Airplane Engine Recall Might Raise Concerns over RTX’s Social Credentials

livemint.com:

Around 1,200 airplane engines by Pratt & Whitney have been recalled due to contaminants found in the metals used to make them, which can cause cracks in critical parts. Parent company RTX said last week it recently discovered the contamination, requiring planes that use these engines—built between 2015 and 2021—to be inspected to check whether repairs are needed. The recall is a negative development for RTX’s social credentials associated with the quality and safety of its products.

Product quality & safety is a financially material category for the aerospace and defense industry according to the Sustainability Accounting Standards Board. This is because safety concerns, either from improper design or failures in manufacturing and testing processes, could lead to an increase in costs and an impact on revenue due to a potential decrease in demand for products. The most immediate inspection of 200 of the 1,200 engines by mid-September is expected to reduce RTX’s free cash flow by $500 million this year, The Wall Street Journal reported.

RTX’s stock price has dropped some 10% since the news broke on Tuesday last week, losing around $14 billion in market value. The company didn’t respond to a request for comment on the negative implications of the recall. Engine recall could hit Airbus’s supply-chain management RTX’s recall is having a knock-on effect on Airbus’s supply chain, potentially affecting its business-model and innovation profile, as around 40% of its popular A320neo single-aisle jetliners are equipped with Pratt engines.