GE Aerospace Releases 1Q'24 Results

Today, we hosted our first earnings call as GE Aerospace – now a pure-play, global leader in propulsion, services, and systems. We’re wholly focused on our aerospace and defense customers, serving the 900,000 passengers in the air right at this moment with our technology underwing. It’s an incredible responsibility for our teams globally, and why we take safety and quality so seriously.?

Below you will find some of the comments I made during the earnings call. To learn more about our results, click here. For important information about forward-looking statements, click here.

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Just 3 weeks ago, on April 2nd, we completed GE Vernova’s spin and launched GE Aerospace, ringing the bell at the New York Stock Exchange... after the successful spin of GE HealthCare last year. It was a proud moment that we celebrated with our teams around the world.

This marked a new beginning, following the completion of GE’s multi-year transformation that strengthened our businesses both financially and operationally. Thanks to the GE team, we significantly improved our financial position, reducing debt by more than $100 billion since 2018... and enhanced our operational execution by embracing lean with a relentless focus on safety, quality, delivery, and cost – in that order – to better serve our customers. Together, we built a strong foundation for our three independent companies that, to date, have increased shareholder value nearly fivefold.

We had an exceptionally strong last quarter as GE. … reflecting real momentum at both GE Aerospace and GE Vernova. And now, the day has come where we bring our full focus to GE Aerospace:

• Our commercial propulsion fleet is the industry’s largest and youngest, thanks to our world-class engineering and services team.
• And in defense, we’re proud to be the rotorcraft and combat engine provider of choice, powering two-thirds of these aircraft worldwide.

A massive part of our business is in aftermarket services, representing 70% of our $32 billion in revenue. Importantly, as we meet higher levels of demand today, services enable us to better understand how our technologies are performing and we use that intelligence to help shape our future product roadmaps.

Now, turning to our performance… GE Aerospace had a solid start to the year. In the first quarter, we delivered double-digit revenue and profit growth, as well as margin expansion in both businesses, with free cash flow doubling year-over-year.

Overall, we have great confidence in our forward trajectory... we’re raising our full-year operating profit guidance and see a path to our $10 billion operating profit target by 2028.

As you heard from us last month at our investor day, we’re keeping our strategy simple – focused on today, tomorrow and the future – with safety and quality first.

Enter FLIGHT DECK – our proprietary lean operating model to ensure focused execution as a public company. Fundamentally, it’s a systematic approach to running our business to deliver exceptional value as measured through the eyes of our customers. And it’s the best way we know to operationalize flight safety at GE Aerospace in combination with our Safety and Quality Management Systems.

Starting with Today… we’re focused on service and readiness, keeping our customers’ fleets flying.

• We’re experiencing a tremendous demand cycle for services as more people fly and fly more often. In the quarter, GE/CFM departures were up low double-digits and we’re revising our expectations upward for the year.
• The onus is on us to meet this demand, and with FLIGHT DECK, we’re maintaining the highest standards of safety and quality, with greater predictability and speed. Easy to say, hard to do.
• A key priority in our Services business is improving turnaround times to increase our shop visit output. We’re making progress with LEAP – a significant driver of shop visit growth this year. For example, at our Malaysia site, a joint GE Aerospace and Safran team collaborated to reduce average LEAP test cell hours by over 30% per engine, and they’re working toward 50%-plus improvement by year-end. As a result, the team has closed 95% of a 100-engine gap in test capacity so far, while optimizing LEAP baseline test time, eliminating interruptions, and reducing network variation.
• Actions like this are improving our shop turnaround time, which for LEAP was down to approximately 90 days this quarter, a 10% reduction, versus our roughly 100-day average in ’23.
• While there’s more work to do, we’re focused on getting engines back in the hands of our customers, faster, while also reducing capex needs within our shops.

For tomorrow, we remain focused on delivering on the ramp.

• This quarter, total engine deliveries improved, up 9% year-over-year, including defense up over 50%. However, these deliveries were short of our objectives due largely to continued material availability challenges.
• We have intensified our efforts working with our suppliers to problem-solve these issues. Here, FLIGHT DECK is key.
• Currently, we can track about 80% of our largest delivery challenges back to about 15 supplier sites, such as castings. We’re deploying more than 550 engineers and supply chain resources, up 25% from last year, working with them to improve quality and delivery performance.
• For example, we’re problem solving with one of our largest tier one suppliers by going to genba at their most constrained supplier. We are shoulder to shoulder with them, leveraging FLIGHT DECK, and working together to identify and break constraints, such as labor shortfalls, manufacturing yield issues, identifying alternate material types for raw material shortages, and improving flow and lead times. And as a result, that constrained supplier recently improved output by more than 25% and is no longer pacing deliveries.
• We also recently announced we’re investing more than $650 million in both our manufacturing facilities and our supply chain this year... reflecting our commitment to strengthening quality and increasing production to better support our customers long-term.

At the same time, both airlines and our defense customers are expanding and modernizing their fleets and choosing to do so with us, adding to our $150 billion-plus backlog and continuing to build our installed base of engines and services.

• At the Singapore Airshow, Thai Airways committed to powering its new widebody fleet of Boeing 787 aircraft with GEnx-1B engines. The GEnx is now a cornerstone of the airline’s long-term plan to open new markets and meet surging demand, while working to achieve its environmental goals.
• And, American Airlines secured 85 new Boeing 737 MAX jets, which will be powered by the LEAP 1-B, and easyJet made a commitment for more than 300 LEAP-1A engines for its fleet of 157 A320neo aircraft.
• In our Defense and Propulsion Technologies business, we won a new order for F414 engines to power additional KF-21 fighter jets for the Korean Air Force, continuing to build our international business.

?And for the future, we’re advancing the technology building blocks that will define the future of flight with more than $2 billion in R&D spend this year.

• For example, we’re continuing to make real progress with testing in our CFM RISE program. We completed our first fan ingestion test with our full-scale RISE fan blade, and the results were extremely encouraging.
• On the Defense side, in partnership with Sikorsky Innovations, our team is finalizing designs for a hybrid electric power systems testbed with a 600-kilowatt electric motor. This will support Sikorsky’s plan to build, test and fly a hybrid electric vertical takeoff and landing demonstrator with a tilt-wing configuration.?

Altogether, we’re running GE Aerospace with customer expectations front and center, while delivering breakthrough innovation that will further shape the future of flight. And FLIGHT DECK ensures we work as one team, utilizing one operating model to implement one strategy, and ultimately yield one culture.

This will enable us to lead the industry forward and advance our vision to be the company that defines flight for today, tomorrow and the future.

To close, our team at GE Aerospace is moving forward with a greater focus to invent the future of flight, lift people up, and bring them home safely. And with FLIGHT DECK as our foundation, I’m confident we will realize our full potential in service of our customers, employees, and shareholders.