RTX’s OE Deliveries Drop Amid Ongoing Aerospace Supply Chain Challenges

RTX

RTX, the US aerospace conglomerate, reported a decline in its third-quarter commercial original equipment (OE) deliveries through its subsidiaries Pratt & Whitney and Collins Aerospace, primarily due to ongoing supply chain disruptions faced by major aircraft manufacturers Airbus and Boeing. However, the company’s financial results were buoyed by strong demand from the aftermarket and military sectors.

Pratt & Whitney, a key subsidiary of RTX, delivered 252 large commercial engines in Q3 2024, a decrease from 261 engines during the same period last year but an increase from 236 engines in the previous quarter. Military engine deliveries, however, experienced a notable decline, dropping to 34 units compared to 55 in Q3 2023 and 37 in Q2 2024. In contrast, Pratt & Whitney Canada saw an increase in engine shipments, delivering 521 units, up from 500 a year earlier and 474 in the second quarter of 2024.

Financial Performance Strengthened by Aftermarket and Military Demand

Despite the dip in OE deliveries, Pratt & Whitney’s adjusted sales for July-September 2024 rose by 14%, reaching $7.2 billion, compared to $6.3 billion in Q3 2023. Commercial aftermarket sales rose by 13%, military sales increased by 20%, and commercial OE grew by 9%. These gains helped offset the prior-year $5.4 billion charge related to an engine withdrawal caused by the use of contaminated powdered metal.

RTX’s geared turbofan fleet management plan, including maintenance, repair, and overhaul (MRO) for PW1100G engines, has been performing well, with throughput rising by 10% from Q2 to Q3 2024, and 27% year-over-year. RTX President Christopher Calio highlighted the company's efforts to address the ongoing challenges of balancing the demand for spare parts and new engine production, particularly for Airbus as it ramps up its production.

Supply Chain and Production Adjustments

Collins Aerospace, another RTX subsidiary, reported $7 billion in sales, a modest increase from $6.6 billion in the prior year. This was largely driven by strong defense and commercial aftermarket demand. However, commercial OE volumes fell by 8% due to lower sales of narrowbody aircraft engines for Airbus A320 and Boeing 737.

RTX has continued to manage its supply chain issues by receiving material and building end products for high-volume programs to meet Boeing’s post-strike requirements. The company also made cost-curtailment adjustments on certain parts of its Boeing product portfolio in response to ongoing pressures.

Challenges with Widebody Aircraft

The company faced mixed performance on widebody aircraft sales. Collins Aerospace saw a 1% increase in sales, primarily driven by Boeing’s 787 program. However, sales related to Airbus A350 deliveries were lower, and the 787 program is not currently profitable for RTX on the OE front. These challenges were further exacerbated by the shift in heat exchanger supply from Russia to the US and UK, a move that has added complexities to the company’s cost structure.

Outlook

While RTX faces significant challenges in its OE delivery and supply chain management, the company's strong performance in the aftermarket, military sectors, and maintenance operations has helped mitigate some of these pressures. The outlook remains cautious, as the aerospace sector grapples with ongoing production issues, particularly with Airbus and Boeing.