Shares in Spirit AeroSystems (SPR 1.64%) increased by slightly more than 30% in the week to noon ET Thursday, according to data provided by S&P Global Market Intelligence. The surge comes after Boeing (BA 3.54%) and Spirit entered into a memorandum of agreement (MoA) to collaborate better, hopefully resulting in both companies improving production. 

Boeing takes action to improve its production rate

The two companies are closely intertwined. Not only was Spirit formerly part of Boeing, but the company also manufactures fuselages for the 737 MAX and the 787 Dreamliner. In addition, Spirit's new CEO, Patrick Shanahan, is a 31-year Boeing veteran who also served as the Deputy Secretary of Defense under President Donald Trump.

Shanahan was appointed on Oct. 2 and wasted no time signing the MoA, which involves Boeing making a $100 million advance. The MoA also provides for Boeing to make further advances to help Spirit ensure the production of fuselages. At the same time, the agreement entails price reductions on the 737 fuselage after 2026, and price increases on the 787 fuselage. 

A win for Spirit AeroSystems and a win for Boeing

The rise in Spirit's share price is due to the reduction in uncertainty around its relationship with aerospace giant Boeing. As previously discussed, the critical catalyst for Boeing's earnings and share price appreciation is its ability to meet its production targets on the 737 and 787.

A passenger on a plane.

Image source: Getty Images.

It's suffered setbacks this year due to manufacturing quality issues on fuselages supplied by Spirit, so the deal makes sense for both companies. Investors will wait to hear whether Boeing is still on track with its target of 400 to 450 deliveries of 737 MAX aircraft when it reports earnings on Oct. 25, while Spirit shareholders will hope Shanahan ushers in a new era of profitability for the company as it ramps up production in line with Boeing.