Spirit Aerosystems signs MOU for long-term agreement with Boeing to settle open issues

Spirit Aerosystems says it has reached an agreement with Boeing into 2022 on open commercial issues related to a range of programs, including the 737 MAX and the 787. Both parties have signed an MOU reflecting the agreement and will be working on formal amendments to the program agreements. “Overall, by addressing a range of programs and not just 787 pricing, the MOU reduces much uncertainty that has long existed in the relationship with our largest customer and preserves our ability to meet our long-term cash flow goals,” Spirit President and CEO Tom Gentile said. The MOU requires that the parties negotiate and execute Definitive Documentation, as defined in the MOU, in the third quarter of 2017. Spirit management believes the agreement will be completed and executed in the third quarter; however, there can be no assurance that Definitive Documentation will ultimately be executed and that Spirit’s dispute with Boeing will be resolved pursuant to the MOU.
“One of the biggest challenges in our discussions with Boeing has been 787 pricing. As part of this new MOU with Boeing, we are extending the block from 1003 units to 1300 units and establishing a planning block through line unit 1405. Although the 787 contract had agreed price step-downs for the 787-8, we had never agreed with Boeing on pricing for the 787-9 and -10. We have now agreed on modified step-down pricing for the 787-9 and -10 through line unit 1405. As a result of the MOU, we have recognized a reach-forward loss of $353 million on the 787 program,” Gentile remarked. “The agreement also includes a commitment from both organizations to work together on joint cost reduction efforts with financial incentives for both parties,” Gentile added.