GE Aerospace has lifted its full-year profit outlook after publishing its first set of results since becoming a standalone company at the start of April.

The company reported a 34% increase in orders for the first quarter overall, as well as for both its Commercial Engines & Services and Defense & Propulsion Technologies units.

A 737 Max CFM Leap engine in Boeing's Renton assembly site

Source: The Seattle Times, Ellen Banner, pool reports

Boeing’s struggles with 737 Max output could impact requirement for Leap-1B engines

GE Aerospace revenues increased 15% in the quarter to $8.1 billion, while operating profit was up almost 25% to $1.5 billion. 

”GE Aerospace had a solid start to the year,” said GE Aerospace chairman and chief executive Larry Culp during a first quarter earnings call on 23 April.

”In the first quarter we delivered double-digit revenue and profit, as well as margin expansion in both businesses.

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

Full-year operating profit guidance now sits at $6.2-6.6 billion, up from $6-6.5 billion previously.

While it was a bright financial start to life as a standalone business after GE’s divestment of its healthcare business last year and the recent spin-off of its energy business GE Vernova, supply chain issues continue to impact the propulsion specialist – affecting both shop visits and the ramp-up of engine production.

Culp says GE remains “focused on delivering on the ramp” and increased engine deliveries 9% compared with the first quarter of 2023. ”However, these deliveries were short of our objectives due largely to continued material availability challenges,” Culp acknowledges. 

Much of this increase was in defence engines and notably its CFM International joint venture with Safran only delivered one more Leap powerplant than the 366 it shipped in the first quarter of 2023.

The company has lowered its expectations for production of Leap engines to grow this year of 10-15%, down from 20-25% previously.

Last year, the CFM joint venture with Safran shipped 1,570 Leap engines and was expecting to deliver just shy of 2,000 in 2024..

But it is unclear how much that reduction is driven by supply chain weakness rather than Boeing’s own issues with 737 Max production. 

”There is clearly a change in the update,” Culp says. ”[Boeing chief executive] Dave [Calhoun] and company are going to talk about their rates [on 24 April] I am sure, so we’ll leave the conversation with them. Rest assured, as we are with all our customers, we are well-calibrated and aligned with what we need to do and they need from us as we look forward.

”We are trying to make sure that we are preparing over the next several years to ramp, given the [delivery] skylines that both of our major airframer customers enjoy today.” 

GE Aerospace increased its services revenue by 12% during the quarter, a figure again moderated by the supply chain. ”I think the financial numbers are strong, but we know that we could have executed on more shop visits in the first quarter, had we had more reliable, more predictable material flow into our shops.

”A key priority in our services business is improving turnaround times to increase our shop visits output. We are making progress with Leap,” he says, noting that turnaround times for the powerplant family were cut by 10%, to 90 days, during the quarter.

“While there is more work to do, we are focused on getting engines back in the hands of our customers faster, without compromising safety or quality,” says Culp.

“We have intensified our efforts working with our suppliers to problem solve these issues.” 

He says GE can track around 80% of its biggest material delivery challenges to 15 sites. It is focusing its efforts in these areas and is encouraged that this work is already yielding progress. ”If you look at what we have seen in April, we have had a stronger start to the second quarter in terms of shop visit activity, completed outputs, than we did in January,” he says.

”The supply chain topic is still relevant. I suspect we will still be talking about for the foreseeable future, but I am very encouraged by the progress we are making,” Culp says. ”We just need to make a whole lot more.”