UPDATE 2-Mexican carrier Volaris sees Pratt & Whitney engine agreement soon

(Updates throughout)

By Kylie Madry and Aida Pelaez-Fernandez

MEXICO CITY, Oct 25 (Reuters) - Mexican airline Volaris expects to reach an agreement with engine maker Pratt & Whitney in the next month on an initial round of mandatory motor inspections, the company's chief executive said on Wednesday.

The inspections, required after RTX Corp-owned Pratt & Whitney discovered a rare powder metal defect, could continue into 2024 and 2025, Volaris Chief Executive Enrique Beltranena said in a call with analysts.

Of Volaris' 126-aircraft fleet, 73 "may be temporarily affected," Beltranena said, representing a major hit to the company.

Pratt & Whitney is expected to shell out billions of dollars to fix the defect, with the vast majority going to airlines.

Volaris will not have clarity on the long-term impact of the inspections until at least the first quarter of 2024, Beltranena added.

However in September alone, Volaris' available seat miles, a measure representing passenger carrying capacity, shrank 8% to represent a revenue hit worth $18 million, he said.

The airline currently has 16 aircraft grounded, Beltranena added.

Volaris trimmed its full-year estimates to reflect the change, with fourth quarter capacity expected to remain "virtually flat" compared to the year-ago period.

The airline had been expecting to boost flights to the United States after Mexico regained a U.S.-given aviation safety rating, which allowed Mexican carriers to expand routes to its northern neighbor.

However, the engine inspections "have affected our ability to relocate aircraft for U.S.-bound routes more than anticipated," Chief Financial Officer Jaime Pous said.

Despite the hit from the engine inspections, Volaris expects to increase international capacity by 19% in the fourth quarter, Executive Vice President Holger Blankenstein said, though some less-profitable routes while be scaled back.

To compensate for the grounded planes, Volaris is extending leases previously due to expire in 2024 and 2025 for 18 aircraft, Pous said.

Shares in the carrier were down around 3.5% in early morning trading, but pared their losses by mid-day to trade down 0.3%. (Reporting by Kylie Madry and Aida Pelaez-Fernandez, Editing by Bill Berkrot and Angus MacSwan)