Spirit Aero weighs liquidity options after tough first quarter

By Abhijith Ganapavaram and Allison Lampert

(Reuters) -Embattled aerospace supplier Spirit AeroSystems said it may tap financial markets for cash after posting heavy losses and burning through more cash than expected in a first quarter dominated by turmoil at top customer Boeing.

Spirit, which was spun off from Boeing nearly 20 years ago, has been losing money for several years. Following the Jan. 5 panel blowout on a 737 MAX, the two parties have been in talks to recombine.

Spirit's cash on hand dropped to $352 million from $824 million at December end. The company posted a net loss of $617 million and burned through $444 million in the three months ended March 28, far more than analysts had expected.

"The strain on the supply chain being experienced by Spirit and other suppliers is both (a) commercial and an operational risk," CEO Pat Shanahan told analysts.

Analysts on average were expecting a cash usage rate of $108 million for the quarter, according to LSEG data.

Shares were down 1.9% in Tuesday trading.

Boeing's talks to acquire Spirit have hit a roadblock due to complicated negotiations with Europe's Airbus, which now accounts for roughly one-fifth of Spirit's revenues. Airbus wants to be paid to take on Spirit's money-losing operations, Reuters reported last week.

The supplier, which makes the 737 MAX fuselage, also has nearly $1.8 billion worth of inventory.

Spirit was already wrestling with money losing programs, and industry-wide supply chain snags that have delayed plane deliveries. The company is also facing added pressure of slumping 737 production due partly to U.S. Federal Aviation Administration (FAA)-imposed quality checks following the January accident.

In a regulatory filing, Spirit said it was pursuing various options to improve liquidity, including issuing equity or debt financing, undertaking restructuring of its operations and seeking additional customer advances.

Airbus had no immediate comment on Tuesday.

"The outlook for the share price is wholly dependent on the company reaching a disposal agreement with Boeing and Airbus," Vertical Research Partners aerospace analyst Robert Stallard wrote in a note.

"These results could play a part in this process, as they highlight just how desperate Spirit's financial position has become."

PRODUCTION DELAYS

Spirit's current Boeing 737 production rate is about 31 fuselages per month, which the company expects to be constant through the end of 2024.

Airlines and lessors have called out both Boeing and Airbus for delivery delays due to production and supply chain challenges.

Dubai carrier Emirates' CEO Sheikh Ahmed bin Saeed Al-Maktoum said on Tuesday he hoped Boeing's new management will put in the effort to fix delays that have plagued its 777X aircraft.

Compounding Spirit's cost concerns, Boeing has clamped down on traveled work and has said it would take only fuselages that adhere to quality standards. Sales to the U.S. planemaker accounted for 64% of Spirit's revenues last year.

CFO Mark Suchinski said the company recorded a combined $448 million in forward losses, primarily driven by two Airbus programs, the A220 and A350.

"I know these are large losses but are really due to the inability to reach a conclusion to commercial negotiations with Airbus," he told analysts.

The quarterly adjusted loss per share widened to $3.93 from $1.69, while revenue rose 19% to about $1.7 billion on higher overall sales from its commercial, space and defense programs.

Analysts had expected a loss per share of 48 cents.

(Reporting by Abhijith Ganapavaram in Bengaluru, Allison Lampert in Montreal and Tim Hepher in Paris; Additional reporting by Siddarth S in Bengaluru; Editing by Sharon Singleton and Sriraj Kalluvila)