8 September 2023
WICHITA, Kan. (KSNW) — The head of Spirit AeroSystems says the company is in talks with Boeing and Airbus about the pressures Spirit is facing with labor, costs and supply chain issues.
“It’s in their best interest, and they realize that,” Tom Gentile, Spirit president and CEO, said. “They’ve been very constructive with us.”
During an interview on Thursday, Gentile said Spirit AeroSystems laid off 8,500 people in Wichita alone during the pandemic.
“A lot of those were older, more senior, experienced workers who took voluntary retirement packages and the new workers that are replacing them are taking a little bit longer to get up to speed,” Gentile said. “So we’re hiring them 8 to 10 weeks in advance and training them.”
He also said Spirit had to find a different way of working now that it cannot require mandatory overtime.
“What we’re doing is what we call alternative workweeks is we’re putting different shift patterns in place so that we have weekend coverage full-time.”
Gentile said air traffic is recovering, but the supply chain is still stressed.
“In the last 18 months, we’ve had $200 million of charges in supply chain that we’ve had to cover either by dual sourcing, in-sourcing or providing cover.”
Gentile said the A220 program rates have been much lower than the company expected. The original projection for 2023 was that Spirit would do 100 units, but it’s closer to 65 to 70 now.
He said that’s put more pressure on the program and the economics of it from when Spirit concluded the deal in 2020.
“This is, I think, true with three of our programs right now — the A220, the A350, and the Boeing 787 — is those are all composite programs, at least the work packages that we have. And it’s, we’ve never really achieved the learning curve to come down in terms of cost historically, and so those programs have always been under pressure,” Gentile said.
Spirit is down to about five Boeing 787 a month, compared to 14 before the pandemic. It wants to get back to 10 a month toward the end of next year.
“The A350, we build the Section 15 it’s called,” Gentile said. “It’s the center fuselage which encompasses the wing box. We don’t build the wing box. We build everything around it. It’s a pretty long section. It’s about 60 feet long, about 22 feet in diameter. And again, that’s one that has been in forward loss. It used to be at rate 10. We’re capitalized for rate 13, but during the pandemic, it dropped down to rate four. Now, with the new freighter version and the pickup in demand, we’re at about five right now and Airbus is thinking they’ll get back to nine.”
“All of those programs are under pressure, and it really is not sustainable for Spirit. So we are having discussions with our customers, with Boeing and Airbus, about these pressures that we’re facing and how we address them,” Gentile said.
He said Spirit is dealing with the higher costs of wages, logistics, and utilities.
“I mean, it’s great that we have a lot of demand and rates are going up, but to achieve those rates, the supply chain has to be stable and healthy, and Spirit needs to be stable and healthy,” he said. “And I think both of our customers realize that, and we’re engaged in discussions.”
Gentile was optimistic about some aspects of the business. He said domestic traffic is up, and it favors narrow-body aircraft.
“We have a huge narrowbody focus on the Boeing 737 and the A320,” he said. “And as those programs go up in rate, that will drive a lot of cash flow for Spirit as well as a lot of profitability. And both of those contracts are very good.”
Click here to read the complete interview with Gentile.