Earnings Report Shows Further Losses At Spirit AeroSystems
It was another dismal quarter for Spirit AeroSystems.
The Wichita aviation manufacturer reported its second-quarter earnings Tuesday. Both revenue and income were down significantly.
Spirit says lower production rates on Boeing programs — most notably the 737 Max — and the impact of COVID-19 on air travel continue to affect the company.
The company says revenue was down 68% compared to the second quarter of 2019. The company had a net loss of about $250 million dollars after earning nearly $170 million dollars a year ago.
Spirit lost $167 million in the first quarter of this year.
Senior Vice President and Chief Financial Officer Mark Suchinski called it "One of toughest quarters in company history."
Tom Gentile, Spirit’s president and CEO, says the company has cut costs by about $1 billion, including closing a plant in San Antonio. Spirit also has laid off nearly 8,000 employees across its U.S. and international locations, about 40% of its total workforce, since January.
The company also announced Tuesday that a four-day work week for salaried workers and a 20% pay cut for top executives will continue through the end of the year.
Boeing has cut production rates for the 737 Max — which normally accounts for half of Spirit’s revenue — by 90%. The plane remains grounded following two fatal crashes last year. It continues to seek certification from the Federal Aviation Administration to return to service.
Boeing also has reduced rates on other programs, as has Airbus, another Spirit customer. Commercial air travel is at record lows because of the pandemic, and airlines are delaying delivery of new planes.
Boeing is Spirit’s largest customer, and Gentile says the two companies have a good working relationship. But he says Spirit will continue to seek business opportunities separate from Boeing.
"They’re a very important customer, and we have won additional work over the years," Gentile said of Boeing. "At the same it’s clear that that concentration is something that we want to change and we want to have a more diverse and broad-based customer group."
Gentile pointed out that Spirit is a partner in the Virgin Hyperloop — a new type of transportation technology – and with Aerion, which is developing a supersonic business jet.
The company also has 800 employees making ventilators with Vyaire Medical at a Wichita plant.
It also plans to continue the acquisition of Bombardier’s aerostructures business and Asco, which does work for Airbus and the defense industry.
During the aviation slowdown, Gentile says Spirit will work to improve productivity and seek to diversify so it will be on stronger footing when a higher demand for commercial aircraft returns.
"In the short term, we are likely to see continued turbulence and will have to navigate our way through the uncertainty," he said. "However, in the long term, we believe the aviation industry is resilient and will return to robust growth. Projections for long-term air traffic are still strong, and both Boeing and Airbus each retain a significant backlog (of orders)."