RTX’s $289 Billion Backlog Tilts Commercial—And That’s Exactly How the Company Benefits

Key Points

• Commercial aerospace strength supports RTX’s defense business and financial flexibility.

• A strong commercial backlog enables the defense business to walk away from unprofitable contracts and avoid problematic ones.

The 60/40 split between RTX’s commercial aerospace and defense backlogs has proven highly advantageous for the company—not merely due to the robust recovery in commercial aviation, but because the commercial aerospace segment has demonstrably strengthened the defense business and overall financial position.

Commercial Aerospace and Defense Are Working Together

Historically, the commercial aerospace industry was perceived as cyclical, marked by alternating periods of growth and contraction. In contrast, the defense sector was viewed as stable but slow-growing, with the U.S. government as its primary customer.

This complementary dynamic was a key rationale behind the merger of United Technologies’ commercial aerospace operations with Raytheon Company, forming RTX. The defense segment’s earnings and cash flow were designed to sustain the commercial aerospace business through cyclical downturns, allowing continued investment in long-cycle solutions and positioning the company to capitalize when conditions improved.

The defense business indeed provided crucial support during the costly multibillion-dollar issue involving powder metal coating on the Geared Turbofan (GTF) engine.

Data source: RTX presentations. Chart by the author.

Why the Commercial Aerospace Backlog Also Supports the Defense Business

Beyond its strong profitability, the commercial aerospace segment helps the defense business avoid overextension during a period when competitors like Boeing and Lockheed Martin face pressure to accept challenging, often loss-making, fixed-price development programs. The U.S. government has adopted a tougher negotiating stance on complex, technically demanding contracts.

An illustrative example: RTX terminated a fixed-price contract for a classified foreign program in 2024, absorbing a $575 million charge in the second quarter—a relatively modest amount compared to Boeing’s multibillion-dollar write-downs. RTX exited the contract because it fell “outside our core competency,” according to CEO Chris Calio, and it had been initiated before RTX’s formation.

Image source: Getty Images.

RTX can adopt a more disciplined approach to defense contract procurement, often concentrating on established solutions such as Patriot missiles, while maintaining the flexibility to walk away from unfavorable contracts—privileges enabled by its substantial commercial aerospace backlog.

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