Spirit AeroSystems, Boeing Agree to Tentative Supply Deal

By Doug Cameron 

Boeing Co. said it has reached a partial agreement on details of a new deal with one of its largest suppliers, though after months of talks, the two sides have yet to finalize a long-term pact for key parts of its main commercial jet programs.

The proposed agreement with Spirit AeroSystems Holdings Inc. would replace a deal that ran out in 2013 and was then extended, covering parts such as fuselages produced for Boeing's best-selling 737 plane. It would run through the end of 2015, and doesn't cover a new version of the 737 or planned upgrades of the 777 and larger models of the 787 Dreamliner.

Boeing, which will report first quarter earnings on April 23, is leaning on its suppliers to help drive down costs on the 787 and other programs, with improved returns from the Dreamliner central to its efforts to boost cash flow and reward shareholders after the prolonged delay of the twin-aisle jet.

The company's Partnering for Success program has drawn fire from some companies unwilling to sacrifice their own profits for Boeing, having suffered through years of delays to the 787 jet.

Spirit, Wichita, Kan., said in a regulatory filing the pact would allow it to suspend repaying some advances made by Boeing for 787 work.

Neither company detailed changes to the contract, including the price Boeing pays for parts such as 737 fuselages, which take effect retroactively// from April 1.

Spirit is the largest supplier for Boeing of structural components such as fuselages for its 737, complete forward fuselage sections, engine pylons and part of the wing on the 787 and major portions of the 777, 747 and 767. While sales of commercial jet parts are booming, it has become saddled with cost overruns and unprofitable work on some new jet development projects.

The existing deal maintains Spirit the sole supplier of some jet structures to Boeing, and a company spokesman said this was unchanged under the proposed new deal.

Boeing said in a statement the "updated pricing structure that also establishes a framework to support future planned production rates".

Spirit, which was spun off from Boeing's Wichita, Kan. and Tulsa, Okla. units in 2005, also makes parts for Airbus Group NV, Bombardier Inc. and the Gulfstream Aerospace arm of General Dynamics Inc.

Jon Ostrower contributed to this article.

Write to Doug Cameron at [e-mail]

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