Nick Oxford/Reuters
Spirit AeroSystems Holdings' headquarters in Wichita, Kansas, December 17, 2019.
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CNN
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Boeing has agreed to buy Spirit AeroSystems, one of its key suppliers and manufacturing partners, as part of a plan to clean up the plane maker's badly damaged safety reputation.
The deal, an all-stock deal valuing the company at $4.7 billion, or $37.25 a share, was announced Monday after months of talks between Boeing and the company it spun off from in 2005.
Boeing announced its intention to buy Spirit in March, saying reuniting the two companies would improve safety. Current Boeing executives acknowledge that selling Spirit to private equity buyers in 2005 for just $900 million at the time was a mistake and undermined the reliability of its supply chain.
The total transaction value, including Spirit Airlines' latest net debt, is approximately $8.3 billion.
“We believe this transaction is in the best interests of air travelers, airline customers, Spirit Airlines and Boeing employees, shareholders and the country at large,” Boeing President and CEO Dave Calhoun said in a statement.
Spirit AeroSystems makes major components for several Boeing models, including the fuselage for the 737 Max. The parts are then sent to Boeing factories for assembly. The company also makes parts for Boeing's rival Airbus, but Boeing is Spirit's largest customer.
The Boeing acquisition would mean breaking up Spirit: Airbus said in a statement on Monday that the supplier's “major business” related to Airbus would be bought by the European plane maker for just $1.
Airbus said in a statement that those activities include production of A350 fuselage sections in Kinston, North Carolina, and Saint-Nazaire, France, and A220 wings and center fuselage in Belfast, U.K. The company will receive $559 million in compensation from Spirit Airlines.
Boeing had been trying to get more funding from rival Airbus for its stake in Spirit, said Richard Aboulafia, managing director at aerospace consultancy Aerodynamic Advisory. Airbus' Spirit deal will account for 19% of its 2023 sales, or $1.1 billion, and its Boeing deal will account for 64%, or $3.9 billion, according to Airbus filings. But Spirit was reluctant to contribute a stake in a deal that Boeing was so keen to get done.
Spirit Airlines has had a series of quality-control problems in recent years, and Boeing had agreed to pay the airline more money to fix quality and reliability issues that were damaging Spirit's production output and reputation.
The payments provided an additional $60 million in revenue last year and $395 million in additional revenue in 2024 and 2025.
These payments show how Boeing is motivated to do business with Spirit. Unless Spirit's problems are resolved, Boeing cannot return to profitability or fix its own quality problems needed to assure regulators, airlines and passengers that the planes are safe. And Boeing will bear the costs of fixing those problems, whether it's its largest customers or the owners of these businesses.
Spirit Airlines was also involved in an incident in January when a door plug on an Alaska Airlines 737 MAX plane blew up shortly after takeoff, ripping a large hole in the side of the plane.
Boeing said last week that two groups of employees worked on door plugs, parts used to replace emergency exit doors. The first group of employees removed the door plugs to fix a problem with rivets manufactured by Spirit AeroSystems. But Boeing staff didn't provide documentation showing they removed the door plug and the four bolts needed to secure it in place to perform that work. So the second group of employees replaced it, unaware that the bolts were missing.
Since the Alaska Airlines accident, Boeing has deployed a large number of employees to Spirit Airlines' factories to ensure the planes are being built to specifications.
Since the incident, several whistleblowers, including Spirit Airlines employees and contractors, have come forward. For example, last week a whistleblower for a Spirit Airlines contractor said he had notified the airline about a large gap in a key part of a 787 Dreamliner plane that posed a “catastrophic” risk to passengers.
Spirit has also been implicated in other Boeing safety issues, including the use of a “non-standard manufacturing process” in joining fuselage parts on its 737 Max jets, which led Boeing to halt deliveries of the planes in 2023. Earlier this year, Spirit employees notified Boeing that two holes may not have been drilled according to Boeing's requirements, forcing Boeing to rework about 50 undelivered planes.
The Justice Department is close to a deal with Boeing that would include corporate oversight and fines in exchange for a guilty plea to criminal charges, according to lawyers representing families of victims of the two 737 Max crashes, who have slammed the proposal as a “sweet deal.”
Boeing (BA) shares, already down 30% so far this year in the wake of the Araxa Airlines disaster, fell another 1% in premarket trading on news of the deal. Spirit (SPR) shares rose 5% but traded below the deal's publicly announced price of $37.25 a share, reflecting doubts about the future value of the Boeing shares being used in the acquisition.
This story has been updated with additional developments and background information.
CNN's Diksha Madovkh and Olesya Dmitrakova contributed to this report.
