United Technologies (NYSE:UTX) geared turbofan (GTF) introduction went badly. The latest problem is a knife-edge seal that caused in-flight shutdowns leading to parked airplanes waiting for fixed engines. United Technologies' Pratt and Whitney unit is almost completely out of Boeing (NYSE:BA), powering only the 767 Freighter. In the last big engine contest for the redesigned 777, Pratt submitted a design with the lowest fuel and maintenance costs. Boeing rejected Pratt and went on to negotiate with GE (NYSE:GE) and Rolls Royce (OTCPK:RYCEY). Because of the GTF, the CEO of UTX, Executive VP of Aerospace businesses, President of Pratt Whitney, and VP of Pratt manufacturing were asked to find employment elsewhere.
UTX may not seem to be the obvious choice for the 8000-engine program, but because of the GTF, it is best placed to win. UTX has buy recommendations, which assume that the GTF will turnaround in a year or two without consideration of the $100 billion in new engine revenue. This is in addition to a large stream of service profits. This upside makes UTX an even stronger buy.
