Leeham News and Analysis
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Leeham News and Analysis
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Solid start for stand-alone GE Aerospace despite cuts to LEAP output
By Tom Batchelor
Apr. 23, 2024, © Leeham News: GE Aerospace enjoyed a “solid start” to 2024 with double-digit growth across orders, revenue and operating profit, the engine maker said as it published its Q1 results – the first since becoming a standalone aerospace company.
The Ohio-headquartered supplier reported “significant profit and cash growth” and raised its full-year forecast following the recent spin off of its aviation and energy businesses.
Aerospace orders grew by 34%, to $11bn, with revenue up 15%, to $8.1bn, helped by pricing, spare parts volume, and increasing deliveries in widebody and defense.
That pushed operating profit to $1.5 billion, an increase of 24%. Operating profit margins reached 19.1%, up by 140 basis points.
In its updated forecast for the full-year 2024, GE Aerospace said operating profits were expected to climb to $6.2-6.6 billion, up from the $6-6.5 billion that was listed in earlier guidance.
Putting the brakes on LEAP production
Elsewhere, GE Aerospace cut estimates for growth in LEAP engine production to 10%-15% in 2024, down from a previous estimate of 20%-25% growth.
The engine has proved hugely popular, with recent commitments from easyJet for more than 300 LEAP-1A engines, and a services agreement from American Airlines for 400 LEAP-1B engines. However LEAP deliveries were basically flat year on year (there were 367 LEAP deliveries in 1Q24, up just one unit year on year).
In a call with analysts, GE Aerospace Chairman and CEO Larry Culp addressed the LEAP slowdown, saying the engine maker was “calibrated” with both of the major narrowbody airframers to ensure output rates matched demand.
He said: “We want to make sure we are not overly indexed on the next quarter or two. We want to make sure that we are preparing over the next several years to ramp, given the skylines that both of our major airframer customers enjoy today.”
Commenting on the results as a whole, Culp added: “We marked a new beginning in early April with the successful spin-off of GE Vernova and launch of GE Aerospace, completing our multi-year transformation. Our teams achieved this milestone while delivering strong results in the first quarter led by significant profit and cash growth at GE Aerospace.
“Moving forward as a focused global aerospace leader, we will continue to prioritize safety, quality, delivery, and cost — always in that order — while also investing in our future and driving long term profitable growth.”
‘Bright future’
Culp’s upbeat mood was mirrored by analysts. Melius Research deemed the future “bright for GE Aerospace in the near, medium, and long-term,” noting that the company should “continue to benefit from the slower delivery ramp at Boeing and the increased utilization of its older engines that require high-margin spare parts and services.”
GE engines power more than 55% of the in-production widebody market (767, 777, 787, A330, and A350), and this figure rises to nearly 60% for the order backlog.
“Unless there is a black swan event or a groundbreaking propulsion technology that disrupts the engine OEMs’ business model or the broader commercial aero industry, we think it will be difficult for any of GE’s competitors to catch up in the next several decades,” the Melius Research note said.
“Simply put, GE’s level of scale and revenue base that is 70% aftermarket-driven allows the company to generate margins that are nearly 1,000bps higher than Pratt and Rolls-Royce.”
Aftermarket growth
The reaction from J.P. Morgan was a little more subdued. The company’s ‘First Look’ report said the results were “solid overall,” although its analysts warned of “slower than expected aftermarket growth.”
Aftermarket growth of 12% was below J.P. Morgan’s estimate of 22%. “When GE indicated in January that Services growth could be in the mid-teens this year, the market thought this was quite conservative,” the report said.
“However, the 12% y/y growth reported for Q1 was more consistent with company guidance than the 22% we had forecast. Internal shop visits grew just 3% and so the vast majority of y/y Services growth in 1Q24 came from spares volume and pricing.”
J.P. Morgan analysts also highlighted the lack of growth in LEAP deliveries. “On some level, this likely points to continued supply chain challenges related to the LEAP ramp but investors will also be seeking an update on LEAP 1B production plans, given the slower pace of 737 production at Boeing,” they said.
Lower installed deliveries will actually driver higher profitability this year
As LEAP-1’s comes to regular OVH shop visits on power by the hour agreements with GE we will see if they were priced right or if GE will bleed on those 1000’s engine shop visits. P&W is in a similar situation on the PW1100G but I suspect the LEAP-1A will cost more for an OVH shop visit when you replace all 3D and CMC parts not passing test/inspection.
Interestingly GE was very much committed to the 737 and 777 over the last 15 years. With the A320 and A350 taking the upper hand, they must be scratching their heads.
Somehow the A350 is on the GE Aerospace list of the widebodies. Is this an error by the author or did GE sign an agreement with Airbus?
The A330neo and A350 are powered by RR. The list represents the current, in-production widebody airplanes, not one that is powered by GE.
@Keesje
As you know, back in 2007, GE refused to design an engine for the A350-1000. GE further cemented their relationship with Boeing when they went all out with the GE9X engine for the 777X. IMJ, Boeing and GE seriously underestimated; 1) the growth potential of the A350-1000 and; 2) the possibility that Airbus, in fact, would be able to design and deliver an airframe with such a low empty weight. Interestingly, Randy Basseler and Boeing, at the time, seemed to be using any opportunity to talk down the A350-1000 and the Trent XWB-97 engine, in particular, and especially when they compared it to the all new powerful GE9X engine. In their “view” the TXWB-97 was a “compromised design” — i.e. the larger core that had to spin faster than the core on the TXWB-84 engine — and, therefore, “suffered” from lower bypass ratio (etc).
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Spat Between Airbus, General Electric Over A350 XWB Engines Deepens. GE Doesn’t Want To Compete With Itself Against Boeing’s 777.
“The problem we have with GE is they go to Seattle and say, ‘What kind of engine should we design for your airframe?'” said Leahy. “Then they come to Toulouse and say, ‘Here is the kind of airframe you need to build to fit our engine.'”
https://www.aero-news.net/aNNTicker.cfm?do=main.textpost&id=740080EF-2DD1-4C82-AFE5-284390FFAD20
Why would GE build a newer engine for the A350-1000 only . RR had first mover/exclusive on the A350-900 so any updated engine would be a smaller development cost.
The 777-300ER replacement market has two different planes with different engines. Its called competition.
Whats so amazing about the A350 size and its empty weight. Its a carbon fibre plane to replace the A340 and 777-200. The empty weight is easily derived from say ‘scaling the 787’ numbers that Boeing has.
As we now know Airbus ‘stole the IP’ from Boeing over re sculpting the cabin circular ring frames to get a slightly bigger cabin cross section. They are following on with an optional fuselage belly tank design taken from the A321XLR . Seems when they froze the A350-1000 design they didnt really optimise it best for its market.
Its a fine plane and should do very well
@Dukeofurl
You seem to be somewhat confused, so let’s go through your two erroneous assertions:
1) Although previous contracts for the GEnx engine on the original A350 (launched on the 6th of October, 2005) did not apply to the A350 XWB (launched on the 1st of December, 2006), Airbus wanted a second engine supplier on the A350 XWB and negotiated with GE over the next half year in order to come to an agreement for GE to provide a common engine for both the A350-900 and A350-1000. At the time, RR didn’t have engine exclusivity on the A350, so it was all up to GE if they wanted to supply a common engine for the A350-(800/-)900/-1000 XWB, something they eventually refused to do — a massive own goal IMO. As for engine exclusivity, RR signed an agreement with Airbus in June, 2011, to be the exclusive engine provider for the enhanced version of the A350-1000 (i.e. max thrust level increased from 93,000 lbf to 97,000 lbf). In March, 2021, RR further extended the exclusive engine deal to provide engines for the Airbus A350-900 (to 2030), cementing its alliance with Airbus.
2) On the original A350, which was launched back in October, 2005, the fuselage frames on the A300/A310/A330/A340 222-inch diameter circular fuselage would be re-scultured and made thinner at the elbow height level in the cabin, in order to increase the effective internal width by 4 inches. So, re-sculpturing fuselage frames does not appear to be a Boeing invention. When re-sculpturing of fuselage frames was indeed undertaken on the A350 XWB, it was just a natural evolution of the new, composite airframe, similar to how the A350-900’s metallic door surround structure were replaced by a CFRP composite door surround structure on the A350-1000.
This just goes to show how the A350-1000 is a far more potent aircraft in 2024 than the aircraft that GE refused to power back in 2006. Again, a massive own goal IMO. They probably listened too much to Boeing and their (self-proclaimed) “marketing wizards” on how “good Boeing’s products were compared to the competition” (i.e. much better investment opportunity for GE if they exclusively went with Boeing etc.). Interestingly, at the time, the pro-Boeing talking points usually included how Boeing always “under-promised” and “over-delivered”, in contrast to Airbus and their “heavy” wide-bodies (i.e. A340-500/-600 and A380). Apparently, quite a few “industry insiders” (i.e. mostly U.S. citizens) seemed to believe that Airbus was incapable of manufacturing “light” airframes, and therefore, that the notional empty weight of the A350-1000 appeared to be much more of a mirage than what Airbus would likely manage to achieve — i.e. typical talking points often alluded to by, first, Randy Baseler (Randy’s Blog), and later, by Randy Tinseth (Randy’s Blog Mk II). In short, the decision makers at Boeing believed their own hype and nonsense and GE went along for the ride.
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Quote: Debuting its new 787-9 widebody here at the Farnborough International Airshow yesterday, Boeing fired off an aggressive opening salvo against its rival Airbus. According to the U.S. airframer’s marketing vice president Randy Tinseth, if Airbus goes ahead with its anticipated launch of the re-engined A330neo this week it will prove that its A350 program is a failure.
“The A350-800 has failed, the -1000 has failed and all they have is a one-trick pony with the -900,” Tinseth told reporters. “The A330 was withdrawn 10 years ago because it couldn’t compete with the [Boeing] 777. The A350 has failed with the same engine [that Airbus is proposing to use for the A330neo.”
Boeing believes that the extension of its 787 family to include the larger, longer-range -9 and, eventually, -10 models, as well as last year’s launch of the 777X, will allow it to combat the A350, as well as any new version of the A330. “We have raised questions for the competition on what they do with the A330 and the A350-1000, if it keeps failing to sell,” said Tinseth. “They also have to answer the question as to what they are going to do about the A380. We will have the most capability no matter what they do.”
https://www.ainonline.com/aviation-news/air-transport/2014-07-14/boeing-debuts-dream-niner-and-slams-airbus-plans
Wow..
Hmmm, Melius’ Black Swan comment is itself Black Swan.
And on the subject of swans, how many analysts thoroughly looked under the surface at Boeing before things became less than rosy?
Not to claim GE is in anything other than an excellent position but the NB offering has yet to pass its pricing stress test (as Claes mentions), its dominant WB revenue source could be upended if the 787 suffers a sigificant blow (not a Black Swan event), and its futue WB revenue source (GE 9X) has had problems on a platform with even more problems. Meanwhile the key military jet family’s main use (Super Hornet) is winding down, they aren’t on the F35 or B21, and have no chance of being on GCAP or SCAF. The T700 looks good, and T901 could be.
And then there is the next NB. Seems to me so much hinges on open rotor vs not as I’m not aware of GE having sufficient strength in gearing or electric drive to get ahead of P&W and RR if open rotor doesn’t happen.
“GE engines power more than 55% of the in-production widebody market (767, 777, 787, A330, and A350), and this figure rises to nearly 60% for the order backlog.”
Of course there is a bit of wide body postering from the GE side:
– 767 is ~over, shared with Pratt & RR.
– 777 great, looking back (GE90)
– 787 shared with RR, margin?
– A330 RR dominant, CF6-80E2 great, looking back. NEO=RR.
– A350 RR exclusive, maybe GE bid on wrong horse (777) exclusively?
https://www.forbes.com/sites/richardaboulafia/2019/11/18/re-engined-airbus-a350-could-be-heavy-blow-for-rolls-royce-big-win-for-ge-and-global-trade/
I could be wrong, but it seems RR is gaining ground in the WB segment, not GE?
RR really happy for the A330 RR Trent700 cargo conversions keeping the Trent700 flying and making money to RR. One can wonder when the first A330neo cargo conversion will start? The emissions rules will stop new production of 767/777 leaving the 777neo and 787 competing with A330neo and A350.
The major risk to GE is that its future is tightly linked to Boeing. The 777 is not selling well and massively late. The 787 is having quality issues affecting delivery. The 767 is going out of production without an extension
Then the Max. This aircraft feels destined for a short production run
The 777X can be the aircraft of choice when you want to max pax on airport after airport. It looks more sturdy for cargo ops vs. A350F. Still if you fly close to A350-1000 max range with full load it becomes a winner if priced competetive and RR not get too greedy.
@Claes
Spot on. There is a reason why the A380 and B747 died. You can fly just as far with smaller aircraft. 40-50% of the B777 backlog is Emirates. I can think of another aircraft line where Emirates dominated and that didnt end well for the airframer.
This is my two cents, but I can foresee a future where there is only one widebody installation per airframer. When you can push an A321XLR to 4700 nm range you can fill a lot of demand with single aisle aircraft.
Sometimes airlines are depending on filling up passenger aircraft with cargo to MTOW also on capacity restrained airports with tons of pax they also need the big irons. The A321XLR has a bright future with its mix of daytime 1-3 hrs jumping and night time intercontinental flying for almost 20hrs/day utilization with engines that eventually can handle this cycling.
I don’t know how you guys count . Last time i check the 777X has 481 orders and the A350-1000 has 303. In my world 481 is more than 303. A350-1000 is 303 in 18 years and 777X is 481 in 11 years. Scott you need to correct this guys sometime.
@Daveo
I prefer Wikipedia for good info on program backlogs and current fleet makeup of airlines…usually pretty well maintained
https://en.wikipedia.org/wiki/Boeing_777X (481 for entire family / 205 at Emirates alone)
https://en.wikipedia.org/wiki/Airbus_A350 (215 backlog for -1000)
@Daveo: I don’t have the time to fact sheet everybody.
Hamilton
Lol. A350-1000 is in service while we don’t even know when FAA will grant TIA to 777X.
Tell me how many orders are coming for the A350-1000 vs. 777X in next two to three years? Next decade or two?
Posted one week ago:
“The flight test program has been going quite slowly.
WH001 and WH003 haven’t flown since January, WH004 hasn’t flown since November 2021.
WH002 has less than 100 flight hours in the last 2 months combined, majority of which are just autoland test flights at Moses Lake (KMWH).”
https://www.airliners.net/forum/viewtopic.php?f=3&t=1489789&sid=a26e9e6943b20530b2c3b385ab7bb9f8&start=100
@Pedro
What would make me nervous about the 777X is that 40% of the backlog is Emirates and a lot of the other backlog is “old” orders. A lot can happen to an airline 10 years after placing an order.
This aircraft may very well live and die based on Emirates and their continued follow-on orders.
Indeed, we don’t know the details of these contracts. All these B777X may become dirt cheap once the penalties for late delivery are included.
Maybe Emirates ordered a bunch of extra B777X in 2023, including potential huge penalties for late delivery (after 2028???) and included the ones from the original 2013 contract with the same penalties. After all, the contract came exactly 10 years after the first one. Seems to me that this may have been the expiration date of the original contract.
After the huge humiliation that Boeing got at the Paris Air show, logically they ware ready to sign anything to save face at the Dubai Air Show. Sir Tim Clark, being the fox that he is, could have grabbed a once in a lifetime opportunity by revising the original contract and a bunch of extra B777X “at a price he could not refuse”
Either way, given the delays, it looks like another financial disaster for Boeing.
How do you compare an entire aircraft programs order book (777X) against just one of the competing models in the segment (A350-1000)?
I guess you could say that the 737Max is kicking the A321XLR’s buttocks, right?
Sign…
The last time i look the A350-900 is a different aircraft from the dash-1000.They do not use the same engine, landing gear and wing. How can you call -900 and -1000 the same aircraft when the three most important component in an aircraft design is different. The a319neo , a320neo and a321 neo uses the same engine, landing gear and wing. That is an aircraft family.
@Daveo
Wrong, the wing on the A350-1000 has a trailing edge extension (by area), and not a whole new wing. In fact, the trailing edge extensions on the A350-1000 wing is much simpler in concept to the wing extensions on the A321ceo/A321neo, which have double-slotted slotted inboard and outboard flaps, in addition to having a larger (wing) area. Airbus, however, went with single-slotted inboard flaps for theA321 XLR.
Now, according to Airbus, the A350-1000 retains 70 percent commonality with the A350-900. Also, according to Rolls Royce, the XWB-97 engine can use 80 percent of the Trent XWB-84 line-replaceable units.
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Quote: A preliminary design review in early 2013 showed that the XWB-97 could use 80 percent of Trent XWB-84 line-replaceable units—effectively most items of equipment except fuel-metering units and more powerful pumps. The two engine variants use common ground-support equipment and tooling as well as shared “externals and consumables.”
https://www.ainonline.com/aviation-news/air-transport/2017-08-31/rolls-royce-gains-easa-certification-trent-xwb-97
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Quote: Airbus’s A350 programme manager estimates the A350-1000 will retain 70% commonality with the smaller A350-800/900 after changes have been made to the large twinjet to improve payload and range.
https://www.flightglobal.com/paris-a350-1000-diverges-from-commonality-with-sisters/100903.article
Last time I checked 777-X had zero deliveries vs. over 80 deliveries for A350-1000. So airlines paid RR for 160 engines and GE for zero. There are about 1,200 RR engines under A350 wings. That’s what is counting in the world.
Paid ? Not under ‘power by the hour’ leases.