Concerns Raised Over Spirit AeroSystems' Operations

Investing.com – Spirit AeroSystems (NYSE:SPR) raised concerns about its ability to continue operations on November 5, sparking questions about the implications for Boeing (NYSE:BA)'s planned acquisition.

In its third-quarter financial report, the aerospace manufacturer disclosed substantial doubt about its ability to continue as a going concern. The filing indicated that the company requires additional liquidity to maintain operations over the next 12 months.

Spirit AeroSystems reported significant net losses of $1.5 billion year-to-date and cash used in operations amounting to $1.25 billion. At the end of the third quarter, Spirit's debt stood at $4.4 billion, while cash and cash equivalents totaled only $217.6 million. The company anticipates a cash burn of approximately $450 to $550 million over the next three quarters.

The financial struggles are partly attributed to complications with Boeing and Airbus. Specifically, the jet supplier has been impacted by Boeing's decision to reject deliveries needing additional assembly or quality rework, which has resulted in increased inventory and contract assets, along with reduced cash flow.

Other factors affecting the company include delays in Boeing's production ramp-up, a strike at Boeing, and ongoing pricing adjustment discussions with Airbus.

The filing comes amidst continued discussions regarding its acquisition by Boeing. Analysts from Bank of America indicated that the full financial implications of Spirit's filing on the acquisition are not yet clear, suggesting that Boeing may need to inject capital into Spirit.

In April 2024, Boeing provided an advance of $425 million to help bolster Spirit's liquidity. According to BofA analysts, further capital injections may be forthcoming. Last month, Spirit raised more than $24 billion and confirmed it had fully drawn a $350 million bridge loan established when Boeing agreed to acquire the company in June.

Bank of America maintained a Neutral rating on Boeing as the industry awaits further developments.

Meanwhile, Boeing is working to restart production of the 737 MAX following a lengthy strike that ended on Monday night, which had involved over 33,000 West Coast workers and halted most of Boeing's commercial jet manufacturing, including the 737 model.