Boeing asks largest supplier to cut production

Boeing has asked its largest supplier to cut production of key components for the 737 MAX jet in a move that has raised fears for the health of the aerospace supply chain.

Spirit AeroSystems said in an SEC disclosure that Boeing had asked it to produce fewer 737 MAX fuselages, underlining the dramatic effects of the coronavirus pandemic on the aerospace sector as well as the 737 MAX’s own certification problems.

The MAX is Boeing’s newest model single aisle jet and has been grounded world-wide since mid-March 2019 after it suffered two deadly crashes inside of five months.

Boeing had originally hoped to return the plane to commercial service this summer. The Federal Aviation Administration has now completed a review that will allow certification tests to begin taking place in the coming days, according to Reuters.

Spirit reported to the SEC that it had been ordered to halt work on 737 MAX shipsets – an industry term meaning all the parts required for one jet.

Boeing told Spirit it wanted 72 fuselages in 2020 for the 737 MAX and P-8 Poseidon, a military aircraft based on the 737-800ERX developed for the US Navy, instead of the 125 it originally requested.

“Given the substantial production plan reduction, Spirit could breach the financial covenants under its credit agreement in the fourth quarter of 2020 without an amendment or waiver,” said the SEC disclosure. “Spirit is in communication with its lenders regarding this matter, and intends to work with them expeditiously to obtain appropriate relief from its covenants.”

Spirit has already made 35 MAX shipsets in 2020 and now only needs to manufacture 37 more.

Before the pandemic, Boeing manufactured than 500 MAX jets a year and continued to produce another 450 MAX jets while the model was grounded.

It now has a surplus of the craft to sell before it needs to restart production. With travel way down there is little certainty how long it will take to sell the surplus.

“Boeing indicates in the June 19 Letter that the reduction is due to Covid-19’s impact and accumulated inventory of Spirit’s B737 products,” said Spirit.

“The B737 MAX grounding coupled with the Covid-19 pandemic is a challenging, dynamic and evolving situation for Spirit. During this time, Spirit plans to work with Boeing to manage the B737 production system and supply chain.”

Meanwhile, it has been reported that Airbus expects production to drop by 40% for the next two years.

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