⚠ Young Engines Earn Less in the ShopModerate threat

RTX (RTX) — threat to the moat

Pratt & Whitney's newest engine produces its overhauls at a lower margin than the old fleet, and its own filing says the mix shift held profit back.

A growing fleet does not produce profitable aftermarket at once. RTX said so in its own account of 2024: Pratt & Whitney's commercial profit was held back by "a shift in aftermarket mix towards higher GTF volume"1. The newer engine's shop visits were earning less than the mature V2500 fleet's.

Pratt & Whitney operating margin (%)2.5%20215.2%20227.2%20247.9%20258.5%H1 2026RTX Forms 10-K FY2023 and FY2025, Q2 2026 release; 2023 loss year omitted
Rising, but still in single digits.

The reason is timing. An engine sold with long-term maintenance commitments and guarantees carries its costs early and its rewards late, and the powder-metal inspections pulled a large number of GTF visits forward. In 2025 Pratt & Whitney again cited "unfavorable aftermarket mix", alongside tariffs and production costs, as an offset to higher volume2.

The result shows in the segment margin. Pratt & Whitney earned 7.9% on its 2025 sales, against 16.3% at Collins34, although it is the larger segment and most of its growth came from aftermarket.

The accounts also show that estimates on engine contracts are drifting the wrong way. RTX said the unfavourable changes in its net estimate-at-completion adjustments at Pratt & Whitney in 2025 "were spread across numerous programs, with no individual or common significant driver"5. Small, widespread downward revisions on long contracts are how a thin margin stays thin.

The danger is that the GTF's aftermarket never reaches the margins of the engines it replaced, because the guarantees and discounts used to win it are larger. Watch Pratt & Whitney's operating margin as GTF shop visits rise; if it stays below 9% after the recall accrual is used up, the young fleet is not paying as the old one did.

References
  1. ReportedRTX said so in its own account of 2024: Pratt & Whitney's commercial profit was held back by "a shift in aftermarket mix towards higher GTF volume".
    RTX Form 10-K for fiscal 2025 - Item 7 segment review and Note 20: net sales and operating profit by segment for 2023-2025, organic sales drivers (commercial aftermarket, OEM, military), sales by customer type, products and services, segment assets, capital expenditure and research and development - Pratt & Whitney: segment sales, operating profit, organic drivers, customer types, assets and capital expenditure. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  2. ReportedIn 2025 Pratt & Whitney again cited "unfavorable aftermarket mix", alongside tariffs and production costs, as an offset to higher volume.
    RTX Form 10-K for fiscal 2025 - Item 7 segment review and Note 20: net sales and operating profit by segment for 2023-2025, organic sales drivers (commercial aftermarket, OEM, military), sales by customer type, products and services, segment assets, capital expenditure and research and development - Pratt & Whitney: segment sales, operating profit, organic drivers, customer types, assets and capital expenditure. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  3. ReportedPratt & Whitney earned 7.9% on its 2025 sales, against 16.3% at Collins, although it is the larger segment and most of its growth came from aftermarket.
    RTX Form 10-K for fiscal 2025 - Item 7 segment review and Note 20: net sales and operating profit by segment for 2023-2025, organic sales drivers (commercial aftermarket, OEM, military), sales by customer type, products and services, segment assets, capital expenditure and research and development - Pratt & Whitney: segment sales, operating profit, organic drivers, customer types, assets and capital expenditure. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  4. Moat Explorer calcPratt & Whitney earned 7.9% on its 2025 sales, against 16.3% at Collins, although it is the larger segment and most of its growth came from aftermarket.
    Moat Explorer calculation from RTX's segment results (Forms 10-K FY2023 and FY2025, Q2 2026 earnings release; $ millions). Operating margins: Collins 2,380 / 21,152 = 11.3% (2021), 2,816 / 23,052 = 12.2% (2022), 4,923 / 30,196 = 16.3% (2025), H1 2026 2,613 / 15,812 = 16.5%, Q2 2026 1,306 / 8,210 = 15.9%, Q1 2026 (first half less Q2) 1,307 / 7,602 = 17.2%; Pratt & Whitney 454 / 18,150 = 2.5% (2021), 1,075 / 20,530 = 5.2% (2022), 2,015 / 28,066 = 7.2% (2024), 2,596 / 32,916 = 7.9% (2025), H1 2026 1,448 / 17,062 = 8.5%, Q2 2026 738 / 8,889 = 8.3%; Raytheon 3,399 / 26,611 = 12.8% (2021), 2,448 / 25,176 = 9.7% (2022), 2,379 / 26,350 = 9.0% (2023), 3,227 / 28,043 = 11.5% (2025), Q2 2026 1,042 / 8,269 = 12.6%; Q1 2026 Raytheon sales 15,214 - 8,269 = 6,945. Growth 2021-2025: Collins 30,196 / 21,152 - 1 = 43% (about 9% a year), operating profit 4,923 / 2,380 = 2.07 times; Pratt & Whitney 32,916 / 18,150 - 1 = 81%, 2025 32,916 / 28,066 - 1 = 17%; Raytheon 28,043 / 26,611 - 1 = 5%. 2025 shares of segment sales (91,155): Pratt & Whitney 36%, Collins 33%, Raytheon 31%; of segment operating profit (10,746): Collins 4,923 = 45.8%, Raytheon 3,227 = 30.0%, Pratt & Whitney 2,596 = 24.2%. Operating profit over segment assets 2025: Collins 4,923 / 71,680 = 6.9%, Raytheon 3,227 / 44,795 = 7.2%, Pratt & Whitney 2,596 / 52,482 = 4.9%. Pratt & Whitney services share 14,449 / 32,916 = 44%; services growth 14,449 / 9,717 = 1.49 times. Collins commercial share 18,858 / 27,585 = 68%; Collins government sales 7,061 + 436 + 1,230 = 8,727, 8,727 / 27,585 = 32%. Raytheon U.S. government share 19,237 / 27,892 = 69%. Collins services share 6,118 / 27,585 = 22%. Pratt & Whitney segment assets 52,482 / 44,307 - 1 = 18%. Pratt & Whitney 2025 defence bookings other than F135: about 9.0 - 2.9 - 2.4 = 3.7 billion. GE Aerospace Commercial Engines & Services profit 8,861 against Pratt & Whitney 2,596: 3.4 times; margins 26.6% against 7.9%. — 2021-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in RTX's Forms 10-K and 10-Q, earnings releases, earnings call and market data; operands shown in the source line.
  5. ReportedRTX said the unfavourable changes in its net estimate-at-completion adjustments at Pratt & Whitney in 2025 "were spread across numerous programs, with no individual or common significant driver".
    RTX Form 10-K for fiscal 2025 - consolidated financial statements and notes: income statement, cash flow, dividends and repurchases, long-term debt of $37,700 million, goodwill by segment, pension income, the 2024 resolution of certain legal matters, the Raytheon contract termination and the accelerated share repurchase. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
Sources
Generated September 28, 2026