June 18, 2024

Keeping Media and Government Accountable.

Reduced hours at Spirit highlights need for diversification

Share Now:
Print Friendly, PDF & Email

Many employees at Spirit AeroSystems are being reduced to a 32-hour work week in order to cope with the fallout from the Boeing 737 Max issues according to the Society of Professional Engineering Employees in Aerospace (SPEEA).

Starting Friday June 21, all salaried, managerial and executive employees will work a four-day week with employees given the option to choose Monday or Friday as their unpaid day. This will result in a 20% decrease in pay for impacted employees.

In Spirit’s 2019 Q1 earning review, executives detailed steps taken by the company to mitigate the impact of Boeing’s problems on Spirit. The actions include a hiring freeze, cut discretionary spending, and pause share repurchasing. An upside for Spirit was a 13% revenue increase from 2018 Q1 to 2019 Q1.

However, the impact of these changes on Wichita could cause bigger problems for the local economy as a whole. “These carry over to all the other local businesses,” says Ted Bolema, Executive Director at the Institute for the Study of Economic Growth at Wichita State. “There is an effect that goes beyond the specific industry being affected.”

According to the Alliance For Aviation Across America, aviation contributes $2.3 billion dollars annually from the airports and airfields, and that number excludes Wichita Eisenhower National Airport.

“Wichita is quite heavily dependent on aviation,” says Bolema.

A 2013 study by the Brookings Institute says, “the region can no longer solely rely on the U.S. domestic market or the aviation industry for its wellbeing.”

The Brooking Institute believes a solution to the issue would be focus Wichita’s output to global exports. Specifically, “diversify exports by fostering growth on non-aerospace exports by 30 percent in five years.” Goods make up 90% of the regions export and of those more than half are aviation based. The problems presented by the Boeing 737 Max can directly impact aviation exports.

Aanother potential downside for Spirit could be aviation workers leaving for greener pastures. Given the shortage of skilled workers, any potential downturn could work against Spirit if workers look to other companies in an industry that is struggling to find skilled workers.

“All these businesses are saying they can’t hire people, and yet wages aren’t really going up,” says Bolema. “Something I’ve been mulling is why our labor market is slow to adjust.”

A domino effect from the reduced hours may be in discretionary spending as aviation employees tighten up on impulse buying.

“That does have an economic impact on the retail sector, restaurants and other areas,” says Bolema.

However, the most damaging aspect to the local economy could be perception that this may just be the beginning of larger downturn for Boeing products.

“There can be anticipation of an economic downturn that could be worse than what actually occurs. People worry about how bad the slow-down will be, so they react, maybe while they are still getting income,  because they are anticipating that they … may have financial restraints later so they react immediately,” says Bolema.

The importance to aviation in Wichita is clear, yet the dominance of the industry on the local economy could lead to volatility that the city has no control over. Like Michigan and the auto industry, or the Gulf nations and oil, the dominance of a single industry to make or break a city can have long term consequences that city leaders need to address.

Share Now:
Print Friendly, PDF & Email

Related Articles

Get The Sentinel Newsletter

Support The Sentinel

Donate NOW!