GTF Powder Metal Issue - Limited Impact on A220 & E2

Pratt & Whitney-parent RTX expects that the powder metal contamination issue of the Geared Turbofan will have no significant operational or financial impact on PW1500G and PW1900G engines. Although there will be some limits on flight cycles, inspections and replacement of affected High-Pressure Turbine and High-Pressure Compressor disks can be done inside existing shop visit plans, RTX said on Tuesday during its Q3 earnings call. The news must come as a relief to operators of the two engine models, which already have been plagued by previous durability issues. The PW1500G powers the Airbus A220 family and the PW1900G the Embraer E2-series. P&W said in September that the analysis of the powder metal contamination on other engine models would be completed by late October. Remember that the issue originally was found in 2020 on the V2500 that powers the Airbus A320ceo family. It later emerged that the PW1100G-JM version of the GTF on the A320neo family was also impacted, but only engines with HPT and HPC disks that were manufactured between Q4 2015 and Q3 2021. Until they are replaced with new parts, affected parts will require inspections at intervals of 2.800 to 3.800 flight cycles. New disks will be installed in new engines first in Q1 2024 and on during shop visits from Q2. PW1100G-guidance unchanged During today’s earnings call, President and Chief Operating Officer Chris Calio confirmed that various analyses have been completed. The number of affected PW1100G-JM in the fleet management plan remains unchanged from what was announced on September 4. This means that between 2024 and 2026, an incremental 600 to 700 engines will require inspections and repairs of the HPT stage 1 and 2 disks. This is in addition to the 1.200 engines that were scheduled to come in first. “The first tranche of (some 200) engine removals has occurred. Some of these engines are eligible for project visit work scope. The turnaround times of the engines average approximately 35 days. The project visits will be a smaller portion of the overall shop visits, turnaround times are encouraging, and our teams continue to identify further process improvements,” said Calio. P&W said in September that it expected turnaround times of 250 to 300 days, so this makes just 35 days look favorable. “The reason I mentioned turnaround times of 35 days for project visits is that we are incredibly focused on taking out minutes, hours, and days out of this. That can translate to the larger scope of shop visits that we are going to face. But 250-300 days and 650 aircraft on ground, those are the assumptions that are the basis for our financial impact. We are doing everything we can to improve on this.” Picture of the P&W GTF, with the arrow showing the two disks that need inspection and replacement. (Wizz Air) Inspection and repairs will continue next year, with a peak in the early months of 2024 when some 650 GTF-powered A320neo family aircraft are expected to be grounded. The average will be 350 aircraft on ground between 2024 through 2026. “The lion's share or two-thirds of those shop visits will be in 2023 and relatively early in 2024. That’s what is causing that peak of 650 AOGs.” P&W says it is having discussions with all individual customers about the consequences of the inspections and repairs on fleet availability. These are complex discussions, as engine cycle times and even thrust settings must be taken into account. “You can imagine conversations are difficult. They do understand what we do from a safety-risk perspective and think we are doing the right thing. However they are not happy, just as they have not been happy with the fleet health prior to the powder metal issue and throughput on MRO and spare assets. Discussions will continue into early next year.” More manageable issue While the PW1500G and PW1900G are not immune to the powder metal issue, Calio said that the problem is much more manageable on these models. “We will institute a fleet management plan that will largely sit inside the shop visit plans that are already in place for these fleets. The financial impact won’t be significant and is contemplated in our current contract estimate and financial outlooks for Pratt,” said Calio. The two engine models will be subject to shorter life limits for certain configuration parts, with inspections required every 5.000 cycles for current configuration parts. This will result in higher aircraft on ground numbers in the early part if 2024, but this will be mitigated by the end of the year. A service bulletin will be released in early November, followed by Airworthiness Directives. Inspections of the V2500 fleet are roughly halfway done since they started in 2021. Based on the latest observations, 100 incremental engine removals will be required, but these will be stretched out over the next four years. With the good availability of spare engines in the market, Calio thinks that the V2500 issue will not cause any significant impacts. A service bulletin will be issued in November. Ramping up MRO capacity To speed up shop visits in an already overstressed system, RTX says it is accelerating investments in MRO capacity for the Geared Turbofan. For example, the company recently announced the third expansion this year of its Singapore facility. Shops in China and South Korea have also started inducting their first GTF engines, to be followed by Iberia Maintenance before the end of this year. By 2025, another three shops will come online, bringing the total to nineteen shops. Although this number has been communicated before, Calio said that the plans have been brought forward. This will bring total capacity to 2.000 annual shop visits, five times more than that in 2019. Spirit Airlines is affected heavily by the powder metal issue on earlier Airbus A320neo's. (Spirit Airlines) “As we said in September, our objective is to replace as many HPT and HPC disks as possible with full-life disks when engines come in for a shop visit and maximize their time on wing when they leave the shop,” said Chris Calio. “We have got to accelerate MRO output. The key parts of those are capacity and materials as well.” RTX has also invested in powder metal production and is now increasing machining and (sonic) inspection capacity. The objective is to speed up production from Q2 2024 so that more full-life parts become available. Or as CEO Greg Hayes said: “I believe we have our arms around the operational and financial impacts of the powder metal issue. Our focus at RTX and Pratt & Whitney is on executing on those plans.” Q3 financial impact RTX said in September that Pratt & Whitney would take a $3.0 billion pre-tax charge in Q3 related to the powder metal issue. In today’s Q3 earnings release, the company specified the charge as $5.401 billion. The charge impacted the operating profit by $2.9 billion. Consequently, P&W reported a quarterly operating loss of $-2.482 billion compared to a $316 million profit in Q3 2022. Sales were also impacted and were down to $926 million from $5.380 billion, although actual engine sales were up 25 percent year on year, commercial aftermarket 21 percent, and military engines by seven percent. Pratt & Whitney delivered 261 large commercial engines in Q3, up from 192 in the same quarter of 2022. This brings total deliveries to 619 engines this year to date compared to 488 in 2022. Total deliveries for 2022 stand at 712.

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