What happened

Shares of Spirit AeroSystems Holdings (NYSE:SPR) lost 8.6% on Thursday as investors continue to grapple with the COVID-19 pandemic's likely impact on commercial airplane sales. Spirit, a onetime Boeing subsidiary, relies on commercial aerospace for the bulk of its revenue and is likely in for a tough road ahead.

So what

Spirit makes airframes and other aircraft components, including the fuselage of Boeing's ill-fated 737 MAX. Commercial aerospace has been hit hard by the pandemic, with airlines grounding planes and cutting capital expenditures to save cash after seeing travel demand evaporate overnight. And even if the pandemic is contained quickly, airlines are likely flying into a recession and will be conservative when it comes to expanding their fleets.

The company is doing what it can to prepare for the storm ahead, cutting production, furloughing workers, and deferring planned capital expenditures. But there is only so much it can do. Spirit earlier this week pre-released first-quarter results, warning of a 46% drop in revenue and a loss of about $1.50 per share.

A Boeing 737 fuselage.

Image source: Spirit AeroSystems.

Things are likely to get worse from here. Airbus, which is Spirit's second largest customer, generating about 16% of total sales, has announced production cuts due to the pandemic. Boeing so far is yet to announce anything more than temporary actions. But it is likely to give new guidance later this month, with the number of 737 MAX frames likely to come down from the current 2020 target of 216.

Low production rates make it difficult for suppliers like Spirit to hit their free cash flow and margin targets.

Now what

Spirit recently raised $1.2 billion in new debt and appears to have ample liquidity to get through 2020. Boeing has been a good partner to the company through the 737 MAX grounding and will likely do what it can to keep the company solvent, since it is a crucial part of the aerospace giant's supply chain.

That said, Spirit at best is looking at mid-2021 (if not later) for a recovery. And its planned acquisitions of major Airbus supplier Asco and the aerostructure business of Bombardier, which just a few months ago looked like shrewd moves to get out from under Boeing's shadow, now seem questionable and potentially subject to termination or renegotiation.

Shares of Spirit are now down more than 70% year to date. But given the challenges Spirit faces, it's hard to get excited about the stock right now.