Airbus In Talks with Spirit AeroSystems, Requests for Financial Compensation to Assume Loss-Making Spirit Operations

Airbus
(Photo : Unsplash/Daniel Eledut )

Airbus is seeking financial compensation to absorb Spirit AeroSystems's unprofitable operations. According to sources familiar with the situation, this request has become one of the hurdles preventing a merger between Spirit and its primary client, Boeing.

The Negotiations to Assume Spirit's Unprofitable Operations

Spirit and Airbus executives are in discussions in New York, as initially reported by Bloomberg, aiming to address various issues, such as Airbus's request for financial compensation to assume the supplier's unprofitable operations and the logistics of separating Airbus's business from Spirit, according to two anonymous sources familiar with the matter. It remains unclear how the discussions progressed or whether any obstacles were resolved.

As reported by Reuters in April, the world's leading aircraft manufacturers have been investigating methods to unravel their connections with Spirit through a meticulously planned framework agreement to divide operations.

The sources did not provide specific financial details. Still, industry insiders have indicated that an Airbus plant operated by Spirit in the U.K. requires over $1 billion in reinvestment to recover from losses.

READ ALSO: Boeing Slaps Back at Whistleblower's Complaint, Defends 787 Dreamliner Against Aircraft's Structural Safety

Splitting Spirit's Business Plans

Boeing aims to acquire its major aerostructures supplier, responsible for making the fuselage of its 737 MAX aircraft, by negotiating with its competitor, Airbus, which represents about one-fifth of the supplier's revenue. According to one source, Boeing is expected to resist paying Airbus to take over operations and focus on finalizing the deal to increase production of the struggling MAX aircraft.

According to a second source, splitting Spirit's Airbus business entails relocating plants and redistributing some of the workload to other locations. The money-losing Belfast plant of Spirit is among the challenges currently being addressed, as noted by two sources. Spirit's financial results are scheduled to be reported on May 7.

An Airbus spokesperson reaffirmed that the company is involved in discussions regarding its operations tied to Spirit but declined to provide additional comments, along with Boeing.

Spirit Aero spokesman Joe Buccino emphasized the company's commitment to prioritizing quality, safety, and the highest engineering standards, irrespective of ongoing negotiations.

Airbus CEO Guillaume Faury informed Reuters last month that it was "not unlikely" for Airbus to take control of both the Belfast and Kinston, North Carolina plants, where Spirit manufactures components for the A350 aircraft. Spirit was separated from Boeing in 2005 and promptly diversified its operations to become a supplier for Airbus, now its second-largest customer after Boeing. Spirit continues to produce approximately 70% of the fuselage for Boeing's top-selling 737 and supplies significant components for the 787.

The situation has reignited worries regarding the fate of Northern Ireland's largest manufacturing employer and its 3,400 employees following Spirit's acquisition of the company from a struggling Bombardier in 2019. In addition to manufacturing wings for the Airbus A220, the company has been diversifying its operations into the defense and space sectors.

RELATED ARTICLE: Southwest Faces Critical Revenue Growth, Slashes 2,000 Jobs, Shuts Down Operations Caused by Boeing Delays

Real Time Analytics