But the big benefit here is it’s a combination of tooling and capital that Boeing is going to pay for. They’ve given us an advance in the fourth quarter and some funding in ’24 and a little bit in ’25, and that’s going to result in us spending higher CapEx in ’24 and ’25 to reflect the new models and the adjustments we need to make in the production system. So there is a benefit to Spirit. It’s going to be a little lumpy when the receipts come in and when the funds go out. But we think our Boeing customer, they’re making the actual capital investment themselves. And so we appreciate that. So really, that’s in a nutshell. It’s a nice little benefit, although it’s cash neutral, it is a benefit to Spirit.
Operator: Our next question comes from Michael Ciarmoli from Truist. Please go ahead.
Michael Ciarmoli: Hey, good morning, guys. Thanks for taking the question. Pat or Mark, just on the MOA, can you maybe help us out or give us a little bit more detail? Obviously, you kind of cotriangulate where the 787 deliveries are going to be this year. You got the $60 million revenue increase. I mean, was that all pricing? And should we assume that’s kind of maybe rough $2 million per unit pricing? And then you kind of said not going to be margin positive for ’25. I guess the reversal of the amortization looks to be an additive, but I think you’re still paying back from the existing MOU, the 450,000. Can you just help us bridge some of those moving pieces so we can get a better expectation on 787?
Mark Suchinski: Yes. Sure, Michael. I’m not going to comment specifically on what the price increase is per unit. But I think the — what you should take from the agreement is we’re reversing forward losses where previously in the future, our cost was higher than our price. So when you reduce a forward loss, right, and the cost forecast is unchanged, it’s a pricing benefit. So those losses or those cash losses that we would book in the future, we’re reversing those because those no longer exist. And then when we talk about when we get to positive margins on that program, we’re at 4, 5 a month, moving to seven a month. So it’s going to take us a little time to absorb some of that overhead and get the full benefits of the pricing agreement.
And so when we look at the early part of 2025, we’re going to be at a higher rate than we are right now. And based on the price we’re getting paid per unit and what our cost projections are, we talked about being positive margins, and we expect that to be a benefit on an ongoing basis. So again, I don’t want to get into specifics about how much we got paid, but it’s a big, big deal to Spirit. We’re at the point now where we were in a loss position since essentially the inception of the program. And here in short order, our cash and the revenue will be higher than our cost, and it will be a cash positive program for us. And so a good thing for us as that program starts to go up and right here over the next 12 to 18 months.
Operator: Our last question today comes from Kristine Liwag from Morgan Stanley. Please go ahead.
Kristine Liwag: Hey, Pat and Mark, the MOA with Boeing clearly signaled to Spirit equity and bondholders your strategic importance to Boeing. I mean that said, operations continue to get worse with the forward losses and the negative cumulative catch-ups, even in defense. So from your conversations with Boeing, to what degree does Boeing’s financial support extend? And can Boeing step in to explicitly help underwrite the refinancing of the 2025 maturities?
Mark Suchinski: Good morning, Kristine. An interesting question. And we do thank our big customer for the agreement that we have in place, and we think it’s — they deemed it as a win-win. I wouldn’t view it as charity. I think we perform a great service to our customers. I think we do a great job performing on their programs. And so overall, it’s — they describe it as a win-win. And we view it as a win-win. As it relates to refinancing strategies, as I’ve said before, we have access to the capital markets. We don’t need Boeing to underwrite us as we think about our strategies around upcoming maturities. And I would just kind of leave it at that.
Kristine Liwag: Great. And if I could do a follow-up. When we factor in the current inflation environment, the higher labor costs, in the pricing step down for the 737 come 2026, what should margins for the program be for the 737 at that point? And how would that compare to where we were around the 2019 levels?
Mark Suchinski: Yes. Hey Kristine, I’d just say this, hey, before we jump to 2026, let us get through 2023 and have a good, robust discussion with you in February about 2024. We’ll have those discussions in good time.
Operator: This concludes today’s conference call. Thank you all very much for dialing in, and have a wonderful day.
