Sanctions against Russia will cost Raytheon Technologies hundreds of millions dollars in 2022, and related titanium shortages could hinder production in 2023.
That is according to Raytheon chief executive Greg Hayes, who on 26 April described sanctions as only part of much broader supply challenge facing the company.
Shortages, particularly of metal castings, left Raytheon subsidiary Pratt & Whitney unable to deliver 70 aircraft engines in the first quarter of 2022, Hayes says.
“We actually see supply chain constraints across the commercial portfolio. We see it in electronics… We see it in aluminium. We see it in titanium,” he says.
Hayes made his comments as Raytheon reported first-quarter operating profits of $440 million for Collins (up 40% year-on-year) and $151 million for P&W (up more than six times).
The improved results partly reflect sales of commercial aftermarket services, which jumped nearly 40% year-on-year at both Collins and P&W.
Hayes says supply shortages have most impacted P&W’s production of PW1000 geared-turbofan engines, which power A320neos, A220s, Embraer E-Jets E2 and Irkut MC-21s.
“We had a problem with our structural casting supplier, where we were not able to get castings in to our… schedule,” Hayes says. “That resulted in about 70 engines moving out of the first quarter.”
Connecticut-based P&W shipped 119 large commercial engines in the first quarter, down from 177 in the previous quarter and from 137 in the first quarter of 2021.
Raytheon’s Hayes says suppliers are facing worker shortages and inflation pressure.
Competing engine maker CFM International has likewise struggled with parts shortages.
The companies face the challenge of keeping up with Airbus and Boeing, which are seeking to increase narrowbody production.
“We are in lockstep with both Airbus and Boeing on their production rates,” says Hayes, noting Airbus intends to produce 70 or 75 A320neo-family jets monthly by 2025. “We will see if we can get there.”
RUSSIAN SANCTIONS
Raytheon is also working to address titanium shortages stemming from sanctions imposed by Western governments on Russia, in response to that country’s invasion of Ukraine.
Russian companies have been a “large source” of Raytheon’s titanium, Hayes says, and Raytheon is now seeking other suppliers.
“[It is] probably not going to impact narrowbody production rates this year, but certainly could going in to next year,” he says.
Separately, sanctions have led Raytheon’s companies to stop selling equipment to Russian customers.
“We are not shipping engines to Irkut, and we are not shipping engines to Airbus that would otherwise go in to Russia,” Hayes say of P&W.
As a result, Raytheon on 26 April said it shaved $375 million off the 2022 revenue targets of both P&W and Collins, for a total $750 million cut.
