RTX (RTX) Annotations

While powdered metal parts have been widely used throughout Pratt’s product lines for decades, Pratt has bounded the potentially impacted material. It has concluded that this condition was present in rare instances in powdered metal produced from approximately Q4 2015 into Q3 2021. The PW1100 engine fleet which powers the A320 Neo will experience the most significant impact due to production volumes during this period. Based on the current assessment, Pratt anticipates by mid-September that approximately 200 PW1100 engines will be removed for enhanced inspection. Beyond the initial 200 engines, Pratt also anticipates that approximately 1,000 additional PW1100 engines will need to be removed from the operating fleet for this inspection within the next 9 to 12 months, though the exact number of engines and the timing of those removals is not yet finalized. It’s important to note that some of the engines that must be removed for inspection in 2023 and 2024 are already forecasted for a regular shop visit during this time period, and so the incremental impact to the fleet is still under evaluation

previously determined that a rare condition in powdered metal used to manufacture certain engine parts may reduce the life of those parts. It’s important to note upfront that the current production of powdered metal parts is not impacted and Pratt will continue to deliver both new engines and new spare parts across all product lines.

Pratt & Whitney

Collins

In the quarter, RINS had $3.1 billion of bookings, resulting in a book-to-bill of 0.96 and a backlog of $17 billion. Bookings at Q2 in RINS included about $1.1 billion in classified award and $322 million for federal and civil cyber defense services. On a year-to-date basis, RINS has a book-to-bill of 1.15.

RINS

RMD had $3.6 billion of bookings in the quarter, resulting in a book-to-bill of 0.92 and a backlog of $35 billion.

RMD

On the defense side across the RTX businesses, we captured $13 billion in net bookings in the quarter, driving a strong book-to-bill of 1.22, and this takes our defense backlog to $73 billion. Contributing to the backlog in the second quarter were a number of significant awards, including $2 billion at Pratt & Whitney for Lot 17 of the F-135 engines and $1.5 billion for 117 sustainment.

With respect to our full year outlook, we’re going to raise the top line to reflect the strength we’re seeing in our end markets. The new range will be $73 billion to $74 billion. We’re also going to bring up the bottom end of our adjusted EPS range by a nickel to $4.95 to $5.05; however, we are going to reduce our 2023 cash flow expectations by $500 million to $4.3 billion, and this is primarily to reflect the developments at Pratt & Whitney that I discussed earlier.

Q2 was another strong quarter of strong demand in both the commercial and defense segments of our business with $25 billion of new orders. This brings our total backlog to a record $185 billion.

we are working through an issue resulting from a rare condition in powdered metal that will require Pratt & Whitney to remove some engines from service for inspection earlier than expected. I want to make just a couple of comments here at the outset. First of all, it’s important to know that we understand the issue and we have begun to address it through an inspection protocol that we already have in place. That said, clearly this will have an impact on Pratt & Whitney and our customers

State Department approve a large sale of advanced air defense systems for Poland as it bolsters its security amid the ongoing conflict in Ukraine. This would expand our existing partnership with Poland and make Poland the first international customer for our LTAMDS system, representing a key transition for this next-generation Raytheon franchise.

This dynamic is supporting strength in the aftermarket and growth across the globe with revenue passenger kilometers now tracking at about 95% of 2019 levels, and long haul international, which has lagged in the recovery is showing strong growth with passenger flight hours up 18 points year-over-year, a good indicator for increasing demand for wide body travel.

And it might get a little bit better during the course of the year. But I think, again, that wouldn't be an issue in terms of our ability to ramp production to meet that. But right now, again, I think Boeing has got some challenges. We'll hear what they have to say here in another day or so. But we're, I would say, in constant contact with both Boeing and Airbus on OEM rates both at Pratt and at Collins.

And I would tell you that we probably didn't spend enough time testing for those harsh environments, specifically places like India. And that's where we've seen the lower life on the combustor. We've seen some lower life the turbine blades just because of the harsh conditions there.

This is why that we are running as fast as we can to continue to insert upgrades into the fleet during shop visits. We've talked before about the sort of the block D upgrades, which are really aimed at combustor hot section, improving time on wing in those areas. That's only about we're only about 50% of the way through the fleet in terms of those upgrades.

As you know, since the GTF program went into service in 2015, we have continued to introduce upgrades and improvements to increase reliability and durability. With respect to reliability, we have met the target level for dispatch reliability. This is now at mature engine levels. With respect to durability, we have improved time on wing since program inception. Again, time on, meaning how long engines can be operated before needing to be removed for maintenance. But we are not yet at the level we and our customers expect. This has put stress on the operations of the fleet. We continue to develop upgrades to the current GTF configuration to improve durability. We are also expanding our MRO capacity and working to reduce shop visit turnaround times to improve service availability. It will take some time to realize these benefits, but we are continuing to invest in time on wing improvements as we were able to do over the course of the V2500 program. And of course, in parallel, we continue to execute on our GTF Advantage Development Program, our next-generation GTF configuration, that will incorporate all of our experiences and technical learnings since entering into service.

Poland recently announced plans to spend 4% of their GDP on defense this year. That's the highest level across all of the NATO countries. And we continue to support Ukraine's ongoing needs, including the Pentagon's accelerated deployment of the Patriot missile defense system, adding another RTX capability to the Ukraine mission.

But obviously, there's a challenge today with margins because time on wing is not what we expected it to be. Reliability and durability are the two issues. And reliability is great. 99.98% dispatch reliability. Time on wing is the challenge. But again, I think as Chris explained, we've got some solutions to that, which we'll see over the next couple of years