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Sometime soon, reports say, aerospace giant Boeing will reach an agreement to buy Spirit AeroSystems Holdings (SPR) .
It’s an important deal for Boeing (Bachelor’s) Because it will bring back into the company fold a major subcontractor for its 737 and other aircraft.
Boeing spun off the Wichita-headquartered company in 2005, arguing that allowing the company to run itself would be more efficient and profitable. But Spirit was at or near the center of Boeing’s quality control problems.
Reports late last week indicated the deal was close to being done, but no details were available, especially regarding price.
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The matter is complicated by Spirit’s work making fuselages for Boeing’s rival Airbus SE (Aidsf) From a factory in Belfast, Northern Ireland. Speculation is that Airbus will buy the Belfast business.
However, the reports were good enough to push Spirit shares up 14% during the week, allowing the stock to show a 5.6% gain over the year.
Compared to Boeing, this is great.
Boeing shares are down 32% in 2024, thanks to strange event after strange event just this year. Shares are down 60% in the past five years.
Boeing is not a good, very bad year
This year of crises began in January when an Alaska Airlines plane was grounded (Alec) The plane exploded after taking off from Portland, Oregon, heading to Ontario, California. Miraculously, the pilots were able to return the plane to Portland with everyone remaining alive.
In the aftermath, there were discoveries that the plug had not been properly secured, Part of years of manufacturing issues.
Later, it was revealed that records of construction progress on the Boeing 787 Dreamliner had been falsified and fasteners had been installed incorrectly.
Production delays have impacted the global aviation industry’s growth plans and forced schedule reductions in many markets. This affects carriers like Alaska and Southwest Airlines (Love) Which only flies 737 aircraft.
Alaska, United Airlines (first) Others are considering purchasing planes from Airbus.
Dave Calhoun, the current CEO, announced that he will leave the company at the end of the year. Recent news reports indicate that recruiters looking to replace Calhoun are struggling to find viable candidates.
Wall Street lobbied for Larry Culp, CEO of General Electric Aerospace (General Electric) , a major jet engine manufacturer. Culp, who broke up General Electric and unlocked billions in value for shareholders, has backed down.
This all came after two 737 MAX planes crashed in 2018 and 2019, killing all those on board. Each 737 MAX has been grounded for 20 months. One of the executives resigned, along with most of the board members.
Optimists believe that Boeing will eventually get things right. It has a project backlog worth $529 billion, including its defense business.
The backlog of commercial aircraft stands at more than 5,600 aircraft worth $448 billion.
But the transformation may take time, even if an agreement is reached with Spirit.
More about Boeing
- Can Boeing stabilize here or is there more risk?
- Boeing is in hot water due to 737 MAX accidents
- Boeing whistleblower says he received “physical threats” over safety concerns
Should one buy the stock?
Only if you expect to wait a long time. Buying Boeing is an act of faith because of its problem and because the company doesn’t even pay a dividend now. It has reported losses since 2019 Exceeded $32 billion.
The four biggest reasons any buyer of Boeing stock should be patient:
The numbers are shocking. The company is expected to lose $1.09 in the second quarter, down from a loss of 82 cents per share a year ago. This is the average estimate among 22 analysts. The low estimate is $2.19. Revenue is expected to be about $18 billion, down from $19.7 billion a year ago.
Operational problems across Boeing are complex and not fully known. Case in point: Boeing’s Starliner shuttle is stuck on the International Space Station while NASA and Boeing try to understand leaks in the vehicle’s propulsion system.
Leadership in crisis. Calhoun will leave in six months, and a successor has not yet been named. A civil war is raging between the financial officers who have controlled the company since 1997 and almost everyone else. The money guys want to make Wall Street happy and have brought the stock price back to $440, the highest price of 2019. Everyone wants Boeing to make great airplanes.
Criminal liability for accidents remains open. Families of victims in the 2018 and 2019 incidents want criminal charges to be filed. There was a New York Times report that the Department of Justice would not bring criminal charges. This has been attributed to the fact that the matter is still under review.
Why should anyone care
The short answer is this: Boeing has for many years been the largest single exporter to the United States and the world’s largest maker of commercial airplanes. It lost the latter title to Airbus, and China has ambitions to offer a competitor to the 737, as does Brazil’s Embraer.
Boeing’s continued health is important to the local economy and a matter of national security. Boeing directly employs approximately 170,000 people. Spirit has 18,000 other workers. Thousands of subcontractors and their workers in the United States and elsewhere depend on Boeing.
Boeing invented modern airplane travel in the 1950s with the 707. It was the main manufacturer of bombers in World War II and, of course, the famous B-52.
It has a history that will be impossible to replace.
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