GTF Engine Fleet Management

Q: Are there milestones indicating risk reduction in the GTF fleet plan?

A: The GTF fleet management plan is a multiyear process, focusing on AOG levels, turnaround times, and MRO output. The company had a strong first quarter, prioritizing MRO output and material flow, including new powdered metal parts. Increased MRO output will relieve the fleet, reducing AOG days and penalties.  -

Defense Margins and Fixed Price Programs

Q: How are the fixed price development programs affecting defense margins?

A: Productivity improvements contributed to margin expansion, with a $58 million year-over-year improvement in Q1. Challenges remain with fixed price development programs, expected to take 12–18 months to resolve. Progress has been made, but some headwinds persist as they work through testing and technical milestones.  -

Pratt & Whitney Aftermarket Guidance

Q: Given Q1's strong growth, is there risk to achieving full-year Pratt aftermarket guidance?

A: The 9% aftermarket growth in Q1 was as expected. The company anticipates low-teens growth for the full year and remains confident in hitting 800 V2500 shop visit inductions. Increased content on shop visits and material flow will support continued growth despite some offsets in other programs.  -

Raytheon Defense Bookings and Outlook

Q: Can you discuss the defense bookings and outlook for the next 12–24 months?

A: Demand remains strong due to global tensions, with significant bookings in Q1. The company expects continued strong top-line growth and bookings, driven by products like GEM-T, NASAMS, Patriot, AMRAAM, and AIM-9X. International orders constituted about 60% of Raytheon's Q1 bookings, providing a favorable mix for margins.  -

Collins Aerospace Margin Expansion

Q: What drives margin expansion at Collins, and details on the $175M impairment?

A: Margin expansion is driven by aftermarket growth and cost reductions. The $175 million charge relates to titanium procurement, securing alternative sources due to supply chain dynamics and sanctions. New agreements resulted in higher purchase costs and impairment of previously capitalized costs but derisk future supply.  -

737 MAX Impact on Collins

Q: How do 737 MAX issues affect Collins Aerospace?

A: Collins has significant content on the 737 and 787 platforms. There is some uncertainty around production rates, but the company is working closely with Boeing and has the capacity and material to support their needs. They are prepared to take necessary actions based on Boeing's guidance.  -

Customer Compensation for GTF

Q: What's the status of GTF customer compensation agreements?

A: The company has completed about nine agreements, representing approximately one-third of the GTF fleet. They are close on several other significant agreements. The compensation remains within the previously provided guidance.  -

Aircraft on Ground Levels

Q: What is the trajectory of aircraft on ground (AOG) levels?

A: AOG levels are at peak, around 550 aircraft, and are expected to gradually decline. Reduction depends on increasing MRO output, improving turnaround times, and material flow. The focus is on enhancing these factors to alleviate fleet pressures.  -

European Defense Bookings and FMS Mix

Q: How does European demand affect bookings and margins?

A: European demand, particularly for integrated air and missile defense, contributes to strong bookings. International orders, especially Foreign Military Sales, are expected to be a multiyear process, favorably impacting margins due to a higher mix of international sales, which were about 60% of Q1 bookings.  -

Supply Chain and Production Capacity

Q: How are supply chain issues and capacity affecting defense execution?

A: The company has seen four consecutive quarters of material receipt growth at Raytheon, indicating supply chain improvements. They are adding production capacity, including expansions in Huntsville and Camden, to meet demand and focus on executing the backlog at required margins.  -

GTF Shop Visit Turnaround Time

Q: What is the current GTF wing-to-wing turnaround time?

A: The wing-to-wing turnaround time for GTF engines is within the 250–300 days range. This depends on the mix of work scopes and material flow. Optimizing work scopes may reduce times, but current figures reflect necessary heavy shop visits.  -