Calio To Become RTX CEO Amid Pratt GTF Challenges

Chris Calio will become the next CEO of RTX, arguably the world’s largest aerospace and defense company by annual sales, on May 2, 2024, the company announced late Dec. 14.

The appointment–which has been widely expected in industry and investor communities–comes just a few years after Calio became the heir apparent when he took over chief operating officer (COO) duties in March 2022.

Current Chairman and CEO Greg Hayes will continue to serve as executive chairman of RTX, a more powerful version of the head of the board that companies often employ during planned CEO transitions.

“Today’s announcement reflects the board’s deliberate, disciplined succession planning process,” Hayes said in the announcement. “Chris has a deep understanding of the industry, our customers’ needs and our operations. I have every confidence in his ability to lead RTX and drive the company’s long-term success.”

Calio, 50, has been a rising star since joining the company as general counsel at engine-making division Pratt and Whitney in 2005 and later becoming head of that business in January 2020. Most recently, RTX credits him with overseeing the realignment of the corporation from four to three divisions, now Collins Aerospace, Pratt and Raytheon. Along the way, Calio has served as chief of staff to Hayes, who is two years from the traditional retirement age of 65.

Still, while expected, Calio’s appointment as CEO comes as RTX is wrestling with prolonged issues from Pratt’s geared turbofan (GTF) engine at the division where he made his mark. In September 2023, the manufacturer revealed that 600-700 engines will need to come off wing for unscheduled inspections by 2026—on top of another 500 already scheduled for overhauls.

For 2024, Pratt’s focus remains centered on damage control over the troubled PW1000G while simultaneously supporting increasing production rates at Airbus and Embraer. The engine-maker’s problems grew in 2023 with the revelation that long-running issues with contaminated powder metal were worse than previously feared and will significantly increase mandated removals and inspections.

“While Calio likely carries some of the negative P&W sentiment with him, we also believe investors are prepared to give him the benefit of the doubt as RTX continues to drive resolution to the powder metal issue,” RBC Capital Markets analyst Ken Herbert sasid.

What is more, RTX will have to work harder to keep shareholders satisfied–many of whom are counting on RTX to make good on promises made to investors when RTX was formed in April 2020 from the combination of Pratt, Collins and the erstwhile Raytheon Co. To combat doubts, RTX recently unveiled a $10 billion accelerated share buyback, which will provide a faster, more-guaranteed return to shareholders but at the cost of taking out new debt in a higher interest-rate environment

The company claims it is on track to return $36-37 billion to shareholders through 2025.

Nevertheless, for Hayes the CEO transition will cap a career of rising to the top of predecessor United Technologies (UTC) and then forming RTX, which counts 180,000 employees and around $67 billion in annual sales. From adding Rockwell Collins in 2018 and Raytheon in 2020 to selling off Sikorsky Aircraft in 2015, Hayes oversaw the creation of the largest aerospace and defense company ever–larger than its OEM customers or other defense primes. He was first appointed UTC CEO in 2014 after Louis Chênevert was ousted there, then was given chairmanship, also in 2016.