Spirit Aerosystems Holdings, Inc.

Good morning, and welcome, ladies and gentlemen, to the Spirit Aerosystems Holdings, Inc., second quarter 2021 earnings conference call. My name is Grant, and I'll be your coordinator today. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I'd now like to turn the presentation over to Aaron Hunt, Director of Investor Relations. Please proceed.

Thank you, Grant, and good morning, everyone. Welcome to SPIRIT's second quarter 2021 earnings call. I'm Aaron Hunt, Director of Investor Relations, and with me today are SPIRIT's President and Chief Executive Officer, Tom Gentile, SPIRIT's Senior Vice President and Chief Financial Officer, Mark Suchinski, and SPIRIT's Executive Vice President and Chief Operating Officer, Sam Marnick. After opening comments by Tom, Sam, and Mark regarding our performance and outlook, we will take your questions. Before we begin, I need to remind you that any projections or goals we may include in our discussion today are likely to involve risks, which are detailed in our earnings release, in our SEC filings, and in the forward-looking statement at the end of this web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of non-GAAP measures we use when discussing our results. And as a reminder, you can follow today's broadcast and slide presentation on our website at investor.spiritarrow.com. With that, I would like to turn the call over to our Chief Executive Officer, Tom Gentile.

Thank you, Aaron, and good morning, everyone. Welcome to SPIRIT's second quarter earnings call. We are pleased to see signs of recovery in global air traffic. The U.S. air travel recovery has been strong and has come back faster than some expected. TSA traveler throughput has exceeded 2 million passengers on multiple days during the past two months, and some days in July where passenger screenings exceeded the 2019 levels. A recent International Air Transport Association report indicates domestic passenger market show improvement. but with demand still down 22% versus June 2019 levels. The situation remains dynamic. We are monitoring the most recent reports of a spike of COVID-19 cases and what impact this may have on air traffic recovery. However, the upward momentum of domestic air traffic over the past few months is an encouraging trend for our industry. We are pleased to see the rebound of demand for the MAX and the news of large orders from United, Southwest, Alaska Air, and Ryanair. Ryanair took delivery of its first 737 MAX 8200 and had positive feedback. With 85% of Spirit's backlog associated with narrow-body aircraft, we believe we are well-positioned to benefit from this domestic air traffic demand and narrow-body recovery. In the first half of this year, we delivered 64 737 shipsets compared to 37 in the first half of last year, a 73% increase. We are also on track to deliver about 160 shipsets this year, a 125% increase over the 71 we delivered in 2020. As we have discussed before, we are trailing Boeing in terms of 737 production rate to burn off the inventory of stored shipsets in Wichita and Tulsa. This quarter, for example, we delivered 35 units but shipped 42 to Boeing. We currently have about 125 units in storage, all of which Boeing owns. We expect stored units will decrease to about 100 ship sets by the end of the year. Our plan is that we will reach 20 stored units by the end of next year, which will remain as a permanent buffer to cushion the production system. Turning to the 787 program. As a result of our ongoing engagement with Boeing, we identified an additional fit and finish issue in the forward section of the fuselage. This issue is related to a part that Spirit receives from one of our Tier 2 suppliers, and we are working with Boeing and the supplier on a resolution. We continue to coordinate with Boeing to ensure that we are performing all necessary rework. Primarily driven by this issue, we have recognized a $46 million forward loss on the 787 program. Despite this forward loss, we are maintaining our free cash flow target of negative $200 to $300 million, as indicated on our last earnings call. This amount is net of the $300 million cash tax benefit, which we expect to receive in the second half of this year. Next, I would like to highlight the fact that we published our first sustainability report in June, outlining SPIRIT's environmental, social, and governance strategy. The report also includes a few of our notable 2020 achievements. For example, by the end of this year, we intend to be 100% wind-powered at our Wichita facilities. Now our Chief Operating Officer, Sam Marnick, will take you through updates on our acquisition integrations. Sam?