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Boeing and aircraft parts supplier Spirit AeroSystems have reached a tentative agreement on a new commercial agreement through 2022 that removes considerable uncertainty for both parties.

Wichita, Kansas-based Spirit AeroSystems is Boeing’s largest supplier on its commercial aircraft programs and Boeing in turn is Spirit’s largest customer. The two had been unable to reach pricing agreements for the 787 and other programs, but a memorandum of understanding (MOU) signed this week “reduces much uncertainty that has long existed in the relationship,” Spirit president and CEO Tom Gentile said in a statement. Boeing and Spirit expect to finalize a definitive agreement during the 2017 third quarter.

“One of the biggest challenges in our discussions with Boeing has been 787 pricing,” Gentile said. “As part of this new MOU with Boeing, we are extending the block from 1,003 [787] units to 1,300 units and establishing a planning block through line unit 1,405. Although the 787 contract had agreed price step-downs for the 787-8, we had never agreed with Boeing on pricing for the 787-9 and -10. We have now agreed on modified step-down pricing for the 787-9 and -10 through line unit 1,405.”

Spirit said it is recognizing a reach-forward loss of $353 million on the 787 program as a result of the MOU. “In addition to addressing open commercial issues, Spirit has also agreed with Boeing that we will jointly study advanced aerostructures and manufacturing processes,” Gentile said.

Boeing said in a statement: “This agreement, when finalized, will … provide additional stability to our commercial programs and is part of our ongoing strategy to retire risk from our business.”

 

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