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GE Aviation Q2 profit slips as 737 Max grounding hits earnings

The grounding of the Boeing 737 Max took a $300 million bite out of General Electric's second quarter results, and GE warns the grounding could shave another $800 million off earnings in the second half of 2019.

Still, the company's GE Aviation division earned a profit of $1.4 billion in the period, down 6% year-on-year.

CFM International, the engine maker co-owned by GE and Safran Aircraft Engines, cut production of the 737 Max's Leap-1B turbofan in the second quarter "to meet Boeing's revised aircraft build rate", GE reports on 31 July.

That production rate cut shaved $300 million off GE's second quarter cash flow, says GE chief financial officer Jamie Miller during the company's second quarter earnings call.

GE expects further impact of $400 million in both third and fourth quarters should the grounding remain in place, she adds.

"When the aircraft starts delivering again... we will get paid for those engines. It's just a delay in cash timing," Miller says.

Boeing cut 737 production from 52 to 42 aircraft monthly in April, following the grounding. At that time, CFM had said it intended not to follow suit, but to maintain its previous engine production rate.

Boeing's latest assumption has regulators lifting the grounding early in the fourth quarter, though it notes that timeline remains uncertain.

GE Aviation's second quarter revenue inched up 5% year-on-year in the second quarter to $7.9 billion. The business landed orders valued at $8.6 billion in the period, 10% less than in the same quarter of 2018. Orders for commercial engines declined 34% year-on-year.

GE Aviation's total backlog jumped 17% year-on-year to $244 billion at the end of the second quarter, including some $38 billion in equipment backlog and $206 billion in service backlog.

In the second quarter, CFM shipped 437 Leap engines, up from 250 shipments in the second quarter last year.

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