Visitors pass the Raytheon Technologies Corporation (RTX) logo at the 54th International Paris Air Show at Le Bourget airport near Paris, France, June 22, 2023. Portal/Benoit Tessier/File Photo Acquire License Rights
- Suppliers and airlines warn of hits
- Airbus boss supports GTF engines
- The extent of the quality problem surprises some analysts
Sept 12 (Portal) – Aerospace suppliers and airlines around the world warned of rising costs and a shortage of aircraft capacity after U.S. engine maker RTX (RTX.N) said a rare manufacturing defect could cause it that hundreds of Airbus jets (AIR.PA) will remain grounded in the coming years.
The problem, a rare powder metal defect that can cause cracks in some engine components, is the latest problem for the industry, which has struggled with staff shortages and supply chain problems even as travel rebounded from pandemic lows.
RTX said Monday it will need to pull 600 to 700 of its Pratt & Whitney Geared Turbofan (GTF) engines from Airbus A320neo jets over the next three years for quality inspections.
Shares of the troubled supplier fell 4.6% on Tuesday to a more than two-year low of $73.66, but received support from Airbus CEO Guillaume Faury, who said at an event in Washington DC that the repairs were necessary to ensure safety.
“We don’t like the situation, but we believe it was the right thing to do,” he said, adding that the problems were “very unfortunate.” Airbus said Monday it expects no impact on its 2023 deliveries. Its shares fell 2.4% in Paris on Tuesday.
The engine problem was first disclosed in July, but RTX made the extent of the problem clearer on Monday.
The announcement caused a stir across the industry, from component makers like Japan’s Kawasaki Heavy Industries to airlines like Germany’s Lufthansa that rely on the popular Airbus jets.
The issue could exacerbate the tug-of-war over engines between aircraft factories and repair shops, industry sources told Portal, as repairs took longer to resolve.
The snag could result in an average of 350 jets being grounded per year through 2026, with up to 650 jets idle in the first half of 2024. RTX initially estimated that the repair work would take 60 days per engine, but is now expected to take up to 300 days.
In July, RTX said it found microscopic impurities in a metal powder used in high-pressure turbine discs that are part of the core of the GTF engine. The presence of these contaminants could cause cracks in the engine.
To replace the discs, the engine must be removed, disassembled and reassembled. The affected engines were manufactured between 2015 and 2021.
Shares of RTX, which was formed from the merger of Raytheon and United Technologies in 2020, have lost a quarter of their value since the problem was announced in July.
RTX shares
“When the company first identified the powder metal issue with the GTF engine, we were confident that the issue was relatively well contained based on the data provided,” RBC Capital Markets analyst Ken Herbert said in a note.
“The financial and operational impacts identified are more significant than we anticipated.”
AIRLINES, MANUFACTURER DETAIL HIT
Aerospace suppliers involved in the troubled engine program said the problem would impact their costs. London-listed aerospace components maker Melrose Industries (MRON.L) said it faces a potential loss of around 200 million pounds ($249.2 million).
Japan’s IHI (7013.T) and Kawasaki Heavy Industries (7012.T) said they expect lengthy inspections to hit profits, while Germany’s MTU Aero Engines (MTXGn.DE) warned on Monday of lower profits.
Lufthansa (LHAG.DE) said on Tuesday that the snag will result in the German airline grounding 20 A320neo planes at any time.
Air New Zealand (AIR.NZ), which has 16 A320neo jets in its fleet, said on Tuesday the issue would further reduce engine availability and have a “significant” impact on its schedule from January 2024.
Scoot, a subsidiary of Singapore Airlines (SIAL.SI), said the inspections would affect four of the engines powering its A320neo fleet and could force the company to adjust some of its flights.
On Monday, Hungarian airline Wizz Air (WIZZ.L) estimated a possible 10% drop in capacity in the second half of fiscal 2024.
RTX is one of two manufacturers of engines for the popular narrowbody Airbus A320neo, the other being CFM International, a joint venture between GE (GE.N) and Safran (SAF.PA).
($1 = 0.8026 pounds)
Reporting by Valerie Insinna in Washington, Rajesh Kumar Singh in New Delhi, Abhijith Ganapavaram, Aniruddha Ghosh, Mehr Bedi in Bengaluru; Edited by David Gaffen and Arun Koyyur
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