The warning comes on top of a spate of durability problems
for Pratt & Whitney's Geared Turbofan series, which RTX -- then named
Raytheon -- acquired through an industry merger in 2020.
In July, RTX said a rare powder metal defect could lead to
the cracking of some engine components and called for accelerated inspections
affecting 200 engines by mid-September.
On Monday, it said it now estimates it will have to pull a
total of 600 to 700 engines off their Airbus A320neo jets for lengthy quality
inspections between 2023 and 2026.
Repair work that CEO Greg Hayes had initially expected would
take 60 days is now projected to last up to 300 days per engine. An average of
350 jets could be grounded per year through 2026, with as many as 650 jets
sitting idle in the first half of 2024.
RTX shares fell 7.9% in late trading to $76.89 after hitting
a low of $76.71. In Paris, Airbus shares fell 1.3%.
Pratt & Whitney competes with GE-Safran joint-venture
CFM to power the A320neo series, which competes with the exclusively
CFM-powered Boeing 737 MAX.
Disclosing higher-than-expected gross costs of $6-7 billion
for dealing with the problem, RTX said it expected an up to $3.5 billion
pre-tax hit to profits over the next several years.
It lowered its $9 billion free cash flow goal for 2025 to
approximately $7.5 billion, and decreased its projected reported sales figure
for 2023 by $5.5 billion.
German partner MTU Aero Engines, which controls 18% of the
GTF program, said it might have to bear 1 billion euros in extra costs but that
it was too early to say how this year's financial goals would be affected.
Speaking to analysts, Hayes acknowledged the problem
"will have a significant impact on our customers."
Some have already been forced to park their A320neo-family
jets to wait for spare engines following durability problems.
Hungary's Wizz Air, one of Europe's largest lost-cost
airlines, estimated that its capacity could be reduced by 10% in the second
half of 2024 by the powder issue.
Germany's Lufthansa, which was first to introduce the GTF
engine series, said it was evaluating the situation.
AIRBUS KEEPS DELIVERY GOAL
Of U.S. carriers, Spirit Airlines, JetBlue Airways and
Hawaiian Airlines have the largest exposure to the GTF problem, according to
Jefferies. None of the airlines responded immediately to a request for comment.
Robert Stallard, an analyst with Vertical Research Partners,
said the RTX charges were larger than expected.
Airbus said the problem is not expected to impact 2023
deliveries or the planned production ramp-up in 2024.
Industry sources said the new checks could exacerbate a tug
of war for engines between airplane factories and repair shops, as airlines
clamor for engines to be diverted from assembly lines and made available as
spares to keep existing jets flying.
Already grappling with fractured supply chains, Airbus has
so far been reluctant to soften delivery targets in order to release engines to
the spares pool.
The quality issue relates to a "rare condition" in
powder metal used to manufacture engine parts, such as high pressure turbine
disks and high-pressure compressor disks, that could result in micro-cracks and
fatigue.
During a production ramp up in 2015, a microscopic
contaminant was introduced into the powdered metal made by RTX subsidiary HMI
in Clayville, New York, which could not be detected by previous inspection
methods, Hayes said.
"At last count there have been nine changes to the
process to ensure the purity of the powder," said Hayes who added he is
"confident" the problem is resolved. -Reuters
