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Right now, we're going to head back to Brazil to hear from the CEO of GE Aerospace G of course, a major conglomerate that has split up and gone into pieces here over the last few years. Larry Kulp is the CEO of GE Aerospace. Guy Johnson, our colleague from London, is in Rio for that interview.
He joins us. Now, Guy over to you.
Thank you very much, indeed, Yeah, Larry is here. Nice to see you. Larry, Thank you very much indeed for spending time with us, some time with.
Us this morning.
Let's talk about the here and now to start the conversation off. And we're in a situation where we've we've got an award that's having an impact on aviation, it's having an impact on fuel prices. What impacts are you seeing right now A G's aerospace as a results of what is going on?
Wellkay, first of all, thanks for the opportunity to visit with you this morning. And what we've seen really is nothing but a continuation of the strength that we saw.
Through the first quarter of this year.
Right It's interesting because we thought we might see some change in airline behavior, but we really haven't. I look at spare parts orders on a regular basis. We were up thirty percent in the first quarter. We've actually seen those spare parts growth rates increase to forty percent year every year. We've seen retirements tick down. We've seen engine removals, which are really a precursor to a shop visit, actually tick up at a rate faster than we can complete
the shop visits currently. So what I think we see our airlines very focused on making the most of the summer flying season, but also making preparations for the other side of the situation in the Gulf, because the lesson we all took from the pandemic was things come back. They come back sooner, and they come back stronger than we would ever have anticipated.
But you're surprised it's coming later. That, I guess is the takeaway from this part of the conversation. You thought we may have seen it already.
I would have thought we would have seen a little bit of change in airline behavior, but we haven't seen that yet.
So yes, surprised pleasantly.
So when it comes and you start to see some effects of this coming through, does it start in the Gulf? Is there any hint at this point that maybe some of the golf carriers start differring, start changing behavior. Is that where it begins and it spreads out.
Well, I think the airlines around the world are being impacted in different ways. So depending on where you are geographically the market segment you serve, you're seeing different impacts or looming impacts on your business and can dely've seen a number of airlines that have adjusted their schedules over
the next several months, So that's happening. But in terms of the interface that we have again both with respect to keeping the planes they have today in the air during this prize summer flying season, but also making preparation for the other side of the conflict, the airlines really have not changed the way they are servicing today's fleets and preparing to expand and modernize.
But where do you think it? What does it look like when it shows up? What does it look like when we still we get through the summer, we get into the into the fall, into the autumn. What are the early things that we kind of watching the aviation sext are looking for clues that things are may be starting to slow down or there's an effect.
What do I look for, I would.
Distract, Well, what we're going to be looking for are those same indicators I mentioned earlier, right right, what's happening with spare parts orders, what's happening with retirements, what's happening with engine removals? Our airlines in a position where they can't or have decided not to prepare for the other side. We were out a week and a half ago at an investor commerce in New York Guy and what we
basically reiterated, is it in twenty twenty six. Given what we see, we feel very good about our services growth coming into it at a mid teens rate, and our medium term outlook, which has our.
Pack for twenty twenty seven.
So I don't want to in any way suggest that nothing might happen, but from what we see right now, a hyper focus on the near term and preparations for.
The other side.
How do you get ready for that? What do you do?
Are you getting it ready? Are you preparing for a storm? Is it kind of what are you thinking about in terms of the way you run the business to get ready for that? Because that's the lesson of the past. The recent pass is get ready use this time wisely to prepare for that kind of story.
Well, I couldn't be more proud of the way the g Eerospace team is dealing with both the short term and getting ready for possibilities. But again, when you look at our business, given the strength of the backlogs that we have both in narrow bodies and wide bodies well into the twenty thirties, the significant demand that we have supporting a million passengers in the air at any one
point in time with our engines underwing. A lot of what we're doing not only in our own operations, in our manufacturing and our service footprints, but also in partnership with our supplier partners has given us the opportunity to put up the numbers that we did in the first quarter, to see lead engine deliveries up over sixty percent for example,
So a lot of good growth. We want to make sure that we're in a position to continue you to support the airlines in whatever way we do well into the next several years.
You bring up with splashes, let's talk about that.
From a moment post pandemic, the supply chain has been the issue.
I'm trying to.
Get the supply chain to work to deliver has been the challenge, are you beginning.
To win that war now? Is that battle turning in your favor?
Do you think you've got this situation under control in a way that you haven't for maybe the last few years.
We have eight quarters now sequentially where we have seen significant increases and inputs from our critical supplier partners. I think what we've actually done is thrown the winning the war framework out the window and gotten into deep technical, collaborative problem solving, making sure we're making the most of existing resources with our supplier partners while we're investing medium
to long term in additional capacity. There's no way that we take our leap deliveries up over sixty percent in the first quarter. No way we have our services revenue is up over thirty percent if we weren't improving the supply chain. The challenge guy that I think a lot of people don't appreciate, is this is a wonderful opportunity that we'll be wrestling with for the rest of this decade. Yeah,
it'll never be a moment where we're finished. Because we have to do more in the back half of this year than we did in the first half of this year. The same will be true in twenty seven and twenty eight. That's the beauty of having one hundred and seventy billion dollars worth of backlog. We know for the rest of this decade we're going to need to get better in our own operations and in partnership with our suppliers. But
if we're bored together, nobody wins. But if we're collaborating, everybody does.
That sounds like you're winning. That sounds like you're in a much better place right now. In terms of competition, Let's just talk about competition for a moment. You are in a good place right now. Scott Kirby at United, it's been singing your praises this morning, talking about you guys and the job that you're doing. He's talked less favorably about the competition Rolls Royce, Rolls Royce has gone through is going through a transformation right now.
It will emerge from that at.
Some Does competition get tougher further down the road when two fan is in a different position, when he's got a handle on that business and a handle on his engines, does competition get tougher?
Well, first off, I'm delighted to hear Scott's comments we're celebrating with United one hundred years of their operations and our partnership with them.
Scott's a friend. We're focused on the airlines, yep. Right.
If we focus on the airlines and what they need, and that's the beauty of our business.
Guy. We don't have a one and done transaction.
We live with these engines from delivery for twenty or thirty years, and that is what I think enables us to make sure that whether it's a shop visit they need completed in the next ninety days or working with them with respect to delivering on their skylines, we're in a position to make sure we understand their needs and then turn around and do everything we can in twenty sixth a year of what we call being more customer driven.
Competition will do what competition does, but we're far more focused on our customers today.
Okay, competition make suffer, I'm taking away from that. But you think you've got you've got to handle on it. That is that the right interpretation.
I'll let you and others talk about where our competitors are. I think in terms of the way our senior team and our board are oriented. Let's be focused on the customer. Okay, customer, we'll lead away.
President She's coming in September to the United States. Should I expect big ge orders?
Well, we were very pleased with the news we had in Beijing when both Kelly or Berg from Boeing and I were there. Honored to ye be there with the President. I think the foundation was laid, the door is opened, will be a good bit of work up for the TA.
So there was an expectation that maybe that that trip would have delivered more. Is it a kind of is it a two part story? Part one we've seen Part two comes in September.
I think it's a journey and there was an important step taking in Beijing, no doubt in my mind.
Okay, final quick question. We're always done with the current generation of engines. We are going to be moving on to the next generation of engines, which you see as being an open ROTA kind of configuration.
Yeah, huge blades at the front of the engine.
Many of the airline CEOs that I talked to at the moment say, let's just fix what we've got right now and make sure it works properly.
What we want is for reliability.
What do you say to that in terms of what this next generation of aircraft engines will actually deliver.
Well, we couldn't agree more. Right here we are in twenty twenty six. Our leaf engine is still a relatively new engine. Our GE NX, our leading wide body engine still relatively new. Our GE ninety really the workhorse in the wide body space, probably a teenager, not a mature adult. So these are engines that are going to fly for decades, and we are working to improve.
The durability and reliability of those engines.
That said, we need to be investing in twenty twenty six to be ready for that next generation narrowbody that may be ten or fifteen years out from where we are today.
If we're not investing today, we're not ready.
Then we do think that the open fan architecture will allow us to a dress those reliability and durability concerns as well as deliver the next breakthrough inefficiency and sustainability.
So it becomes simpler, not more complicated, exactly.
And that's the technology breakthrough that allows us to do both is my friend Jim Collins would say, to employ the genius of the end durability and efficiency.
Larry's Curtesy, Thank you very much, and Dee for spending some time with us this morning. Guys, back to you in the studio Larry Cole, the CEO of G Aerospace,