Boeing HQ
The Boeing supply chain is having difficulties, and it now appears that Leonardo, who manufacture a fuselage section for the 787 as a Tier 1 partner, is looking to sell its loss-making aerostructures business. This move could potentially be disruptive for the Dreamliner program, depending on whether and to whom Leonardo could sell that business segment, and how quickly recurring quality issues in fitting together fuselage sections can be addressed.
The company is reportedly close to a funding agreement with Spirit Aerosystems, the manufacturer of the 737 MAX fuselage and the most critical supplier to Boeing’s cash flow. Spirit Aero agreed to be re-acquired by Boeing after being spun off in 2005, but in the interim is facing a financial crises, exacerbated by the recent IAM strike. Boeing will need to fund the company to avoid near term bankruptcy in order to keep its supplier of fuselages as a going concern prior to the re-acquisition agreed to in July.
Boeing is also reportedly looking at potential divestitures, including a potential $6 billion deal to spin out Jeppesen. That deal would provide the cash to go through with the funding and Spirit Aero acquisitions necessary for the 737 MAX program. The company must still carefully manage its cash flow as the ramp-up of 737 MAX production will be slow, particularly as the FAA increases its oversight.
M&A activity in the industry could be on the rise in 2025, particularly if a Trump administration returns to more favorable anti-trust oversight with looser interpretations. That could bring about more supply-chain consolidation.
The impacts of the IAM strike will be felt throughout the industry. In an era of union strength, Boeing’s compensation bump will be an example that other unions emulate and target. During the strike, the company had rolling furloughs for some employees, and has decided to repay them for their involuntary time off. The company is still proceeding with job cuts, and still plans to cull 10% of its non-IAM staff.
A new competitive aircraft has emerged for the P-8 Poseidon program, as Airbus has introduced the A321MPA, a new Maritime Patrol Aircraft. It appears that France will order the new aircraft for its Air Force. Given that the A321MPA is based on the new A321XLR, while the P-8 is based on the older generation 737NG, it has a larger cabin, longer range, and 15% better fuel economy. For long-loitering missions, the additional range of the A321MPA will leapfrog the P-8 in capability.
Finally, an interesting story talks about what Boeing needs to do to rebuild the company, which is to focus on the products that brought them market leadership – the airplanes. It also appears that Kelly Ortberg has reached out to former Boeing CEOs for their insider knowledge and advice in the turnaround, a wise move. Boeing appears to have made a good choice in their new CEO, but his task remains daunting.
Links to key news items follow:
- Leonardo eyes carve-out of loss-making aerostructures unit – Flight Global
- Boeing close to funding agreement to help supplier Spirit Aero, source says – Reuters
- Boeing exploring possible $6 billion sale of Jeppesen unit, Bloomberg News reports – Yahoo
- Boeing to repay furloughed employees, but will still proceed with job cuts – IBT
- Boeing deal’s big compensation bump raises bar for other unions – Bloomberg Law
- Airbus Defense and Space unveils new A321XLR-based maritime patrol aircraft – Aerospace Global News
- With the strike over, Boeing tries to refocus on what made the company iconic – KNKX
- Ortberg taps Mulally, Conner about Boeing’s recovery – Leeham
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