United Technologies Corp. (UTC) executives cited a combination of strong demand and good fortune for a surge in aftermarket sales at units Pratt & Whitney and UTC Aerospace Systems (UTAS) last quarter, and they are cautiously optimistic for more of the same near-term.
"It's only one quarter," said UTC CFO Akhil Johri. "But I would think based on what we are seeing in the marketplace, I would bet that probably both Pratt and UTAS will see a little upward pressure on the full-year aftermarket."
Pratt's commercial aftermarket revenue jumped 18%, riding strong demand for the V2500 line, which remains on track for more than 1,000 shop visits globally. "We're about the eighth or ninth year of [V2500] average life, and this is where the heavy maintenance overhauls are coming in," UTC CEO Greg Hayes said.
Pratt also got a surprise bump from higher-than-expected sales tied to PW4000 work. The company cited a higher percentage of 112-in. PW4000 engines coming through shops as a primary driver. The 112-in. PW4000 family members, which power Boeing 777-200s and -300s, typically require more parts during a shop visit than their 94-in. and 100-in. siblings.
UTAS saw its aftermarket sales increase 16%, thanks in part to some initial-provisioning (IP) deals that came in earlier than planned. "A couple of airlines took deliveries earlier than we expected. So it was part of the [full-year forecast], but came through in first quarter," Johri said, noting that IP was up 28% year-over-year.
"I don't know whether provisioning will stay at that high level," he added. "Compares get more difficult for them in the third and fourth quarter, where we saw really good numbers last year, but overall we're still very happy with where the trends are." Parts and repair were up 10% and 12%, respectively, the company said.
UTC's full-year financial guidance includes a 10% increase in Pratt commercial aftermarket and a low- to mid-single-digit bump in UTAS commercial aftermarket. While executives aren't ready to officially raise these figures based solely on one quarter, the signals they're sending suggest their expectations have increased.
"Airline profitability remains strong. [Air traffic] growth remains strong. And oil prices, although up a little bit, are still a relatively moderate impact on the bottom line," Hayes said. "I think all of that points to a very robust aftermarket, not just in the first quarter, but probably for this year and into next."