September 2, 2009

Are production rate cuts to come for Wichita's largest employer? Spirit's chief executive tells investors that lower rates are a 'probability.'

Spirit's CEO Jeff Turner says he remains bullish about the long term prospects of the airline industry. However, he says there is a probability of lower production rates in the next couple of years.

"My favorite saying these days is, 'flat is the new up,'" said Spirit's Jeff Turner at a Morgan Stanley conference in New York. He says there's less demand for Boeing and airbus planes Spirit builds components for.

"My personal forecast is ... there's a little bit less demand than the current production levels," said Turner

Earlier this year, Boeing adjusted production rates for their wide body, twin aisle planes, 747 and 777. But Boeing left the production rate the same for the 737 jetliner, at 31 planes a month.

That's important to Wichita's Spirit Aerosystems because it supports so much work in the area. But Turner indicated to analysts he's not certain that rate can be sustained in this economic environment.

"I think the probability, in the next couple of years, is we're going to see lower rates."

But for now, Boeing's production rates remain stable, and Turner is prepared to be wrong in his assessment. And Turner says Spirit is also positioned to grow and capture new business when the next up cycle comes.

"Fundamentally I'm a bull on this market long term. And i think it's important for Spirit to have good programs, which we do... and capacity and the capability to add to that capacity when the customer demand is there. And i think it will be," said Turner.

There won't be any rate cuts for the time being. However, Spirit is outsourcing some of its information technology work to IBM. Today, 37 spirit direct employees and 15 contractors learned their jobs will go away October 2nd. That's out of a department of 455 Spirit employees. Spirit spokeswoman Debbie Gann says it's a business decision and not made because of the current economy.