Aftermarket Set To Benefit From Widebody Recovery, Raytheon Says
Mega-supplier Raytheon Technologies remains confident that global passenger traffic will be fully recovered by the end of 2023, supporting strong aftermarket business that will soon include the widebody long-haul segment that has been slowest to rebound.
“Right now, we’re sitting at about 75%” of 2019 global revenue passenger kilometers (RPKs), Raytheon President and CEO Greg Hayes said at a recent Morgan Stanley investor conference. “That recovery is very uneven, as we know. We’ve seen a huge recovery here in U.S. domestically. It’s been much, much slower transpacific in the widebody routes. But we fully expect that we will see a recovery through 2023.”
Strong narrowbody demand has favored Raytheon more than some other suppliers because a significant amount of its exposure, particularly within its Pratt & Whitney engine manufacturing business unit, skews toward single-aisle aircraft. That is driving commercial aftermarket sales growth of 20-25% in 2022 compared to last year within both Pratt and Raytheon’s Collins Aerospace unit.
One trend that is holding is airlines’ willingness to prepare fleets for steady activity even as demand rises and falls with COVID-19-related concerns.
“In China, which represents about 19% of the world [RPKs], they have snapped back very quickly when the lockdowns end. Then they have another lockdown, and traffic drops down,” Hayes said. “The good news is, Chinese airlines, like many others, continue to bring their engines in for overhauls, and continue to keep the planes in serviceable condition ready for the traffic when it comes back.”
Another motivation for getting maintenance done as soon as possible and re-stocking spare parts bins: rising costs. Suppliers are passing on inflation-related cost increases to airlines and maintenance shops via higher parts prices—a trend that Hayes suggested is inevitable.
“We’re looking at pricing,” Hayes said. “We put out a catalog price increase early this year that will take effect [in October]. And that price increase is healthy because it recognizes the fact that costs are going up. That is the one lever that we have that it’s not popular with the airlines, but they have seen price increases, and they’re going to see price increases in their supply chain as well.”