Located in a frosty Northern Irish air hangar, Ray Burrows, one of the founders of Ulster Aviation Society, oversees delicately reconstructed aircraft including a sleek Sherpa jet, a sturdy Short 330 and a Canberra spy plane. Each of these were constructed at the Short Brothers factory in Belfast, a building as pivotal to the region’s production history as Harland & Wolff shipyard that engineered the Titanic. The Shorts factory is now under the ownership of Spirit AeroSystems, a fundamental AirBus supplier.
Spirit AeroSystems and its future are currently hung in uncertainty due to challenges faced by Boeing, which is navigating tumultuous times following issues with its 737 Max jet in the wake of a mid-flight panel failure in January, coupled with two devastating crashes in recent years. Boeing began discussions last week signaling interest in buying back Spirit AeroSystems, almost two decades post its divestiture, in an effort to rectify and enhance its quality procedures.
AirBus finds itself in a tricky situation as a result. While catering to the major share of Spirit’s business operations, the Belfast factory pieces together wings and middle-fuselage sections for AirBus’s A220 passenger jets. This could potentially pressurize Airbus to acquire the loss-generating Shorts factory if Boeing and Spirit reach an agreement, even though Airbus already maintains a considerable UK-based operation creating wings for its larger commercial aviation initiatives. Market analysts expect Airbus to hesitate in adding another factory to its operations.
In an unexpected twist, the ambiguity surrounding the Belfast factory is due to Boeing’s intention of reversing its unfortunate decision made in 2005, to spin off its Wichita operations to Canadian private equity firm Onex which then renamed the company as Spirit. Boeing had thought that this would decrease procurement costs and aid in laying off its unionized workforce. However, Spirit had to bear the brunt of unbalanced contracts with its previous owner as well as its primary customer, and also had to deal with deficiencies in its manufacturing processes.
Rob Stallard, an analyst at Vertical Research Partners, has identified this potential retraction as a larger issue. He mentioned that for the last two decades, Boeing’s focus has been on bargaining with suppliers on price and contract terms. The last couple of years paired with the Covid Pandemic has proved that the aerospace supply chain lacked the expected strength and resilience. When Boeing takes Spirit back on board if the deal goes through, it would entail higher expense but perhaps serve as an acknowledgement of their past mistakes.
With the future of the Belfast manufacturing base and Spirit’s other UK venture in Prestick, Scotland, still unclear, concerns are increasing. The latter, a hub for components of multiple Airbus models such as the A350 and employing around 1,100 staff, is also not profitable.
The Airbus company, engaged in a struggle to minimise the expenditure on the A220 programme procured from Canadian company Bombardier almost half a decade ago for C$1, has initiated preliminary discussions with Spirit concerning the Belfast plant, sources close to the situation reveal. Amidst price renegotiations with Airbus for contribution towards the A220 and A350 initiatives, Spirit indicated numerous possibilities continue to be plausible. Airbus chose to not respond.
The potential for a further change in ownership of one of the largest factories in Northern Ireland, just four years post acquisition by Spirit from Bombardier, has heightened a profound sense of unease about the survival of its over 3,500 job positions, says Alan Perry, senior coordinator at GMB union. “There is a prevalent fear in anticipation of future developments,” he expressed.
Established in England in 1908, Shorts landed a contract from the famed Wright brothers the succeeding year, thereby positioning itself as the world’s first aircraft manufacturing company. In 1936, it relocated to Belfast.
Camouflaged within it is a thriving Northern Irish aerospace and defence division now quantified at £2 billion, with an over 100 strong supply line of typically small-scale companies hiring 9,000 staff throughout the region. Currently, Northern Ireland boasts a production rate of one in every three of the globe’s airplane seats.
“The significance of this in such a small area is massive,” comments Leslie Orr, director of the regional aerospace and defence trade union, ADS NI. “Aerospace is an essential component to Northern Ireland – spelling high-tech, high-value export.” Nearly three-quarters of UK’s elite aerospace and defence suppliers find home in this region.
The Belfast venture by Spirit is a “national gem”, asserts Mark O’Connell, chief of the trade consultancy OCO Global. Spirit’s instrumental role within the Northern Ireland Advanced Composites and Engineering Centre, a neighbouring research laboratory, marks its importance.
The programme for the C-Series aircraft wing in Belfast, once known as Bombardier’s, attracted the largest single financial influx of £520 million in Northern Ireland. Although the Canadian corporation aimed to challenge the joint monopoly held by Boeing-Airbus on single-aisle commercial airplanes, it almost faced bankruptcy in 2015 as a result.
In 2018, Airbus salvaged the C-Series and renamed it A220, thereby retaining the production of the carbon-fibre composites wing and jobs in Belfast. The Ulster Aviation Society’s Burrows stated that Shorts was ahead of other companies in working on composites and adhered to it, which brought rewards.
According to Orr, the innovative culture of Northern Ireland, paired with international demands, ensures the aviation industry always plays a key role. A considerable global order backlog of about 15,000 aircraft will take several years to meet.
Nonetheless, monetary constraints burden the Belfast plant, which has not generated profits since 2016. It has been affected by a narrow supply chain and rising prices, despite a rebound in the worldwide airline business post-Covid.
Airbus’s objective of trimming down A220 programme costs contradicts Spirit’s ambition for greater yields on the 110-130 seat jet. Agency Partners’ analyst, Sash Tusa, mentioned Airbus is facing losses of a few hundred million euros annually and described the situation as a stand-off between two determined entities.
Airbus CEO, Guillaume Faury, verified discussions with Spirit last month, which encompassed several contractual aspects, including pricing. There is no guarantee that Airbus will acquire the Belfast plant if Boeing incorporates Spirit.
Tusa explained that while Spirit is crucial for Boeing, it’s not the same for Airbus – the A220 only accounts for roughly 7 per cent of Airbus’s yearly commercial aircraft income. Therefore, Airbus’s valuation will determine the worth of the Northern Ireland Spirit business, as it completely governs its volume and potential future profitability.
Burrows, whose career commenced nearly six decades ago when he was a mere 16-year-old at the Belfast factory, now dedicates his time to the conservation of vintage aircrafts from Shorts, among others. Burrows fondly recollects the lingering smell of oil and grease from the workshop during his tenure in the 1960s and 1970s.
The locality, famous for its triad of heavy industries including shipbuilding, engineering, and linen production, owes a substantial part of its infrastructure to Spirit’s Belfast trade.
“It has been one of the prime sources of employment post World War II,” Burrows shared, underlining that irrespective of who possesses the venture, it is paramount to sustain the aviation industry. Copyright The Financial Times Limited 2024.
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