RTX engine issue will ground 350 A320neos through 2026

By Valerie Insinna and Abhijith Ganapavaram

(Reuters) -Aerospace supplier RTX said on Monday that an average of 350 Airbus A320neos will be grounded through 2026 as its Pratt & Whitney engines unit removes geared turbofan engines (GTF) for quality checks.

As the result of a materials defect that could lead to the cracking of certain engine components, which RTX first described in July, RTX now estimates it will pull 600 to 700 engines off jets for inspections and take $3 billion charge in the third quarter, said RTX, formerly Raytheon.

European low-cost airline Wizz Air said Monday its initial estimates indicate capacity could be reduced 10% in the second half of 2024 as a result of the GTF issue.

Repair work, which RTX CEO Greg Hayes initially expected would take 60 days, is now expected to last up to 300 days per engine, with the majority of engine removals occurring in 2023 and early 2024.

The issue is the latest headwind for the beleaguered GTF engine, which has been plagued by durability problems that have forced airlines to ground jets.

The company anticipates up to $3.5 billion pre-tax hit to its profit over the next several years as a result of the problem. The issue also forced RTX to lower its $9 billion free cash flow goal for 2025 to approximately $7.5 billion, and it decreased its projected reported sales figured for 2023 by $5.5 billion.

RTX shares hit an over two-year low of $78.80 in early trade. Airbus shares were down 1.3%.

German partner MTU Aero Engines, which controls 18% of the GTF program, warned its own revenues and profit could be impacted this year, adding it was too early make a precise assessment.

Hayes acknowledged on a call with investors that the problem “will have a significant impact on our customers,” with executives stating that the company will financially compensate impacted carriers.

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 the company’s 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 said he is “confident” that the problem is resolved.

The company expects to release a service bulletin in the next 60 days laying out an inspection protocol for high pressure turbine disks and compressor disks, and will replace as many disks as possible during shop visits, executives said.

Robert Stallard, an analyst with Vertical Research Partners, said the charge “is larger than expected.”

Pratt & Whitney is analyzing the impact of the quality issue on other engine model, but that impact is expected to be far less, RTX said. Hayes said the issue is not expected to result in additional inspections for F-35 engine, which is also made by Pratt & Whitney.

Airbus did not immediately respond to a request for comment.

(Reporting by Valerie Insinna in Washington, Abhijith Ganapavaram in Bengaluru, Tim Hepher in Paris; Editing by Arun Koyyur and Nick Zieminski)