MTU Targets Quicker Turn-Around Times For PW1100G Inspections
MTU Aero Engines is working on a cost-efficiency program and will enter negotiations with partner Pratt & Whitney to reduce the financial impact of RTX’s PW1100G fleet management plan presented Sept. 11.
The company wants to find ways to reduce the time needed for inspections and potential repairs, according to CEO Lars Wagner.
The Munich-based engine manufacturer updated investors on the fallout for its business Sept. 13. Wagner predicted a reduction in reported revenue and reported operating profit of around €1 billion ($1.07 billion) each. A significant impact on cash-flow is expected for 2024-2026. Nonetheless, CFO Peter Kameritsch expects the company to retain its investment grade rating.
Some 3,000 engines—including PW1000Gs of all types and IAE V2500s, built from mid-2015-mid-2021—may have parts with contaminated powder metal (PM). Cracking from PM contamination has been found in high-pressure turbine (HPT) stage 1 and stage 2 disks, or hubs, installed in the motors. Pratt is also inspecting some high-pressure compressor (HPC) disks built at the same time, RTX revealed. Most of the affected engines are PW1100Gs found on A320neo-family aircraft.
Clogged engine overhaul shops and a fast-tracking of necessary inspections on higher-time PW1100G geared turbofans will drive repair turnaround times up to as many as 300 days per engine and could ground 650 Airbus A320neos at one time early next year, RTX disclosed. According to the Aviation Week Network Fleet Discovery database, 1,354 Pratt-powered A320neo family aircraft are currently in service, parked, stored or in parked/reserve status.
Fleet groundings will “average” 350 at any given time through 2026, according to RTX President and COO Chris Calio.
Wagner said talks with Pratt will cover the commercial conditions under which MTU might expand MRO capacity for the GTF work. But Kameritsch made clear that the company will only add GTF maintenance capacity if it is not low margin work that would replace much higher margin independent orders. Another constraint is the consortium’s commitment to deliver new PW1100Gs to Airbus’ final assembly lines supporting the OEM’s production ramp-up.
MTU also wants to find “other ways” to reduce the impact on its business. Wagner indicated that in his view there is still room to negotiate settlement terms within the framework of the partnership’s risk/revenue scheme. He was not prepared to share details of the arrangement.
Should MTU find ways to increase its GTF MRO capacity at favorable terms, the financial impact could be lower. Also, added capacity would reduce aircraft on ground (AOG) time for operators, leading to lower penalties. Wagner also stressed that MTU is exploring ways to reduce the time needed for the shop visits, which RTX defined as up to 300 days per engine. “We want to be significantly below this,” Wagner said.
Launching a major cost-cutting program is tricky for MTU, Kameritsch said, as the company is in expansion mode with demand for its products high. One way to tackle the situation is for the OEM to delay capital investment where it is not necessary.
Wagner also insisted that he still believes in the long-term future of the GTF and is not concerned that it would lose further market share vis-à-vis CFM International’s Leap program on the A320neo family: “We are confident that we can stabilize or even improve market share.”
The existing durability issues that have been hampering the GTF for years have also led to a cooling of the Airbus-Pratt relationship. Airbus is known to be seriously considering CFM as a second engine provider for the A220 program if, as expected, it launches a stretched A220-500 (or A221).
Eighty percent of the costs that burden the Pratt program partners are to compensate customers, since aircraft will be grounded for an average of 350 days due to the program, while the remaining 20% cover additional labor and materials for the shop visits, Morningstar Investor said in a Sept. 12 research note.
Though Pratt & Whitney is the main supplier of the turbine components, since MTU Aero shares inspection program costs with the Connecticut-based company, “the inspections will result in a headwind for free cash flow over the duration of the program,” Morningstar added.
MTU Aero has lost about $3.6 billion in market capitalization since Pratt parent company RTX Technologies first identified the GTF engine problem in late July.
