Financial Report Reflects A Grim 2020 For Spirit AeroSystems

Feb 23, 2021

Spirit AeroSystems has ended what company officials have called a challenging year.

The company issued its final 2020 financial report on Tuesday and it was grim: Spirit lost nearly $900 million last year because of the pandemic and the grounding of Boeing’s 737 Max. That compares to a profit of more than $500 million in 2019.

The report also had a personal toll: Spirit laid off 8,000 employees last year, more than 40% of its workforce. It also instituted furloughs and cut executive pay as part of $1 billion in cost savings.

Despite the difficult news, Spirit officials hope that 2021 is the beginning of the company’s recovery phase.

“2021 will be a bridge year for Spirit as we recover from the effects of the 737 Max grounding and the COVID pandemic,” Spirit President and CEO Tom Gentile said on a call with investors Tuesday. “Now that the 737 Max has safely returned to service in many parts of the world, we look forward to improved production rates for that program.”

The company also is looking for an increase in airline travel. The pandemic significantly reduced travel across the world and, as a result, the demand from airlines for new planes.

“We are encouraged by the various measures being taken to address the COVID-19 pandemic,” Gentile said, “and hope to see a much improved environment for air travel as the year progresses.”

Even though the 737 Max began flying again in December, a full production recovery for Spirit is likely to take years. Boeing expects 737 Max production levels to reach about 50% of 2019 output in 2022.

The 737 Max is Spirit’s most important program financially. In 2019, it accounted for nearly half of the company’s revenue.

In 2020, Spirit delivered 71 737 MAX shipsets – the plane’s fuselage and other structures — compared to 606 in 2019.

Work for Boeing accounted for 74% of Spirit’s revenue in 2019. That dropped to 48% this year and will drop further in 2021.

Gentile said Spirit is working on ways to reduce its reliance on Boeing.

“Emerging from this crisis, we believe Spirit will be a more diversified company with several new and profitable revenue streams,” Gentile said.

That includes more defense work, which grew 20% last year. It is expected to grow another 15% in 2021.

The company also has increased its work for Airbus and in the business jet and aftermarket sectors. Part of that increase is the result of Spirit buying some manufacturing assets last year from Bombardier. Spirit has said the purchase will give the company more work on the Airbus 220, access to more defense work and make it the exclusive supplier for Bombardier business jets.

Spirit also purchased FMI last year, which does work in the defense industry and with NASA.

Spirit says its backlog of work at the end of 2020 was about $34 billion. That includes work packages on all commercial Boeing and Airbus models.