WASHINGTON — Kansas-based Spirit AeroSystems, which spun off from Boeing in 2005, has long been a key manufacturer and supplier of structural components for aircraft comparable to Boeing’s E-7 Wedgetail and P-8 Poseidon, Northrop Grumman’s B-21 Raider, struts and nacelles for Boeing and Rolls Royce’s re-engining of the B-52 Stratofortress, and Bell’s V-280 Valor helicopter.
Within the words of Joshua Boehm, Spirit AeroSystems’ vp of business development and strategy for defense and space, that “bread and butter” work is the corporate’s largest area of business.
Spirit’s place within the defense industry is growing. In 2021, the corporate cracked the Defense News Top 100 for the primary time, on the 99th spot. It dropped off the list in 2022, but this 12 months returned in 86th place, buoyed by 11% growth that brought its fiscal 2022 defense revenues to just about $650 million.
But Spirit is setting its sights even higher. In earnings calls with investors this 12 months, company executives set a goal of hitting $1 billion in defense revenue by 2025. To try this, the corporate is reaching beyond its legacy business activities to broaden work in five growth areas: hypersonics, unmanned aerial systems, next-generation effects, next-generation aircraft and space.
Boehm spoke to Defense News in an Aug. 30 interview concerning the role acquisitions and a change of focus play in Spirit’s path to that revenue figure, and why, despite its goals of expansion, the corporate isn’t competing for a spot amongst the most important prime contractors within the defense industry. This interview was edited for length and clarity.
Spirit AeroSystems saw an 11% growth in defense revenue in FY22 to about $650 million. Your goal of hitting $1 billion by 2025 is a rise of greater than 50%. What makes you’re thinking that that goal is achievable, and the way will the corporate reach it?
In the primary half of 2023, we’re about 29.5% growth 12 months over 12 months. That could be very strong growth. We expect our defense and space business to grow around 20% this full 12 months. We proceed to take a look at the pipeline of latest programs beginning — particularly because it pertains to a few of our classified work, other customer proprietary information — and we’re really enthusiastic about those latest projects kicking in and the acceleration of all these pipeline opportunities which are getting pulled forward.
Our CEO is on the record at our last earnings call saying that we’re on a path to $1 billion by 2025, and everybody is standing by that number.
What’s in the brand new pipeline?
We’ve got three different buckets: Ones that we will speak about publicly; classified programs, which obviously we will’t speak about; and an entire bucket we consider to be customer proprietary that, though it’s not classified in nature, we cannot make any statement about. We’re seeing growth across all those three areas.
Just a few years ago, once we checked out the composition of our defense business, it was primarily crewed aircraft. What you’ve seen within the last couple of years is a dramatic expansion of things like hypersonics, for instance, and an actual robust set of plays around not only boost glide — we’re one in all the major suppliers on the Common-Hypersonic Glide Body thermal protection system. But we’re also seeing some really positive movement in our business efforts with respect to air breathers, in addition to on the defensive side of the home.
What you’re going to see on this hypersonics area is a fairly rapid acceleration in sales, not only across our existing business base on boost glide systems, particularly the Common-Hypersonic Glide Body, but in addition in other areas.
On unmanned aircraft systems, we had virtually no work on this space just two years ago, and that’s changing pretty rapidly. You’re going to see a really significant acceleration of company revenue on this area in the subsequent couple of years.
The third area’s around space. You possibly can’t speak about national defense without having some discussion around space since it’s a critical enabler to so a lot of our national defense missions and assets. We’ve seen lots of acceleration of proposal activity within the last three months on this area.
On next-generation effects, this has probably been my best surprise with respect to the quantity of latest work that we’re winning on this area, particularly because it pertains to missile system development and missile defense interceptors.
After which finally, our manned aircraft program is our bread and butter. That continues to be the realm where we have now the most important pipeline focus.
What work is Spirit doing on the Common-Hypersonic Glide Body thermal protection system? How did your 2020 acquisition of Fiber Materials aid you crack the hypersonic market?
We make three of the major six components of the thermal protection system: the nose tip, the nose tip extender and the strakes. We’re currently a supplier to [Leidos subsidiary] Dynetics, who’s the prime for the Common-Hypersonic Glide Body. We’re currently producing two, what we call, birds per thirty days, [or about 24 sets of those three components per year]. But we have now the capital and facilities without delay to extend production to roughly 50 all-up round units this this 12 months. We’re well positioned for what we expect is an impending production contract that might be awarded by the Army to assist serve Dynetics and make them successful because the prime in that area.
We’re producing high-quality carbon billets, densifying them and shipping them to Dynetics for integration into the common hypersonic glide products for which they’re the prime. That’s all done out of our facility in Biddeford, Maine; it’s the legacy Fiber Materials business, [which specialized in creating high-temperature materials and composites for defense programs, particularly hypersonic missiles].
That acquisition gave us access to a component of the market where, had we not done this acquisition, we’d be looking from the surface. Our relationship with key decision-makers and influencers within the Pentagon has exploded because of this of that acquisition.
At what point did Spirit AeroSystems consciously set a method to focus on the UAS, hypersonics and space markets along with your legacy aircraft work?
It was April 2021 when all the highest leaders and defense and space business and across the business side laid out our vision for growth. Ultimately, it was the appliance of our core capabilities: What we do very well is design and construct. We’re less enthusiastic about doing what we might call “construct to print” work, where we get a set of specifications from the prime contractor and we construct to those specs.
We’d wish to goal our work where we could work in partnership with our primes and help customers improve and iterate designs based on a set of necessities. This whole notion really drove us into these five different market areas. They’re all hot spots out there which are going to proceed to endure and receive priority from the federal government in any variety of environment. There’s bipartisan support for all of those different programs.
What role does the acquisition of the E-7 by the U.S. and the U.K. play in Spirit’s expansion?
It’s a smaller part. We’ve got a really robust business derivatives business for the P-8 and within the KC-46 [Pegasus refueling tanker] that we supply on to Boeing.
We’re performing some “construct to print” work without delay [on the E-7, P-8 and KC-46] where it makes strategic sense for us to accomplish that. But at the top of the day, our strategy is around higher-value design work.
What makes designing and constructing unique products higher for your small business than the “construct to print” work? Is it since it’s more interesting to your engineers, since you’re in a position to put more of Spirit’s own stamp on it, or since it’s more lucrative?
The entire above. We get enthusiastic about opportunities where we will help improve and iterate existing systems. We’re pleased to do “construct to print” work where it suits our strategy or we have now existing programs in place. We’re at all times going to proceed to try this work as long as it stays viable for us. We get excited where we will roll up our sleeves, sit down with the prime contractor, and really take into consideration ways in which we will improve and iterate their design.
Spirit’s business model now focuses on constructing components and structural systems that you simply then supply to primes. Do you envision a future where Spirit makes a play to compete for those prime contracts, where you bid on and design a system from start to complete?
No. We need to make our customers successful. We’ve got one policy without delay: We will not be going to compete against our customers. There is perhaps an instance where we compete on a small contract that’s so low value that it’s noise for these prime firms. But there’s not going to be a scenario where we’re going to try to construct our own aircraft or our own missile. We need to make our teammates successful, and we’ve got a extremely great area of interest out there doing that. It’s just not in our DNA to wish to pursue a market position like that.
It’s a core strategy. We’ve got a fairly lean staff here. We’re very efficient in our use of resources and the way we bid. I get lots of bang for my buck as a tier one supplier. To maneuver up the chain and take a look at to compete against the primes — that’s a completely different infrastructure that’s required, comparable to research and development in addition to capital.
About 20% a 12 months growth is what we’re expecting and is impressive by any metric. I’m not saying we’re going to hit 20% yearly, but we’ve got a really strong pipeline and a really strong pathway to continued growth by just doing what we’re doing with the strategies, market positions and core capabilities we have now without delay.
Stephen Losey is the air warfare reporter for Defense News. He previously covered leadership and personnel issues at Air Force Times, and the Pentagon, special operations and air warfare at Military.com. He has traveled to the Middle East to cover U.S. Air Force operations.