A Pratt & Whitney PW1000G turbofan engine sits on the wing of an Airbus A320neo aircraft during a delivery ceremony outside the Airbus Group SE factory in Hamburg, Germany, on Friday, February 12, 2016.
Bloomberg | Krisztian Bocsi
Shares of RTX fell 10% on Tuesday after the aerospace giant said a manufacturing problem with some of its popular engines requires “expedited” inspections of about 200 of them.
The problem stems from metal powder used to make some engine parts, RTX, the parent company of aircraft engine maker Pratt & Whitney, said during a quarterly earnings call. Engines currently in production are not affected, the company said.
RTX, formerly known as Raytheon Technologies, lowered its cash flow outlook for the year by $500 million to $4.3 billion because of the issue.
“It’s getting expensive,” RTX CEO Greg Hayes said on the company’s earnings call. “We’re going to make the airlines whole as a result of the disruption we’re going to cause them.”
The issue is the latest challenge for airlines on top of late-plane manufacturers as airlines try to reap the benefits of a travel boom with a limited number of planes available.
Pratt & Whitney said it also expects about 1,000 more engines to be removed from airline fleets over the next nine to 12 months.
Noah Poponak, an aerospace and defense stocks analyst at Goldman Sachs, said the impact could spill over into next year and possibly 2025, depending on how many of the roughly 1,000 engines have to be sent to repair shops ahead of schedule.
“I think the stock reaction is actually fair,” said Poponak, who has a neutral rating on RTX with a 12-month price target of $102. The shares closed at $87.10 on Tuesday.
The engines have had other challenges requiring maintenance, especially when used in warm climates, Poponak noted.
RTX said it will continue to provide new aircraft engines and parts. A spokesperson told CNBC that the issue does not affect flight safety.
The issue will affect some A320neos, a narrow-body aircraft and one of the world’s most popular aircraft. It competes with the Boeing 737 Max.
The Federal Aviation Administration said it is aware of the issue and is in contact with Pratt & Whitney and the airlines affected by the issue
“The agency will ensure that appropriate steps are taken,” the FAA said.
Delta Airlines, a major Airbus customer, said it is looking into the matter. Airbus did not immediately respond. a JetBlue Airways A spokeswoman said the carrier is “working with Pratt to assess the impact on our fleet.”
Meanwhile shares of General Electrica rival engine maker, added more than 6% to a five-year high on Tuesday after the conglomerate raised its revenue and cash flow forecast for the year, in part due to strong demand for jet engines.