On June 4, 2020, Spirit AeroSystems [NYSE: SPR] received a letter from Boeing directing Spirit to pause additional work on four 737 MAX shipsets and avoid starting production on sixteen 737 MAX shipsets to be delivered in 2020, until otherwise directed by Boeing, in order to support Boeing's alignment of near-term delivery schedules to its customers' needs in light of COVID-19's impact on air travel and airline operations, and in order to mitigate the expenditure of potential unnecessary production costs.
Based on the information in the letter, subsequent correspondence from Boeing dated June 9, 2020, and Spirit's discussions with Boeing regarding 2020 737 MAX production, Spirit believes there will be a reduction to Spirit's previously disclosed 2020 737 MAX production plan of 125 shipsets. Spirit does not yet have definitive information on what the magnitude of the reduction will be but expects it will be more than 20 shipsets.
The 737 MAX grounding coupled with the COVID-19 pandemic is a challenging, dynamic and evolving situation. During this time, Spirit plans to work with Boeing to determine a definitive production plan for 2020 and manage the 737 MAX production system and supply chain.
Due to the matters described above, Spirit has elected to place certain Wichita hourly employees directly associated with production work and support functions for the 737 MAX program on a 21 calendar day unpaid temporary layoff/furlough effective Monday, June 15. In addition, Spirit will declare an immediate reduction of the hourly workforce in Tulsa and McAlester, Okla., effective Friday, June 12.
Spirit remains a proud partner on the 737 MAX program and looks forward to working with Boeing to ensure the long-term success of the program.