete this process as timely as possible.” If the acquisition is completed, Airbus will receive $559 million in compensation. 

Boeing's Busy Week

The developments follow an frantic few days for Boeing. On June 27, the National Transportation Safety Board (NTSB) sanctioned the company after it shared “non-public investigative information” relating the the 737 Max investigation with the media. Boeing said it deeply regretted that some of its comments "overstepped the NTSB’s role."

Just a few days later, on June 30, Reuters reported that the Justice Department is planning to ask Boeing to plead guilty for deceiving federal regulators about certain aspects of the 737 Max 8.