GE Aerospace (GE) Business & Investor Dossier

GE Aerospace makes money through two streams: selling new jet engines (equipment revenue) and selling services, spare parts, and maintenance on engines already in service (services revenue). The services stream is the larger and more profitable of the two. When an airline or military customer buys a GE engine, GE also typically signs a long-term service agreement under which it provides maintenance, repair and overhaul (MRO), spare parts, and technical support over the engine's 20-30 year operational life. These aftermarket service contracts generate recurring, high-margin revenue that dwarfs the initial engine sale in lifetime value. GE Aerospace also jointly owns CFM International with Safran of France -- a 50-50 joint venture that makes the CFM56 (most widely used commercial jet engine ever) and the LEAP engine (next-generation narrow-body engine powering the Boeing 737 MAX and Airbus A320neo). LEAP engine deliveries are critical to airline fleet renewals. Defense engines (F110 for F-16, F404/F414 for F/A-18, T700 for Black Hawk helicopters) generate significant government revenue.

General Electric was once the most valuable company in the world and operated across dozens of industries including power generation, aviation, healthcare, finance (GE Capital), lighting, appliances, and media. Beginning in the early 2000s, GE's complex conglomerate structure became a liability rather than an asset: GE Capital nearly bankrupted the company in the 2008-2009 financial crisis, and successive CEOs struggled to manage the enormous corporate complexity. Larry Culp, who became CEO in 2018, made the decision to dismantle GE into three focused standalone companies. GE HealthCare (medical imaging and diagnostics) was spun off in January 2023 as a separate publicly traded company. GE Vernova (power generation -- gas turbines, wind, electrification) was spun off in April 2024. What remained -- the aviation engine and services business -- was renamed GE Aerospace and retained the GE stock ticker (NYSE: GE). This breakup thesis is that focused companies with clear identities trade at higher valuations than conglomerates and can execute their specific strategies more effectively. GE Aerospace emerged as a pure-play aviation company with a dominant position in jet engines.

CFM International is a 50-50 joint venture between GE Aerospace and Safran Aircraft Engines of France, established in 1974. CFM produces the CFM56 and LEAP commercial jet engines. The CFM56 is the most widely used commercial jet engine in history, powering hundreds of thousands of Boeing 737 Classic, 737NG, and Airbus A320ceo aircraft. The LEAP is the CFM56's successor, powering the new-generation narrow-body aircraft: the Boeing 737 MAX and Airbus A320neo family. As airlines replace their older narrow-body aircraft with fuel-efficient MAX and A320neo jets, they take delivery of LEAP engines, generating equipment revenue for CFM. More importantly, each delivered LEAP engine eventually enters the aftermarket service cycle, building GE Aerospace's future services revenue backlog. GE Aerospace's backlog of committed future services and equipment orders has grown to over $170 billion, providing revenue visibility for years. The LEAP engine's installed base will drive GE Aerospace's services revenue through the 2030s and beyond as those engines mature and require more maintenance.

The jet engine market is an oligopoly dominated by three major manufacturers: CFM International (GE + Safran joint venture), Pratt and Whitney (a division of RTX Corporation), and Rolls-Royce. Each of these manufacturers produces engines for specific aircraft programs, and airlines select which engine they want when ordering new aircraft (for some aircraft types, there is only one engine option). CFM International's LEAP engine competes directly with Pratt and Whitney's GTF (Geared Turbofan) on both the Boeing 737 MAX (LEAP-only) and the Airbus A320neo family (where airlines can choose between LEAP and GTF). Rolls-Royce focuses primarily on wide-body aircraft (Airbus A350, Boeing 787, Boeing 777X) and does not directly compete with CFM for narrow-body orders. GE's wide-body engines (GE9X on the 777X, GEnx on the 787, GE90 on the 777) compete primarily with Rolls-Royce's Trent family and Pratt and Whitney's PW4000 series. The competitive moat in jet engines comes from the very long qualification and certification timelines (years), the capital intensity of development, and the aftermarket lock-in once an airline selects an engine for a specific aircraft type.

GE Aerospace's main risks include: Boeing production risk, as Boeing's well-documented production problems (737 MAX certification issues, 787 supply chain delays, 777X certification delays) directly delay GE engine deliveries and reduce services revenue ramp-up; supply chain constraints, as aerospace supply chains for high-performance materials (titanium, nickel superalloys, composites) and specialized components remained strained post-pandemic, limiting how fast GE Aerospace can ramp LEAP production to meet strong airline demand; engine quality and safety, as any discovered defect or accident involving a GE engine triggers regulatory investigations, operational groundings, and reputational damage (the CFM56 engine failures on Southwest 1380 in 2018 and United 328 in 2021 both generated scrutiny); defense budget dependency, with military engine programs (F110, F404/F414, T700) subject to U.S. government budget cycles; and competition from Pratt and Whitney GTF, which has won significant market share on the Airbus A320neo against LEAP (though GTF has also suffered its own material quality issues requiring engine inspections).