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Forget 2021: Key Boeing Supplier Braces for 737 Max Production Cuts Through 2022

By Lou Whiteman – Jul 23, 2020 at 11:28AM

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Spirit AeroSystems is warning lenders that it will be years before the aerospace giant gets back to building the passenger jet in the quantities it once planned to.

Production of the Boeing (BA 0.07%) 737 Max will remain sluggish through 2022, according to one of the airplane's top suppliers -- fresh evidence that investors should expect the company's path to recovery from both the passenger jet's grounding and the impact of the COVID-19 pandemic on air travel will take several years.

Spirit AeroSystems (SPR -2.44%), a one-time Boeing subsidiary that manufactures the 737 Max fuselage among other things, in June warned that Boeing now intends to produce far fewer of those planes in 2020 than it originally planned. Spirit said it had received a letter from Boeing telling it to reduce its planned 2020 shipsets -- a term for all the parts needed to produce one plane -- from 125 to 72.

A 737 Max plane on the assembly line.

Image source: Boeing.

Spirit warned that given the reduction it could end up in breach of financial covenants. CNBC on Thursday reported that Spirit, in discussions with lenders about debt terms, has said it expects to miss its prior production expectations through 2022 at least.

The supplier now anticipates 2021 deliveries will be less than half of the earlier forecast of 400 planes, and that the 2022 figure will be less than 400 compared to the prior forecast of almost 500.

The 737 Max program was troubled even prior to the pandemic. The plane has been grounded since March 2019 after a pair of crashes that killed all who were aboard both planes. Boeing expects the model to be recertified for use again by year's end, but given how steeply the demand for air travel has fallen amid the pandemic, airlines have sharply cut flights and spending, and for now have far less need for new planes.

As of January, Boeing reportedly had more than 400 completed but not yet delivered 737 Max jets on its lots that it will have to find homes for once the aircraft is recertified.

The prolonged slowdown is fresh evidence the 737 Max, which was once expected to be one of the best-selling planes of all time, will never be the hit its creators had envisioned. Prior to the grounding Boeing had hoped to be manufacturing more than of the 55 planes per month by 2021.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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The Boeing Company Stock Quote
The Boeing Company
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