Spirit AeroSystems Holdings (SPR.N), Boeing Co’s (BA.N) largest supplier, said on Monday it was seeking relief from its lenders as its finances are stretched by the COVID-19 pandemic and a 737 MAX production halt after deadly crashes. Shares in Wichita-based Spirit, which builds the fuselage, thrust reversers, engine pylons and wing components for the 737 MAX, fell about 4% in after-hours trading.
Boeing has asked the aero parts maker to substantially reduce 737 production this year, and Spirit warned that further suspensions or cuts may have a “material adverse” effect on its financial condition.
The company said it now expects to deliver only 72 shipsets – or complete sets of parts – to Boeing, compared with 125 planned earlier.
“Given the substantial production plan reduction, Spirit could breach the financial covenants under its credit agreement in the fourth quarter of 2020 without an amendment or waiver,” the company said in a regulatory filing.
A Boeing spokesman said the U.S. planemaker was working closely with Spirit to adjust delivery schedules and production rate profiles as appropriate.
Spirit’s profits were already under pressure after Boeing halted production of its once best-selling 737 MAX in January. The jet was grounded worldwide in March 2019 after two fatal crashes killed 346 people five months apart.
Earlier this year, Spirit reached a deal with Boeing to make 216 shipsets in 2020, but that was cut down to 125 shipsets in May, as the coronavirus crisis hammered international air travel and several airlines started deferring deliveries of planes.
As a result, Spirit has been forced to cut thousands of jobs and reduce its quarterly dividend by 90% to just 1 cent per share.
The company had already delivered 35 737 shipsets to Boeing as of June 19, and expects to produce and deliver the remaining 37 shipsets over the rest of the year.