Spirit AeroSystems to furlough 700 staff as Boeing strike continues
October 21, 2024
Spirit AeroSystems has announced it is to impose a three-week furlough on approximately 700 employees working on the 767 and 777 programmes in response to the ongoing Boeing strike.
Effective from 28 October, the furlough – described by Spirit AeroSystems CEO Pat Shanan as “a difficult step” – was “necessary given [Spirit’s] limited storage capacity for 767 and 777 units,” he added. Having built up a “significant inventory buffer” on these production lines, Spirit added it “does not have room for additional storage”.
This first wave of furloughs are complemented by other cost-saving measures, effective immediately: including the implementation of a hiring freeze, cessation of overtime hours, and the scaling back of capital expenditures. If the ongoing Boeing strike continues beyond November, “financial pressures may require the company to implement additional cost savings measures including layoffs and additional furloughs”.
With Boeing’s machinist strike now in its second month, with previous talks and mediation efforts having reached an apparent stalemate, hope may be on the horizon – with IAM Union District 75 to offer its membership a vote (due later this week) on its negotiated proposal and resolution. This includes the provision of a 35% general wage increase spend over four years (the Union had originally hoped for 40%, but were countered by what Boeing described as its “best and final offer” of 30%).
During its second quarter 2024 earnings call, Spirit noted it delivered nine and eight 767 and 777 shipset deliveries respectively during the quarter: ending the period with a total free cash flow of $597 million. However, with “higher production across most programmes partially offset by lower production volume on the Boeing 737 programme,” bottlenecks in Spirit’s ability to deliver 767 and 777 units will be hitting the company hard.
At the time, Spirit added that “the Boeing 777 programme catch-up adjustments were primarily driven by schedule changes and higher production cost estimates,” indicating that the company’s ongoing ability to deliver profitably on these programmes was of key importance. Spirit also acknowledged other events in the first half of 2024 resulting in “significant reductions in projected revenue and cash flows this year” (including Boeing quality control measures and lower than planned 737 production rates), explaining that management had already “developed plans to pursue various options to improve liquidity as needed”.
