Spirit AeroSystems reports that it received a letter from Boeing on June 4 directing it to pause additional work on four 737 MAX shipsets and avoid starting production on sixteen 737 MAX shipsets to be delivered in 2020.

The instruction reflects revised near-term delivery schedules relating to Boeing's customers' needs in light of COVID-19's impact on air travel and airline operations, and is intended to mitigate the expenditure of potential unnecessary production costs.

Based on the information in the letter, subsequent correspondence from Boeing dated June 9 and Spirit's discussions with Boeing regarding 2020 737 MAX production, Spirit believes there will be a reduction to Spirit's previously disclosed 2020 737 MAX production plan of 125 shipsets. Spirit does not yet have definitive information on what the magnitude of the reduction will be but expects it will actually turn out to be more than 20 shipsets.

"The 737 MAX grounding coupled with the COVID-19 pandemic is a challenging, dynamic and evolving situation," Spirit says. "During this time, Spirit plans to work with Boeing to determine a definitive production plan for 2020 and manage the 737 MAX production system and supply chain."

As a result Spirit has elected to place certain Wichita hourly employees directly associated with production work and support functions for the 737 MAX program on a 21 calendar day unpaid temporary layoff/furlough, and will declare an immediate reduction of the hourly workforce in Tulsa and McAlester, OK.