GE Aerospace at Bernstein Conference: Strategic Flight Path

On Wednesday, 28 May 2025, GE Aerospace (NYSE:GE) participated in the Bernstein 41st Annual Strategic Decisions Conference. CEO Larry Culp provided insights into the company’s strategic direction, addressing both opportunities and challenges. While GE Aerospace boasts strong revenue growth and a robust operational model, it also faces headwinds from tariffs and supply chain constraints.

Key Takeaways

• GE Aerospace reported $35 billion in revenue for 2024, with significant growth in recurring services.
• The company aims to offset $500 million in tariff headwinds through cost and price actions.
• An installed base of 70,000 engines supports their operational reliability and market presence.
• The RISE program is set to enhance fuel efficiency by 20%.
• Supplier delivery improvements have reached 95% on-time performance.

Financial Results

• Total 2024 Revenue: $35 billion
• Commercial Engines and Services (CES) Revenue: $26 billion, a 13% increase
• Defense and Propulsion Technologies (DPT) Revenue: Nearing $10 billion, with mid-single-digit growth
• Services Orders Growth in CES: 30% for 2024 and Q1
• Backlog: $180 billion
• Tariff-related headwinds for 2025: $500 million

Operational Updates

• CES powers 75% of global commercial departures, with an installed base of over 45,000 engines
• DPT powers two-thirds of US combat jets and rotorcraft, with 25,000 installed engines
• Lean operating model, Flight Deck, focuses on safety, quality, delivery, and cost (SQDC)
• LEAP engine deliveries expected to grow 15-20% in 2025
• LEAP engine time on wing anticipated to double to 8,000 cycles

Future Outlook

• CES growth expected in high single digits, with further details to be shared at the Paris Air Show
• The RISE program targets a 20% improvement in fuel efficiency
• Collaboration with Boeing on the MAX recovery and production ramp-up
• CFM 56 shop visits to reduce from 2,300 to 2,000 annually by 2030
• Open rotor aircraft projected to be operational between 2035-2040

Q&A Highlights

• Strong support from the administration for GE Aerospace’s orders and US manufacturing revitalization
• Advocacy for a return to a tariff-free aerospace environment
• Collaboration with Boeing to align LEAP engine deliveries with Boeing’s production increases
• Focused M&A strategy, with no plans for widespread expansion

In conclusion, GE Aerospace remains committed to navigating current challenges while capitalizing on growth opportunities. For more detailed insights, please refer to the full transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference:

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Okay. Why don’t we get started here? I’m Doug Harned, Bernstein’s senior global aerospace and defense analyst. And I am thrilled to have back with us again Larry Culp, CEO and chairman of GE Aerospace. Larry’s got a few things he wants to talk about first, and then we’ll go into a fireside chat.

And I think as you may know, you can submit if you have questions through the Pigeonhole link. But, Larry, let me turn it over to you.

Larry Culp, CEO and Chairman, GE Aerospace: Great, Doug. Thank you. With that sound, I think everybody can hear me even in the room next door. Well, good morning. And we we appreciate the opportunity to visit with you for a little bit this morning.

Doug, it’s the second time we’re here, so it’s good to be back as a stand alone GE Aerospace. So I thought what we might do is just give you a quick update as to where things stand here with the company at the May and then get into the questions that are always the fun part of the session. As we think about GE Aerospace and the journey over the last fourteen months, I think it’s worth repeating that our purpose has really been front and center for us every step of the way. And as you can see on the slide, the the words here are are are deep and meaningful. Doug’s very excited when we put this slide up.

We we invent the future of flight. We lift people up, and we bring them home safely. And that last part is is meaningful to us in no small part because we have the better part of a million passengers in the air right now with our technology underway. Now it’s one thing to talk about safety being front and center, but for a company like ours, what’s critical is to operationalize that. And we’ll talk a little bit about Flight Deck, which is our proprietary lean operating model, which really gives us, I think, the the wherewithal to walk the talk around SQDC, safety, quality, delivery, and cost in that order every day, everywhere.

So there’s a lot that we’re proud of in terms of what has happened since we spun out on the April 2 a year ago. Really pleased with the effort and the momentum we have across 53,000 people around the world. But hopefully, as you see today, there’s still a lot in front of us that we think is is is noteworthy. We look at the company for some of you who may not be familiar with the story. We really think this is an exceptional business focused primarily on propulsion related services and systems.

As you can see last year, in 2024, we did approximately $35,000,000,000 of revenue. We had a very strong first year out as a stand alone company. We think we have an incredibly resilient business in large part because of the balanced exposure we have across wide body, narrow body regionals, and in our military business. And I think you see that right smack in the middle here maybe most starkly with that 70% figure. 70% of our revenue comes from repeatable, predictable, recurring services.

So we’re out there with our customers. We’re living with the product every single day, and we think that makes us better. We think that is in large part how we differentiate ourselves. We operate in two segments, commercial engines and services or CES and defense and propulsion technologies or DPT. Clearly, CES is the business that runs the the overall franchise.

26,000,000,000 last year in revenue, up 13%. And here, we really have, we think, the enviable position of powering three quarters of every commercial departure around the world. So that speaks to the installed base in excess of 45,000 engines across that portfolio and a a business that we think gives us exposure not only to customers’ realities today, but how they’re thinking about what comes next. And with a larger service percentage here, nearly three quarters of revenue, again, we’re out there every day. And this is where we see real strength, frankly.

We talked at earnings back a little over a month ago about a 30% orders growth in services in CES last year. We continued at that pace in the first quarter. And as we look out today with respect to the demand environment, we continue to be encouraged by that. But it’s not just the aftermarket. It’s not just supporting the installed base.

There’s a lot going on here with respect to growing the installed base. And you’ve seen a couple of noteworthy orders here of late. We had the good fortune to be with the president when he was in Qatar just two weeks ago, announcing the largest wide body engine order in our company’s history in excess of 400 engines with Qatar. Around that same time, we were thrilled to win the the nod to power 32 new Dreamliners, the seven eight sevens that that British Airways will be buying from Boeing. So there’s just a lot of momentum here as the fleets are are being worked on a daily basis, but also as the airlines look to modernize and expand their fleets.

Not dissimilar dynamics in defense and propulsion technologies. It’s a smaller business, you can see, approaching 10,000,000,000 in revenue. We had a good year last year, mid single digit growth with a backlog now quickly in well, now in excess of of 10,000,000,000 or closing in on $20,000,000,000. This is where we really have a similarly enviable position in that we power two thirds of The US combat jet and rotorcraft fleets. So our engines are out there.

We’ve we’ve won platforms over the last several decades, which gives us that installed base of here 25,000 engines, which we’re out, again, servicing on a on a regular basis. We are off to a good start here. A little bit more of a profitability emphasis in in DPT, and we saw a profit up in the first quarter of 16%. When you put it all together, a lot of momentum here in large part because of the installed base and the activity on both sides of the aisle, but, again, also with the backlog overall in the the $180,000,000,000 range, a lot of commitments that we’re looking forward to fulfilling in the years ahead. So how do we do that?

What you really capture here, I mentioned flight deck earlier. When we think about our strategy, simply put, we wanna be the company that defines the future of flight. And that really requires us to be focused strategically on what we’re doing today, tomorrow, and into the future. When we talk about today, it really is all about servicing the ramp. This backlog around services that we that we mentioned earlier, the expansion of the the fleets around the world, and at the same time, making sure that we’re doing the same thing for our military customers that we are with our commercial customers.

With respect to tomorrow, because we’re sold out in many respects through the rest of this decade, it’s all about building out the capacity and the capabilities, be it a new make, be it in the aftermarket, to make sure we’re we’re prepared and all the while continuing to evolve and advance the the products. Time on wing, really the the hallmark of of any outstanding engine platform. There’s a lot that we’re doing to make sure in narrow bodies and wide bodies and even in defense that we’re continuing to to progress to improve the time one wing that improves in turn the overall performance and economics for the airline. All the while, as challenging as that is operationally, we need to make sure we continue to focus on the future of flight. We’re fortunate to be here today because of the good work so many have done in in in the generations really that preceded us.

When we hand this business off, we wanna make sure we’re as well positioned strategically on the platforms that matter around the world. Flight deck in turn is how we make that strategy a reality. It’s how we implement. It’s our operating model, And it’s real really all about behaviors that we expect from everybody on the payroll coupled with lean operating fundamentals, which allows us to do a better job for our customers on a regular basis throughout the course of the year. And in turn, that’s what you see on the far right, the results that we drive.

The operating results, first and foremost, the financial, and in turn, our Hoshikanu, our strategic breakthroughs, as well as our culture. So there’s a lot here. We don’t have time to unpack at all, But I think the main takeaway here is that we care deeply not only about what we’re doing, but how we do it. We think the how is critical. It’s what makes it sustainable.

It it’s what makes it valuable for customers and investors alike. So we spend a lot of time on flight deck when we’re back in the office. I mentioned the future of flight. A lot happening here. And on the commercial side, we’ll we’ll be in Paris in a couple of weeks talking a lot about our RISE program, which is really a technology effort across multiple elements, our open fan rotor design, our compact core, everything that we’re doing in hybrid electric, sustainable fuels to make sure that next generation aircraft, particularly in the narrow body segment, has GE underwing.

And when you think about the fact that we’re spending $3,000,000,000 a year in r and d, you might think, well, that’s that’s a lot, six to 8% of sales, right right where you wanna be. We don’t think about it as a twelve month spend. Right? Just as importantly as that $3,000,000,000 that we’re spending, consider that we have in excess of 1 and a half billion dollars of flight hours of experience. And it’s that experience that those reps coupled with the spend, coupled with the talent that we have that really has us excited about being able to to to define the or to invent the future of flight, particularly with the RISE program in next generation air bodies.

But there’s plenty to do on the defense side as well. And we’ve we’ve talked in the past about our x a 100, the adapt adaptive cycle engine that completed its its test campaign just last year. We’re excited about the thrust and the range capabilities that that engine offers, and that’s really given us the the platform to pursue our x a one zero two program, which is tied to the Air Force’s next generation adaptive propulsion program. So as you think about everything that’s happening in sixth generation combat, know that GE Aerospace is actively investing, actively involved with the customers to lead and invent in that realm as we are on the commercial side. I mentioned earnings just, about five, six weeks ago at the April.

We were pleased with the strong start to 2025. As as you can see on this slide, we held our full year guidance, which we were pretty proud of when we laid it out, all the more so in April. And we did that knowing that there are more macroeconomic uncertainties out there today, and I don’t think we’re gonna change our our view materially in that regard. But we’re off to a good start here in the second quarter. Demand has been pretty much in line with what we would have anticipated.

And maybe just as importantly, as we have been working our way through the supply chain challenges, we’re really encouraged by what we’ve seen flight deck help us do, especially with our supply base, which will really pace not only our deliveries of new make engines, but also the completion of shop visits, the delivery of spare parts, the like. We really manage this less on a quarter over quarter basis on an year over year, more on a sequential basis. And a lot of what we’ve done with flight deck, putting the right tools in the hands of our engineers to go out in the field, work with our critical suppliers that tend to pace us, has really yielded some nice results. We were doing this by a bit by force, admittedly, in 2024. We’ve changed our organizational structure, put in a new team, which we call technology and operations, really bringing quality, engineering, and supply chain together under one roof, putting the putting the flight deck tools in their hands, and in turn, we’re seeing real results.

The results that matter most for us really are frankly deliveries. And to just see here in April and May, a a double digit increase sequentially in deliveries from those critical suppliers is very gratifying. All the more is this increased certainty that we see in those deliveries. The the the suppliers that have been our focal points are now delivering to us 95% of the time to their commitments. And that’s, oh, well over twice as much as they were doing a year ago.

So we’re getting more, and we’re getting more in a predictable fashion. That really sets us up, I think, at least here in the second quarter, to have very strong year over year improvements, particularly in in CES. So a lot a lot still to do. We’ve talked about the the headwinds given some of the trade and tariff dynamics. There are a number of things that we can do within our own operations to limit that exposure in earnings, and we said that would would leave us with about $500,000,000 of of headwinds in 2025.

We said in turn between cost and price actions, we intend to offset that, and that’s really why we were able to hold the guide as opposed to perhaps take it up despite the strength that we saw in the first quarter. We’ll we’ll go through ’25 excuse me, 2025 in more detail in two weeks when we have an Investor Day at the Paris Air Show. Welcome everybody to to join or or or dial in. But a lot in addition to an update here that we’re excited to share with with everybody in Paris. And then just to to wrap up here, a lot has happened over the last several years at GE.

A lot has happened over the last fourteen months at GE Aerospace, but we really believe we are still poised to soar as a company. What you see across this slide, we think are really the critical elements of the competitive advantages that we enjoy. We power most of the customer preferred platforms, again, across both the commercial and the military segments. Our products deliver the highest operational reliability in in large part because of the the the underlying technology coupled with flight deck. And, again, that operational reality is paramount for for airlines.

That installed base tally up the the two figures I I cited. 70,000 engines around the world, again, give us a solid foundation, exposure to what the customer needs every day and that recurring predictable revenue stream. A billion and a half hours of flight experience coupled with that r and d spend allows us to push the envelope to really drive breakthrough innovation. And then, again, finally, with Flight Deck, we really have an operating model that allows us to operate as one team, implementing one strategy with an integrated operating model to serve our customers as best we can. So, Doug, that’s a little bit of an update, a little bit of an overview on GE Aerospace.

Over to you.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Great. Thanks, Larry. You know, when I think back, you mentioned, you know, last year, you were here was your first time here as GE Aerospace CEO. And we talked about what it how it would differ from your history running a multi industry company, either GE, Danaher. And, you know, how how have you found this if you look at the last year in terms of what you personally focus on?

And are there any things that when you look back possibly could have done differently?

Larry Culp, CEO and Chairman, GE Aerospace: Or or better. Right? Yeah. No. It really wasn’t changed personal level because I had I’m sorry.

I had fourteen years as CEO at Danaher. And even before I became CEO, I was I was involved in different aspects of the portfolio, and the GE job, right, from the jump back in October of twenty eighteen was was similar. So rather than being in multiple sandboxes, I ended up last April in one. I hadn’t done that since really the mid nineties, so I had to make sure I was ready to to do that. So far, so good, I think.

But the change really is all about the depth that you’re able to pursue on almost any topic. And and for me, being able to spend more time with our customers and more time with our team has been invaluable. And I just see, Doug, as I begin my second lap at GE Aerospace, I know things. I understand people, be they people on the payroll, people in the in the marketplace, a lot better, and that informs decision making. If there’s one thing that I would have done differently last year, it would have been to have accelerated the implementation of this technology and operations organization that I mentioned earlier.

I think we had to go through what we went through in 2024 really to force more collaborative, deeper, more technical, more action oriented problem solving in the supply base. There were a lot there’s a lot of history, a lot of past practices that we’ve been working to improve. But I think we’re seeing well, it’s early. I think we’re seeing a step function improvement in our collective ability to go out and work with suppliers to identify and solve the operational bottlenecks that they may have. And there’s no one bottleneck out there.

A lot of people say, you know, what’s the one thing you need to solve for? I wish it was just one thing. Right? It’s a thousand, and it changes. But we’re far better in the field with now, I think, over 500 people, forward deployed, working with suppliers large and small.

Some names you know, some names you’ve never heard of that are just critical to our ability to to ramp. So glad we got after that in January. Love what we’ve seen so far this year. I wish I had the insight and the perspective done that maybe last summer, but we move forward.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: You know, you mentioned this. Well, in fact, we we talked about this on the earnings call in terms of you you know, you’ve been engaged with the administration in, you know, providing a point of view on tariffs. You talked about the the 500,000,000 estimate you made. Now you you’ve just been on this trip in The Middle East with the president and and his team. You know, when you think about that, clearly more engagement both on the order side and on probably a better understanding about how they’re thinking about tariffs.

After all of that time, how, you know, how has your perspective shifted on where GE is going vis a vis where the administration’s going?

Larry Culp, CEO and Chairman, GE Aerospace: Well, I I would say well, let’s take those in in in that order. I I would say from an orders perspective, we were gratified to to be part of the president’s state visit to Qatar. Our signing with Qatar Airways, say ours, Kelly Ortberg was there with with us representing Boeing. I mean, that was just a wonderful moment. 400 engines more than 400 engines for us to have that sort of visibility.

But in the run up and and and this was this was not something that came together on the flight over. I would just give the administration tremendous praise for how supportive they were over time on a on a interagency basis. And I don’t think GE Aerospace is the only US company that has strong support from the the current administration, and that matters. When we’re competing outside of The US, when we’re competing with other companies, we’ve we’ve long seen other governments in full support. So to have that sort of engagement again across many principles was was helpful, and we’re we’re thankful for it.

From a from a trade policy perspective, you know, I I just step back. We’ve said this publicly. We’ve said it internally. We strongly support the direction that the administration’s taking with respect to trying to revitalize US manufacturing. Right?

No one’s more invested in US manufacturing competitiveness, innovation, and the like than than GE Aerospace. When we’ve sat down with the administration, what we’ve tried to articulate is that unlike many sectors of our economy, aerospace is unique. Aerospace enjoys a $75,000,000,000 annual trade surplus, and that’s largely on the back of the nineteen nineteen seventy nine civil aviation agreement that allowed for basically tariff free trade in both directions across the Atlantic. And in many ways, that I think is the objective of the America First trade agenda. And we’ve we’ve drawn that parallel in advocating for a return to that that arrangement.

I think as we go forward, we’re gonna see a number of bilateral agreements. We saw what happened with the The UK, for example. And we’re gonna be full throated in our support of a return to a tariff free aerospace arrangement that will allow our company and and others to compete on a on a on a fair level playing field internationally. That’s obviously been something that we have been able to to manage well, witness the Qatar order, witness the BA order, and we wanna continue to to operate in just that in just that fashion. Doug, as to an outlook, it’s hard for me to say, but, again, I think we have we’ve had a number of meetings with with people across the administration, and I think they understand how unique and important aerospace is.

So we’re we’re optimistic about that outlook.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Great. You now when you when you look ahead, you’ve described a growth rate, I think, five to 28 within commercial engines and services of something in the high single digit range. You’ve been growing faster than that. Is that still a good number? I mean, what how do you see that breaking down between OE and the services portion of the business?

Larry Culp, CEO and Chairman, GE Aerospace: Well, I don’t wanna give away everything that we’re gonna share in Paris, but I think we’re we’re well aware that we’ve gotten off to a very strong start here. And with the the backlog I mentioned earlier, we think we can continue to grow in that in that ballpark. We’ll we’ll fine tune that for for everyone when we’re together in a couple of weeks here in in Paris. And, again, it’s really a function of what’s happening with the utilization of today’s fleets and the airlines’ efforts to expand and modernize. I share that framework again because that’s really the way we think about the second part of your question, Doug, in terms of new make versus services.

Services will continue to be strong even as departure growth moderates in in large part because we see some of our legacy platforms like the CFM 56, like the GE 90 being stronger for longer. We see work scopes expanding. We’re getting a little bit of price. You put all that together, what’s happening in the aftermarket is is is quite good for us right now. We think that outlook, as far as one can see into the future, remain remains robust.

New make will probably, as we ramp here, grow a little bit faster than what we’ve seen in services just as these supply chain improvements that we’ve been talking about really take root. We know we’ve got airframers, be it Airbus, be it Boeing, others that are very keen to to move at an accelerated clip to service their own backlogs. We’re gratified to be underwing. That’ll create a little bit of margin pressure for us. We’ve talked about that just in terms of the new make versus services margin structure, let alone some of what we know we’re going to be working through in terms of the introduction of the triple seven x at Boeing with our nine x engine under wing and some of those those platform specific issues.

But I think on balance, we feel very good about the outlook top line for the rest of the decade.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Well well, tied into that, as you look at the at how services and OE sales go forward, you know, you’ve been targeting 25% margins in CES this year. But as you look as you look out, you’ve clearly got some pressure on the OE side as it it’s a good kind of pressure as LEAP deliveries hopefully go up. But how do you foresee margins evolving given that LEAP growth at lower margins and your very strong services business?

Larry Culp, CEO and Chairman, GE Aerospace: Well, I I think that when we look at the margin structure in CES in particular, it really is a function of the the very strong growth that we’re seeing in services and, in turn, the operational improvements that we’re we’re driving productivity delivery on the back of flight deck. I think with respect to the headwinds, it really is worth noting that as we bring the the the lead forward, as we increase the lead share of departures, we will see a little bit of a pressure in that regard. I mentioned the triple seven x introduction as well earlier, but we think we’re gonna continue to grow our margin dollars in in CES. We think that’s what what matters most. And to the extent that we have that robust demand outlook that I highlighted earlier, we think we’ll work through those headwinds, including the headwinds we we touched on with respect to tariffs as we move forward.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: And and you’re contrasting margin dollars with margin percentage more of it, eve even if there’s some pressure on that percentage margin, the dollar.

Larry Culp, CEO and Chairman, GE Aerospace: We wanna we wanna grow both, but I think what matters most clearly is gonna be the dollars.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Now, you know, you’ve talked a lot in the past about the supply chain challenges you’ve had on the OE side, particularly on, certainly on, you know, LEAP deliveries to Airbus. Can you talk about where that stands now and and how your trajectory is looking as you look out for the rest of this year and beyond?

Larry Culp, CEO and Chairman, GE Aerospace: Doug, I would say that we we we knew that we’re gonna have a slower start than any of us would have wanted in 2025. But what we shared back in January in terms of LEAP deliveries growing in the 15 to 20% range continues to be what we believe we will do in in 2025. It’s all about the supply chain dynamics. And, again, with what we’ve been doing with flight deck with the supply base, we are really encouraged by the sequential improvement that we’ve seen in our deliveries from our critical suppliers. For us to be up so early in the quarter, April, May sequentially compared to where we were in the first quarter, Even when you maybe discount that a bit for a a slow start in January, very optimistic.

Maybe as as much as the numbers give fuel that optimism, the underlying work that’s delivering, that’s that’s undergirding that really is helpful. So we’ve got a good bit here to still do in June, but we think that sets us up well not only for the second quarter, but if we are able to build on that momentum through the back half of this year, our delete deliveries and everything else around that, right, be it other engine platforms, the aftermarket and the like, should continue to improve as we work our way through the calendar year.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: You know, at the start, when you were talking about these two these big new orders that you’re getting, one one of the things that looks so challenging, it’s not just you, it’s Airbus, it’s Boeing, it’s Pratt, it’s everyone, is taking in, like, a huge order, like the cutter order or even adding in some of the narrow body orders. There are slots available. I mean, you don’t have them for engines. Boeing and Airbus don’t have them given their profile. So how do you think about when you work these deals adding those into your delivery flow?

Larry Culp, CEO and Chairman, GE Aerospace: Well, I think that’s critical, and the the customers are well aware of that that slot dynamic as well. And I think that’s why you’ve seen some customers maybe postpone orders until there’s maybe greater clarity, but so many others saying time is not our friend here. We better get in line given the scarcity value of those those air draft slots and, in turn, the the engine slots. So when you look at any large new order, unless there’s a small gap someone’s looking to fill in their skyline, you’re probably talking about a a delivery here with a three handle.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Yeah.

Larry Culp, CEO and Chairman, GE Aerospace: I think the way we think about it, Doug, again, back to that today, tomorrow, and and future construct, we have a lot that we need to take care of here in 2025. That is paramount. But as I as we look forward to ’26, ’20 ’7, ’20 ’8, there are things that we need to be doing now. Recall, this is a this is the ultimate long cycle business. There are things that we need to do now in our own shops with our supply base to make sure we’re building in the capability, the capacity for those sequential step ups in ’27, ’20 ’8, and ’29.

But the good news is because we have that that that backlog booked to the the to the extremes in line with with Airbus, in line with Boeing, that’s you know, those are the tasks the teams are tackling on a daily basis.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Now now on the on LEAP, if we go if we go back a ways, there were a number of issues you had, you know, the engine radial drive shaft and the fuel nozzle coking, HPT blades. I know those have largely been resolved, and the latest appears to be your new Maverick blades on the with HPT. Can you talk about how much improvement you expect that to provide for the LEAP?

Larry Culp, CEO and Chairman, GE Aerospace: Sure. And, again, back to that last slide we we we talked about. Operational reliability is critical for our customers. Right? They wanna be able to dispatch.

They wanna be able to complete those those missions on a regular, predictable basis. And I think we pride ourselves tremendously in our time on wing, which is really the way we measure how well we’re doing over the course of time. You know, I think if you step back for a moment, Doug, we’ll talk about LEAP in a moment. If if you think about the way we go to school on our installed base, the way we learn from that that over a billion five of flight hours. The g n GENX is instructive again, the engine on the seven eighty seven.

When we launched since we’ve launched that, I think we’ve increased the time on wing two and a half fold. So we’re up, I think, in harsh environments to to 4,000 cycles, in neutral environments up to six. So a significant improvement post entry into service as we continue to drive those those product enhancements. You Doug just rattled off a number of things that we’ve done with the LEAP. And that’s really the model that that we deploy.

We want the engines to be as robust as possible at launch, but we know there are gonna be things that we will be learning and in turn addressing early in the in the life cycle. If we look at the LEAP, mean, LEAP’s coming in to, what, ten years since EIS. The pandemic created a bit of a a double launch there. But as we have gone through, particularly with the improvements that we have put in on the LEAP one a here at the that were approved at the end of last year, we’ve been implementing them here this this winter and spring, we see another improvement in our our our our field performance capability. So we’re gonna take the the LEAP from about 3,000 cycles to eight.

So we’re gonna more than double the time on wing with the LEAP, and that gives us, we we believe, performance parity with the CFM 56, which is the the predecessor engine platform on on the narrow body on the narrow bodies. And that’s really what the customers want. Right? Customers understand we’re gonna go through a bit of a transition with a new engine. But when they think about dispatch reliability, when they think about field performance, their benchmark is the CFM 56.

We enjoy being that benchmark. And now with these enhancements that that we’re talking about on the LEAP, we think we put put the LEAP right in that same performance zone. That’s what we ship today with new engines. There’ll be a a multiyear field retrofit program, obviously, but we feel very good about that. But, again, not done.

In either instance, we wanna continue to learn, continue to improve what we do for our customers.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Now Boeing appears to be on a recovery path on on the with respect to the MAX. May hear more from Kelly tomorrow on that. But when you look at it, you’ve delivered a lot of LEAP one b’s to Boeing. And so they’ve they’ve got, well, all all they need right now for for production in terms of engines. So when you look, though, at the future for GE and the LEAP one b as Boeing ramps up, how do you plan for that?

In other words, right now, you’re still delivering. Right. But, you know, in theory, in a normal environment, you would be delivering at a lead time pretty much in sync with their rate. How do you think about that engine today?

Larry Culp, CEO and Chairman, GE Aerospace: Well, I think that we we spent a lot of time in concert with Boeing. I trust Kelly will attest to this. Not only looking at deliveries for May and June of twenty twenty five, but how do we step up as they step up, right, in in ’26, ’20 ’7, and beyond. They came into the year, I think it’s been well documented, with with an inventory position of engines and and other other elements as well. As they ramp here, and Kelly, I think, has has indicated that they ’re they’re gonna be at rate 38 here before before too long, they’re working their way through that inventory.

We wanna make sure that we are completely in sync with them as as we move forward. I touched on some of the improvements that that we need to to see through, deliver that 15 to 20% year over year increase in deliveries of of LEAPS at large. We won’t get into the a’s versus b’s here. But I think we feel very good about the way we are collaborating with Boeing, the the turnaround underway, both operationally and otherwise. And we just wanna do everything we can to support that that RAM, not only on the on the on the MAX, obviously, the the eight seven as well down in Charleston.

And that’s what we spend a lot of time doing.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: So one of one of the big issues, you know, airlines have faced, and it’s kind of across the board, is very long induction times into MRO shops and actually flow throughput many times because of shortages of parts. I know availability of parts has been an issue for you. How do you see this? And I’d say both if you look at the LEAP and actually also for CFM 56, if you compare those two profiles and what you need to do to improve it.

Larry Culp, CEO and Chairman, GE Aerospace: Yeah. And and when we talk about delivery, you know, so often, Doug, as you know, people will focus on on new make deliveries, how many planes did Boeing or Airbus deliver, how many engines did GE ship. But just as important is the turnaround time in our in our shops, be they shops we operate or be they shops our our partners operate. And we really haven’t, I think, been thrilled with the progress we’ve been able to demonstrate. We see a lot of underlying improvements operationally.

Again, back to flight deck, where we’re in there rooting out a lot of the process waste that consumes time, nonvalue added work. But we could strip all of that out. But if we don’t have the parts, right, even if just if it takes a day to do a shop visit, we’re not gonna be able to bring those turnaround times down. But we are seeing in a number of our wide body shops the turnaround time curve bending. So we’re getting back to double digit turnaround times, encouraged by that, a a long way to go.

Again, flight deck is helpful in that regard both in our shops and with respect to how we’re deploying that with our supply base. Again, when we talk about what we’re doing with suppliers, the same suppliers that we use in in Newmake support us in the aftermarket. We’re also trying to leverage AI where we can. Right, to the extent that we can put to better and higher use this these incredible data sets we have about engine performance to anticipate what a particular engine may need in terms of parts ahead of that that shop visit, ahead of the engine’s arrival, we’re more likely to have everything in hand to complete that shop visit in as quick a time as we can. So work to do on the narrow bodies on the 56 and and the LEAPS.

We think we know what we need to do here. We just need a little bit more time to be able to have those improvements read through to what customers experience.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: And and I and I know one of the most important things for you is is the expansion out and the greater use of third parties, third party MRO. But, of course, you’re providing the parts for those. So there’s potentially the same types of bottlenecks. Can you can you talk about how you’re thinking about the evolution on the LEAP to more third party maintenance since it’s really just starting now on the on full?

Larry Culp, CEO and Chairman, GE Aerospace: Right. Right. And, you know, I think what Doug’s talking about, a little bit of the the risk transfer dynamics through the the life cycle of an engine in service. I mean, early on, it’s a big commitment for for an airline. They know there’s risk.

Back back to some of the performance issues we talked about earlier. They’d like to put that risk to us as the manufacturer. We’ve taken that on. We’ve priced that accordingly and managed it. And that has helped us, I think, drive the the market shares that that you see us enjoy today, but it also helps us set up the the the aftermarket economics through the life cycle of of of that engine.

One of the things that we have really prided our another thing we’ve prided ourselves in is having an open network. Through the course of that engine’s life cycle, we don’t want necessarily to have the airline be captive to having that work done inside of a GE shop. We want them to be able to, if you will, shop the work, which is why our third party network is such a point of pride. Early on here, a lot of that work will be done by us. That’s okay.

Frankly, it accelerates the learning for for us. But these third parties, and especially for LEAP now, as Doug is alluding, we’re seeing our third party partners come come in line. I think we saw over 10% of our our LEAP shop visits done here recently by third parties. That’s gonna continue to to step up. I suspect you’re gonna see you know, it it may break into thirds over time.

Right? We may do call it a third. The firm may do a third. We may have third parties pick pick up that sort of mind maybe a little bit more. We’ll see how the market shapes the evolution, but we we like the fact that we don’t have to necessarily capitalize the entire footprint over the engine’s life cycle.

And in addition, we think that open that open that non captive market is good for the customer.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Yeah. Well, as you look on the c f m 56, certainly, that service business is hugely important for you. We continue to see life extensions, fleets getting older and older, and we’re you know, they’re staying out there a long time. And I know when we’ve talked, it seems like each time we talk, that profile moves further out. You know, I I think you’ve been talking about on the order of 2,300 or so shop visits for CFM 56 right now going to, like, 2,000 in 2030, something like that profile.

Is that still how we should think about it? And if we were to translate that into revenues, because there will be pricing increases, how do you think about the profile today?

Larry Culp, CEO and Chairman, GE Aerospace: Yeah. Dung, I think I think that curve fundamentally is one we would we would endorse today. We’re gonna see growth here in 2025 in that regard. We’ll see a plateau in that 2,300 range the next couple of years, and then we think there’ll be a slow fade. But we’ve been predicting that for a while, and we’ve been wrong.

So we’ll we’ll see how that plays out. But I I do think the combination of the work scopes, a little bit of price, and the like will allow us to buffer those volume pressures and offset that at at the revenue and at the margin line. Our our critical challenge, of course, will be then bringing on the the leap, not only in terms of capacity to service the customer, but to replicate that financial profile over time. And over time, I think we’ll be able to do that.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Well, I I wanna go back to what you highlighted at the beginning in terms of next generation technology, the RISE program, the open road. You talked a fair amount about it. But I guess the two things that the two questions I had around that were, one, can you give us a sense of timeline if we’re going to an open road? Or because I know you I know airlines have been out there. They’ve been you’ve been briefing them on this, so I know it’s not fiction.

Right?

Larry Culp, CEO and Chairman, GE Aerospace: I thought those are confidential briefings. Well You’re you’re well sourced, doctor.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Well, whatever. Yeah. But, anyway, I think you may have been out there. So so what are we what are we thinking about in terms of timeline?

Larry Culp, CEO and Chairman, GE Aerospace: Well, I think that what we have been doing the last few years and what we’ll do, again, at at the airshow in particular, is just share with our airline customers, as we do the airframers, of course, our technology road maps. I haven’t talked to a single customer that isn’t looking for a step function improvement in performance to undergird the introduction of a next generation narrowbody. And we clearly wanna be underweight on the platforms that that matter. And we think with RISE, the suite of technologies that are under development, particularly with the open rotor, that we can deliver a 20% improvement in fuel efficiency and not trade that off for trade that off with durability or reliability performance. So, ultimately, that engine will need an aircraft, right, to go into service.

The airlines will, I think, shape the decisions the air framers make with respect to what they what they introduce when they do it. So, Doug, it’s really not for us to say when we’re gonna see that that architecture EIS. But I think what we what we will say is that we’re really encouraged by the feedback that we’re getting. We really like the performance that we’re seeing in our in our test environments. We recently talked about a 3,000 cycle endurance test we just completed on the high pressure turbine blades.

There are dozens of these sorts of technology milestones that we’re completing that will ultimately yield the, the product that we’ll launch. We talked recently about the Airbus, flight test program later, the the road map toward that, later this decade. Really encouraged by how prominent the open rotor design featured the recent, Airbus Technology Symposium. So there’s there’s a lot of time. There’s still a lot of work to do with the engine, with the aircraft, but we’re excited about what will what will fly, call it, 2035, ’20 ’40.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: I wanna switch over to defense for a bit. You know, on the defense side, so you had a a book to bill of, I think, 1.2 last year, and you’re projecting mid to high single digit type growth. Can you talk about what the key platforms are that are driving those growth assumptions?

Larry Culp, CEO and Chairman, GE Aerospace: Sure. I mean, I I think for us, you know, we certainly are focused on margins because we know we’ve we’ve had recently margins that are a little of where we wanna be in in that in that segment. But from a growth perspective, we really like where we are from a rotorcraft perspective, the Apaches, the Blackhawks and the like. We think they will will lead the the overall unit volume growth. We’ll see a little bit of a slower trajectory with with combat, but there are a number of platforms there like the the 15 EX that we’re excited about.

And as we think about the future, right, whether it be sixth gen combat, the related CCAs, hypersonics, the like, are a number of things that we’re doing within our Edison Works group to make sure that we’re well positioned with what will come next gen. So you put all that together. That’s why we think we end up in that in that mid single digit

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: range. And that’s true both as you’re thinking about I mean I mean, clearly, things like the f 47 would be more of a long term one given the timing of that. But but near term, they’ve got the fifteen fifteen x. But are are there other what are some of the other important pieces to that in the near term?

Larry Culp, CEO and Chairman, GE Aerospace: Well, I would I would say that the the the primary volume growth that you will see will largely come with the the the t seven hundreds on the Blackhawks and the Apaches.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Yeah. Right. I guess if we go you know, something that we’ve talked about before, and I’m gonna ask you again. And then but, you know, way back, there was an effort. GE was looking at at moving into other areas into in the Smiths acquisition, things like that.

You know, how do you think about GE Aerospace as it stands right now with respect to what you’re have a very focused propulsion portfolio. Is that something that you would want to extend as some of your peers have? What’s the future here?

Larry Culp, CEO and Chairman, GE Aerospace: Doug, I’m not sure what I told you last time you asked, but I hope I’m gonna give you the same answer. Because from a strategy perspective, from a capital allocation perspective, I think management and the board are are well aligned. We we know we’re going to have a significant amount of cash generation over the next several years. We really think the priority one will remain reinvestment in the business. Talked about that $3,000,000,000 of r and d figure.

We talked about being in that six to 8% of revenue range. We really wanna make sure come thick or thin that we continue to invest in inventing the future of flight. So that’s that really is job one. We clearly have a strong bias toward returning capital to shareholders. We think that works given the context that we operate in today, let alone who we are.

As you’ve seen between buybacks and dividends, we’re gonna return in excess of a hundred percent of our annual cash flow. We’ve got, I think, a framework that has us returning, call it, three quarters of of what we do back to shareholders over over time. But that still will leave us ample opportunity, ample firepower to do smart m and a. I don’t think we’re keen to build out a an all singing, all dancing aerospace portfolio just for its own sake. One of the things that served me well over time is making sure that you’re strong, not just big.

And we know we’ve got an exceptional franchise today. But there are things that we will do to invest inorganically both in the existing positions that we enjoy in propulsion and perhaps to to do some things, that are are near adjacencies. But I I don’t think you know, if there’s a banker whispering, you know, GE’s gonna do this or do that. It’s gonna be big and bold and revolutionary. I’d put much stock in that.

I really wouldn’t.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Okay. Well well, good. Well well, to wrap up here, maybe you could give us a sense as you look over the next year, you know, what are your priorities, and what are you gonna be focusing your time on?

Larry Culp, CEO and Chairman, GE Aerospace: Well, I I think we go back to where where we started. Right? There’s there’s so much that we need to do to service the backlog. It’s incumbent upon me to make sure that we’re we’re doing that all the while making the right bets as we think about inventing the future flight both commercially and with respect to defense. That’s our strategy.

That’s where CEOs ought to be focused. But if we’re gonna do that, we’re gonna do it right. We’re gonna do it sustainably. We’re gonna do that with flight deck. I have very strong points of view in that regard, so I spend a good bit of time in that regard.

But, ultimately, it’s about the team. And the greatest leverage I get is the CEO, the most important decisions that I’m party to are those that pertain to the team, making sure we’re recruiting, developing, retaining, promoting the best possible people. I’m really proud of the team we’ve got, but we need to continue to to to strengthen the team to improve and and grow. So I spent a tremendous amount of time on on that as well.

Doug Harned, Senior Global Aerospace and Defense Analyst, Bernstein: Great. Well, I think we’ll call it there. But, Larry, thank you very much. That was great.

Larry Culp, CEO and Chairman, GE Aerospace: Doug, thank you. Thank you.

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