Spirit AeroSystems Reports First Quarter 2025 Results

Estimated reading time: 7 minutes

Spirit AeroSystems Holdings, Inc. reported first quarter 2025 financial results.

Revenue

Spirit's revenue in the first quarter of 2025 decreased from the same period of 2024, primarily due to lower production activity on most Boeing programs, particularly the Boeing 737 program. For the Boeing 737 program, production activity during the first quarter of 2024 was higher due to preparation for expected rate increases which were subsequently delayed later in that same period. This decrease was partially offset by higher production activity on Airbus programs during the first quarter of 2025.

Overall deliveries increased during the first quarter of 2025 compared to the same period of 2024. Boeing 737 deliveries were significantly higher year-over-year due to the delay in deliveries caused by the initiation of the joint product verification process with Boeing during the first quarter of 2024.

Spirit's backlog at the end of the first quarter of 2025 was approximately $48 billion, which includes work packages on all commercial platforms in the Airbus and Boeing backlog.

Earnings

Operating loss in the first quarter of 2025 improved compared to the same period of 2024, primarily resulting from less total change in estimates as well as $80 million of gain driven by the sale of Fiber Materials, Inc. (FMI), partially offset by a warranty reserve of $116 million.

During the first quarter of 2025, the Company updated its estimates related to a specific warranty issue involving parts affected by the titanium records and certifications that are alleged to have been counterfeited and established a specific warranty reserve of $116 million for the matter. These costs are accrued and recorded to unallocated costs of goods sold in the Commercial segment. The Company believes it has certain contractual rights related to recovery from suppliers and plans to aggressively pursue these.

Total change in estimates in the first quarter of 2025 included net forward losses of $293 million and unfavorable cumulative catch-up adjustments of $8 million. Net forward losses were mainly driven by the Airbus A350, Airbus A220 and Boeing 787 programs of $90 million, $86 million and $38 million, respectively, resulting from schedule changes, production performance and supply chain cost growth. Excess capacity costs during the first quarter of 2025 were $47 million. In comparison, total changes in estimates in the first quarter of 2024 included net forward losses of $495 million and unfavorable cumulative catch-up adjustments of $39 million. Additionally, excess capacity costs were $26 million in the same period of 2024.

First quarter 2025 EPS was $(5.21), compared to $(5.31) in the same period of 2024. Adjusted to exclude the incremental deferred tax asset valuation allowance, first quarter 2025 adjusted EPS* was $(4.25), compared to $(3.93) in the first quarter of 2024.  

Cash

Cash from operations and free cash flow* during the first quarter of 2025 decreased compared to the same period of 2024, largely resulting from the timing of working capital, partially offset by higher Boeing 737 deliveries. The Company's cash balance at the end of the first quarter of 2025 was $220 million.

Developments in 2024 resulted in significant reductions in projected revenue and cash flows over the next twelve months. These developments include production and delivery process changes implemented by Boeing, lower than planned 737 production rates and the lack of price increases on Airbus programs. Although the customer advances received in 2024 and 2025 have provided essential operational liquidity, there can be no assurance that Spirit will be able to obtain additional advances from customers, repay current advances on the specified due dates, renegotiate the due dates or otherwise obtain additional liquidity as needed under acceptable terms or at all. We will need to obtain additional funding to sustain operations, as we expect to continue generating operating losses for the foreseeable future.

Management has developed a plan designed to improve liquidity. These plans are dependent upon many factors, including, among other things, the outcomes of active discussions related to the timing or amounts of repayment for certain customer advances, achieving forecasted 737 deliveries, the timing and expected proceeds received from certain divestitures and the expected timing and outcome of the transactions contemplated by the merger agreement with Boeing and the stock and asset purchase agreement with Airbus. Management is also evaluating additional strategies intended to improve liquidity to support operations, including, but not limited to, additional customer advances and restructuring of operations in an effort to increase efficiency and decrease expenses. However, there can be no assurance that these plans or strategies will sufficiently improve our liquidity needs or that we will otherwise realize the anticipated benefits. Accordingly, substantial doubt about the Company's ability to continue as a going concern exists.

Pending Boeing Acquisition of Spirit AeroSystems Update

On June 30, 2024, the Company entered into an Agreement and Plan of Merger with The Boeing Company (the "Merger Agreement"). Upon completion of the merger, subject to the terms and conditions of the Merger Agreement, the Company would become a wholly owned subsidiary of Boeing. The closing of the transaction is expected to occur in the third quarter of 2025, subject to the completion of the divestiture of certain portions of Spirit's business related to the performance by Spirit and its subsidiaries of their obligations under their supply contracts with Airbus SE and other closing conditions, including receipt of regulatory approvals. In connection with the proposed merger, Spirit and Boeing have each received a request for additional information ("second request") from the Federal Trade Commission as part of the regulatory review process under the Hard-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act").  The second request extends the waiting period imposed by the HSR Act until 30 days after Spirit and Boeing have substantially complied with the requests or the waiting period is terminated sooner by the Federal Trade Commission.

Subsequent Events

On April 28, 2025, the Company announced that it has entered into a definitive agreement with Airbus SE (the "Airbus Divestiture Agreement") to transfer ownership of certain assets and sites involved in the production of Airbus aerostructures to Airbus. Airbus SE would acquire these assets and sites, excluding any portions thereof to be acquired by third parties, and cash in the amount of $439.0 million, for nominal consideration of one U.S. dollar, subject to working capital and other purchase price adjustments and specified additional downward adjustments if specified assets are to be acquired by a third party instead of Airbus SE. The divestiture of assets to Airbus under the terms of the Airbus Divestiture Agreement is subject to regulatory approvals, among other closing conditions, and is expected to close in the third quarter of 2025, concurrently with the closing of the acquisition of Spirit by Boeing under the Merger Agreement

Additionally, on April 28, 2025, Spirit disclosed that it has entered into a memorandum of agreement with Airbus S.A.S. under which Airbus S.A.S. has agreed to, among other things, provide Spirit with non-interest-bearing lines of credit in an aggregate amount of $200 million, which will be used by Spirit to support Airbus programs. Under the terms of the memorandum of agreement, the repayment obligations relating to the lines of credit will be assumed by Airbus S.A.S. or one of its affiliates upon the closing under the Airbus Divestiture Agreement or, if earlier, repaid to Airbus S.A.S. on April 1, 2026.

Segment Results

Commercial

Commercial segment revenue in the first quarter of 2025 decreased from the same period of the prior year, primarily due to lower production activity on most Boeing programs, particularly the Boeing 737 program, as discussed above. Operating margin for the first quarter of 2025 decreased compared to the same period of 2024, primarily driven by lower production activity and margins on Boeing programs and the warranty reserve discussed above, partially offset by lower changes in estimate charges recorded in the current period compared to the same period of 2024. In the first quarter of 2025, change in estimates for the segment included $263 million of net forward losses and $17 million of unfavorable cumulative catch-up adjustments. Additionally, during the first quarter of 2025, the Commercial segment included excess capacity costs of $41 million. In comparison, during the first quarter of 2024, the segment recognized $494 million of net forward losses, $39 million of unfavorable cumulative catch-up adjustments, and excess capacity costs of $25 million.

Defense & Space

Defense & Space segment revenue in the first quarter of 2025 increased from the same period of the prior year. This increase was primarily due to higher activity on the Boeing P-8 and Sikorsky CH-53K, partially offset by the lack of revenue from FMI resulting from the site divestiture.  Operating margin for the first quarter of 2025 decreased compared to the same period of 2024, primarily due to additional forward losses recorded on the KC-46 Tanker and KC-135 programs. The segment recorded net forward losses of $30 million and favorable cumulative catch-up adjustments of $9 million. In comparison, during the first quarter of 2024, the segment recorded net forward losses of $2 million and no cumulative catch-up adjustments.

Aftermarket

Aftermarket segment revenue in the first quarter of 2025 increased slightly from the same period of the prior year. Operating margin in the first quarter of 2025 decreased slightly compared to the first quarter of 2024, primarily due to sales mix.

2025 Financial Outlook

In light of the Merger Agreement, and consistent with customary practice during the pendency of such transactions, Spirit will not provide guidance.