​Spirit AeroSystems sees Bombardier deal as path to new markets
Spirit AeroSystems views its pending purchase of Bombardier's aerospace businesses as a means to acquire more Airbus work, expand its footprint into lower-cost regions and acquire high-tech, composite manufacturing assets.
The deal, announced 31 October, will also see Wichita-based Spirit reenter the business jet manufacturing sector – a segment in which Spirit has a history of struggle.
"This acquisition aligns very well with our strategic priorities of capturing more Airbus business, expanding our low-cost country footprint and scaling our aftermarket business with good long-term shareholder returns," Spirit chief executive Tom Gentile told investors on 31 October.
He predicts the deal will generate some $60 million in cost "synergies" and expects Spirit will bring efficiencies to Bombardier's aerostructures operation.
"As we take our supply chain strategy and overlap it with these Bombardier assets, we see a lot of opportunity to get even more competitive pricing," Gentile says.
Spirit will pay $500 million to acquire Bombardier's aerostructures and aftermarket services businesses in Belfast (Northern Ireland) and Casablanca (Morocco), and its maintenance and overhaul business in Dallas.
Owning the Dallas maintenance facility will more than double Spirit's aftermarket sales, Gentile says.
He stresses that the deal will give Spirit a presence on two of the world's most-modern civil aircraft: Airbus's A220 and Bombardier's 7500 business jet.
The Belfast site manufactures the A220's composite wings and the 7500's composite horizontal stabilisers, according to Bombardier.
The facility also makes fuselage sections, cockpits, nacelles, engine cowls and thrust reversers for aircraft including Global 5000s and 6000s, Challenger business jets, Learjets, A320s and A320neos.
Bombardier's Morocco site makes wing components, fuselage sections and floors for CRJs, Learjets, Challengers and Globals, Bombardier says.
The three sites employ 4,000 people and will generate about $1 billion in 2019 revenue, according to Spirit. The companies expect the deal will close in the first half of 2020, at which time Spirit will also make a $130 million cash contribution to pensions associated with the acquired businesses, Spirit says.
Gentile tells investors the acquisition aligns with Spirit's ambitions to capture more Airbus work. The company significantly relies on Boeing, to which it provides 737 Max fuselages.
Currently, 78% of Spirit's revenue comes from manufacturing of products for Boeing aircraft, with Airbus projects accounting for 16% of revenue, Spirit's third quarter earnings presentation shows.
The acquisition would shift those figures to where Boeing would account for 69% of revenue and Airbus would account for 18%.
Once finalised, the agreement would see Spirit re-enter the business jet market, which it exited several years ago following a difficult bout as a supplier of engine and wing components for Gulfstream G280s and G650s.
Earlier this decade, Spirit posted forward losses of more than $1 billion attributed to those programmes, and in 2014 exited the sector by selling the Gulfstream programmes to a unit of Triumph Group.
"It's true, Spirit has struggled in the past with some of its business jet programmes," Gentile says.
But he thinks this time will be different, noting the deal includes long-term production contracts.
"We [will] have life-of-programme contracts with Bombardier … with very good pricing," Gentile says. "When we start to combine what we do – in terms of engineering, design, operations and, particularly, supply chain – we think we can bring a lot more value."
First prototype of Stratos 716 very light jet takes shape
Stratos Aircraft has completed load testing on its 716 very light jet (VLJ), and is now assembling the first prototype of the single-engined six-seater, which it hopes to fly in the second half of the year.