Pratt & Whitney’s Engine Recall Sends Shockwaves

Pratt & Whitney’s recent recall of several hundred airplane engines has sent ripples through the global engineering sector, impacting stocks and causing concern among industry players. The engine maker and parent company, RTX, announced at the beginning of the week that approximately 600 to 700 engines would be recalled for inspection due to an issue related to the powdered metal used in certain parts. These engines are specifically used to power the Airbus A320neo, and Pratt & Whitney is currently assessing the potential impact of the powder metal on other engine models within its fleet.

According to RTX, inspections will be conducted over the course of the next three years. However, this recall comes at a cost, and RTX estimates a significant hit on profits in the third quarter, amounting to $3 billion. As a result, shares in RTX decreased by nearly 8% on Monday and continue to decline by an additional 1.8% during premarket trading on Tuesday.

The repercussions of the engine recall are not limited to RTX alone. Jet engine partners of RTX have also been affected, as it is anticipated that approximately 350 aircraft will be grounded between 2023 and 2026. This has caused a downturn in shares for various companies in Japan, including IHI Corp., which experienced a nearly 16% decrease, Kawasaki Heavy Industries with a nearly 6% decrease, and Mitsubishi Heavy Industries with a 4% decrease.

Additionally, Frankfurt-listed shares of MTU Aero Engines have plummeted by more than 6% following the announcement. The company stated that it expects its earnings before interest and taxes to be impacted by €1 billion ($1.1 billion) throughout this financial year.

Meanwhile, in London, Melrose Industries revealed that its GKN Aerospace division holds a 4% program share on the engine variant affected by the issue. As a result, the company anticipates a potential cash hit of approximately £200 million ($250.2 million). After experiencing a 5% decline on Monday, Melrose shares have slightly recovered.

The fallout from Pratt & Whitney’s engine recall serves as a stark reminder of the intricate nature of the aerospace industry and the wide-reaching implications that can arise from a single issue. As companies grapple with the financial consequences and work to rectify the problem, the engineering sector is bracing itself for further impact and uncertainty in the coming years.