Key Takeaways
- RTX warned it would charge $3 billion this quarter to inspect passenger jet engines with a potential defect.
- The Pratt & Whitney engines are used on the popular Airbus A320neo aircraft.
- RTX shares fell to their lowest level in more than two years following the news.
Shares of RTX (RTX) fell nearly 8% Monday after the jet engine maker said it would take a $3 billion charge this quarter due to an engine recall jets manufactured by its manufacturer Pratt & Whitney Unit.
Around 600 to 700 GTF engines, used on Airbus' A320neo jetliners, will be removed for workshop inspections between this year and 2026, longer than Pratt & Whitney's previous schedule. The majority of inspections will take place this year and next year, according to the company formerly known as Raytheon Technologies.
RTX said the additional costs are linked to a previously disclosed “rare condition in the metal powder” used to make certain parts for the GTF engines, 'and' which will require inspections sooner than previously thought.
CEO Greg Hayes said the company was “focused on the challenges” surrounding the metal powder issue and acknowledges that “this is an extremely difficult situation for our customers, and we are taking proactive steps to support them and mitigate the operational impact on them. ”
RTX also said that while the issue is not expected to impact sales and margins in 2025, free cash flow will be impacted by approximately $1.5 billion, resulting in free cash flow of #39;around $7.5 billion in 2025.
RTX shares fell 7.9% to their lowest level since March 2021 following the news.
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Source: investopedia.com