The commercial aerospace supply chain, already under pressure, just hit some unexpected turbulence.
Key
Boeing
(ticker: BA) supplier
Spirit AeroSystems
(SPR) announced it was suspending factory operations after the International Association of Machinists and Aerospace Workers voted no to a new labor contract that included wage increases of almost 8% per year for the coming four years.
“We are disappointed that our employees represented by the IAM rejected our four-year contract offer and voted to strike,” read part of Spirit Aero’s statement. “We believe that our fair and competitive offer recognizes the contributions of our employees and ensures we can successfully meet increasing demand for aircraft from our customers.”
The union sees things differently. “The IAM’s dedicated and hardworking membership at Spirit AeroSystems has worked without fail during tumultuous times, including a pandemic that saw everything grind to a halt,” said an IAM spokesperson in an emailed statement. “Most of our members have concluded that the company’s offer is unacceptable….[we] will regroup and begin planning the following steps to bring the company back to the table.”
Spirit Aero and the IAM didn’t immediately respond to a request for comment about when negotiations will resume.
Both
Boeing
and its rival
Airbus
(AIR.France) have been trying to boost production to meet rising demand. It hasn’t been easy. Skilled workers left the industry during the pandemic and suppliers have struggled to attract and retrain talent.
Both would like to see production start to approach a combined 2,000 jets a year in the coming years. The best year ever for commercial jet deliveries was about 1,600 in 2018. Just 753 jets were delivered in 2020, amid the pandemic and the worldwide grounding of the Boeing 737 MAX following two deadly crashes. Wall Street projects almost 1,300 combined deliveries for 2023, rising to more than 1,800 by 2026.
The strike isn’t going to help. Spirit Aero supplies about 70% of Boeing’s narrow-body aircraft and defense and business jet structures. If the strike goes on too long, 737 MAX production will be affected.
“We continue to monitor the situation and support our valued supplier,” Boeing told Barron’s in an emailed statement.
Spirit Aero stock closed down 9.3%, while the
S&P 500
gained 0.4% and the
Dow Jones Industrial Average
finished flat.
Boeing stock declined 3.1%. Stock in Airbus, another Spirit Aero customer, fell 1.7% in overseas trading.
The suspension seems to have overshadowed positive news coming out of the Paris Air Show, which continued Thursday. The two aircraft makers have announced orders for more than 1,000 jets over the past few days.
Write to Al Root at [email protected]
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