During its first-quarter results, the company revealed $110 million in charges related to the Airbus A220, Airbus A350, and Boeing 787. The A220 incurred losses of around $81 million, including $46 million in nonrecurring supply-chain costs attributed to a "distressed supplier," according to Spirit CEO Tom Gentile. This comes just one month after Boeing suspended deliveries of some 737 MAXs due to a problem with two fittings that attach the Spirit-made aft fuselage to the vertical tail.
Spirit's first-quarter profit fell by $17 million because of the 737 issue, with additional costs expected beyond the $31 million anticipated hit to profits this year. However, the company cannot provide a reasonable estimate of the remaining potential costs at this time. As a result, Spirit AeroSystems shares closed 12.3% lower at $26.28 on Wednesday.
The company now predicts a cash burn of about $100 million to $150 million in 2023, given the potential for reduced 737 fuselage deliveries. Spirit initially anticipated 420 deliveries this year, but now expects to deliver up to 390 fuselages for 737s. Additionally, the company reported an $18 million A350 charge due to extra costs associated with production schedule changes and an $8 million loss on the 787 Dreamliner caused by increased labor and supply-chain issues.
Analysts had foreseen a challenging quarter for Spirit due to the ongoing 737 problem. However, the costs of the 737 rework may be lower than some of the most pessimistic estimates, according to J.P. Morgan analyst Seth Seifman. Repair work on fuselages in Spirit's factory is expected to be completed by the end of July, with the company already building and delivering production-conforming 737 fuselages under a revised process.
Approximately 500 in-service 737s are suspected of having the bracket defect, but since it is not a flight safety issue, affected jets will be inspected and repaired during maintenance. The timing for inspections has yet to be determined by Boeing and the Federal Aviation Administration.
Spirit anticipates receiving a $180 million cash advance from Boeing in the second quarter, which CEO Gentile believes will offer "additional surplus and cushion." Boeing announced last week that it was providing "manufacturing and engineering resources" to Spirit following the discovery of the 737 bracket problem.
In the first quarter, Spirit reported an adjusted loss per share of $1.69, wider than the expected 30-cent loss per share, and $1.4 billion in revenue, missing the analyst consensus of $1.5 billion. Cash burn was $69 million, compared to $298 million a year earlier.
