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Delta Air assessing hit from RTX engine issues but sees little near-term pain

Delta Air assessing hit from RTX engine issues but sees little near-term pain
© Reuters. FILE PHOTO: A Delta Air Lines jet departs Hartsfield-Jackson Atlanta International Airport in Atlanta, Georgia, U.S. December 22, 2021. REUTERS/Elijah Nouvelage

 

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By Mehr Bedi

(Reuters) – Delta Air Lines (NYSE:DAL) said on Thursday in the near term it is expecting a minimal hit from recently disclosed quality issues with RTX’s Pratt & Whitney engines but added it was yet to fully assess the impact.

The airline expects a more detailed assessment from Pratt & Whitney at the end of this month, Delta’s finance chief Dan Janki said during a conference organized by Morgan Stanley.

Earlier this week, RTX said it would have to pull 600 to 700 of its Pratt & Whitney Geared Turbofan (GTF) engines from Airbus A320neo jets for quality inspections over the next three years.

The problem arose due to a powder metal defect that can lead to cracks in some Pratt & Whitney engine components. RTX initially estimated repair work per engine to last 60 days, but it is now expected to take up to 300 days.

Speaking about the impact, Janki said “I think (it) will be minimal at this point, but we got to assess it.”

“You got to look at the secondary impacts as it relates to new deliveries, other knock-on effects in a supply chain that continues to be fragile in nature.”

Delta had taken delivery of Airbus A321neos “later in the cycle” and will end 2023 with just under 50 neos, Janki added.

Shares of the carrier fell nearly 1% during market hours after rising over 2% before the bell.

The airline raised its current-quarter revenue forecast earlier in the day as Americans’ thirst for travel to Europe lifted demand for lucrative transatlantic flights.

The carrier said it expects third-quarter revenue to rise within the upper half of its forecast range of 11% to 14% growth.

However, it slashed its quarterly forecasts for operating margin and profit as extended oil production cuts by Russia and Saudi Arabia drove the airline’s fuel expenses higher.

The carrier now expects a profit of $1.85 to $2.05 per share in the third quarter, down from its prior forecast of $2.20 to $2.50 per share.

(This story has been corrected to say A321neos, not A320neos, in paragraph 7)

Source: Investing.com

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