Initially, they were just rumors, but on Friday they were confirmed: The leading aircraft manufacturer Boeing is in talks to acquire the aircraft fuselage manufacturer Spirit Aerosystems.

As expected, the press release in which the acquisition talks were officially confirmed by both companies triggered a rush for Spirit Aerosystems‘ shares last Friday (March 1, 2024).

But before I delve into the press release of the two publicly traded aircraft manufacturers, I would like to briefly introduce the companies to you.

Boeing and Spirit Aerosystems in profile Boeing – or The Boeing Company, as the company is officially called – was founded in 1916 by the son of German immigrants and Yale graduate William E. Boeing.

Based in Arlington, Virginia (Greater Washington DC area), the company is a global leader in the production of passenger aircraft. In addition, Boeing is also active in the fields of defense, space technology, and as a service provider.

In the fiscal year 2023, the more than 170,000 Boeing employees generated revenues of $77.8 billion (approximately €71.7 billion). The operating profit (EBIT) was $454 million (approximately €419 million).

Spirit Aerosystems Holdings, Inc. was founded in 1927 and is headquartered in Wichita, Kansas. According to their own statements, the company is one of the world’s largest manufacturers of parts for commercial aircraft, defense platforms, and business and regional aircraft.

The company, which specializes in aluminum and modern composite material manufacturing solutions, produces aircraft fuselages, integrated wings and wing components, pylons, and nacelles. The globally operating company has locations in the United States, United Kingdom, France, Malaysia, and Morocco.

Spirit Aerosystems was part of the Boeing group until 2005. Even today, about two-thirds of its revenue comes from supplying Boeing. In the fiscal year 2023, Spirit Aerosystems generated annual revenues of $6.05 billion (approximately €5.6 billion) and an EBIT of -$274.6 million (approximately €-253 million).

Boeing seeks to regain lost trust Since the incident in early January 2024, in which a door was ripped off the fuselage of a Boeing 737 MAX 9 during a flight, the US aircraft manufacturer has been struggling with a massive loss of reputation. According to preliminary investigation results from the US aviation authority, missing bolts were responsible for this damage, which fortunately did not cost any lives.

Whether Boeing or Spirit Aerosystems employees caused this serious deficiency was not mentioned in the investigation report. Nevertheless, Spirit Aerosystems has already been criticized in the press multiple times for quality deficiencies.

Through the acquisition of Spirit Aerosystems, Boeing wants to be able to carry out quality control at the important supplier in-house, as emphasized in their press release:

„We are convinced that the reintegration of Boeing’s and Spirit Aerosystems‘ production facilities would further increase safety in aviation, improve quality, and serve the interests of our customers, employees, and shareholders.“

In addition, Ed Clark, the responsible employee for the 737 MAX program, has already left the aircraft manufacturer a few weeks ago. Additionally, Boeing has hired a former admiral as a special quality advisor.

Further details from the company announcements In the short press releases from March 1, 2024, both companies confirm rumors that talks are underway for a possible acquisition. However, both companies emphasize that there is no certainty about a merger.

In its announcement, Boeing emphasizes that the company is committed to finding ways to further improve the safety and quality of aircraft that millions of people rely on daily.

How the market reacted As mentioned before, the price of Spirit Aerosystems‘ shares rose sharply on March 1, 2024. Specifically, it jumped 15.3% and closed at $32.98 at the end of trading on the New York Stock Exchange (NYSE).

The price of Boeing’s shares declined on the same day. It fell by 1.8% and closed at $200.00 on the NYSE. Investors apparently believe that a potential acquisition of Spirit Aerosystems could be expensive. After all, the market value of the supplier is now over $3.8 billion after the price increase on Friday.

What may happen next Whether the confirmed talks between Boeing and Spirit Aerosystems will lead to an acquisition agreement remains uncertain. An investment in Spirit Aerosystems‘ shares at this time is highly speculative.

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