WASHINGTON: US aircraft manufacturer Boeing said Monday it had reached a “definitive deal” to buy its subcontractor Spirit, which has faced scrutiny over production quality control in recent months. “The merger is an all-stock transaction at an equity value of approximately $4.7 billion, or $37.25 per share,” the company said in a statement.

Boeing disclosed in March that it was in talks to potentially reacquire Spirit, which it spun off in 2005 to lower costs. “We believe this deal is in the best interest of the flying public, our airline customers, the employees of Spirit and Boeing, our shareholders and the country more broadly,” said Boeing president and CEO Dave Calhoun. He said by reintegrating Spirit, “we can fully align our commercial production systems”, including safety and quality management systems, and “our workforce to the same priorities, incentives and outcomes - centered on safety and quality”.

Spirit AeroSystems builds fuselages and other significant parts for both Airbus and Boeing.

Airbus said separately that it would buy Spirit AeroSystems facilities that produce parts for its aircraft for a nominal fee of $1, and will be “compensated by payment of $559 million from Spirit AeroSystems” for the transaction. This includes production sites related to the A350 in North Carolina and France, as well as the production of the A220’s wings and mid-fuselage in Belfast and Casablanca in Morocco. It would also cover the A220 pylons which are made in Kansas in the United States.

Airbus said the agreement “aims to ensure stability of supply for its commercial aircraft programs through a more sustainable way forward, both operationally and financially.”

Boeing is by far Spirit’s biggest customer, with around 70 percent of its revenue coming from the American plane maker in 2023. The two companies have faced intense scrutiny since a near-catastrophic incident in January when a fuselage panel blew off a 737 MAX operated by Alaska Airlines mid-flight. The Alaska Airlines investigation has focused on missing bolts on the door plug. The fuselage was produced by Spirit AeroSystems.

Boeing has been under heavy scrutiny from regulators at the Federal Aviation Administration, which has required the company to address safety concerns, including oversight of contractor Spirit AeroSystems. Boeing announced operational changes on March 1 intended to improve its interfacing with Spirit AeroSystems.

The Alaska Airlines incident undermined Boeing’s contention that it has fully turned around its operations after two fatal 737 MAX crashes on Lion Air and Ethiopian Airlines in 2018 and 2019.

Boeing could still face legal problems related to those two crashes, which claimed 346 lives. The US Department of Justice (DOJ) concluded in May that Boeing could be prosecuted for violating a deferred prosecution agreement reached following the two fatal 737 MAX crashes in 2018 and 2019. A lawyer for the victims’ families said Sunday that the DOJ is offering Boeing a plea deal that will allow it to avoid a trial related to two crashes.

Details of the deal, which requires Boeing to pay a fine and submit to an outside supervisor, were given to the families in a two-hour presentation by the DOJ on Sunday, said Paul Cassell, a University of Utah law professor who represents the families. Under that three-year deferred prosecution agreement signed in 2021, Boeing agreed to pay $2.5 billion to settle fraud charges related to the certification of the 737 MAX. In addition to the financial penalties, the agreement required Boeing to strengthen its compliance program, meet regularly with US anti-fraud officials and submit annual reports documenting its progress.

The DOJ said in May that Boeing’s violation of several provisions of the initial agreement, including measures requiring it to bolster its internal controls to detect and deter fraud, opened the company to prosecution. Boeing contested the DOJ’s conclusions in mid-June, but has recognized the gravity of the safety crisis.

Victims’ families have called for the criminal prosecution of Boeing and its executives, and are seeking a nearly $25 billion fine. Boeing slowed production in the 737 program in the wake of the January Alaska Airlines incident as it addressed quality control issues, again pushing it into loss. Criminal prosecution could put the company, which is a major supplier for the US military aerospace program, in further financial difficulty. – AFP