First-Quarter Revenue, Earnings Nosedive At Spirit AeroSystems
WICHITA, Kansas — Spirit AeroSystems’ first-quarter earnings were as dreary as expected.
The company said Wednesday its revenue dropped by nearly half — from roughly $2 billion to $1 billion — in the first quarter of 2020 compared to the same quarter in 2019.
Spirit lost $167 million in the quarter after earning $233 million a year earlier.
"This is a difficult time not only for Spirit, but for the entire aerospace industry," Mark Suchinski, Spirit’s senior vice president and chief financial officer, said on an earnings conference call. "These past few months have certainly been challenging, and we have had to make some very difficult decisions."
The continued grounding of Boeing’s 737 Max, compounded by the ongoing pandemic, were the major issues for Spirit.
The 737 Max is Spirit’s most important program, responsible for nearly half of the company’s revenues last year. But production on the plane fell nearly 90% in the quarter after Boeing halted deliveries from Spirit on Jan. 1.
Spirit, traditionally one of the state’s largest private employers, has laid off more than 4,000 employees since the first of the year, about a third of its workforce. Remaining employees have taken furloughs and the company’s top U.S. executives took a 20% pay cut. Another 850 employees took early retirement.
At its peak, Spirit was producing about 600 737 Max shipsets — the plane’s fuselage and other structures — per year for Boeing. It announced earlier this year it would make 216 shipsets in 2020 but lowered it to 125 on Wednesday.
Spirit’s woes also affect the numerous suppliers in the Wichita area who have contracts with the company, many of them tied to the 737 Max program.
The plane has been grounded for more than a year following two fatal crashes overseas. Its return to service continues to be delayed.
Along with Boeing, Airbus — another Spirit customer — has reduced production rates. Spirit president and CEO Tom Gentile says domestic air travel in April was down 96%.
"The COVID-19 pandemic has created a health emergency for the entire world, which has had a particularly severe impact on the global aviation industry," he said.
Company officials say one bright spot is new growth opportunities for defense work. With commercial activity slowed, Gentile said Spirit has room to increase its defense capacity and is aggressively competing for defense contracts.
He said defense work accounts for 15% of Spirit’s revenue, and the company would like to eventually grow that to 40%.
"I’m pleasantly surprised as it relates to the number of new work opportunities that have been coming our way on the defense side," Suchinski said.
The company this month also announced a partnership with Vyaire Medical, which manufactures ventilators.
About 700 Spirit employees will build ventilators at a converted facility in Wichita. Vyaire, based in the Chicago area, was chosen by federal officials to build 22,000 ventilators for the U.S. Strategic National Stockpile.
Vyarie says it will take advantage of Spirit’s skilled workforce and the company’s production expertise.
Gentile said Spirit currently doesn’t plan to access federal stimulus money available to businesses. He said it’s possible the company might be interested in future federal programs targeted specifically at aerospace companies.
During the slowdown, Gentile said Spirit wants to work on improving its productivity and efficiency in preparation for when the industry turns around.
"We remain confident in the recovery of commercial air travel and are working hard to maintain Spirit’s position as the leading aerostructure supplier to both Boeing and Airbus as well as our defense customers," he said.
Tom Shine is director of news and public affairs at KMUW. Follow him on Twitter @thomaspshine.
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