It turns out that Boeing isn’t the only aerospace manufacturer giving airlines headaches. On Friday, Spirit told investors that it had reached an agreement with the engine supplier for its Airbus planes that will credit the carrier for planes it can’t fly because of a parts flaw. Spirit expects that the credits will be worth somewhere between $150 million and $200 million.
Last July, the aerospace manufacturer Pratt & Whitney discovered a problem with the metal used to build its PW1100G-JM geared turbo fan engines. Specifically, the issue was with powdered metal high-pressure turbine and compressor discs. Because the defect can cause cracks, all of those engines had to be inspected or removed from service to make sure they weren’t affected. Airbus uses the PW1100G-JM for its A320neo planes, and Spirit uses those planes. Pratt & Whitney parent company RTX said in September that it would take a $3 billion charge related to the fallout.
“The temporary removal of engines from service is expected to drive a significant decrease in our near-term growth projections,” Spirit said in its annual report in February, adding that the company was “in discussions with Pratt & Whitney regarding compensation for the loss of utilization; however, the amount, timing, or structure of the compensation that will be agreed upon is not yet known.” Well, now those things are known.
The cash gives Spirit a nice liquidity boost as it tries to chart a future without JetBlue Airways. The two companies had planned a $3.8 billion merger, but they called it off after a judge blocked the deal on anti-trust grounds. Spirit has more than a $1 billion in debt coming due in the next couple years, and creditors are bracing for bankruptcy.
Spirit notes due next year were trading at about 76 cents on the dollar Monday, their best price since October.