RTX Faces Challenges in OE Deliveries Amid Supply Chain Issues but Strong Military and Aftermarket Demand Offset Losses

RTX, the US aerospace conglomerate

Supply Chain Disruptions Impact Commercial OE Deliveries
RTX, a leading aerospace company, reported a decrease in third-quarter original equipment (OE) deliveries through its subsidiaries Pratt & Whitney and Collins Aerospace. The decline was mainly driven by ongoing supply chain challenges impacting major aircraft manufacturers, including Airbus and Boeing. Pratt & Whitney’s large commercial engine deliveries fell to 252 units in Q3 2024, down from 261 in the same period last year. However, the total number of engines delivered increased slightly from the previous quarter, showing some resilience in the face of supply chain disruptions.

Military engine deliveries also experienced a notable decline, dropping to 34 units, compared to 55 in Q3 2023. However, Pratt & Whitney Canada, another arm of the company, saw an increase in engine shipments, delivering 521 units, up from 500 in the previous year.

Financial Performance Boosted by Military and Aftermarket Demand
Despite the dip in OE deliveries, RTX’s financial performance for Q3 2024 was strengthened by strong demand in the aftermarket and military sectors. Pratt & Whitney’s adjusted sales grew by 14%, reaching $7.2 billion, up from $6.3 billion in Q3 2023. Commercial aftermarket sales rose by 13%, while military sales saw a significant increase of 20%. These gains helped mitigate the negative impact of a $5.4 billion charge in the prior year related to an engine withdrawal due to contaminated powdered metal.

In addition, RTX’s geared turbofan fleet management plan, covering maintenance, repair, and overhaul (MRO) for PW1100G engines, performed well, with throughput rising by 10% from Q2 to Q3 2024 and 27% year-over-year. These efforts have helped the company manage the balancing act of spare parts demand and new engine production, especially for Airbus.

Collins Aerospace Faces Lower Commercial OE Sales
Collins Aerospace, another RTX subsidiary, reported $7 billion in sales, showing modest growth from $6.6 billion in the previous year. This increase was largely driven by strong defense and commercial aftermarket demand, but commercial OE sales fell by 8%. The decline was attributed to reduced sales of narrowbody aircraft engines, particularly for the Airbus A320 and Boeing 737 models.

RTX has been responding to ongoing supply chain pressures by focusing on high-volume programs for Boeing and managing cost curtailments in certain Boeing product portfolios. Despite these challenges, the company continues to make adjustments to maintain production flows and meet demand.

Challenges with Widebody Aircraft and Global Supply Chain Issues
RTX faced mixed results with widebody aircraft sales, as Collins Aerospace saw a modest 1% increase in sales, driven by the Boeing 787 program. However, deliveries related to the Airbus A350 saw lower sales figures, and the 787 program remains unprofitable for RTX on the OE side. The company’s cost structure has also been impacted by the shift in heat exchanger supply from Russia to the US and UK, creating additional complexities and pressures.

Outlook Amid Ongoing Supply Chain Pressures
Despite the challenges faced in OE deliveries and supply chain management, RTX remains optimistic about its prospects in the aftermarket and military sectors. The company’s ongoing efforts to streamline its operations and address production challenges at Airbus and Boeing will be crucial in maintaining its growth trajectory in the coming quarters. The aerospace industry continues to be affected by supply chain disruptions, geopolitical factors, and fluctuating demand for widebody aircraft, but RTX’s strong performance in other areas is expected to help buffer these risks.

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