Boeing Makes Strategic Moves - Both Forward and Backwards! - Part I

Boeing is once again grabbing the headlines this week as it announced the acquisition of Spirit Aerosystems which was originally jettisoned and spun-off by Boeing almost 2 decades back, during the post 9/11 carnage which hit commercial aviation really bad and as part of a new radical and path breaking approach to new commercial airplane building philosophy pivoted on massive outsourcing, for building the 787 as outlined by the company's reigning CEO, Harry C. Stonecipher, who had jumped ships in 1998 by masterminding the Boeing's acquisition of McDonnell Douglas in the decade of historic and unprecedented defense industry consolidation in the post Cold-War era.

Spirit Aerosystems did well, as a standalone, pureplay T-1 commercial aviation supplier producing fuselages, propulsion and wing systems for commercial and military aviation programs, through the course of one of the longest aviation super cycles witnessed ever by the industry taking off after the 2008's global financial crisis and ending only with the COVID-19 pandemic in Q1 2020. Throughout this period, Spirit maintained a close relationship with both Boeing and Airbus for commercial aircraft programs as a supplier on the Airbus' A220, A320, A380. A350XWB and almost all Boeing commercial aircraft programs, namely, 737, 747-8, 767, 777, 787 and the currently under development 777X.

However, the COVID-19 pandemic did create a serious existential crisis for Spirit as commercial aviation literally nosedived with global in-service aircraft fleets literally grounded overnight and demand as well as deliveries of new aircraft by OEMs vanishing in thin air leading to aircraft production rates hitting rock bottom levels across industry OEMs. Further, Boeing's 737 MAX crisis, which predated COVID-9 by almost 18 months, had already impacted Spirit terribly with customer deliveries of 737 MAX remaining on hold for almost 20 months, as Spirit produces the fuselage on the 737 program.

Boeing's ongoing series of problems, which started with the fall from grace with the 737 MAX crisis, have been further compounded following an increased FAA scrutiny and whistleblower actions leading to discovery of multiple quality and safety issues on the 737 MAX and 787 programs over the recent years, especially, the mid-air blow-out of an emergency exit door on a 737 MAX variant operated by Alaska Air in January 2024. The latest move to acquire Spirit Aerosystems in an all stock deal, thus, takes Boeing almost full circle in the commercial aviation business and is, seemingly, a two-pronged move from a strategy perspective.

It will, most importantly, provide Boeing with a much tighter grip on its quality and safety issues as after bringing Spirit in-house, Boeing will be able to have direct control on production quality. Secondly, Spirit, currently is a key fuselage producer and supplier on multiple, upcoming defense programs, namely, the V-280 Valor tiltrotorcraft for the U.S. Army's Future Vertical Lift (FVL) program and the USAF's next generation B-21 Raider LRS-B, E-7 Wedgetail AEW&C aircraft and the KC-46A refueling tanker programs and the U.S. Navy's P-8 Poseidon Naval Patrol aircraft. Boeing, thus, by acquiring Spirit will gain access to multiple key defense programs as a supplier which is likely to give a further fillip, stability and anchoring to its defense unit, BDS, for the long term.

Boeing, thus, is targeting two birds simultaneously, fixing its commercial business while boosting its defense business with a single arrow in a 'Back to the Future' kind of move while still being in a cash-starved and highly indebted state. Well played Boeing! However, the ball is still in the court of regulators and other industry OEMs who can still raise their objections to the deal as Spirit is an integral supplier on multiple defense programs with strategic significance for national security.

Will cover the 'To the Future' Part of Boeing's strategic, overarching gameplan in the next post! Stay tuned...

Image Credits: Author Duch, Usage: CCA-SA 4.0 International License