Airbus called for compensation to take on money-losing Spirit operations, sources say

7:01 pm Thursday, May 02nd, 2024

By Allison Lampert and Mike Stone

(Reuters) – Airbus has called for financial compensation to take on money-losing operations from Spirit AeroSystems, a demand that has emerged as one obstacle to a tie-up deal between the supplier and its main customer Boeing, people familiar with the matter said.

Spirit and Airbus executives are holding talks in New York, first reported by Bloomberg, to try and work through issues such as the European planemaker’s demands for financial compensation to take on the supplier’s loss-making operations. They also include the mechanics of separating Airbus’ business from Spirit, said two of the sources who spoke on condition of anonymity.

It was not clear how the talks progressed or whether any of the obstacles were resolved. The world’s dominant aircraft makers have been exploring how to untangle their respective ties with Spirit through a carefully timed “framework” deal to split operations, Reuters reported in April. The sources did not give financial details, but industry sources have said a UK Airbus plant run by Spirit needs a $1 billion-plus re-investment to dig it out of losses. Boeing is focused on acquiring its key aerostructures supplier, which produces the fuselage for its 737 MAX jet. In order for Boeing to regain control, it has to deal with its arch-rival Airbus, which accounts for roughly one-fifth of Spirit revenues. Boeing is seen likely to oppose payments to Airbus to take operations. It wants to close the deal to focus on ramping-up slumping MAX production, one of the sources said. “They want it done so that things can be stabilized and prepare the entire production system to go up in rate,” he said.

Separating Spirit’s Airbus business involves both transferring plants and extracting part of the work from others, a second source said. Spirit’s money-losing Belfast plant is one of the sticking points currently being worked through, two of the sources said. Spirit reports earnings on May 7. An Airbus spokesperson reiterated it was engaged in talks over its Spirit-based operations and declined further comment. Boeing also declined comment.

Spirit Aero spokeman Joe Buccino said “irrespective of negotiations, we are and will always lock in on quality, safety, and the highest engineering rigor.” Airbus CEO Guillaume Faury told Reuters last month it was “not unlikely” that Airbus would assume control of Belfast and the Kinston, North Carolina, plant where Spirit makes part of the A350. Spirit was spun off from Boeing in 2005 and quickly set about diversifying to supply Airbus, which is now its second-biggest customer behind Boeing. It still makes about 70% of Boeing’s best-selling 737, including the fuselage, and supplies large parts of the 787.

The saga has revived concerns over the future of Northern Ireland’s largest manufacturing employer and its 3,400 staff after Spirit stepped in to acquire it from struggling Bombardier in 2019.

As well as building wings for the Airbus A220 it has been expanding into defence and space.

(Reporting By Allison Lampert in Montreal, Mike Stone in Washington. Additional reporting by Tim Hepher in Paris; Editing by David Gregorio)