- RTX, an aerospace leader, suffers a 13% share tumble due to a manufacturing problem in some of its popular engines, leading to accelerated inspections on about 200 airplane engines.
- The issue, linked to the powdered metal used in some engine parts, leads RTX to trim its yearly cash-flow outlook by $500 million, impacting airlines already grappling with aircraft delivery delays.
- Competitor General Electric sees a 6% increase in shares following an upward revision of its yearly revenue and cash flow forecast, riding on the back of strong demand for jet engines.
On Tuesday, RTX, a prominent player in the aerospace industry, saw its shares plunge by 13% following an announcement about a manufacturing snag affecting several of its popular engines. The malfunction originates from the powdered metal used to construct specific engine components, a disclosure made during RTX's recent quarterly earnings call. While current engines in production remain untouched, around 200 engines already in use will need fast-tracked inspections.
Formerly known as Raytheon Technologies, RTX has now scaled down its cash flow forecast for the year by a staggering $500 million, bringing it down to $4.3 billion due to this unexpected complication. RTX's CEO Greg Hayes candidly expressed the financial implications during the earnings call, assuring that they will compensate airlines for the disruption they inevitably face.
Airlines are already grappling with delays in aircraft deliveries from manufacturers. This issue adds another layer of complexity as they strive to capitalize on the surging travel boom but are constrained by a limited supply of planes. Pratt & Whitney, a subsidiary of RTX, anticipates an additional 1,000 engines to be recalled from airline fleets over the next nine to twelve months, despite the continuation of new aircraft and parts delivery.
The problem affects some A320neos, a globally favored narrow-body plane that competes with the Boeing 737 Max. The Federal Aviation Administration (FAA) is informed of the problem and is in constant communication with Pratt & Whitney and the affected airlines. Delta Air Lines, a major Airbus client, has stated it is examining the issue, while JetBlue Airways is working with Pratt to assess their fleet's impact.
In the meantime, General Electric, an RTX competitor, saw its shares leap more than 6% on Tuesday after increasing its revenue and cash flow forecast for the year. This rise can be attributed in part to robust demand for jet engines.
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