And so that will also put a little bit of pressure on the system. And it’s kind of a version of the 10. And so that creates another minor model mix, let’s say, so some additional complexity. But the capital is in place to get up to rate nine as Airbus is expecting, and we just need to start hiring the people at the right time period so that they’re ready to meet those rate increases.
Doug Harned: Well, should we expect and we shouldn’t expect any additional capital investment requirements. But next year, just trying to dimension the pressure that this ramp-up from a staffing standpoint, what is that going to suggest in terms of just pressure on your margins and cash next year?
Tom Gentile: Yes. Well, since both of those programs are in forward loss, that’s the normal type of pressure. We’ve built into our projections in the out years, the increase in head count to support higher rates, but you also get the benefit when you have higher rates, of course, of better fixed cost absorption. And so that will be an offsetting benefit. But I’ll just get back to what I said a little bit earlier, when Seth asked the question about the forward loss charges, is this is an industry-wide problem and in a kind of a very high demand environment, which also has supply constraints, it’s important that all the suppliers are healthy and suppliers are incurring higher levels of cost on inflation and material as well as labor, logistics and utilities. And these do have to be addressed in the long-term, and these are the conversations that we’re having with our OEM partners.
Doug Harned: Okay. Thank you.
Tom Gentile: Thanks Doug.
Operator: Next question comes from George Shapiro of Shapiro Research. George, the line is yours.
George Shapiro: Yes, good morning. Mark, just a clarification. The $80 million you said was an average. I mean, if I look at the wage changes, they go up like 11% from 2023 to 2025. So, I just assume that, that $80 million was really like a 2024 number, forgetting the people you got to hire. That was just kind of the average wage per individual, right?
Mark Suchinski: Yes, it’s about right, George.
George Shapiro: Okay. And then one other quick clarification. What is different between the agreement you have on the advance from Boeing versus Airbus that lets Airbus be counted as free cash flow and Boeing is financing?
Mark Suchinski: Sure George. So, the main fundamental difference between the $180 million advance from we got from Boeing and the $100 million from another customer is the Boeing Advance is paid to us. We’ve collected that money and we make a one-time payment to Boeing in the first quarter of 2024 of $90 million, just the payment to them like paying back a bank, and we do that in 2025. The other customer wanted its structure differently at the end of the day for their own reasons. And so we’re paying that one back in a per ship set quantity in 2025. So, essentially, we’re paying it back in 2025. So, I think the other way you can look at it, it’s a prepayment that we received $100 million against deliveries that we’re making in 2025 and so from an ASC 606 accounting standpoint, that results in us — that requires us to treat that as in cash from operations as an advance and so again, it’s really more of a technical accounting item.
It’s — at the end of the day, it’s not operational, but technical accounting wise, it results in us having to have to treat it in 2023 as favorable to free cash flow and in 2025, that will be a negative impact to free cash flow in 2025.
George Shapiro: Okay, very clear. Thanks very much.
Mark Suchinski: Thanks George.
Operator: Our next question comes from Cai von Rumohr of TD Cowen. Cai, please go ahead.
Cai von Rumohr: Yes, thanks so much. So, two questions on cash flow. First, while the 737 build is a big plus, the 787, A350 and 220 are basically losers. So, as those rates build, what is the incremental build in terms of the forward loss burn off? And then secondly, because you have the Boeing repayments are below the line, will you be able, over the period, 2024 and 2025 to reduce your debt?
