⚠ Scale Did Not Prevent the RecallModerate threat

RTX (RTX) — threat to the moat

RTX's scale did not stop a flaw in one powder from reaching hundreds of engines and costing $2.9 billion of profit.

RTX's size gives it engineering depth, testing capacity and supplier leverage. It did not stop a manufacturing flaw from reaching hundreds of engines. In July 2023 Pratt & Whitney found "a rare condition in powder metal" used in certain engine parts1, and it later said about 600 to 700 engines would be removed for shop visits between 2023 and 20262.

What the powder-metal flaw cost RTX ($bn)2.9Operating profit charge, 20231.0Paid to customers, 20241.0Paid to customers, 2025RTX Form 10-K FY2025, Powder Metal Matter; payments in cash and credits
One quality failure, three years of cash.

The lesson for the moat is that scale protects a company from competitors more than from itself. The recall is covered on its own page; its relevance here is that a single quality failure cost $2.9 billion of operating profit3 and turned the group's 2023 return on capital down to 2.8%4.

The filing still warns that "durability issues" in other in-service GTF engines could arise5.

Nor did scale stop the problem spreading to cash. The customer-compensation accrual created for the recall was $2.8 billion6, and $1.0 billion of it was paid in cash and credits in each of 2024 and 20257, cash that would otherwise have gone to buybacks or debt reduction.

The test is simple: does another charge of this kind appear? RTX has not reported one since; a new fleet-wide inspection programme on any engine family would show that the quality systems, not the market, are the constraint on the moat.

References
  1. ReportedIn July 2023 Pratt & Whitney found "a rare condition in powder metal" used in certain engine parts, and it later said about 600 to 700 engines would be removed for shop visits between 2023 and 2026.
    RTX Form 10-K for fiscal 2025 - the Powder Metal Matter: the July 2023 finding, the third-quarter 2023 charge ($5.4 billion of net sales, $2.9 billion of operating profit at Pratt & Whitney's net 51% program share, partners' 49% share), customer-compensation accruals of $1.7 billion at the end of 2024 and $0.7 billion at the end of 2025, $1.0 billion used in each of 2024 and 2025, and elevated aircraft on ground levels through the end of 2026. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  2. ReportedIn July 2023 Pratt & Whitney found "a rare condition in powder metal" used in certain engine parts, and it later said about 600 to 700 engines would be removed for shop visits between 2023 and 2026.
    RTX Form 8-K exhibit 99.1 of 11 September 2023, GTF fleet update - 600 to 700 engines to be removed for shop visits between 2023 and 2026, a $3 billion to $3.5 billion operating profit impact after partners' share, and the capital-return commitment. — September 2023 · publ. 11 September 2023 · source ↗
  3. ReportedThe recall is covered on its own page; its relevance here is that a single quality failure cost $2.9 billion of operating profit and turned the group's 2023 return on capital down to 2.8%.
    RTX Form 10-K for fiscal 2025 - the Powder Metal Matter: the July 2023 finding, the third-quarter 2023 charge ($5.4 billion of net sales, $2.9 billion of operating profit at Pratt & Whitney's net 51% program share, partners' 49% share), customer-compensation accruals of $1.7 billion at the end of 2024 and $0.7 billion at the end of 2025, $1.0 billion used in each of 2024 and 2025, and elevated aircraft on ground levels through the end of 2026. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  4. Moat Explorer calcThe recall is covered on its own page; its relevance here is that a single quality failure cost $2.9 billion of operating profit and turned the group's 2023 return on capital down to 2.8%.
    Moat Explorer calculation, tools_roic_edgar.py method on SEC EDGAR XBRL for CIK 101829: return on invested capital 3.5% (2021), 4.1% (2022), 2.8% (2023), 4.9% (2024), 7.1% (2025); -1.5% in 2020. Earlier years are on United Technologies' pre-2020 basis and are not comparable. — 2020-2025 · publ. September 2026 · source ↗
    Method: NOPAT (operating income x (1 - effective tax rate)) divided by average operating invested capital (total assets less current liabilities less cash), from SEC EDGAR XBRL using the tools_roic_edgar.py method. The 8% hurdle is an assumed cost of capital.
  5. ReportedThe filing still warns that "durability issues" in other in-service GTF engines could arise.
    RTX Form 10-K for fiscal 2025 - Item 1A risk factors: competition on price, delivery and technology; customers buying parts from suppliers other than the original equipment manufacturer; discounts and guarantees to win engine positions; new defence entrants; GTF durability; reputational harm; pension sensitivity to the discount rate; tariffs. — FY2025 · publ. 6 February 2026 · source ↗
  6. ReportedThe customer-compensation accrual created for the recall was $2.8 billion, and $1.0 billion of it was paid in cash and credits in each of 2024 and 2025, cash that would otherwise have gone to buybacks or debt reduction.
    RTX Form 10-K for fiscal 2025 - the Powder Metal Matter: the July 2023 finding, the third-quarter 2023 charge ($5.4 billion of net sales, $2.9 billion of operating profit at Pratt & Whitney's net 51% program share, partners' 49% share), customer-compensation accruals of $1.7 billion at the end of 2024 and $0.7 billion at the end of 2025, $1.0 billion used in each of 2024 and 2025, and elevated aircraft on ground levels through the end of 2026. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  7. ReportedThe customer-compensation accrual created for the recall was $2.8 billion, and $1.0 billion of it was paid in cash and credits in each of 2024 and 2025, cash that would otherwise have gone to buybacks or debt reduction.
    RTX Form 10-K for fiscal 2025 - the Powder Metal Matter: the July 2023 finding, the third-quarter 2023 charge ($5.4 billion of net sales, $2.9 billion of operating profit at Pratt & Whitney's net 51% program share, partners' 49% share), customer-compensation accruals of $1.7 billion at the end of 2024 and $0.7 billion at the end of 2025, $1.0 billion used in each of 2024 and 2025, and elevated aircraft on ground levels through the end of 2026. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
Sources
Generated September 28, 2026