2nd UPDATE: Spirit, Boeing Reach Agreement On 787 Program Claims
12 Januar 2011 - 9:29PM
Dow Jones News
Spirit AeroSystems Holdings Inc. (SPR) on Wednesday became the
first company to disclose a deal with Boeing Co. (BA) covering
compensation for the three-year delay in its 787 passenger
plane.
The terms of the deal agreed to last month weren't disclosed,
but Spirit said it would "include any impact of the agreement" when
it reports earnings on Feb. 10, two weeks after Boeing's own
quarterly release.
Its shares were recently up 10% at $22.53, their highest level
since last May..
Spirit, other suppliers and 787 customers have all been in talks
with Boeing over compensation and other penalties for the
successive delays in the 787 program caused by production and
design problems.
Suppliers who built up production of parts for the 787s expected
entry into service have been left sitting on inventory, while
airline customers were left to continue using older, les efficient
planes.
Phil Anderson, Spirit's chief financial officer, said in a
statement that the companies "developed a fair and equitable
framework that reflects the current program financial realities."
The company last year said it was shifting resources to other
projects as it awaited further guidance on the 787 production
schedule.
Boeing had hoped to wrap up talks with all affected customers
and suppliers by the end of last year, but an onboard fire on a
test flight in November is expected to lead to another delay in the
787's first delivery to an airline.
The company declined comment Wednesday, but said before the
November incident that negotiations continued "in an orderly
fashion."
Analysts have speculated that the final bill could run into the
billions, but Boeing has sought to minimize the cash impact.
Reparations are likely to involve a mix of cash penalties and
nonfinancial "credits" such as subsidized freighter conversions or
guaranteed future delivery slots, according to a person familiar
with the process.
One of the most closely watched negotiations is with
International Lease Finance Corp., which remains the largest 787
customer. Observers said could it set a benchmark for reparations
with other customers.
Boeing has been insourcing some production work from its array
of 787 partners to alleviate quality-control and supply-chain
issues. The outsourcing was intended to share the financial burden
of the program.
The company has restarted test flights of the 787 as it seeks
certification from regulators, but has not officially updated
guidance that launch customer All Nippon Airways Co. (ALNPY,
9202.TO) would receive its first plane next month.
A senior European regulator, which is assessing the plane in
parallel with its U.S. counterparts, said this week that it was
looking for certification by mid-year, if not later.
Boeing shares were recently up 1.9% at $70.28 in a broader
market rally.
-By Doug Cameron and Matt Jarzemsky, Dow Jones Newswires;
212-416-2240; matthew.jarzemsky@dowjones.com
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