US aerospace conglomerate RTX, through its Pratt & Whitney subsidiary, increased deliveries of its commercial aircraft engines in the first quarter, but said today that it expects tariff-related pressures this year if those taxes persist.
RTX — comprised of Pratt & Whitney, Collins Aerospace and Raytheon — on Tuesday maintained its annual earnings guidance, but warned that tariffs could erode that view. The direct impact from US tariffs and retaliatory actions from trade partners could result in an $850mn hit to profit this year, RTX said.
RTX's estimate — based on assumptions that tariffs will remain in place for the balance of the year — include mitigations that are available to the company, including duty drawbacks, free trade zones and temporary imports under bond.
The company anticipates being able to pass along some tariff costs to customers, while looking to source inputs from alternative suppliers or shifting production to different assembly sites.
"We came into the year with a number of levers we would potentially pull if we saw things change in the marketplace," RTX chief executive Christopher Calio said. "We're going to let things sort of play out. And then to the extent that we see some softening or other things, then we're going to go and execute on that playbook."
Still, RTX remains "cautiously optimistic" that air travel demand will keep aircraft utilization strong, which will support its maintenance, repair and overhaul (MRO) services, while the company anticipates airframers' backlog will boost consumption of new engine builds.
Total large commercial engine (LCE) shipments in first quarter rose on the year by 7.8pc to 250 units. RTX produces the PW11100G geared turbofan (GTF) engine, which is used to power Airbus' A320neo aircraft family.
The company continued to make progress with its GTF fleet management plan, increasing MRO output by 35pc year-over-year, as it works to reduce the number of grounded aircraft that require rework.
RTX also has sought to rectify supply chain constraints that have weighed on aircraft production, including heat exchangers for Boeing's 787 Dreamliner that the company produces through Collins Aerospace. Calio said production is "where it needs to be" to support the airframer's wide-body ramp but did not offer further details.
Quarterly military engine deliveries increased by 19pc to 51 units from the prior-year period. Engine handovers from Pratt & Whitney Canada, which sells into the business, regional and general aviation end markets, rose by 4.4pc to 518 in the same timeframe.
Demand for RTX's MRO services surged in the quarter with aftermarket sales increasing by 28pc from the prior-year period as airlines are forced to operate their aging fleets for longer because of delivery days of new aircraft.
RTX's first-quarter profit decreased by 10pc to $1.5bn from the prior-year period, even as revenue grew by 5pc to $20bn.
