Boeing Supplier Rises as CEO Vows End to Tardy Shipments for 737

(Bloomberg) -- Spirit AeroSystems Holdings Inc. rose the most in nine months after Chief Executive Officer Tom Gentile reassured investors that late shipments of 737 jetliner fuselages to Boeing Co. would get back on schedule by June.

The shares jumped 7.9 percent to $85.64 at 2:18 p.m. in New York, the biggest intraday gain since August 2. The airframe manufacturer reported first-quarter revenue Wednesday that was more than analysts had expected, while announcing a $650 million acquisition that will bring it more work on military and Airbus SE aircraft.

But it was the 737 -- the main source of profit for former parent Boeing -- that drew the most questions during Spirit AeroSystems' quarterly earnings call. The delays have caused Spirit to spend heavily on overtime and expedited freight charges, while raising questions about whether suppliers can keep pace with the ambitious production increases planned by Boeing and Airbus.

Falling Behind

Earlier this year, Spirit fell behind schedule by as many as 13 to 15 jetliner fuselages, which it builds in Wichita, Kansas, and then ships by rail to a Boeing's 737 factory outside Seattle, Gentile said. The delays lessened after Spirit hired contractors, sent “SWAT” teams into struggling suppliers and created a special squad, complemented by Boeing mechanics, to install missing components at the end of its own assembly line.

The company is still running about five airframes behind schedule, but expects to be fully caught up by next month. “Now, we're starting to ship with more lead time,” Gentile said. “That will, in the second half of the year, allow us to reduce our overtime, reduce the number of contractors.”

He blamed the delays on the stress of speeding to a 52-jet monthly production tempo set by Boeing while rapidly transitioning from an older generation of 737s to the larger and more advanced Max. The latest version of the jetliner family should account for about half of Spirit's 737 output this year, Gentile said.

About 15 of the 600 suppliers that feed parts to Spirit's 737 assembly line also fell behind schedule, creating bottlenecks. With that out-of-sequence work starting to shrink, Spirit has set a goal of no late 737 shipments to Boeing in the second half of this year, Gentile said.

The company is talking with Boeing and Airbus about boosting single-aisle production even higher next decade.

“We are very capable of doing it,” Gentile said. “We have the capital to do it, we have the expertise, and we would look forward to it.”

To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net.

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Susan Warren, Tony Robinson

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