By Bryan Corliss

Jan. 24, 2023, © Leeham News – Aerospace suppliers GE and Raytheon both reported fourth-quarter sales surges, as the commercial aviation industry continued its recovery from the worst of the Covid pandemic. 

Both companies also project strong sales growth in 2023, but warned investors that there are lingering supply chain issues and labor shortages that could hold them back.

“While we are broadly beginning to see our supply chain improve, it is not yet at the levels we need,” Raytheon CFO Chris Calio told stock analysts during the company’s fourth-quarter earnings call on Tuesday. “We are assuming a recovery as we move into the back half of the year.” 

• GE reports backlog near 10,000 for LEAP
• Raytheon expects double-digit growth for Collins, P&W
• Supply chain improving, but still tangled
• Raytheon talks about Boeing, Airbus rates

GE reports ‘unprecedented ramp’ in commercial

GE reported a 22% growth in orders for its Aerospace division, with revenues up by 23% in 2022, in what CEO Larry Culp described as an “unprecedented ramp” for the business.

GE reported a 26% increase in orders during the fourth quarter, to $9.7bn. Revenues were up 26% on the quarter, to $7.6bn.

After the industry all but flatlined during the peak of the Covid pandemic, which coincided with the groundings of Boeing’s 737 MAX and 787 programs, GE Aerospace’s deliveries finished last year at 90% of their 2019 levels, Culp said. “We expect to be back to ‘19 levels later this year.” 

Demand for GE’s LEAP engines in particular is strong. Culp said the company has “almost 10,000 LEAP engines in the backlog.” He said GE is gearing up to increase output, and said he expects LEAP deliveries will grow by about 50% in 2023.

Supply chain problems are improving, which is helping GE Aerospace’s ability to deliver. He cited one team in Terre Haute (IN) which produces lead turbine center frames. The team started 2022 behind in deliveries, but implemented lean manufacturing process improvements that grew output 20% and productivity 10%.

GE teams will “need to continue to use lean in this way to deliver for our customers,” Culp said. “We are laser-focused on supporting our airframers, airlines and lessors as they ramp post-pandemic.”

Raytheon: Double-digit growth for Collins, P&W

Raytheon CEO Greg Hayes called 2022 a particularly challenging year, given that the company was “transitioning out of Russia, managing record levels of inflation as well as supply chain and labor constraints.”

The company reported solid growth, however. Sales were up 6% to $67.1bn, while backlog grew 12% (to $86bn) on the strength of those new orders.

Raytheon’s Collins Aerospace division reported sales increased 15% for the fourth quarter, which was due to “continued strength in the narrow-body (market),” CFO Chris Calio said. That included growth of more than 20% in both original equipment and aftermarket sales.

Meanwhile, Raytheon’s Pratt & Whitney division had 10% growth, with a 37% increase in sales of new commercial jet engines.

Supply chains improving, but still tangled

Both GE and Raytheon reported that they’re dealing with parts and labor shortages, and with overall inflation.

Culp said GE Aerospace’s profits would have been 4% better if not for inflation and supply chain issues.

Raytheon said it was budgeting $2bn to cover expected inflation in parts and labor costs during 2023.

Raytheon’s leaders went into more detail discussing the challenges they’re facing, saying the company has put its own personnel in the shops of almost 400 suppliers. 

“Supplier delinquencies were down (at the end of ‘22),” Calio said. “But I’ll tell you, it isn’t where we need to be, especially for the back half of 2023.” 

Castings continue to be a bottleneck, he said. “We saw some improvement on castings, but it’s not where it needs to be.”

Microelectronics also are in short supply, Calio added. “While lead times have stabilized, they haven’t come down and back to 2019 historical levels.”

To address the problems, “we’ve got the people on site, and they’re responding to engineering and quality issues, giving us better visibility of what’s going on.”

Hayes agreed, particularly when it comes to castings.

“We’re not out of the woods, as Chris said, but it has certainly gotten a lot better from where we were a year ago,” the CEO said. “It’s going to be the end of 2023 before we see structural castings back to 2019.”

But, Hayes added, “We’ve got confidence. They have been bringing people on, they have been training people. We have folks out there helping them.”

Raytheon talks Boeing, Airbus production rates

The supply chain issues won’t keep Raytheon’s divisions from meeting its commitments to Boeing and Airbus, Hayes said.

Hayes said Raytheon’s 2023 outlook assumes Boeing will produce an average of 31 737s a month. 

“I think they were a little light on that in the fourth quarter, but we think we’ll get back to that,” he said. “They still have roughly 200 aircraft to be delivered that are in inventory too, from when the line was shut down.”

Hayes said the company also projects Boeing will steadily increase 787 rates during the year. “I think it’s one a month, going to two a month and perhaps up to three,” he said. “That will all depend upon Boeing’s ability to get the aircraft out the door.”

With Airbus, Hayes acknowledged that supply chain issues had “limited, I would say, our ability to meet some of the demand out there.” 

That’s starting to ease, he continued, and Raytheon is “working very close with Airbus on the A320 production rate.” Airbus is looking to ramp up to 75 A320s a month by 2025.