Recall of Jet Engines Hits Airbus And Sinks RTX Stock.

"Hundreds of Airbus jetliners will require inspections over a new problem with their Pratt & Whitney engines, adding another potential airline disruption in coming months.

Pratt's parent, RTX, said recently discovered contamination in the metal used to make some engine parts required the Airbus A320neo planes to be inspected to check on whether repairs were required.

The contamination could cause cracks to form in critical engine parts. The new problem exacerbates the shortage of new, fuel-efficient engines that has sidelined dozens of Airbus and Boeing jetliners worldwide after parts wore out faster than expected.

The recall isn't expected to have an immediate impact on travel because only a fraction of the engine fleet that has flown the most will be inspected over the next six weeks.

The level of disruption will depend on the results of the checks and the time taken for any fixes. The company expects the extent of the potential problems to become clearer over the next six weeks

U.S. airlines that have operated the affected engines include JetBlue Airways, Spirit Airlines and Hawaiian Airlines, according to aviation data tracker Ascend by Cirium.

RTX, formerly known as Raytheon Technologies, had hoped by the end of the year to more than halve the 8% of the A320neo fleet that is grounded by existing durability problems. "This is going to throw that out the window," RTX Chief Executive Greg Hayes said.

Hayes said he learned of the new problem on July 14, and the decision to accelerate inspections was made on July 18, triggering calls to customers.

"If we didn't address this, there was risk out there," he said. "You can imagine what the calls were like."

Pratt & Whitney's Geared Turbofan, or GTF, engine has required more maintenance than expected since it was introduced in 2015, RTX said. Worst affected have been engines used in hot climates such as India or the Middle East.

The latest problem wiped around $14 billion on Tuesday from the market value of RTX. The shares closed down 10% at $87.10 as the recall overshadowed consensus-beating profits in the second quarter and stronger guidance for full-year sales.

RTX, which was formed from the 2020 merger of Raytheon and United Technologies, is the world's largest aerospace and defense company by sales. The company makes aircraft engines and aerospace parts including brakes and seats, as well as military equipment such as the Patriot missile defense system.

The A320neo family of single-aisle jets is a workhorse of the global airline fleet. Around 40% are powered by Pratt engines. The rest use the Leap model engine produced by the CFM joint venture between General Electric and Safran, which have also suffered from durability issues.

The Federal Aviation Administration said it was aware of the issue and has been in contact with Pratt and U.S. airlines that operate the affected engines. The FAA said it will "ensure that the appropriate steps are taken."

How soon regulators or Pratt require inspections -- and how long the checks will take -- would determine the length of time any jets with the affected engines are out of service.

The recall affects around 1,200 engines made between 2015 and 2021. Engines on newly delivered jets aren't affected.

The inspection over the next several weeks of the 200 engines that have flown the most is expected to reduce RTX's free cash flow by $500 million this year. An additional 1,000 engines will also need to be inspected over the next year to check for any issue with the metal.

An Airbus spokesman said the engine problem didn't pose an immediate safety issue and wasn't expected to affect aircraft deliveries. He said the European plane maker would support its airline customers as they work with Pratt and minimize disruption to their fleets.

Airbus is increasing production of the A320neo jets to meet strong demand from airlines. The rebound in travel has increased flying times for jets, placing more strain on GTF engines made by Pratt & Whitney and the Leap model engines made by CFM, which also power the A320neo.

Pratt & Whitney and CFM have said that both engines have proved less durable than planned, requiring more maintenance and leading to a global shortage that has crimped production of new jets." [1]

1. Recall of Jet Engines Hits Airbus And Sinks RTX Stock. Cameron, Doug; Tangel, Andrew. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 26 July 2023: A.1.