Oct 25 (Reuters) – Aerospace supplier Raytheon Technologies Corp (RTX.N) on Tuesday posted a near 5% rise in third-quarter revenue as air travel demand buoyed parts and services sales, though lingering supply chain issues spurred the company to trim its 2022 sales outlook.

Raytheon, whose customers include Boeing Co (BA.N) and Airbus SE (AIR.PA), has benefited from the planemakers raising their output, increasing demand for engines, though labor shortages have hit deliveries.

The resulting engine shortage has led to a feud with Airbus as the planemaker targets raising narrowbody production over the next few years.

Supply-chain issues still dogged the company as components and materials failed to show up on time, Chief Financial Officer Neil Mitchill said in an interview.

“We did not see the acceleration in the material receipts that we expected and needed to see” to meet the previous revenue guidance, he said.

Raytheon lowered the midpoint of its 2022 sales guidance by 1.6% from $68.25 billion to $67.15 billion.

But on the upside, demand for aftermarket sales and services has risen at Pratt & Whitney and Raytheon’s avionics and parts unit Collins Aerospace, as planes were forced to use existing fleet for longer.

In the third quarter, both Collins Aerospace and Pratt & Whitney recorded double-digit sales.

“We note, Raytheon (Pratt and Collins) and Safran intend to implement substantial price increases in Q4 – likely above 10% – for commercial aftermarket parts and services. Consequently, airlines likely placed sizeable orders for parts in Q3 in advance of the Q4 price hikes,” Melius Research analyst Rob Spingarn wrote in a note.

However, supply chain constraints were a drag on the company’s missiles and defense unit, where sales fell 6%.

“While we expect industry-wide challenges to continue near-term, we remain focused on operational excellence, including cost containment and program performance,” Raytheon Chief Executive Greg Hayes said.

The company raised the lower end of its adjusted earnings outlook for the year to a range of $4.70 to $4.80 per share, from its prior estimate of $4.60 to $4.80.

On an adjusted basis, Raytheon’s quarterly net income was $1.21 per share, compared to $1.26 a year earlier.

Net sales for the quarter through September was $16.95 billion, compared with $16.21 billion a year earlier.

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