B737 - General Discussion

737 Program

On April 5, 2019, Spirit announced it will maintain its current delivery rate on the Boeing 737 program of 52 shipsets per month following Boeing's announcement that it will reduce its own production rate to 42 aircraft per month. On April 12, 2019, Boeing and Spirit executed a Memorandum of Agreement which established that all Boeing 737 shipsets produced above Boeing's production rate (collectively, the "incremental shipsets") will be deemed to be delivered to Boeing "FOB" at Spirit's facilities, which will trigger Boeing's payment obligations for the incremental shipsets. Spirit will maintain these shipsets at Spirit's facilities. Spirit will also receive certain advance payments from Boeing for material purchases, all of which are repayable.

"Previously, we had planned to increase production to 57 aircraft per month on the Boeing 737 program beginning in approximately June 2019. Now, we will be maintaining production at our current rate of 52 aircraft per month. With this schedule, we will produce fewer 737 MAX aircraft this year than we previously forecasted, by five units per month beginning in June, for as long as we remain at a production rate of 52 aircraft per month," said Tom Gentile, Spirit's President and Chief Executive Officer. "Given the reduction in production units and corresponding revenue, we have begun taking immediate actions to reduce expenses, defer capital investments, and redouble our efforts on working capital improvements to mitigate the financial impact of the production rate change. After spending $75 million in the first quarter on share repurchases, we will pause our share repurchases pending further clarity surrounding the 737 MAX."

"Our prior guidance for 2019 assumed we would increase 737 monthly production in June 2019 to 57 aircraft. As we now expect to remain at 52 aircraft per month for some period of time, that guidance does not reflect our current outlook," said Gentile. "Due to the uncertainties, we will issue updated guidance for 2019 when we receive more definitive information on the timing of the 737 MAX return to service and Boeing's new production schedule."