Summary
- Spirit Airlines to receive $150-200m credit from IAE for engine problems, boosting liquidity.
- Pratt & Whitney GTF engine issues impact multiple global airlines, leading to grounded fleets.
- Airlines forced to inspect, disassemble engines due to rare condition. Unclear cost impact on Pratt & Whitney.
Along with GE and Rolls-Royce, Pratt & Whitney is one of the giants dominating the commercial jet engine market. However, its normally excellent reputation for cutting-edge engines has been beset with issues from the Pratt & Whitney Geared Turbofan (GTF) engine problems on Airbus A320 fleets. The problem is expected to affect up to 700 engines globally over the next three years. Spirit Airlines has now negotiated to receive between $150 and $200 million in compensation from International Aero Engines (IAE) for its engine troubles (IAE is a Pratt & Whitney affiliate).
Spirit Airlines settles with Pratt & Whitney affiliate
Reuters reported that Spirit Airlines recently announced it would receive a monthly credit from International Aero Engines that would last through the end of 2024. Reuters reported, “The carrier said in a filing with the US Securities and Exchange Commission the agreement would boost liquidity by between $150 million and $200 million.” The compensation was determined based on the number of days Spirit’s aircraft were grounded and unavailable due to Pratt & Whitney GTF engine problems. The agreement will also release IAE and affiliates from any other claims related to the engine issues before 31 December 2024.
Photo: Kevin Porter | Shutterstock
The settlement comes as a boon for Spirit Airlines – an ultra-low-cost carrier still struggling with liquidity and a return to sustainable profitability. While Spirit will not receive a cash payment, having a credit will ease pressure on their cash flow. Concerns have been raised surrounding the airline’s ability to repay maturing debt next year. Spirit was going to merge with JetBlue Airways, but this $3.8 billion merger was scrapped by regulators triggering concerns about Spirit’s way forward.
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Pratt & Whitney’s GTF engine woes
The Pratt & Whitney GTF engine problems are not limited to Spirit Airlines. The impact of Pratt & Whitney’s faulty engines has been felt globally, affecting airlines like Air New Zealand, JetBlue, Volaris, IndiGo, All Nippon Airways, Cebu Pacific, and Hawaiian Airlines. They have been forced to ground their workhorse Airbus A320 fleets, disassemble the engines, and inspect them for issues. The problem is a rare condition in the powdered metal used to manufacture certain engine parts. Commercial jet engines cost from $5 million and up to as much as $50 million depending on the size and mission requirements.
Photo: Pratt & Whitney
It is unclear how much the engine troubles will cost Pratt & Whitney in lost sales and compensation (although it will be billions). Pratt & Whitney recently agreed to a compensation deal with Volaris while Financial Express reported in November that IndioGo was also seeking compensation. The NZ Herald reported four Air New Zealand A320-21 aircraft will be out of action on average at one time over the next two years because of the issue. It further reports that Air New Zealand is expecting compensation that will over the direct costs incurred for replacement leased aircraft.
