CFM LEAP-1A engine undergoing dust testing – a key milestone in the validation of the more durable high-pressure turbine (HPT) hardware that was certified in December 2024.
It's been a busy quarter as we wrap our first year as a standalone company at GE Aerospace – a pure-play global leader in propulsion, services and systems.
In November, we celebrated LEAP-1A powering the first Airbus A321XLR flight in service, operated by Iberia. Royal Jordanian announced an order for 18 GEnx-1B engines plus spares to power their expanded Boeing 787-9 fleet. We're also pleased to report VietJet reaffirmed their order for 400 LEAP-1B engines powering Boeing 737 MAX.
We also celebrated the opening of our Services Technology Acceleration Center in November. The new facility will enable GE Aerospace to accelerate the deployment of new repair and inspection technologies to its MRO shops globally as part of the $1 billion investment in its MRO Network.
As expected, CFM International announced today that the U.S. Federal Aviation Administration (FAA) and the European Union Aviation Safety Agency (EASA) have certified the updated high-pressure turbine (HPT) hardware durability kit for the LEAP-1A. As we shared last quarter, the certification is a significant milestone in our progress to improve LEAP durability. Combined with the three durability enhancements that are currently performing well in the field, we expect this will result in an over 2x improvement in time on wing - in line with current CFM56 levels. The new hardware is also easier to manufacture, which will help increase output.
Finally, we've received questions on a few key topics since we reported third quarter earnings in October. We're sharing the top questions and our responses below.
We'd also like to thank those of you who voted for GE Aerospace in Extel (formerly Institutional Investor) rankings. We're continuously working to serve you better and appreciate your constructive input. We're honored to receive many of the top rankings in our sector.
Thank you for your continued interest in GE Aerospace and we welcome your feedback,
The Investor Relations Team
Your Questions Answered
How does GE Aerospace expect to accelerate CES aftermarket growth in 4Q?
Overall, demand for CES services remains strong. In 3Q, orders were up 26% year-to-date, book-to-bill was 1.2x, and our backlog grew.
Our output across new engines, internal shop visits, and spare parts continues to be paced by supply of material from our suppliers. Leveraging FLIGHT DECK, we're making progress on increasing material input sequentially – yet, this increase still remains below our demand. We continue to make trade-offs across OE and aftermarket demand with the material we have. As we've shared, demand for aftermarket remains robust, with strong orders and shop visit inductions outpacing our output each quarter.
While this may limit our growth in some parts of our business in 2024, this demand is not foregone, and will push into the future.
Overall, as we said at our 3Q earnings call, we expect to achieve our full year guidance of high single digit revenue growth, $6.7-6.9B of operating profit*, and $5.6-5.8B of free cash flow*.
GE Aerospace's DPT business faced headwinds in 3Q. What would be considered temporary versus structural?
Big picture, DPT has performed well year-to-date, with revenue up 6%, segment profit up 22% and margin expanding 150 basis points year-over-year. Backlog remains strong at $18B, up about $1B year-over-year.
We are facing a few temporary headwinds in the second half of 2024 which impacted our guidance:- Engine mix: Our output of higher margin marine engines was challenged, which led to unfavorable engine mix.
- R&D investment: Due to U.S. government budget uncertainty, we have elected to self-fund R&D for now. We believe this is critical to support the continued development of our next-gen defense programs, and a temporary measure.
- P&AT volume: Several of our P&AT businesses have commercial exposure, and lower ramp rates have impacted our volume and profit. We expect volume will increase with overall commercial ramp in '25.
- Catalyst investment: We continue to invest in our Catalyst engine as it nears certification, but we are expecting lower investments in '25.
We continue to work towards providing solutions that meet the evolving needs of our military and allies.
What can you share about '25 total company guidance?
GE Aerospace is positioned to deliver continued revenue, profit, and free cash flow growth in 2025. Taking it by business:
- In CES, services is expected to be up low-double-digits from significant backlog of shop visit demand, LEAP services growth, mature fleets flying longer, and pricing. Both internal shop visits and spare parts will contribute to our growth, with spare part sales expected to be in-line with overall services growth. We expect that OE will grow faster than services, including LEAP output up 15-20% aligned with Safran's comments yesterday. We also continue to expect LEAP program will achieve breakeven next year and will no longer be a headwind to GE Aerospace margins. We continue to work through our expectations for 9X, but we expect shipments to grow.
- In DPT, we continue to expect revenue grows MSD/HSD and profit grows faster than revenue.
- In CES, services is expected to be up low-double-digits from significant backlog of shop visit demand, LEAP services growth, mature fleets flying longer, and pricing. Both internal shop visits and spare parts will contribute to our growth, with spare part sales expected to be in-line with overall services growth. We expect that OE will grow faster than services, including LEAP output up 15-20% aligned with Safran's comments yesterday. We also continue to expect LEAP program will achieve breakeven next year and will no longer be a headwind to GE Aerospace margins. We continue to work through our expectations for 9X, but we expect shipments to grow.
We look forward to providing further color on our 2025 guidance at our earnings call in January.
*Non-GAAP Financial Measure. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in our quarterly report on Form 10-Q and earnings release for the third quarter.
This document contains "forward-looking statements." For details on the uncertainties that may cause our actual future results to be materially different than those expressed in our forward-looking statements, see here.