Boeing is in talks to re-acquire Spirit AeroSystems, the maker of fuselage parts for its troubled 737 Max aircraft, marking a shift in stance regarding outsourcing by the US plane maker.
The reintegration of Spirit into Boeing would address safety concerns, which came to a head on January 5 after an Alaska Airlines 737 Max 9 suffered a door panel blowout, Virginia-based Boeing said in a statement on Friday.
“We have been working closely with Spirit AeroSystems and its leadership to strengthen the quality of the commercial airplanes that we build together. We confirm that our collaboration has resulted in preliminary discussions about making Spirit AeroSystems a part of Boeing again,” it said.
“We believe that the reintegration of Boeing and Spirit AeroSystems' manufacturing operations would further strengthen aviation safety, improve quality and serve the interests of our customers, employees, and shareholders.”
However, Boeing gave no assurance that an agreement will be reached, but stressed that it was “committed to finding ways to continue to improve the safety and quality of the airplanes on which millions of people depend each and every day”.
Kansas-based Spirit confirmed the talks, as well as the uncertainty that a deal will be agreed upon, in a separate statement on its website.
Spirit said that it is “currently engaged in discussions with Boeing about a possible acquisition … no assurances can be given that a definitive agreement will be entered into, that any transaction will be consummated, or the timing, terms or conditions of any such transaction”.
“The Spirit board of directors and management team are committed to enhancing shareholder value and regularly review the company’s opportunities to further this objective.”
A Boeing-Spirit reunion would mark a turnaround for the former, which had relied on outsourcing for the supply of its key aircraft parts.
However, following the Alaska Airlines blowout, Boeing chief executive Dave Calhoun appeared to have changed his stance after the company's fourth-quarter earnings report, seeming to imply that the company may have gone too far with outsourcing.
The company's narrowed its loss to $30 million in the fourth quarter. Its stock, which tumbled after the Alaska Airlines incident, is now down nearly 21 per cent year-to-date.
Boeing's 737 programme is under scrutiny from regulators after the Alaska Airlines blowout. A rush of air blew through the aircraft after the panel broke off, damaging several seats and ripping off the insulation from the plane's walls.
That also caused several 737 planes to be grounded, as scrutiny ramped up from lawmakers, regulators and airlines themselves, as well as claim the job of 737 Max programme boss Ed Clark, who was fired on February 21.
Before the Alaska Airlines debacle, Boeing had urged airlines to inspect 737 Max aircraft for a possible loose bolt in the rudder control system.
Also in January, the US Federal Aviation Administration launched an investigation after a Delta Air Lines Boeing 757 passenger plane's nose wheel fell off and rolled away as the jet lined up for take-off.
All these prompted Boeing to step up inspections for the 737 Max and, along with Spirit, open its factories to airline customers for additional oversight.
Dubai's Emirates, the world's biggest long-haul airline and one of Boeing's biggest customers, had said it will send its own engineers to observe the production process of Boeing's 777 aircraft and Spirit following the latest safety issues.
Emirates president Tim Clark had said that Boeing has let its production standards slip and that it was in the “last chance saloon”, he told the Financial Times.
This week, Mr Clark called for changes at Boeing after the series of technical snags in the past couple of months.
Boeing has been given 90 days by the FAA to come up with a plan to improve quality and meet safety standards.
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War 2
Director: Ayan Mukerji
Stars: Hrithik Roshan, NTR, Kiara Advani, Ashutosh Rana
Rating: 2/5
The President's Cake
Director: Hasan Hadi
Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
Rating: 4/5
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
Results
6pm: Dubai Trophy – Conditions (TB) $100,000 (Turf) 1,200m
Winner: Silent Speech, William Buick (jockey), Charlie Appleby
(trainer)
6.35pm: Jumeirah Derby Trial – Conditions (TB) $60,000 (T)
1,800m
Winner: Island Falcon, Frankie Dettori, Saeed bin Suroor
7.10pm: UAE 2000 Guineas Trial – Conditions (TB) $60,000 (Dirt)
1,400m
Winner: Rawy, Mickael Barzalona, Salem bin Ghadayer
7.45pm: Al Rashidiya – Group 2 (TB) $180,000 (T) 1,800m
Winner: Desert Fire, Hector Crouch, Saeed bin Suroor
8.20pm: Al Fahidi Fort – Group 2 (TB) $180,000 (T) 1,400m
Winner: Naval Crown, William Buick, Charlie Appleby
8.55pm: Dubawi Stakes – Group 3 (TB) $150,000 (D) 1,200m
Winner: Al Tariq, Pat Dobbs, Doug Watsons
9.30pm: Aliyah – Rated Conditions (TB) $80,000 (D) 2,000m
Winner: Dubai Icon, Patrick Cosgrave, Saeed bin Suroor
