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RTX warns of $3 billion charge in Q3 due to engine issue By Reuters


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© Reuters. FILE PHOTO: Visitor passes the Raytheon Technologies Corporation (RTX) logo at the 54th International Paris Air Show at Le Bourget Airport near Paris, France, June 22, 2023. REUTERS/Benoit Tessier/File Photo

By Valerie Insinna and Abhijith Ganapavaram

(Reuters) -Aerospace supplier RTX said on Monday 600 to 700 geared turbofan engines (GTF) powering Airbus A320neo jets will have to be removed for quality checks, resulting in a $3 billion charge in the third quarter.

RTX, formerly Raytheon (NYSE:), 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 decrease its $9 billion free cash flow goal for 2025 to approximately $7.5 billion.

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.

Shares of the company, whose GTF engines power about half of Airbus A320neo fleet of jets, fell 4.1% before the bell.

“The accelerated removals and incremental shop visits will result in higher aircraft on ground,” RTX said in a statement.

The company expects to record about $3 billion in pre-tax charge in the third quarter, after partners’ share of charges.

Pratt & Whitney is also analyzing the impact of the quality issue on other engine models in its fleet, but that impact is expected to be far less, RTX said.

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. It also plans to add maintenance capacity and increase part output to help mitigate the impact to GTF customers, RTX, said.

Airbus did not immediately respond to a request for comment.

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