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Boeing and Spirit AeroSystems reach long-term pricing deal

Spirit AeroSystems has reached a memorandum of agreement with Boeing that includes long-term pricing terms for additional aircraft programmes, and the release of claims from both sides in relation to the 737 manufacturing delays earlier this year.

The long-term agreement includes pricing terms for the 737NG, 737 Max, 767, 777 Freighters, 777-9 and 787 programmes "well into the next decade", says Spirit AeroSystems. These include 737 pricing based on production rates above and below current levels, as well as investments for tooling and capital for certain 737 rate increases, it adds.

Both sides have also committed to joint cost reduction programmes for the 777X and 787.

Previous agreements between Boeing and Spirit AeroSystems have concerned a cost reduction programme around the 737, as well as pricing for the 747 and 777.

"The agreement establishes pricing and capital investment for a range of potential production rate increases on the 737 programme. With the new agreement, we expect price to exceed cost eventually on the 787 programme," says Spirit AeroSystems chief executive Tom Gentile.

The planned long-term agreement includes the "release of liability and claims asserted by both companies related to Boeing 737 disruption activity and other matters", says Wichita, Kansas-based Spirit AeroSystems.

Boeing has struggled to meet its monthly 737 52-aircraft monthly target for much of 2018, due to supply chain issues including delays in the delivery of aircraft fuselages from Spirit AeroSystems.

Boeing plans to further hike the 737 production rate to 57 aircraft monthly in 2019.

In addition, Spirit AeroSystems secured Boeing's support for its pending acquisition of SRIF, the parent of Asco Industries.

Gentile says the agreement with Boeing will help Spirit AeroSystems maintain its target of converting 7-9% of revenue to free cash flow.

A Boeing spokesperson says the deal with Spirit AeroSystems "will provide additional stability to our commercial programmes and is part of our ongoing strategy to retire risk from our business".

Story updated with Boeing statement

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