What is the financial health of Spirit AeroSystems post-labour deal?

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Spirit AeroSystems Faces Financial Scrutiny Following New Labour Agreement

Spirit AeroSystems is expected to face significant scrutiny from investors regarding its financial health following the recent labour agreement with its machinists union. The deal, which includes substantial wage increases, comes at a time when the company anticipates burning cash throughout 2023, raising questions about its capacity to absorb these additional costs without impacting its financial stability.
Wage Increases and Financial Strain

The agreement reached on June 29, and which saw operations fully resume by July 5, mandates a wage increase of at least 23.5 per cent over a four-year period. This significant boost to labour costs is a primary concern for analysts, particularly given Spirit AeroSystems' projected cash burn for the current fiscal year. The potential for these higher expenses to strain the company's financial resources is a key point of discussion among industry observers.
Concerns Over Affordability of Labour Costs

Industry analysts suggest that Spirit AeroSystems may not possess the financial resilience to comfortably absorb the increased labour expenses stemming from the new union contract. The cost of skilled labour in the aerospace sector has reportedly surged, and while aircraft manufacturers often pass on such rising costs to airlines through escalation clauses, these clauses have limitations. The question remains whether Spirit AeroSystems, already anticipating negative cash flow, can manage these elevated operational expenditures.
Potential Impact on Production Costs and Deliveries

The financial implications of the labour deal extend to Boeing, as Spirit AeroSystems is a crucial supplier for its aircraft. Investors will be looking for clarity on whether the higher labour costs will translate into increased prices for Boeing aircraft. Furthermore, concerns exist about potential production delays impacting Boeing's bestselling 737 model, as a two-week work stoppage at Spirit could have already affected the timely delivery of fuselages. Evidence suggests a potential slowdown, with a higher proportion of 737s delivered in June seemingly coming from Boeing's existing inventory.

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What is the financial health of Spirit AeroSystems post-labour deal?

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