Boeing purchases Spirit AeroSystems for $4.7 billion

In a new twist on Biggie’s #4 commandment – never get high on your own supply – Boeing is buying Spirit AeroSystems, a major supplier that helps its planes get high.

In an announcement released yesterday, the two aviation companies revealed deal terms:

• Spirit AeroSystems will receive $4.7 billion in Boeing stock. Boeing will also assume Spirit’s $3.6 billion in debt.
• The transaction was also complicated by the fact that Spirit AeroSystems – which makes the body of the 737 Max and parts of the 767, 777, and 787 for Boeing – also supplies Airbus, Boeing’s major planemaking rival. As part of the deal, Boeing will spin off parts of Spirit and sell it to Airbus.

Big picture: This acquisition marks a strategic shift for Boeing, the world’s biggest commercial plane manufacturer, which started relying more extensively on independent suppliers in the early 2000s to cut costs and raise profits. Spirit was created during that outsourcing drive in 2005, when Boeing sold a division in Wichita, Kansas, and operations in Oklahoma, the NY Times reports.

However, quality issues have plagued Boeing in recent years. Purchasing Spirit AeroSystems, which did work on the Alaska Airlines’ plane whose door panel blew out mid-flight in January, provides the planemaker with more input and control over the production process.

⚖️ In other Boeing news… The US government is set to criminally charge the planemaker with fraud over two fatal 737 MAX crashes, and has reportedly given Boeing until the end of the week to either plead guilty and pay a settlement or face trial.