Spirit AeroSystems received a letter on June 19 from Boeing in which the airframe maker directed the firm to further reduce its production of MAX shipsets – the second such instruction sent this month.
Based on the letter and further communications the two firms agreed that Spirit would reduce its 2020 B737 production plan from 125 to 72 shipsets, which includes 37 shipsets to be produced and delivered over the balance of the year and 35 shipsets that have already been delivered to Boeing as of the June letter. Spirit announced the news in an SEC filing.
Following the first letter Spirit announced it was reducing shipset production by at least 20 and was putting a number of employees on three weeks unpaid leave from June 15 and make workforce reductions starting from June 15.
With the latest cut in Boeing production Spirit warns that it may breach its financial covenants under its credit agreement in the fourth quarter of 2020 without an amendment or waiver. Spirit said it was in discussions with lenders in order to find an alternative to breaching covenants.
“Our business depends, in large part, on sales of components for a single aircraft program, the B737 MAX. Further suspensions or reductions in our production rates for the B737 MAX as well as our other programs, as a result of the COVID-19 pandemic may have a material adverse impact on our business, financial condition, results of operations, and cash flows,” the company said in its SEC statement.