What happened
Shares of Spirit AeroSystems (SPR -1.10%) gained 10.7% on Wednesday, as key customer Boeing (BA -0.20%) restarted its 737 Max production line. Spirit's fortunes are closely tied to Boeing, its former parent, and the restarted production is good news for beleaguered Spirit shares.
So what
Spirit AeroSystems makes the fuselages for the 737 Max, and the company was having troubles well before the COVID-19 pandemic, due to the aircraft being grounded after a pair of fatal crashes. The pandemic has only made it more difficult for Boeing and its suppliers, as airlines have been forced to ground planes and rethink growth plans due to a slump in travel.
Image source: Getty Images.
Boeing suspended production of the 737 Max earlier this year, but is restarting the work now in anticipation of the 737 Max being recertified in the second half of 2020. Assuming things go to plan, the decision to restart production is the first step in a long and slow process for Boeing and suppliers like Spirit to recover what has been lost while the plane was grounded.
Now what
Alas, this is but the first step in a long process. Boeing was making planes while the 737 Max was grounded, and has an extensive backlog to work through. The 737 Max will not be back to full production until 2021 at least, and if demand does not recover quickly Boeing might never make the jet at the rates it first envisioned prior to the crashes.
Spirit has cut costs and has done what it can to weather the slowdown, but the shares, down 66% year to date, are unlikely to fully recover until Boeing's commercial aerospace business does. That could be 2022 or later, depending on the health of the airline industry. There is no need for investors to rush in based on this bit of good news.
