By Allison Lampert
(Reuters) -Spirit AeroSystems said it has developed a plan that gives it “a high degree of confidence” to meet U.S. planemaker Boeing’s rate and quality demands for parts for the 737 MAX jet, the company told Reuters on Wednesday.
Boeing is under pressure to restore slumping production of its strong-selling narrowbody jet to 38 per month in the second half of the year as it grapples with a sprawling safety crisis following a January mid-air panel blowout on a new 737 MAX plane.
Boeing is pressing Spirit Aero, its key supplier, to improve the quality of the fuselages it produces for the MAX at a higher rate for the second half of 2024. Boeing is in talks to tie-up with Spirit, which reports earnings on May 7.
“We’ve developed a plan that we believe affords us a high degree of confidence that we will meet Boeing’s demand rate and quality expectations,” said Spirit Aero spokesperson Joe Buccino.
Boeing declined comment.
The planemaker is taking a calculated risk in steadily buying parts from its suppliers to protect its supply chain, despite lower deliveries. The higher spend is pressuring its finances while it is producing well below the U.S. Federal Aviation Administration (FAA) cap of 38 MAX jets a month.
Ratings agencies last week slashed the outlook on Boeing’s credit to just above “junk” status after it burned $3.9 billion in free cash during the first quarter and as it faces looming bond maturities in 2025 and 2026.
The company secured additional breathing room this week with a $10 billion debt raising. However, progress on output would help protect its investment-grade rating, said Ben Tsocanos, analyst at S&P Global Ratings.
“It would be difficult for them to have visibility towards meaningful free cash flow next year without getting to that level of production,” he said.
Spirit shares rose 0.2% on Wednesday while Boeing ended up 2.2%.
(Reporting By Allison Lampert in Montreal; Editing by Kirsten Donovan and Sonali Paul)
