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Spirit AeroSystems 'fully recovered' from 737 fuselage lag: CEO

Spirit AeroSystems has fully recovered from fuselage production delays that recently rippled from its Wichita manufacturing facility to Boeing's 737 assembly site in Renton, say Spirit's executives.

Having recovered, the company is now working to reduce 737 production costs and taking steps to ensure it can meet Boeing's plan to boost 737 production next year.

"We are fully recovered on our delivery schedule," Spirit chief executive Tom Gentile says during the company's third quarter earnings call on 31 October. "Our focus now is improving efficiencies."

Spirit's posted a third quarter profit of $169 million, up 15% year-over-year. Revenue increased up 4% to $1.8 billion, while costs inched up 3% to $1.6 billion.

The higher costs partly reflect Spirit's efforts to ramp up 737 fuselage work, which led to increased employee costs and express shipping expenses, says chief financial officer Sanjay Kapoor.

"Now that we are on schedule… we expect continued cost improvement on the 737 programme in the fourth quarter," he says.

The fuselage division's third quarter profit slipped 6% year-on-year to $135 million, the propulsion system unit's profit increased 5% to $76 million and the wing systems unit posted a 19% jump in profit, to $59 million.

Spirit shipped 160 737 fuselages to Boeing in the third quarter – nine fewer than last quarter, but still ahead of Boeing's 52-aircraft monthly production target.

Spirit delivered 457 737 fuselages in the first nine months of 2018, it reports.

Boeing increased 737 production from 47 to 52 aircraft earlier this year, but failed to meet that target for much of 2018. The airframer's production slipped to 29 737s in July before recovering to 61 in September.

Boeing's difficulties partly reflected inability by key suppliers – including Spirit and engine maker CFM International – to deliver components on time, Boeing executives have said.

Spirit's executives spent much of the earnings call insisting the company is prepared to meet demand next year, when Boeing plans to boost 737 production again, to 57 aircraft monthly.

Gentile says Spirit has built a "buffer" into its production line, hired more suppliers, increased employee training and already hired 90% of employees needed for the surge.

"With this level of preparation, we are very confident in our ability to execute a smooth rate [increase] to 57 aircraft per month," he says.

Spirit's troubles should also ease next year as the company moves beyond the complexities of its transition from production of 737NG to 737 Max fuselages, says Gentile.

Production is currently split evenly, but by 2019 737 Max fuselages will account for 90% of production, he says, noting that the Max fuselage is 35% different from the NG's.

Spirit is also prepared to meet demand as Boeing increases 787 production from 12 to 14 aircraft monthly next year, Gentile adds.

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