RTX Corp.’s plan to address the latest flaw in its marquee commercial jet engine will ground hundreds of Airbus SE A320neo aircraft over the next three years, a fresh source of disruption to global airlines’ post-pandemic recovery.
Shop visits for accelerated inspections and repairs to key components in Pratt & Whitney’s geared turbofan engine made from tainted metal powder will take up to 300 days each to complete and result in an average of 350 aircraft being parked per year through 2026, peaking at about 650 planes in early 2024, RTX executives said Monday on a call with analysts.
The fallout highlights the sweeping impact to the global fleet from the latest problem with Pratt’s geared turbofan engine, one of two power plants offered on the top-selling Airbus A320neo family of aircraft. That may complicate efforts by airlines to increase capacity and flight service to meet steady post-Covid lockdown demand for travel.
RTX cut its full-year sales outlook and will take a roughly $3 billion charge in the third quarter tied to the plan to address the flawed parts, which will involve compensating airlines for the disruption to their operations.
The company now expects reported sales in a range of $67.5 billion to $68.5 billion it said in a statement Monday. An earlier forecast called for adjusted sales of $73 billion to $74 billion, compared with an average analyst estimate for $73.6 billion.
Pratt, a unit of aerospace giant RTX, said in July that 1,200 GTF engines must be removed and inspected over the next 12 months. That came after the company discovered contamination in the powdered metal used to manufacture high-pressure turbine discs could shorten their life span.
The company now says between 600 to 700 engines must be removed for maintenance through 2026 beyond what the Pratt & Whitney jet-engine unit had earlier planned for.
The impact to RTX’s pretax operating profit will be as much as $3.5 billion over the next several years, the company said.
Shares of the company fell 5.4% to $78.95 at 9:41 a.m. in New York.
Vertical Research analyst Rob Stallard said the $3.5 billion financial hit was larger than feared, after the company earlier estimated that the first 200 engines needing inspections would reduce free cash flow by $500 million this year.
“We think investors are likely to remain a little wary of the RTX stock, as the industry’s track record of dealing with execution issues has not been great in recent years,” he said in a research note.
MTU Aero Engines, which is a partner on the GTF engine, said in a separate statement that it expects a €1 billion impact on its earnings before interest and taxes in the current financial year. It also expects an impact on its liquidity in the financial years from 2024 to 2026.
RTX has said the first 200 turbines will need accelerated removals by mid-September.