RTX, a leading aerospace and defense company, announced on Monday that it will face a significant financial impact due to an engine manufacturing flaw affecting Pratt & Whitney’s GTF engines. This flaw has necessitated accelerated inspections, leading to a loss of $3 billion in pretax results for this quarter. As a result, shares of RTX fell in premarket trading.
The problem lies in the powder metal used to manufacture a number of Pratt & Whitney GTF engines. This issue has forced the early inspection of hundreds of engines, causing airlines to lose access to some of their aircraft during the ongoing rebound in travel following the COVID-19 pandemic.
RTX stated that they now anticipate the need to remove approximately 600 to 700 engines for shop visits by 2026, exceeding their initial projections. These engines are primarily utilized to power popular planes like the Airbus A320neo.
Despite the financial setback, RTX has maintained its adjusted earnings estimates of $4.95 to $5.05 per share for 2023. However, the company anticipates a $1.5 billion hit to cash flow in 2025, increasing the estimate to $7.5 billion from the previously projected $9 billion.
The total cost associated with addressing this issue is expected to reach up to $7 billion. Pratt & Whitney, holding a 51% share in the GTF PW1000 engine program, will share the financial burden.
RTX’s announcement has brought attention to the potential impact on airline operations and the aerospace industry as a whole. The grounding of aircraft for inspections, combined with the costs associated with remedying the manufacturing flaw, could further strain an industry still recovering from the COVID-19 pandemic.
Investors will be closely monitoring RTX’s ability to mitigate the financial impact and address the manufacturing flaw promptly, as well as its implications for the aviation sector.