Spirit Bombardier Sale.jpg

Spirit Lauds Bombardier Deal’s Aftermarket Boost

The acquisition, which includes three Bombardier sites in the UK, the U.S. and Morocco, was completed in late October.

Spirit Aerosystems’ deal to buy certain Bombardier commercial aviation assets significantly increases and broadens the aerostructures specialist’s aftermarket presence beyond traditional spare-parts sales, largely through principal customer Boeing.

"This is really one of the hidden gems of this acquisition,” Spirit President and CEO Tom Gentile said on a recent earnings call. "They've got significant MRO capabilities in Belfast and also in Dallas, and this is going to more than double our aftermarket activities.”

Spirit on Oct. 31 announced it would acquire parts of Bombardier aerostructures and aftermarket services businesses in Belfast, Northern Ireland; Casablanca, Morocco; and Dallas for a cash consideration of $500 million. Total value of the deal expected to close in the first half of 2020, will be about $1.1 billion after Spirit assumes pension liabilities and makes other payments.

Bombardier’s aftermarket business is about 20% of its aerostructures revenues. Combined with Spirit’s current activities, the  services business will be closer to 10%, with room to grow.

"This is scale work. They're very efficient,” Gentile said. "They have tremendous customer relationships with airlines all over the world, very competitive. We see this as an opportunity to really accelerate the growth of our aftermarket business. It's always been strong. This enables us to really take it to a completely different level.”

Spirit generates nearly 80% of its business and half of its $7.3 billion in annual revenue from Boeing. Airbus work is about 16%. The Bombardier deal—which includes wing manufacturing for the Airbus A220—boosts Spirit’s Airbus-generated work to 18%, and lowers the Boeing share to about 70%.

“We don't have a goal of diversifying away from Boeing,” Gentile said. "At the same time, we do want to grow some of our other customers faster.”

News of the deal comes as Spirit continues to manage uncertainty surrounding the 737 MAX program. The MAX has been grounded since mid-March following two fatal accidents. Boeing halted deliveries and cut monthly production to 42 from 52 soon after, reversing a previous plan to boost production to 57 this year. Boeing is finalizing changes ordered by regulators and anticipates at least some will clear the model to return to service by yearend.

Spirit does not expect to exceed 737 fuselage rate production of 52 new units a month until possibly 2022. “Our current expectations are that we will continue to produce at rate 52 in order to burn off the excess stored inventory after Boeing eventually transitions to rate 57,” he said.

Boeing has said it expects to reach rate 57 late 2020, but will not finalize plans until the MAX's return timeline is more clear. Spirit currently has about 65 shipsets in storage at its facilities, and expects to carry inventory possibly through 2021.

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