Spirit Aerosystems sees Boeing cancels license for spare parts

Confident that events will not impact heavily on the company, Spirit Aerosystems have confirmed that they will no longer be providing a broad selection of spare parts for Boeing aircraft after having their license cancelled by the US plane manufacturer. Despite such a show of force, shares in Spirit dropped 5%, but the price has recovered in the days subsequent to the release of the news. The 15,000-strong workforce may, however, see a modest reduction in numbers.
The cancellation of this license is separate to another expired supply agreement which Boeing and Spirit are seemingly unable to agree upon. Industry analysts see the move by Boeing as a further indication that the company may well be considering creating its own aftermarket business.
Negotiations between Boeing and Spirit were intended to drive down costs as Boeing looks to increase profits. It is understood that Boeing are currently looking at Spirit to reduce their costs by between 10% and 15% in addition to demanding royalty payments on spare parts that Spirit supplies, but Boeing designed.
Speaking anonymously, an industry expert confirmed that suppliers were hesitant, saying “I know for a fact it’s occurring.” The opinion was such that part of the reluctance is that in agreeing to pay a royalty for one part, “Boeing’s going to want it on others.” However, Boeing have indicated that royalties reflect the value of their intellectual property, whilst enabling them to recoup a percentage of R&D costs.
Having already cut its own costs, Spirit now shares less financial data with Boeing. “We’ve partnered for success as much as we’re going to,” according to a source who was referring to Boeing’s cost cutting initiative, Partnering for Success.