Can Spirit Aero survive and what it means for Boeing acquisition

Investing.com -- Spirit AeroSystems (NYSE:SPR) on Tuesday, November 5, raised concerns about its ability to continue operations, sparking questions about the implications for Boeing (NYSE:BA)'s planned acquisition.

In its third-quarter financial report, the aerospace manufacturer disclosed "substantial doubt about the Company’s ability to continue as a going concern exists."

“The Company will require additional liquidity to continue its operations over the next 12 months,” the filing added.

Spirit AeroSystems reported significant net losses of $1.5 billion year-to-date, with cash used in operations amounting to $1.25 billion. As the third quarter concluded, Spirit's debt stood at $4.4 billion, with cash and cash equivalents at a mere $217.6 million.

The company also anticipates a cash burn of approximately $450 to $550 million over the coming three quarters.

The company's financial challenges are partly attributed to complications with Boeing and Airbus.

More concretely, the jet supplier has been affected by Boeing's decision to reject deliveries that require additional assembly or quality rework, leading to increased inventory and contract assets, along with reduced cash flow.

Other contributing factors include delays in Boeing's production ramp-up, a strike at Boeing, and ongoing pricing adjustment discussions with Airbus.

The filing comes amid ongoing discussions about its acquisition by Boeing. According to Bank of America (NYSE:BAC) analysts, the full impact of Spirit's recent filing on the acquisition's financial aspects is not yet clear.

“We would assume that Boeing will likely have to inject capital to Spirit,” analysts led by Ronald J. Epstein said in a note.

In April 2024, Boeing provided an advance of $425 million to Spirit AeroSystems to bolster its liquidity, and according to BofA analysts, further capital injections may be on the horizon.

Last month, Spirit raised more than $24 billion. It also confirmed it had fully drawn a $350 million bridge loan established when Boeing agreed to acquire the company in June.

Bank of America maintained a Neutral rating on Boeing, as the industry awaits further details.

In the meantime, Boeing continues striving to restart 737 MAX production following the resolution of a weeks-long strike that ended Monday (NASDAQ:MNDY) night. The strike, involving over 33,000 West Coast workers, had halted manufacturing of most of Boeing's commercial jets, including the 737 model.