Ron Epstein: Maybe the elephant in the room, I’ll just bring it up. People have been sort of beating around it. Is there a fundamental change that you have to make in Spirits business to make it less volatile and just more predictable because it always seems like you guys end up on the tail of the whip, A220, A320, 737, they’re great programs like Michael said, but they don’t seem to be helping you right now, although they’re helping the OEs? You must, I mean, if you can give us some feeling for how you’re thinking about strategy and how you could change Spirit to make it a more — I don’t want to say viable, but less volatile business that the public markets could view easier, right? Because things swinging all over the place. It seems like you guys always end up with the short end of the stick, and that just doesn’t seem fair.
Tom Gentile: So, as I said, it’s a challenging environment right now. And on our narrow-body contracts, we have sole-source life of program and we have great work packages. And those rates are going up. The challenge has really been on some of the wider body contracts and more of the composite programs. So, if you look at the three programs that are in forward loss, the 87, the 350 and the 220, those are all composite programs, and that has been more challenging. We’ve not come down the learning curve as fast as we all thought we would when they first started. And so we do need to have the conversations about how we address that given the inflationary environment that we’re in. But let me see, you said, what can we do to improve and change fundamental changes in Spirit.
A lot of it is in our production system. And these are investments we’ve been making over the last three, four years during the pandemic to improve the flow of our factories, improve digitization and automation and robotics and drive quality in a much more fundamental way. And those are going to start to pay dividends as we go up in rate. So you will see that. The other broader thing, I would say, you said about strategy is when we went into the pandemic, we were too concentrated. We were 95% commercial. We were 98% original equipment. We were about 75% Boeing and 50% of our revenue came from MAX. We were too concentrated. And so we’ve made a concerted effort over the last four years, including during the pandemic, to start to diversify. And that diversification, a big part of it was the acquisition we made from Bombardier in Belfast, Morocco and Dallas to give us more Airbus content, to give us twice as much aftermarket and four times as much business yet.
And so the diversification will start to pay dividends over time. As we’ve said, we want to be $1 billion in defense by 2025. We want to be $500 million in aftermarket by 2025. And so those are some of the things that we’re doing to fundamentally change Spirit is improving the factory and delivering productivity through all of the different advanced manufacturing initiatives. I said, having discussions with the OEMs about the composite programs and the material system and the challenges that we’ve incurred over time and then continuing the diversification of Spirit so that we’re less concentrated in the future with a broader exposure to Defense & Space as well as aftermarket.
Ron Epstein: And I mean, if I may, as a follow-on. When we look at Belfast, specifically, has that created any value, I mean to this point? And when would you expect it to do so?
Tom Gentile: It’s where we expected it to be. Rates are a little bit lower, and that’s driven some of the forward losses. But when we did the program, we knew it was going to be a challenge. We took a purchase accounting charge of about $375 million through 2025. And we expected that the rates would get up to 14 or 15 by the middle of 2025. Now, that could get pushed out, but that’s still what Airbus is saying. The A220, we think, is a great program. It is 100 and the 300 right now take it from about 100 passengers up to 150 passengers. It’s got a brand-new engine and a geared turbo fan. It’s a lightweight fuselage, and it’s a fully composite wing, all of which we make. And so it is a very efficient aircraft. The airlines do like it.
I know it’s had some operational challenges, which they’re working through and they’ll get that right. But it’s a great program. And someday, they might extend it up to 500, which would take it up to 170 passengers, which would increase the rate even further. So, we made a big bet on the A220 program. We’re happy with that bet. We think it’s a great strategic program. It’s taking a little bit longer to realize. But in the long-term, it was a good strategic move. We’re happy we did it. It’s going to help diversify Spirit because in addition to the A220 program that we got out of Belfast, we also doubled our aftermarket, and we got four times the amount of business jet work. So we think it was a good deal and it will pay off in the long-term.
Ron Epstein: Got it. Thank you.
Operator: Our final question comes from Peter Arment of Baird. Peter, the line is yours.
Peter Arment: Thanks. Good afternoon. Mark, maybe I’ll just try to end on a positive note, aftermarket mix or the margins where it was very strong this quarter. Just any one time to call out? Or was it just mix and how sustainable is it? Thanks again Mark.
