How Are Airbus & Boeing Are Splitting Up Spirit Aerosystems?

On Monday Boeing announced the much anticipated repurchase of Spirit AeroSystems while Airbus outlined the terms for acquiring certain loss-making activities from Spirit as part of a broader breakup involving the two competing manufacturers. Airbus will take over facilities that supply parts for its A220 and A350 aircraft. In return, Spirit will compensate Airbus with $559 million, while Airbus will pay a nominal $1 for the assets, subject to final agreement.

Airbus will take over operations at four Spirit plants in the U.S., Northern Ireland, France, and Morocco, as well as minor activities in Wichita, Kansas. This agreement follows Airbus's decision to stabilize supply for its aircraft programs amid financial and operational concerns. The deal, contingent on final approvals, marks a significant move in a crisis-driven triangular negotiation involving Airbus, Boeing, and Spirit.

Boeing's sale of Kansas and Oklahoma plants in 2005 to private equity firm Onex for $950 million had led Spirit to diversify, including setting up a 500,000-square-foot Airbus A350 parts plant in North Carolina. However, high costs and production issues led to financial losses. Airbus had been negotiating with Spirit to improve efficiency but had to adjust its strategy after Boeing's bid plans were revealed. Airbus focused on two key plants in Kinston, North Carolina, and Belfast, Northern Ireland, to protect strategic operations.

Negotiations between Boeing and Airbus included compensation for Airbus taking on Spirit's losses, estimated at $2 million per A220 shipset. Despite initial resistance, Boeing agreed to Spirit paying Airbus $559 million while seeking buyers for some assets. Airbus accepted that it might have to take over these plants if no buyers were found.

The final agreement saw Boeing switch from a cash offer to an all-stock deal valued at $37.25 per share. Spirit's board and Morgan Stanley approved the deal on Sunday, with shareholders expected to receive $4 billion in stock for selling core factories and assets back to Boeing.