Kansas based Spirit AeroSystems is facing the prospect of job cuts now that the 737 MAX production has been suspended. More than 13,000 workers have been offered voluntary layoffs as the supplier halts the production of the 737 MAX parts that it makes. The supplier says the move is due to ‘uncertainty’ over the future of the aircraft.
Voluntary layoffs offered
Spirit AeroSystems announced on Monday that it would offer employees voluntary layoffs in an attempt to rein in any losses incurred through the stoppage of the 737 MAX production. CEO Tom Gentile is reported In AP News as saying this was because the company doesn’t have “clarity on the timing for resuming MAX production or a firm production rate schedule when it does resume.”
In a statement issued to the press by the company, Spirit said,
“Spirit AeroSystems is evaluating a range of potential actions to reduce costs due to ongoing uncertainty regarding the 737 MAX. We do not know how long the pause in production will last, or what the production rate will be when it does resume. Part of our effort includes offering a voluntary layoff program for eligible employees. While no final decisions have been made on additional actions, we remain focused on doing what is in the long-term interests of Spirit, its stockholders and other stakeholders, including employees.”
The voluntary job cuts are being offered to all employees in Wichita along with those in Tulsa and McAlester. Spirit’s employee base encompasses around 13,000 workers in Kansas, along with a further 1,300 in Tulsa. The company has not said how many jobs could be affected.
The unseen losers
For so much of the 737 MAX debacle eyes have been on airlines and how the loss of the type has impacted them. Eyes have also been on Boeing, watching how the manufacturer tackles this complicated problem. But there’s another major loser that hasn’t had much attention at all: the supply chain.
Producing 40 or 50 aircraft a month, as Boeing was, requires a massive team effort from many different companies. One of the biggest is Kansas based Spirit AeroSystems. Known as ‘Spirit’, but not to be confused with the low-cost airline, the company builds several important pieces of Boeing aircraft, notably the fuselage of the 737.
At one point, Spirit AeroSystems was merely a department of Boeing, but was spun out more than a decade ago. Despite standing on its own two feet as a separate company, Spirit was incredible reliant on Boeing for its income. The 737 MAX production accounted for almost half of Spirit’s total revenue.
In the aftermath of the 737 MAX grounding, Boeing worked out a deal to keep purchasing 737 MAX parts from Spirit at a rate of 52 per month, despite slowing its own production to 42 aircraft a month. However, with Boeing now putting the brakes on the 737 MAX production entirely, that agreement can no longer be honored.
Indeed, the supplier itself announced back in December that it would suspend Boeing 737 MAX production from January, following the lead of Boeing. Analysts are warning that it could be years before Spirit’s 737 production ramps back up to where it was. In the meantime, it’s a very uncertain future ahead for the thousands of employees at the company.