Q2 2025 General Electric Co Earnings Call and Investor Update

July 17, 2025

Operator: Good day, ladies and gentlemen, and welcome to the GE Aerospace investor update and second quarter 2025 earnings webcast. At this time, all participants are in a listen-only mode. My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Blair Schorr from the GE Aerospace Investor Relations Team. Please proceed.

Good day, ladies and gentlemen, and welcome to the GE Aerospace investor update and second quarter 2025 earnings webcast.

At this time, all participants are in a listen-only mode.

Liz: My name is Liz and I will be your conference coordinator today.

Liz: If you experience issues with the webcast, slides, refreshing or there appears to be delays in the slight advancement, please hit F5 on your keyboard to refresh.

Liz: As a reminder, this conference is being recorded.

I would now like to turn the program over to your host. For today's conference player. Shore from the GE Aerospace investor relations team. Please proceed.

Blair Schorr: Thanks, Liz. Welcome to GE Aerospace's 2025 Investor Update and Q2 2025 Earnings Call. I'm joined by Chairman and CEO Larry Culp and CFO Rahul Ghai. Today, we will be sharing an update on our second quarter 2025 results, financial guidance for 2025, an outlook for 2028, followed by a Q&A session. As usual, many of the statements we're making are forward-looking and based on our view of the world and our businesses as we see them today. As described in our SEC filings and website, those elements may change as the world changes. Additionally, Larry and Rahul will speak to total company and corporate financials as well as our guidance and outlook on a non-GAAP basis. With that, I'll hand it over to Larry.

Blaire Shoor: Thanks, Liz. Welcome to GE Aerospace's 2025 Investor Update and Q2 2025 Earnings Call. I'm joined by Chairman and CEO Larry Culp and CFO Rahul Ghai. Today, we will be sharing an update on our second quarter 2025 results, financial guidance for 2025, an outlook for 2028, followed by a Q&A session. As usual, many of the statements we're making are forward-looking and based on our view of the world and our businesses as we see them today. As described in our SEC filings and website, those elements may change as the world changes. Additionally, Larry and Rahul will speak to total company and corporate financials as well as our guidance and outlook on a non-GAAP basis. With that, I'll hand it over to Larry.

Shore: Thanks Liz. Welcome to GE Aerospace 2025 investor update and 2 q25 earnings call.

Shore: I'm joined by chairman and CEO Larry Culp and CFO Rahul ghai.

Today we will be sharing an update on our second quarter, 2025 results, Financial guidance for 2025, and outlook for 2028 followed by a Q&A session.

Shore: As usual, many of the statements were making our forward-looking and based on our view of the world and our businesses. As we see them today,

Shore: as described in our SEC filings and website, those elements may change as the world changes.

Larry Culp: Thanks Blair, and we appreciate everyone joining us today. The GE Aerospace team is guided by our purpose to invent the future of flight, lift people up, and bring them home safely. At any given moment, nearly 1 million people are flying with GE Aerospace technology under wing. That is a significant responsibility that our 53,000 employees carry with great pride. We use Flight Deck, our proprietary lean operating model, to continuously improve safety, quality, delivery, and cost, always in that order, as we strive to provide unrivaled customer service and deliver our roughly $175 billion backlog.

Larry: Additionally, Larry, and Rahul will speak to to Total company and corporate financials, as well as our guidance and outlook on a non-gaap basis with that, I'll hand it over to Larry.

Larry: Thanks Blair. And we appreciate everyone joining us today.

The Aerospace team is Guided by our purpose.

Larry: To invent the future of flights lift people up and bring them home safely.

at any given moment, nearly 1 million people are flying with GE Aerospace technology under wing

That is a significant responsibility that our 53,000 employees carry with great pride.

Larry: Delivery and cost always in that order, as we strive to provide, unrivaled customer service and deliver our roughly 175 billion dollar backlog.

Larry Culp: Before we dive in further, I want to acknowledge the tragedy of Air India Flight 171. We extend our heartfelt sympathies to the families and loved ones of those who lost their lives. Since June 12, our focus has been and remains on supporting our customers and providing technical support to the regulators.

before we dive in further, I want to acknowledge the tragedy of our India, flight 171

Larry: We extend our heartfelt sympathies to the families and loved ones of those who lost their lives.

Since June, the 12th, our Focus has been and remains on supporting our customers and providing technical support to The Regulators.

Larry Culp: While we were looking forward to a broader update with you in Paris, Rahul and I are here today to share our Q2 results and our increased outlook. We'll create additional opportunities later this year to share more of the operational details we expected to cover with you in Paris.

while we were looking forward to a broader update with you in Paris Rahul and I are here today to share our second quarter results and our increased Outlook

Larry: We'll create additional opportunities later this year to share more of the operational details. We expect it to cover with you in Paris.

Larry Culp: Turning to the next slide. Safety is and always will be foundational to everything we do through decades of experience, learning, and continuous improvement. We've built our reactive, proactive, and now predictive safety processes. GE Aerospace was the first manufacturer to have its Safety Management System, or SMS, accepted by the FAA. We established our SMS a decade before the agency proposed requiring it. The system encourages our employees to report safety concerns voluntarily and ensures that they are thoroughly evaluated.

Turning to the next slide safety is and always will be foundational to everything we do.

Through Decades of experience learning and continuous Improvement. We've built our reactive proactive and now predictive safety processes.

Larry: Aerospace was the first manufacturer to have its safety management system or SMS accepted by the FAA.

We established our SMS. A decade before the agency proposed. Requiring it.

Larry: The system encourages our employees to report safety concerns voluntarily, and ensures that they are thoroughly evaluated.

Larry Culp: SMS, together with our quality management system, are the foundation of our safety culture. While our approach to continuous improvement helps us drive safety up the value chain, Flight Deck further standardizes our own processes to support safety investigations leading to identifying corrective actions faster. We're also enhancing engine inspections to begin at the part level, extend through manufacturing, and continue into the aftermarket. Now we're deploying AI-enabled tools to further improve inspection accuracy and consistency, helping to predict potential safety threats. Everyone at GE Aerospace owns safety and we never compete on safety.

SMS together, with our quality management system, are the foundation of our safety culture.

Larry: While our approach to continuous Improvement, helps us drive safety up the value chain.

Larry: Flight Deck further standardizes our own processes to support safety investigations leading to identifying corrective actions faster.

Larry: We're also enhancing engine inspections to begin at the part level extend through manufacturing and continue into the aftermarket.

Larry: Almost to further improve inspection accuracy, and consistency, helping to predict potential, safety threats.

Larry: Everyone at GE Aerospace owns safety and we never compete on safety.

Larry Culp: Turning to Slide 5. GE Aerospace is an exceptional franchise. As a global aerospace leader in propulsion, services, and systems, we're well positioned to benefit from favorable long-term market trends across both commercial and defense. Our commercial engines and services business, or CES, is servicing and growing the industry's most extensive commercial installed base. We're proud to be underway on three out of every four commercial flights, demonstrating our unmatched scale and scope across the world's most successful and innovative aircraft platforms. Our Defense and Propulsion Technologies business, or DPT, powers 2/3 of all US military, combat, and helicopter fleets. DPT offers both the leading defense programs of today while developing mission critical technology for the future.

Larry: Turning to slide 5.

Geros space is an exceptional franchise.

Larry: As a global Aerospace leader in propulsion services and systems.

We're well positioned to benefit from favorable long-term market trends.

Across both commercial and defense.

Our commercial engines and services business or CES is servicing and growing. The industry's most extensive commercial installed base.

Larry: We're proud to be underway on 3 out of every 4 commercial flights.

Demonstrating our unmatched scale and scope of the world's most successful and Innovative aircraft platforms.

Our defense and propulsion Technologies, business or DPT Powers 2/3 of all US, military, combat and helicopter, fleets.

DPT offers, both the leading defense programs of today, while developing Mission. Critical technology for the future.

Larry Culp: Let's take a closer look at GE Aerospace today.

Larry: Let's take a closer look at GE Aerospace today.

Larry Culp: As the industry's largest and growing engine fleet, our business model is highly resilient, largely due to our balanced exposure across narrow body, widebody, regional, and defense platforms. CES has more than 49,000 engines in service and growing. In 2024 we delivered a particularly strong year with $27 billion of revenue growing 13% with robust services, demand, and performance supporting higher profit. About half of our revenue comes from narrowbody platforms, while widebody represents 35%.

Larry: Is the industry's largest and growing engines lead. Our business model is highly resilient largely due to our balance exposure across narrow body, widebody Regional, and defense platforms.

CES has more than 49,000 engines in service and growing.

Larry: In 2024, we delivered a particularly strong year with 27 billion dollars of Revenue. Growing 13%.

Larry: With robust Services, demand and performance supporting.

Larry: Higher profit.

Larry: About half of our Revenue comes from narrow body platforms. While widebody represents 35%

Rahul Ghai: In DPT.

Larry Culp: In DPT.

Larry Culp: We have more than 29,000 engines in service. 2024 was a solid year with nearly $10 billion in revenue up 6% and profit up double digits. Our defense and systems business accounts for roughly 2/3 of DPT revenue, including over 70% of revenue from US customers and around 30% internationally. Propulsion and additive technologies represents the remaining 1/3, with exposure to commercial programs and localized European defense capabilities.

Larry: in DPT, we have more than 29,000 engines in service.

2024 was a solid year with nearly 10 billion dollars in Revenue up 6% and profit up double digits.

Our defense and systems business accounts for roughly 2/3 of DPT Revenue, including over 70% of revenue from us customers and around, 30% internationally.

Larry: Propulsion and additive Technologies represents the remaining third with exposure to commercial programs and localized. European Defence capabilities.

Larry Culp: Notably, 70% of our total revenue comes from recurring, predictable, and highly profitable services, including 3/4 of CES revenue and more than half of DPT revenue. This represents a significant growth opportunity as our commercial installed base continues to grow at a low-single- to mid-single-digit compounded growth rate through the end of the decade. Services also enable us to live the customer experience and strengthen our relationships, seeing and hearing their needs firsthand while shaping our product roadmaps to ensure alignment with their future priorities.

Larry: Notably 70% of, our total revenue comes from recurring predictable and highly profitable services including 3/4 of CES revenue and more than half of DPT Revenue.

Compounded growth rate through the end of the decade.

Larry: Services. Also enable us to live, the customer experience and strengthen our relationships.

Larry: Seeing and hearing their needs. Firsthand while shaping, our product road maps to ensure alignment with their future priorities.

Larry Culp: Turning to Slide 7.

Larry: Turning to slide 7.

Larry Culp: Given macroeconomic dynamics, we're watching demand near term. This quarter departures grew nearly 4% in line with our expectations for 2025. We're still planning for low single digit departures growth, taking a more conservative view on the second half.

Larry: Given macroeconomic Dynamics. We're watching demand near-term.

Larry: This quarter, departures grew, nearly 4% in line with our expectations.

For 2025, we're still planning for low single digit. Departures growth, taking a more conservative view on the second half.

Larry Culp: Broadly speaking, we support promoting free and fair trade, including the duty free environment that has long fueled the US aerospace sector, leading to more than 1.8 million US jobs and a $75 billion annual trade surplus. We commend the administration for the US UK Trade Deal eliminating tariffs on the aerospace sector and view this deal as a strong framework for future trade agreements.

Larry: Broadly speaking, we support promoting free and fair trade, including the duty-free environment that has long fueled. The US Aerospace sector,

Larry: Leading to more than 1.8 million us jobs.

And a 75 billion dollar annual Trade Surplus.

Larry: We commend the administration for the US UK trade deal. Eliminating tariffs on the Aerospace sector and view this deal as a strong framework for future. Trade agreements.

Larry Culp: Longer term, GE Aerospace is operating from a position of strength. Our robust orders over the last several quarters have increased our commercial services backlog to now over $140 billion, supporting growth for years to come.

Larry: Longer term Geo spaces operating from a position of strength.

our robust orders, over the last several quarters have increased our Commercial Services backlog

To now, over 140 billion dollars.

Larry: Supporting growth for years to come.

Larry Culp: Across the commercial sector specifically, we see strong fundamentals. Air traffic growth is expected to outpace global GDP, especially in Asia Pac and the Middle East, and new aircraft builds and airline expansions remain healthy, supporting the growth of our installed base.

The commercial sector specifically we see strong fundamentals.

Larry: Are traffic growth. Is expected to outpace Global GDP especially in Asia Pac and the Middle East.

Larry: And new aircraft builds and Airline expansions remain healthy supporting the growth of our install base.

Larry Culp: On the defense side, we see solid momentum globally toward modernization and localization. Domestically, we're pleased. The reconciliation package includes funding for key defense propulsion initiatives with more than $1 billion for sixth generation aircraft programs.

On the defense side, we see solid momentum globally toward modernization and localization.

Domestically we're pleased. The reconciliation package includes funding for key defense. Propulsion initiatives with more than 1 billion dollars for 6 generation aircraft programs.

Larry Culp: Internationally, we're expecting faster growth than in the US. Largely in response to rising global tensions and the evolving geopolitical landscape.

Internationally, we're expecting faster growth than in the US largely in response to Rising Global tensions and the evolving geopolitical landscape.

Larry Culp: Overall, we expect the market to grow at a mid single digit compounded growth rate through 2028, reaffirming our strong trajectory.

Larry: Overall, we expect the market to grow at a mid single digit compounded. Growth rate through 2028, reaffirming our strong trajectory

Larry Culp: Moving to slide 8.

moving to slide 8.

Larry Culp: Our vision is clear to be the company that defines flight for today, tomorrow, and in the future. For today, we're ramping up services and equipment to support our customers' fleets while fulfilling strong demand for new engines. For tomorrow, we're expanding capacity and capabilities to deliver on while growing our backlog. This includes expanding our supply chain and service networks, and investing in technologies to further enhance engine performance.

Larry: Our vision is clear.

Larry: To be the company that defines flight for today, tomorrow, and in the future.

Larry: For today, we're ramping up services and equipment to support our customers fleets while fulfilling strong demand for new engines.

Larry: For tomorrow, we're expanding capacity and capabilities to deliver on while growing our backlog.

Larry: This includes expanding our supply chain and service Networks.

Larry: And investing in technology to further enhance engine performance.

Larry Culp: For the future, we're building the technological foundation that will define the future of flight across both commercial and defense.

And for the future, we're building the technological Foundation that will Define the future of flight across both commercial and defense.

Larry Culp: Flight Deck is a systematic approach to running our company, translating strategy into outcomes while advancing our culture.

Larry: Flight deck is a systematic approach to running our company translating strategy into outcomes while advancing our culture.

Larry Culp: Let me share here a few examples of Flight Deck in action to support our Multi-Year Services and Equipment Ramp. Earlier this year, we launched a new technology and operations team to hardwire and accelerate the Flight Deck enhancements we made last year, often in partnership with our suppliers. The team is providing greater stability and transparency to our demand signals and stronger collaboration to help identify and then break constraints. This helps our suppliers deliver today while investing to support the ramp in the future.

Let me share here. A few examples of Flight Deck in action to support our multi-year services and equipment ramp

Earlier this year, we launched a new technology and operations, team to hardwire. And accelerate the flight deck enhancements we made last year often in partnership with our suppliers

The team is providing greater stability and transparency to our demand signals and stronger collaboration to help identify and then break constraints. This helps our suppliers deliver today while investing to support the ramp in the future.

Larry Culp: We're also removing waste within our own operations with a focus on improving output and turnaround times.

We're also removing waste within our own operations with a focus on improving output and turnaround times.

Larry Culp: Take our largest MRO site in Celma, Brazil, which is responsible for 1/4 of our global volume. Here, the CFM56 fan module has been the key constraint to reaching our turnaround time target.

Take our largest mro site in Selma Brazil, which is responsible for a quarter of our Global volume.

Larry: Here, the cfm56 fan module has been the key constraint to reaching our turnaround time Target.

Larry Culp: A cross-functional team used value stream mapping and implemented flow lines to reduce lead time by over 30%. Now CFM56 turnaround time at Celma is below 80 days.

Across functional. Team, use value stream, mapping and implemented flow lines to reduce lead time by over 30%.

Larry: Now, see if m56 turned around in time at Selma is below 80 Days.

Larry Culp: Additionally, our recently deployed AI-enabled blade inspection tool is improving inspection accuracy and consistency while reducing inspection time by roughly 50%.

Larry: Additionally, our recently deployed AI enabled plate. Inspection tool is improving, inspection accuracy, and consistency. While we're reducing inspection Time by roughly 50%

Larry Culp: Improvements like this are driving turnaround times closer to 90 days for GEnx and CFM56 in our larger shops. That said, we have more work to do on our other platforms, and finally, we're expanding capacity with the LEAP installed base expected to roughly triple, and GEnx to roughly double by 2030. We're growing our LEAP third party MRO network which includes six premier partners, and this quarter we saw significantly higher third party LEAP shop visits.

Improvements like this are driving turnaround times closer to 90 days.

Larry: For genx and cfm56.

Larry: that said,

Larry: We have more work to do on our other platforms.

Larry: And finally, we're expanding capacity with the leap installed base expected to roughly triple.

Larry: And gex to roughly double by 2030.

Larry: We're growing our leap. Third-party mro Network.

Larry: Which includes 6. Premier Partners in this quarter. We saw significantly higher.

Larry: Third-party leap shop visits.

Larry Culp: Additionally, last year we announced we'll invest more than $1 billion in our MRO and component repair facilities over the next five years. We've added XEOS in Poland in partnership with Lufthansa Technik to our MRO network, which inducted its first LEAP engine earlier this year. We're investing more than $1 billion across our US factories and supply chain infrastructure to support growth. Overall, we expect to grow internal and external capacity by approximately 40% by the end of the decade.

Additionally, last year, we announced we'll invest more than 1 billion dollars in our mro and component repair facilities.

Larry: Over the next 5 years.

Larry: We've added zoos and Poland and partnership with Bhutan, the technique.

To our mro Network.

Larry: Which inducted its first leap. Engine earlier this year.

Larry: And we're investing more than 1 billion dollars of our us factories.

And supply chain infrastructure to support growth.

Overall, we expect to grow internal and external capacity.

Larry: By approximately 40%.

Larry: By the end of the decade.

Larry Culp: The impact of Flight Deck and our technology and operations team combined is delivering better operational outcomes with substantial momentum. In Q2, material input at our priority supplier sites was up 10% sequentially. Stability also continued to improve with suppliers delivering more than 95% of committed volume, up nearly twofold versus early last year. This contributed significantly to Q2 output. CES services revenue was up nearly 30% year over year, supported by internal shop visit revenue up more than 20%, and spare parts revenue up over 25%. Total engine deliveries were up 45% with commercial up 37%, including LEAP up 38%, and defense up 84%.

Larry: The impact of flight deck and our technology and operations. Team combined is delivering better, operational outcomes with substantial momentum.

In the second quarter material input, at our priority supplier sites was up, 10% sequentially.

Larry: Stability. Also continue to improve with suppliers delivering more than 95% of committed. Volume up. Nearly twofold.

Larry: Versus early last year.

This contributed significantly to second quarter output.

CES Services, Revenue was up, nearly 30% year-over-year supported by internal shop, visit Revenue.

Up more than 20% and spare parts Revenue up over 25%.

Larry: Total engine deliveries were up 45% with commercial F. 37, including leap up 38% and

Fence up 84%.

Larry Culp: Through the first half, we've delivered 12% growth in commercial units, including LEAP, up 10%, and 37% growth in defense deliveries.

Larry: And through the first half, we've delivered 12% growth in commercial units, including leap up. 10%

And 37% growth in defense deliveries.

Larry Culp: Overall material input improvement has resulted in higher inventory as we accelerate output and grow LEAP deliveries 15% to 20% here in 2025. But I do want to pause here and just thank our teams and our suppliers who are working hand in hand to deliver for our customers both near term and longer term.

Larry: Overall material input Improvement, has resulted in higher inventory. As we accelerate output and grow leap, deliveries 15 to 20% here in 2025.

Larry: But I do want to pause here and just thank our teams and our suppliers.

Hand in hand to deliver for our customers, both near-term and longer term.

Larry Culp: We move to slide 11. We've won some sizable deals so far in 2025.

Larry: We moved to slide 11, we won some sizable deals so far in 2025.

Larry Culp: I'd like to highlight a few. Qatar Airways announced a significant expansion of their fleet with a deal for over 400 GEnx engines, marking the largest widebody win in GE Aerospace history. IAG announced an agreement for 32 Boeing 787 aircraft powered by GEnx for British Airways. This further builds upon our growing backlog for GEnx and our life of program win rate now stands at 75%.

Larry: Like to highlight a few.

Qatar Airways announced a significant expansion of their Fleet with a deal for over 400 Genex and ge9x engines marking the largest widebody. Win in jarrow, space history.

Larry: Iag announced an agreement for 32 Boeing 787 aircraft powered by gfx for British Airways.

This further Builds on Upon Our growing backlog for GNX and our life of program win rate now stands at 75%.

Larry Culp: In defense, the US Air Force awarded a $5 billion contract for our F110 engines to meet the evolving needs of allied operators.

Larry Culp: Today we have more than 1,600 commercial and defense engines in backlog, and we're effectively sold out through the rest of this decade.

Larry: And in defense, the US Air Force in order to 5 billion dollar contract where our f110 engines to meet the evolving needs of Allied operators.

Today, we have more than 1600, commercial and defense engines, and backlog. And we're effectively sold out through the rest of this decade.

Larry Culp: Turning to slide 12, GE Aerospace is a business with tremendous competitive advantages built on decades of experience and significant investment.

Larry: Turning to slide 12.

Geo space is a business with tremendous competitive advantages built upon Decades of experience and significant investment.

Larry Culp: With the world's largest installed base of engines, we've accumulated over 2.3 billion flight hours, providing us with unmatched insights on performance, opportunities for improvement, and future breakthroughs. Add to that our R&D investment of approximately $3 billion in 2025, or 6% to 8% of revenue per year. We're well positioned to enhance our foundational and current generation platforms while inventing the future of flight.

Larry: With the world's largest installed base of engines, we've accumulated over 2.3 billion.

Larry: Flight hours providing us with unmatched, insights on performance opportunities for improvement and future breakthroughs.

Larry: Add to that R&D investment of approximately 3 billion dollars in 2025 or 68% of Revenue per year. We're well positioned to enhance our foundational and current generation platforms while inventing the future of flight.

Larry Culp: Here's a specific example. Composite fan blades, a technology that only GE Aerospace and our partners have in service today.

Larry Culp: Compared to traditional metal blades, these lighter and stronger fan blades were first introduced on the GE90. Now with over 140 million flight hours on more than 2,500 engines in service, these blades are helping us deliver industry-leading departure reliability.

Here's a specific example. Composite fan blades, a technology that only Geo space in our partners have in service today.

Larry: Compared to traditional metal blades, these lighter and stronger fan blades were first introduced on the ge90.

Larry: Now with over 140, million flight hours on more than 2500 engines in service.

These blades are helping us deliver industry-leading departure, reliability.

Larry Culp: Our experience with the GE90 along with GEnx and LEAP has informed the GE9X development with fourth generation composite fan blades. These blades contribute to the platform's overall performance with enhanced durability and fuel burn.

These blades contribute to the platform's overall performance with enhanced durability and fuel burn.

Larry Culp: And finally, we're designing composite fan blades for the CFM RISE program, combining 30 years of experience with continued investment to help deliver the next step change in durability and efficiency. More on that in a moment, but let me first share with you how our current generations of engines is ramping with customer needs in mind.

Larry: And finally we're designing composite fan blades for the CFM, Rise program.

Larry: Combining 30 years of experience with continued investment to help deliver the next step change in durability and efficiency.

Larry: More on that in a moment. But let me first share with you how our current generations of engines is ramping with customer needs in mind.

Larry Culp: Looking at slide 13, durability and reliability are the top priorities to ensure consistent performance for our customers. Leveraging our experience over multiple product generations, we're maturing technologies to deliver meaningful durability gains. Take the GEnx for example. We launched the platform back in 2011 and released our durability package back in 2021. This resulted in a more than two and a half times increase in time on wing, supporting increased utilization. Today, the fleet leader in hot and harsh environments is approaching 4,000 cycles and still running. This means customers are keeping engines on wing about five years between shop visits and even longer in neutral environments. This has been a differentiator for us in the marketplace, underpinning our 90%+ win rate since 2023. Through our hot and harsh experience here, we've refined durability testing to replicate dust challenges, innovate effective fixes, and validate them.

Looking at slide 13.

Larry: Durability and reliability are the top priorities to ensure consistent performance for our customers.

Larry: Leveraging. Our experience over multiple product Generations. We're maturing Technologies to deliver meaningful durability gains.

Larry: Take the genx, for example.

We launched the platform back in 2011.

And released our durability package back in 2021.

Larry: This resulted in a more than 2 and a half times increase in time on wing.

Larry: Supporting increasing utilization.

Larry: Today, the fleet leader in hot and harsh environments is approaching 4,000 cycles and still running.

This means customers are keeping engines on Wing about 5 years between shop visits and even longer in neutral environments.

Larry: This has been a differentiator for us in the marketplace. Underpinning, our 90% plus win rate since 2023.

Through our hot and harsh experience here. We've refined our ability testing to replicate dust challenges.

Larry: Innovate effective fixes and validate them.

Larry Culp: We're the only engine manufacturer able to leverage this extensive wide body experience for narrow body engines, which has accelerated the LEAP learning curve. Getting to mature time on wing faster, the LEAP-1A durability kit released late last year that includes the upgraded HPT blade is now incorporated into all LEAP-1A deliveries and shop visits. This will improve time on wing by more than twofold, matching our industry-leading CFM56 performance.

Larry: And we're the only engine manufacturer able to Leverage. The extensive widebody experience for a narrow body and engines, which is accelerated, to lead. Learning curve getting to mature time on Wing faster.

the leap 1, a durability kit, released late last year that includes the upgraded hbt blade is now incorporated into all

Larry: Leap 1A, deliveries and Shop visits.

Larry: this will improve time on Wing, by more than

2-fold matching our industry-leading CFM, 56 performance.

Larry Culp: Next up, we're working with Boeing to certify the LEAP-1B durability kit in H1 2026, but we haven't stopped there. As we tested the upgraded HPT blade, our teams leveraging Flight Deck found further design improvements which are already certified and set to enter production in H2 2025, further enhancing HPT blade producibility.

Next up, we're working with Boeing to certify the leap 1B durability kit in the first half of 2026.

But we haven't stopped there.

As we tested the upgraded hbt blade, our teams leveraging Flight Deck found further design improvements which are already certified and set to enter production in the second half of 2025.

Further enhancing hbt blade producibility.

Larry Culp: These durability enhancements have supported a win rate of over 70% on the A320 family since 2023.

Larry: These durability enhancements have supported a win rate of over 70%, on the 8320 family since 2023.

Larry Culp: Turning to Slide 14, we're also using our experience to enhance new engine platforms before they enter service. Starting with the GE9X, the most tested engine in GE Aerospace history with more than 30,000 cycles, the equivalent of six years of commercial flying. Drawing on our Gen X and LEAP experience, this is the first time we've completed dust testing prior to launch, which has informed product enhancements such as the second iteration of the HPT blades. Importantly, we're ensuring that the GE9X is as close to maturity as it can be at launch.

Larry: Turning to slide 14.

Larry: We're also using our experience to enhance new engine platforms before they enter service.

Larry: Starting with the ge9x, the most tested engine in Geo space history, with more than 30,000 Cycles. The equivalent of 6 years of commercial flying

Larry: Drawing on our Genex and leap experience. This is the first time we've completed dust testing prior to Launch.

Which is informed product enhancements such as the second iteration of the hbt blades.

Larry: Importantly we're ensuring that the ge9x is as close to maturity as it can be at launch.

Larry Culp: We're also progressing the CFM RISE program, our most ambitious and transformative technological effort underway to date. We've completed over 350 program tests with an early focus on durability. This includes advancing new HPT blade cooling technology and testing full-size fan blades along with more than 3,000 endurance cycles. In early this year, at the Airbus Summit, we outlined our vision for the future of propulsion with Open Fan technology. Airbus and CFM teams continue to work together on engine and airframe integration as we look forward to engine ground-level and flight tests this decade.

We're also progressing the CFM Rise program, our most ambitious and transformative technological effort underway.

Larry: To date. We've completed over 350 program tests with an early focus on durability.

This includes advancing new hbt, blade cooling, technology and testing full-size fan blades.

Larry: Along with more than 3,000 endurance Cycles.

Larry: In earlier, this year, the Year above Summit. We outlined our vision for the future of propulsion. With open fan technology.

Larry: Airbus and CFM teams continue to work together on engine and airframe integration as we look forward to engine ground level and flight tests, this decade,

Larry Culp: Big picture, we're continuously applying learnings and improving durability to advance new programs, ensuring we deliver the best performing engines for our customers.

Big picture. We're continuously applying learnings and improving durability to advance new programs ensuring. We deliver the best performing engines for our customers.

Larry Culp: Spending another moment on CFM RISE, which will be a game changer for customers prioritizing safety, durability, and efficiency. Looking at the Open Fan architecture. First, on safety. Leveraging our experience with composite fan blades, the Open Fan will spin slower at 1/6 the speed of a traditional jet engine. This helps provide a safe flying experience even without a nacelle, and we also expect will result in a quieter engine than today's LEAP.

Spending another moment on CFM rise, which will be a game changer for customers prioritizing safety durability and efficiency.

Larry: Looking at the open fan architecture.

Larry: First on safety.

Leveraging. Our experience with composite fan blades. The open fan will spin slower.

Larry: At 160 the speed of a traditional jet engine.

This helps provide a safe flying experience, even without in the South and we also expect will result in a quieter engine.

Larry: Than today's leap.

Larry Culp: Turning to durability, RISE's Open Fan architecture gains efficiency through the fan system rather than the core. This reduces the need to push the core to higher temperatures as much as a ducted engine, a key driver of today's engine removals. Finally, efficiency. Our customers need at least a 20% reduction in fuel burn to support investments in next-generation technology. In our view, the Open Fan is the most promising path to accomplish this step. Change in efficiency.

Rice is open fan, architecture gains efficiency through the fan system rather than the core.

This reduces the need to push the core to higher temperatures as much as the ducted engine.

Larry: Key driver today's engine removals.

Larry: And finally efficiency.

Larry: Our customers need at least a 20% reduction in fuel burn to support investments in Next Generation technology.

Larry: In our view, the open fan is the most promising path to accomplish this step change inefficiency.

Larry Culp: When it comes to delivering greater durability and fuel burn, we won't compromise on either, as we recognize both are critical for our customers. With RISE, we believe we can accomplish the genius of the LEAP and meeting customer needs for durability and delivering fuel efficiency.

Larry: When it comes to delivering greater durability and fuel burn, we won't compromise on either.

As we recognize both are critical for our customers.

Larry: With rise, we believe we can accomplish that Genius of the and meeting customer needs for durability and delivering fuel efficiency.

Larry Culp: Turning to slide 16, we're pursuing similar generational advancements in military propulsion. In the US, we completed testing on the XA100 adaptive cycle engine, demonstrating significant gains in thrust and range. Building on that success, we're now progressing to the XA102, aligned with the US Air Force's Next Generation Adaptive Propulsion, or NGAP, program.

Turning to slide 16.

Larry: We're pursuing similar generational, advancements in military propulsion.

In the US, we completed testing on the xa100, Adaptive cycle engine, demonstrating significant gains in thrust and range.

Larry: Building on that success. We're now progressing to the XA 102.

Aligned with the US. Air Force's. Next Generation, adaptive propulsion or end gap program.

Larry Culp: Importantly, earlier this month Congress funded $750 million for the F/A-XX through the reconciliation bill in the coming years and the US Navy recognized its need for a sixth generation fighter is the only platform capable of delivering the combination of range, stealth, advanced sensors, and standoff capabilities necessary to operate across mission sets in highly contested environments. We stand ready to deliver and encourage the Pentagon to move forward with this important program that Congress has already funded.

Importantly earlier this month, Congress funded 750 million.

Larry: For the faxx through the reconciliation bill in the coming years.

And the US Navy recognized its need for a sixth. Generation fighter is the only platform capable of delivering the combination of range stealth and advanced.

Larry: And standoff capabilities necessary to operate a cross Mission sets and highly contested environments.

We Stand ready to deliver and encourage the Pentagon to move forward with this important program that Congress has already funded.

Larry Culp: Through Avio Aero. We represent Italy as an equal propulsion partner with the UK and Japan in the Global Combat Air Program, a next-gen indigenous European fighter. We're actively investing to support a targeted 2035 entry into service, and at the same time with Kratos, we're advancing propulsion technologies for affordable unmanned aerial systems by the end of the decade.

Through Avio Aero, we represent. Italy is an equal propulsion partner with the UK and Japan in the global combat are program, a next-gen indigenous, European fighter,

Larry: We're actively investing to support a targeted, 2035 entry into service.

Larry: And at the same time with Kratos, we're advancing propulsion Technologies for affordable, unmanned aerial systems by the end of the decade.

Larry Culp: And to accelerate development of advanced hypersonic propulsion systems. We recently announced significant investments in our test infrastructure at select manufacturing sites, enabling us to conduct higher Mach mission-relevant testing.

Larry: And to accelerate development of advanced Hypersonic propulsion systems. We recently announced significant investments in our test infrastructure at select manufacturing sites.

Larry: Enabling us to conduct higher Mission relevant testing.

Larry Culp: Inventing the future of flight has always motivated the GE Aerospace team. We're building upon our leadership positions across both defense and commercial.

Larry: Inventing, the future of flight has always motivated the jaro space team.

Larry: We're building Upon Our leadership positions across both defense and Commercial.

Larry Culp: Shifting to the outlook on slide 17, Rahul will cover the second quarter results momentarily, but so far in 2025, we're off to an excellent start, enabling us to raise both our near- and longer-term outlook.

Shifting to the outlook on, slide 17.

Larry: Rahul will cover the second quarter results momentarily, but so far in 25, we're off to an excellent start. Enabling us to raise both our near and longer-term Outlook.

Larry Culp: For 2028. We're raising our outlook for profit and free cash flow by $1.5 billion versus our prior view, driven by strong operating and commercial services performance.

Larry Culp: We expect to sustain strong adjusted revenue growth at a double-digit compounded rate, which will be supported by robust demand for services and equipment. We expect to drive meaningful operating leverage over that period with adjusted EPS reaching roughly $8.4. Operating profit is expected to reach approximately $11.5 billion with margins expanding to more than 21%, and we expect to generate substantial free cash flow of at least $8.5 billion with conversion around 100%.

For 2028, we're ready for profit and free cash flow by 1 and a half billion dollars versus our prior view, driven by strong operating and Commercial Services. Performance.

Larry: We expect to sustain strong, adjusted Revenue growth.

At a double digit compounded rate, which will be supported by robust demand for services and equipment.

We expect to drive meaningful operating leverage over that period, with adjusted EPS, reaching a roughly 8.40.

Larry: Operating profit is expected to reach approximately, 11 and a half billion dollars with margins expanding to more than 21%.

And we expect to generate substantial free, cash flow of at least 8.5 billion dollars with conversion around 100%.

Larry Culp: All in, this represents operating profit growth of more than $3 billion compared to our updated 2025 guide, driven by commercial services. We're well-positioned for continued value creation for years to come. Let me pass it over to Rahul.

Larry: All in this represents operating profit growth of more than 3 billion dollars.

Compared to our updated 25 guys. Driven by Commercial Services.

Larry: We're well positioned for continued value creation for years to come.

Rahul Ghai: Larry, thank you and good morning everyone. Starting with the results, we had a strong second quarter with improvement across all key metrics. Orders were up 27%. Revenue was over $10 billion, up 23%, with CES growing 30% and DPT up 7%. Profit was $2.3 billion, up over $400 million or 23%, driven by services volume and price which supported margins reaching 23%.

Rahul: Let me pass it here. Over to Rahul

Speaker Change: Larry, thank you and good morning everyone. Starting with the results we had a strong second quarter with Improvement across all key metrics.

Rahul: Orders were up to 27%.

Revenue was over 10 billion dollars up 23% with CES growing 30% and dpd up 7%.

Profit was 2.3 billion up over 400 million dollars for 23% driven by Services, volume and price, which supported margins reaching 23%.

Rahul Ghai: EPS of $1.66 was up 38% from profit growth, a favorable tax rate, lower interest expense, and a reduced share count. Free cash flow was $2.1 billion, nearly doubling over last year. Looking closer at our businesses, CES delivered an excellent quarter with demand remaining robust. Orders for services were up 28% and equipment was up 26%. Continued demand combined with material input improvement drove meaningful revenue growth. Service revenue was up 29% with spare parts revenue up more than 25% from higher volume and price. This included strong CFM56 shop visit growth and higher LEAP third party shop visits.

Rahul: EPS a $1.66 was up 38%.

From profit growth of favorable tax rate, lower interest expense, and a reduced share count.

Rahul: Cash flow was 2.1 billion, nearly doubling over last year.

Rahul: Looking closer at a business.

Rahul: CES delivered, an excellent quarter with demand remaining robust.

Rahul: Orders for services were up, 28% and equipment was up 26%.

Continued demand combined with material input Improvement, drove, meaningful, Revenue growth.

Service Revenue was up 29% with spare parts, Revenue up, more than 25% from a higher volume and price.

Rahul: This included strong cfm56 shop visit growth and higher leap third-party shop visits.

Rahul Ghai: Internal shop visit revenue grew more than 20% from higher output, increased work scopes, and price. This included LEAP internal shop visit volume growth of over 20%. Equipment revenue grew 35% with spare engine ratio down sequentially, and year over year. As expected.

Internal opposite Revenue grew more than 20% from higher output increased work Scopes and price.

Rahul: This included leap internal shop visit volume growth of over 20%.

Rahul Ghai: Profit was $2.2 billion, up 33% primarily from services volume. CES margins expanded 50 basis points to 27.9%, moving to DPT. Higher output supported a solid quarter. Orders were up 24% year over year with defense book-to-bill of 1.2x. Revenue grew 7% with defense and systems up 6%, and propulsion and additive technologies up 9%. Profit was roughly $360 million, up 5% on a tough compare. Volume, productivity, and price more than offset self-funded next-gen investments and inflation; margins declined 20 basis points to 14.1% at the mid-year mark. We've delivered high-teens revenue growth, $1 billion of operating profit growth, and nearly $800 million of higher free cash flow. Given the strength of our first half results and our expectations for remainder of the year, we are raising our 2025 guidance across the board.

Equipment Revenue, grew 35% with spare engine ratio down sequentially and year-over-year as expected.

Rahul: Profit was 2.2 billion dollars up 33% primarily from Services volume.

CES margins expanded. 50 basis points to 27.9%.

Rahul: Moving to DPT higher output, supported a solid quarter.

Orders were up 24% year-over-year with defense spoke to Bill of 1.2 WX.

Rahul: Revenue grew 7% with defense and systems up, 6% and propulsion and additive Technologies up 9%.

Rahul: Profit was roughly 36060 million up 5% on a tough compared.

Volume productivity and price more than offset, self-funded nextion, Investments and inflation.

Rahul: Margins declined. 20 basis points to 14.1%.

Rahul: At the mid year, mark.

Rahul: We've delivered High Teens Revenue growth.

1 billion dollars of operating profit growth.

And nearly 800 million dollars of Higher free, cash flow.

Rahul: Given the strength of our first half results.

Rahul: And our expectations for remainder of the year. We are raising our 2025 guidance across the board.

Rahul Ghai: We now expect total revenue growth of mid teens up from low double digits. With the absence of reciprocal tariffs in China thus far, we currently see reduced risk for spare engines and spare part deliveries, and material availability is improving, supporting higher spare parts growth. Therefore, we are increasing revenue growth expectations for commercial services to high teens and commercial equipment to high teens to 20%. This supports total CES revenue growth of high teens. Our DPT expectations are unchanged from mid to high single digit revenue growth.

Rahul: we now expect total revenue growth of mid, teens up from low double digits,

Rahul: With the absence of reciprocal tariffs. In China, thus far, we are currently see reduced risk for spare engines and spare part deliveries.

Rahul: And material availability is improving.

Supporting higher Square Parts growth.

Rahul: Therefore, we are increasing Revenue growth expectations for Commercial Services to High Teens.

Rahul: And commercial equipment to High Teens to 20%.

Rahul: This supports total CS Revenue growth of High, Teens.

Our dpd expectations are unchanged from mid to high single-digit Revenue growth.

Rahul Ghai: For total operating profit, we now expect to be in a range of $8.2 to 8.5 billion, up $350 million at the midpoint versus our April guide from improved services outlook, and we now expect adjusted EPS of $5.60 to $5.80, growing over 20% at the midpoint year over year, reflecting higher operating profit and a reduced tax rate.

Rahul: For total operating profit. We now expect to be in a range of 8.2 to 8.5 billion up 350 million at the midpoint versus our April guide.

Rahul: From improved Services Outlook. And we now expect a just to EPS of $5.60 to $5.80 growing over 20% at the midpoint year-over-year.

And a reduced tax rate.

Rahul Ghai: Additionally, as we shared in April, heightened tariffs are resulting in additional costs for us and our supply chain. We are continuing to make progress on our operational plans to reduce the impact. Assuming that reciprocal tariffs are implemented after the current pause, we still expect the net impact of tariffs to be roughly $500 million in 2025, which we are offsetting through cost controls and pricing actions.

Rahul: Additionally as we shared in April, heightened, tariffs are resulting in additional costs for us and our supply chain.

Rahul: We are continuing to make progress on our operational plans to reduce the impact.

Rahul: Assuming that reciprocal tariffs are implemented after the current pause, we still expect the net impact of tariffs to be roughly 500 million in 2025.

Rahul: Which we are offsetting through cost controls and pricing actions.

Rahul Ghai: We now expect free cash flow to be in a range of $6.5 to 6.9 billion, up from $6.3 to 6.8 billion, driven by our improved profit outlook. With this raise, we expect to grow operating profit by over $1 billion for second year in a row with free cash flow conversion remaining solidly above 100%.

Rahul: We now expect free cash flow to be in a range of 6.5 to 6.9 billion up from 6.3 to 6.8 billion.

Driven by our improved profit Outlook.

Rahul: With this raise we expect to grow operating profit by over 1 billion dollars for second year in a row with free cash flow. Conversion remaining sold about 100%

Rahul Ghai: Now as we look at the longer term outlook on slide 20, win rates continue to be strong, backlog is at record levels, we are making operational progress to improve durability and delivery, and defense spending remains resilient. With this backdrop, we are expecting that the improvement in 2025 guidance will carry through to our 2028 outlook. Starting with revenue, we now expect double-digit growth on an annualized basis between 2024 and 2028. The main drivers will be growth in commercial installed base largely from LEAP and GEnx, an increase in work scopes as our fleets mature, supporting 25% growth in widebody revenue per shop visit, favorable mix in defense with rising international defense shipments, and mid single-digit growth or low single-digit net price increases. Higher revenue will support double-digit profit growth with profit reaching approximately $11.5 billion in 2028.

now, as we look,

Rahul: At the longer term outlook on slide 20.

Rahul: Win rates. Continue to be strong.

Rahul: Backlog is at record levels.

Rahul: We are making operational progress to improve durability and delivery.

Rahul: and defense spending remains resilient

Rahul: with this backdrop, we are expecting that the Improvement in 25 guests will carry through to our 28 Outlook

Rahul: We now expect double-digit growth on an annualized basis between 24 and 28.

The main drivers will be growth in commercial, install base largely from leap and GE and X.

Rahul: An increase in work Scopes as a fleet mature supporting 25% growth in wide body Revenue per shop with it.

Rahul: Favorable, mix and defense with Rising International defense shipments.

Rahul: Mid single-digit growth or low single digit. Net pricing.

Rahul Ghai: This growth, plus benefits from share buyback and a lower tax rate, will drive mid-teens EPS growth, and we expect to convert 100% of net income to free cash flow, reaching roughly $8.5 billion of cash by 2028. Our updated outlook for profit and free cash flow both represent a raise of $1.5 billion versus our prior outlook.

Rahul: Higher Revenue, will support double-digit profit growth with profit, reaching approximately 11.5 billion in 28.

This growth Plus benefits from share buyback. And a lower tax rate will drive mid teens, EPS growth.

Rahul: And we expect to convert 100% of net income to free cash flow.

Rahul: Reaching roughly 8.5 billion dollars of cash by 28.

Rahul: Our updated outlook for from profit and free cash flow. Both represent arrays of 1.5 billion dollars versus our prior Outlook.

Rahul Ghai: On Slide 21. Looking closer at our profit growth drivers between 2025 and 2028, starting on the left at our new 2025 profit midpoint of $8.35 billion, the most significant driver of profit growth will be nearly $8 billion of commercial services revenue growth between 2025 and 2028. This will be partially offset by a mid-teens increase in equipment revenue, including higher LEAP and GE9X shipments and the normalization of spare engine ratio. We expect incremental GE9X losses of a few hundred million dollars in 2028 versus 2025. Given higher volume, DPT revenue growth of mid-single digits at improving margins will also contribute to profit growth.

On slide 21.

Rahul: Looking closer at a profit growth drivers between 25 and 28.

Starting on the left at a new 25, proffitt midpoint of 8.35 billion.

The most significant driver of profit growth will be nearly 8 billion dollars of Commercial Services, Revenue growth between 25 and 28.

Rahul: This will be partially offset by a mid teens increase in equipment Revenue, including higher leap, and GE 9x shipments.

Rahul: And the normalization of square engine ratio.

Rahul: We expect incremental GE 9x, losses of a few hundred million dollars in 28 versus 25 given higher volume.

DPT Revenue growth of mid single digits at improving margins. Will also contribute to profit growth.

Rahul Ghai: Given ongoing supply chain constraints, we expect material inflation to stay elevated, but pricing actions should more than offset that impact, and we are leveraging Flight Deck to drive two points of productivity annually as we reduce waste by lowering the non-productive and overtime in our shops, and increase output per employee. At the same time, we're stepping up R&D investments to improve LEAP durability, support the GE9X ramp, and advanced technologies supporting the future of flight. Overall, these actions will add more than $3 billion of profit between 2025 and 2028. Despite the introduction of a new widebody platform and significant new product ramps, double-digit annualized growth in services will support margin expansion.

Rahul: Given ongoing supply chain constraints. We expect material inflation to stay elevated, but pricing actions should more than offset that impact

And we're leveraging Flight Deck to drive 2 points of productivity annually.

As we reduce waste by lowering the non-productive and overtime in our shops and increase output for employee.

Rahul: At the same time, we are stepping up R&D Investments.

To improve lip durability support. The ge9x ramp and Advanced Technologies supporting the future of flight.

Rahul: Overall, these actions will add more than 3 billion dollars of profit between 25 and 28.

Rahul: And despite the introduction of a new wide body platform and significant new product, ramps, double-digit, annualized, growth in services, will support margin expansion.

Rahul Ghai: Let's unpack commercial services revenue in slide 22. As you can see, both narrowbody and widebody are well positioned to deliver sustainable growth. Today, CFM engines power approximately 75% of industry's narrowbody flights. This share continues to increase as the LEAP fleet is expected to grow roughly 3x by 2030. Narrowbody revenue is exceeding our prior expectations, driven by LEAP growth and the extended longevity of the CFM56 fleet. As a result, we now expect narrowbody revenue to grow at a low double-digit CAGR, and 2028 revenue to be approximately 15% higher than our expectations last March.

So let's unpack Commercial Services revenue in 2012 and slight 22.

Rahul: As you can see, both narrow body and wide body are well positioned to deliver sustainable growth.

Rahul: Today CFM, engines power, approximately 75% of Industries narrow body flights.

Rahul: This share continues to increase as a leap lead is expected to grow roughly 3x by 2030.

Narrow body revenue is exceeding. Our prior expectations, driven by leap growth and the extended longevity of cfm56 Fleet,

Rahul: As a result. We now expect

Rahul: narrow body Revenue to grow at a low double-digit kegger and 28 Revenue to be approximately 15% higher than our expectations last March.

Rahul Ghai: Our widebody business remains a significant differentiator. We currently power more than half of industry's departures. We expect to maintain this position with GE9X, doubling its installed base by the end of the decade and continued utilization of GE90 fleet and the introduction of GE9X. We anticipate widebody services revenue will grow at high single digit CAGR through 2030, including GE9X at a low double digit CAGR. Taken together, the strength of our foundational fleets, combined with our installed base growth, supports the annualized double digit services revenue growth.

Rahul: our widebody business remains a significant differentiator,

We currently power more than half of industry's departures.

We expect to maintain this position with ge9x, I apologize. G. NX doubling its install base by the end of the decade.

Rahul: And continued utilization of ge90 Fleet.

Rahul: And the introduction of GE 9x.

Rahul: We anticipate wide body Services, Revenue will grow at high single digit cable through 2030 including GNX at a low double digit CER.

taken together with our foundational fleets combined, with our installed base growth supports the analyze double-digit Services Revenue growth

Rahul Ghai: Moving to slide 23 on Commercial Services revenue growth and how that will translate into significant profit improvement. Narrowbody profit is expected to rise over 70% primarily from LEAP, with CFM56 continuing to contribute meaningfully, and by the end of the decade we expect LEAP and CFM56 profit to reach parity, reflecting the maturity and the scale of the LEAP program. Widebody profit is expected to grow more than 40%, supported by installed base growth and higher work scope shop visits for both GE90 and GEnx. We also expect contributions from productivity, pricing, and favorable mix as external shop visits increase. Even with LEAP shop visit volume growing at a 25% CAGR through 2030, we expect CES margins to stay at current levels as you're offsetting the impact of LEAP with better performance on other platforms.

Rahul: Moving to slide 23.

Rahul: On Commercial Services Revenue growth and how that will translate into significant profit Improvement.

Rahul: Narrow body, profit is expected to rise over 70% primarily from leap with cfm56 continuing to contribute meaningfully.

ECT leap and CFM 56 profit to reach, parity reflecting the maturity and the scale of the LEAP program.

Widebody profit is expected to grow more than 40%.

Supported by installed base growth and higher work scope sharp visits for both ge90 and GE NX.

Rahul: We also expect contributions from productivity pricing and favorable mix as external shop visits increase.

Rahul Ghai: Altogether, we expect services profit to grow over 50% between 2024 and 2028, with contributions from both foundational and current generation programs.

Rahul: And even with leap shop, visit volume growing at a 25% cager through 2030. We expect CES margins to stay at current levels as your offsetting the impact of leap with better performance on other platforms.

Altogether. We expect Services profit to grow over 50% between 24 and 28.

With contributions from both foundational and current generation programs.

Rahul Ghai: Going deeper into the outlook for our foundational fleets on slide 24. Currently, approximately 40% of the CFM56 fleet has yet to undergo a first shop visit, and a majority of the operators anticipate keeping these engines in service well into the 2000s. This sustained demand is resulting in fewer retirements. We expect retirements of around 1.5% in 2025, rising to 2% to 3% in 2026 before normalizing at 3% to 4%.

Rahul: Going deeper into the outlook for our foundational fleets on slide 24.

Rahul: Currently approximately 40% of CFM 56. Fleet has yet to undergo a first sharp visit.

Rahul: And a majority of the operators anticipate, keeping these engines in service well into 2030s.

This sustained demand is resulting in fewer retirements. We expect retirements of around 1 and a half percent in 2025 rising to 2 to 36 before. Normalizing at 3 to 4%.

Rahul Ghai: Increased shop visit activity, which we expect to peak in 2027 with approximately 600 additional shop visits through 2028 compared to our outlook last March.

Increased sharp visit activity, which we expect to Peak in 27 with approximately 600 additional sharp visits through 28 compared to our Outlook last March.

Rahul Ghai: We expect a gradual decline in volume post 2027 to roughly 2,000 shop visits by the end of the decade. With this shop visit outlook, we expect CFM56 revenue peaks in 2018, underpinned by increased work scopes and pricing. We are seeing similar dynamics with GE90. Continued strong demand for freighter aircraft, coupled with a more gradual widebody production ramp, is extending the services demand across this fleet. We now expect internal shop visits for GE90 to grow through 2028, representing approximately 100 incremental visits compared to our outlook last March. As a reminder, widebody shop visits can be more than 2x the revenue of a narrowbody shop visit, so this is a significant contributor to higher revenue. In addition, the scope for widebody shop visits typically increases by about 50% during the second shop visits.

Rahul: And we expect a gradual decline in volume post 27 to roughly 2,000 shares by the end of the decade.

Rahul: With this sharp visit Outlook, we expect CSM 56, Revenue peaks in 28, underpinned by increased work Scopes and pricing.

Rahul: We are seeing similar Dynamics with ge90.

Rahul: Continued strong demand for freighter. Aircraft coupled with a more gradual wide body production. Ramp is extending the services demand across this Fleet.

We now expect internal shock for this for g90 to grow through 28.

Rahul: Representing approximately 100 incremental visits compared to our Outlook last March?

Rahul: And as a reminder wide body shop, visits can be more than 2x the revenue of a narrow body shop visit. So this is a significant contributor to higher Revenue.

Rahul Ghai: With approximately 70% of the GE90 fleet yet to undergo a second shop visit, this dynamic is contributing to higher growth. Better performance from both CFM56 and GE90 is a key driver of our improved outlook compared to last March.

Rahul: In addition, the school for wide body shop visits typically increases by about 50% during the second sharp visits.

With approximately 70% of ge90 Fleet yet to undergo a second sharp visit. This Dynamic is contributing to higher growth.

Rahul: Better performance from both cfm56 and ge90 is a key driver of our improved Outlook compared to last March.

Rahul Ghai: Another significant contributor to our profit outlook is the growing LEAP aftermarket on slide 25.

Rahul: Another significant contributor to our profit Outlook is a growing leap after market on slide 25.

Rahul Ghai: Overall, the LEAP install base will approximately triple by the end of the decade, with internal shop visits growing roughly at the same pace. Beyond revenue, we are focused on improving the profitability of services as the program matures. Touching on a couple of ways we are improving performance. First, we expect external shop budgets to grow from 10% of the total in 2024 to 15% in 2025 to 30% by the end of the decade. This increased volume drives spare part sales and offers a mix benefit. Second, we expect to continue benefiting from catalog price increases. More importantly, we've significantly improved pricing in new service contracts as we move past launch. While these increases take time to materialize in the financials, higher shop visit pricing, combined with improved time on wing, will support improved services profitability.

Overall, the leap installed base will approximately triple by the end of the decade with internal shock resistance growing roughly at the same pace.

Beyond Revenue, we are focused on improving the profitability of services as the program. Matures.

Rahul: Touching on a couple of ways we are improving performance. First, we expect external shop visits to grow from 10% of the total in 24, to 15% in 25 to 30% by the end of the decade.

Rahul: This increased volume drives spare parts sales and offers a mixed benefit.

Second, we expect to continue benefiting from catalog, price increases.

More importantly, we have significantly improved pricing in new service contracts as we move past launch.

While these increases take time to materialize in the financials higher Shoppers at pricing combined, with improved time on Wing will support improved services profitability.

Rahul Ghai: We continue to expect approximately 70% of LEAP shop visits to be performed by CFM, split equally between our JV partner Safran and us. To further reduce shop visit cost, we are investing in repair technology, which typically costs roughly 50% less than new parts. This offers customers significant economic benefit, while also reducing turnaround time as we do not have to wait for new material. Year to date, we have developed over 200 new repairs for LEAP and 1,000 repairs across the commercial engines business. Our goal is to more than double the number of LEAP-specific repairs by 2028. For context, we've developed nearly 3,000 repairs over the lifetime of the GE90 program, and we are targeting a similar number for LEAP at maturity.

We continue to expect approximately 70% of leap shop visits to be performed by CFM, split equally between our JV, partner, saffron and us.

To further reduce shop visit cost, we are investing in repair technology, which typically costs roughly 50%, less than new parts.

This offers customer significance and economic benefit while also reducing turnaround time. As we do not have to wait for new materials.

Year to date, we have developed over 200, new repairs for leap and a thousand repairs across the commercial engines business.

Rahul: The number of leap specific Repairs by 28.

Rahul: For context, we've developed, merely 3,000 repairs over the lifetime of the ge90 program.

Rahul Ghai: These actions give us confidence that we can navigate the impact from CFM56 retirement and that LEAP will not only equal CFM56 profit by the end of the decade, but the profitability levels will continue to improve beyond that. Now let's turn to how we plan to continue converting this profit growth into cash. We added approximately $3 billion of inventory between 2023 and 2024, and as a result, our inventory turns declined by about half a point. The majority of this increase is due to trapped inventory material we purchased but can't yet use because we don't have all the parts needed to complete a shop visit or deliver an engine. As material availability and stability improve, we expect inventory turns to begin recovering. We see a clear opportunity to improve at least one full turn from 2024 to 2028.

Rahul: And we are targeting a similar number for leap at maturity.

Rahul: These actions give us confidence that we can navigate the impact from CFM 56, retirement.

Rahul: And that leap will not only equal cfm56 profit by the end of the decade, but the profitability levels will continue to improve beyond that.

Rahul: Now, let's turn to how we plan to continue converting. This profit growth Into Cash.

We added approximately 3 billion dollars of inventory, between 23 and 24.

And a result, our inventory turns declined by about half a point.

Rahul: the majority of this increase is due to trapped inventory, material, we purchased, but can't yet use because we don't have all the parts needed to complete a shop visit or deliver an engine

Rahul: As material availability and suitability improve, we expect inventory, turns to begin recovering.

Rahul Ghai: We'll get there by reducing work in progress and raw material inventory, driven by better flow and continued implementation of a pool-based system with our suppliers. If you look to the right-hand side of the page, you will see a growing installed base and increasing flight departures are fueling strong growth in billings. Take LEAP, for example. Billings are expected to grow 2.5x between 2024 and 2028. For GEnx, we expect 1.5x increase over the same period. Given shop visit growth, the cash flow from contract assets will not contribute at the same levels as the last couple of years, but billings growth on these contracts continues to support cash flow growth. This gives us a clear roadmap to sustain cash conversion at or above 100% through 2028. To summarize, GE Aerospace is a business with solid operational and financial fundamentals.

Rahul: We see a clear opportunity to improve at least 1 full, turn from 24 to 28.

We'll get there by reducing work in progress, and raw material inventory.

Rahul: Driven by better flow and continued implementation of a pool based system with our suppliers.

Rahul: If you look to the right hand side of the page, you will see the growing install base. And increasing flight departures are fueling strong growth in Billings.

Rahul: State leap, for example.

Rahul: Billings are expected to grow, 2.5x between 24 and 28.

Rahul: For GNX, we expect 1.5x increase over the same period.

Rahul: Given shop, visit growth, the cash flow from contract assets, will not contribute at the same levels as the last couple of years, but Billings growth on these contracts continues to support cash flow growth.

Rahul: This gives us a clear road map to sustain cash conversion at or above 100% through 28.

Rahul Ghai: Revenue growth will be driven by positive secular trends, our growing installed base, and our best in class products, technology, and people. Profit growth will be driven by volume, productivity, and price, offsetting the typical headwinds associated with new product introductions. Given this strong profit and cash performance, we have ample opportunity to compound shareholder returns. I'll now pass it back to Larry to cover capital allocation and share some closing remarks.

To summarize. G Aerospace is a business with solid operational and financial fundamentals.

Revenue growth will be driven by positive, secular Trends our growing install base and our best-in-class products technology and people

Rahul: Profit growth will be driven by volume productivity and price.

Rahul: offsetting the typical headwinds associated with new product, introductions

Rahul: Given this strong profit and cash performance. We have ample opportunity to compound shareholder returns,

Larry Culp: Larry, Rahul, thank you pulling this all together on slide 27 as Rahul just walked you through. Our operating performance and robust commercial services outlook underpins our increased guidance of sustainable revenue, earnings, and cash flow growth. 2024 was a strong year with approximately $1 billion more in operating profit than we had originally expected at the start of the year. In 2025, we're again performing ahead of our expectations and raising guidance across all key metrics. Compared to our 2024 Investor Day outlook, this represents an increase of more than $1 billion in operating profit. Importantly, we expect this momentum extends into 2028, with operating profit growing more than $3 billion and free cash flow growing over $1.5 billion versus 2025. We're also leveraging our strong balance sheet and free cash flow generation to support mid-teens EPS growth.

I'll now pass it back to Larry to cover Capital, allocation and share some closing remarks Larry

Rowe. Thank you, pulling this all together on slide 27 is Rahul just walk. You through our operating performance in robust Commercial Services. Outlook underpins our increased guidance of sustainable Revenue earnings and cash flow growth.

2024 was a strong year with approximately a billion dollars more in operating profit than we had originally expected at the start of the year.

Rahul: In 2025, we're again performing ahead of our expectations and raising guidance across all key metrics.

Rahul: Compared to our 2024 investor day outlook, this represents an increase of more than a billion dollars in operating profit.

Rahul: Importantly, we expect this momentum extends into 2028 with operating profit growing more than 3 billion dollars and free cash flow.

Growing over.

A billion and a half dollars versus 25.

We're also leveraging, our strong balance sheet and free cash flow generation to support mid-teen DPS growth.

Larry Culp: With respect to capital allocation, our principles remain the same. First, we will invest in the business to support growth in current and future programs. Next, we have a bias toward returning cash to shareholders, and expect we'll return more than 100% of free cash flow to shareholders through 2026. Last year we shared plans to return roughly $19 billion of cash to shareholders between 2024 and 2026. Between dividends and buybacks, now subject to board approval, we're increasing that to $24 billion, including about $19 billion of buybacks, and roughly $5 billion of dividends. At roughly 30% of net income, this is 20% higher than what we discussed a year ago. Beyond 2026, we expect to return at least 70% of free cash flow annually through a combination of dividends and buybacks.

Rahul: With respect to Capital allocation, our principles remain the same.

Rahul: First.

We will invest in the business to support growth and current and future programs.

Rahul: Next, we have a bias toward returning cash to shareholders.

And expect will return more than 100% of free cash flow to shareholders through 2026.

Rahul: Last year, we shared plans to return roughly, 19 billion dollars of cash to shareholders between 24 and 26, between dividends and BuyBacks.

Now subject to board approval, we're increasing that to 24 billion dollars, including about 19 billion dollars of BuyBacks and roughly 5 billion dollars of dividends.

Rahul: At roughly 30% of net income.

This is 20% higher than what we discussed a year ago.

Larry Culp: Finally, we're open to opportunistic bolt-on M&A with a high threshold for strategic, operational, and financial fit.

Rahul: Beyond 2026. We expect to return at least, 70% of free, cash flow annually, through a combination of dividends and BuyBacks.

Finally, we're open to opportunistic. Bolt-on m&a with a high threshold for strategic operational and financial fit.

Larry Culp: We believe this balanced and disciplined approach best supports our goal of compounding long-term shareholder returns.

Rahul: Believe this balanced and disciplined approach.

that supports our goal of compounding long-term shareholder returns

Larry Culp: To close on slide 29, our strong operational and financial foundation supports our increased outlook, and our sustained competitive advantages will propel us to new heights. We have a diversified fleet of preferred platforms across the narrowbody, widebody, and defense sectors. What we do and how we do it matter. Front and center are safety, quality, delivery, and cost, always in that order. Our services and technology offer industry-leading operational reliability, including greater efficiency, extended time on wing, and faster turnaround times.

Rahul: and to close on slide 29.

Rahul: Our strong operational and financial Foundation supports our increased Outlook, and our sustained, competitive advantages will Propel us to new heights.

Rahul: We have a diversified Fleet of.

Rahul: Preferred platforms across the narrow body, wide body, and defense sectors.

Rahul: What we do and how we do it matter.

Rahul: Front and center are safety quality delivery and costs always in that order.

Rahul: Our services and Technology offer. Industry-leading operational, reliability.

Rahul: Including greater efficiency extended time on wing. And

Rahul: Faster, turnaround times.

Larry Culp: We serve the industry's largest fleet of 78,000 engines with unrivaled customer service and flight support. This keeps us close to our customers through decade-long life cycles, building meaningful relationships, and making us the partner of choice.

We serve the industry's largest Fleet.

Rahul: Of 78,000 engines with unrivaled, customer service, and Flight Support.

Rahul: This keeps Us close to our customers through decade long, life cycles, building, meaningful relationships, and making us the partner of choice.

Larry Culp: Our talented engineering teams continue to develop breakthrough innovation to support our existing fleet, and advanced next generation technology.

Rahul: Our talented engineering teams, continue to develop breakthrough Innovation to support our existing Fleet and advanced Next Generation technology.

Larry Culp: Flight Deck supports us in delivering results and lasting value for our customers and shareholders.

And finally flight deck supports Us in delivering results and Lasting value. For our customers and shareholders.

Larry Culp: We're still far from reaching our full potential, yet we couldn't be more optimistic about our path ahead. We appreciate you joining us for this extended call on both the quarter and our revised outlook. With that, I'll throw it back to Blair for questions.

Rahul: So we're still far from reaching our full potential.

Yet, we couldn't be more optimistic about our path ahead.

We appreciate you joining us for this extended, call on, both the quarter and our revised Outlook.

So with that, I'll throw it back to Blair for questions.

Blair Schorr: Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask one question, so that we can get to as many people as possible. Liz, can you please open the line?

Blaire Shoor: Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask one question, so that we can get to as many people as possible. Liz, can you please open the line?

Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask 1 question that we can get to as many people as possible. Liz, can you please open the line?

Operator: Ladies and gentlemen, if you wish to ask a question, please press star 11 on your telephone. If you wish to withdraw your question or your question has already been answered, please press star 11 again.

Rahul: ladies and gentlemen, if you wish to ask a question, please press star, 1 1 1 on your telephone,

Rahul: if you wish to withdraw your question or your question has already, been answered. Please. Press star, 1, 1 1, again.

Operator: Our first question comes from Scott Deuschle with Deutsche Bank.

Speaker Change: Our first question comes from Scott deslie with Deutsche Bank.

Larry Culp: Hey, good morning. Good morning, Scott. Rahul. The high end of the 2025 guide implies second half EBIT nearly $500 million lower than the first half. Over the last few years, the second half EBIT has actually been trending around $400 million higher than the first half. Your guide essentially has nearly a $1 billion spread versus the seasonality you've demonstrated over the last few years. I understand there's this GE9X headwind this year, but it is a very stark difference versus typical earnings cadence. Just wondering if you can reconcile that second half EBIT decline for us.

Scott Deuschle: Hey, good morning.

Rahul Ghai: Good morning, Scott.

Hey, good morning.

Scott Deuschle: Rahul. The high end of the 2025 guide implies second half EBIT nearly $500 million lower than the first half. Over the last few years, the second half EBIT has actually been trending around $400 million higher than the first half. Your guide essentially has nearly a $1 billion spread versus the seasonality you've demonstrated over the last few years. I understand there's this GE9X headwind this year, but it is a very stark difference versus typical earnings cadence. Just wondering if you can reconcile that second half EBIT decline for us.

Good morning, Scott.

Speaker Change: Rahul the the high end of the 2025 God implies second half Eve at nearly million dollars lower than the first half.

Speaker Change: But over the last few years, the second half even has actually been turning around 400 million higher than the first half. So your guide essentially has nearly a billion dollars spread versus

The seasonality, you've demonstrated over the last few years. I understand there's this g9x headwind this year, but it is a a very Stark difference versus typical earnings Cadence. So

Rahul Ghai: Yeah, Scott, let me try. Larry, please jump in here. Scott, first, we're having a good year, right? Raised our revenue growth expectations from low double digit to mid teens, so about $900 million of increase in revenue at the midpoint with about $350 million of profit increase at the midpoint versus April. We had a better second quarter than we expected. If you look at a $350 million split, $350 million profit increase, it is split between what our overperformance in the second quarter and raising our expectations for the second half of the year. The first half, second half thing, we've been, you know, we expected a strong start for the year this year, and we've been striving to have a more linear year than we did in 2024.

Just wondering if you can reconcile that second half even decline for us. Thank you.

Rahul Ghai: Given the OE ramp in the second half of the year, including 9X shipments, we expected a couple of million dollars of headwind versus the prior year and also expected a lower spare engine ratio in the second half. The corporate expenses also typically step up in the second half of the year. You can see that in the corporate expenses in the first half versus what we are projecting for the full year. There is an R&D step up between the first half and second half as well. These expectations around all these factors have not changed from where we were back in April. We are maintaining some conservatism around departures that Larry mentioned in his prepared remarks, which impacts our expectations for spare part sales in the second half.

Yeah, Scott, let me, let me try and Larry, please jump in here. Um, so Scott first, we are having a good year, right? Um, raise the revenue growth expectations, uh, from low double digit to meetings. So about 900 million dollars of increase, uh, in Revenue at the midpoint with about 350 million dollars of profit increase, uh, at the midpoint versus April. So we had a better second quarter than we expected, but if you look at the 350 million dollars, split, uh, 350 million dollar profit increase, it is split between what our over performance in the second quarter and raising our expectations for the second half of the year. Um, so the first half second half thing, we've been, you know, we we expected a strong start to the year this year and we've been striving to have a more linear year than we did in 24. Just given the OE ramp in second half of the year including 9x shipments, uh, that we expected a couple of million dollars of headwind versus. Yeah, you know, the prior year and also expected a low

Speaker Change: Spare engine ratio in the second half.

Speaker Change: And then the corporate expenses also typically step up in the second half of the year and you can see that in the corporate expenses in the first half versus what we are projecting for the full year. And then there's an R&D Step Up, um, between the first half and second half, um, as well.

Rahul Ghai: Even with that, we're kind of expecting a mid-teen services revenue growth in the second half. If you look at all of that, we should still see strong year-over-year profit growth in the second half at the midpoint of the guide. Overall, we feel better about the year than we did back in April. If you step back, it should be another year of more than $1 billion of profit growth and $1.025 billion at the high end.

And these expectations around. All these factors have not changed from where we were back in back in April. Um, but also, we are maintaining some conservatism Nest around departures that Larry mentioned in his prepared remarks, which impacts our expectations for spare parts sales in the second half. Um,

Larry Culp: Thank.

Scott Deuschle: Thank.

Thank you.

Larry Culp: You.

Scott Deuschle: You.

Operator: The next question comes from Miles Walton with Wolfe Research.

The next question comes from Mi Walton with Wolfe research.

Larry Culp: Thanks. Good morning. Good presentation. I wanted to touch on two assumptions if I could. One is the pricing assumption through 2028, 2024 to 2028, and the low single digit assumption there. What would that imply for the go forward period 2026 through 2028? It would seem like it would imply no pricing. On the retirement step up to 3% to 4%, can you just give us some baseline as to for the last decade, CFM56 has been running about 1.5%? Is there a prior period where you'd put this as similar, where you'd have that quick of a step up in retirement rates?

Myles Walton: Thanks. Good morning. Good presentation. I wanted to touch on two assumptions if I could. One is the pricing assumption through 2028, 2024 to 2028, and the low single digit assumption there. What would that imply for the go forward period 2026 through 2028? It would seem like it would imply no pricing. On the retirement step up to 3% to 4%, can you just give us some baseline as to for the last decade, CFM56 has been running about 1.5%? Is there a prior period where you'd put this as similar, where you'd have that quick of a step up in retirement rates?

Mi Walton: Thanks, good morning. Um, good presentation, I wanted to touch touch on 2 assumptions that I could 1 is the the pricing assumption through 2028 2024 to 2028 and, um, the low single digit assumption there. What? What would that imply for the go period? Go forward period 26 through 28. It would it would seem like it would imply no pricing. And then on the retirement step up to 3 to 4% um can you just give us some baseline as to you know for the last decade to see if m56 has been running a Route 1 and a half percent

Is there a prior period? Where you'd put this as similar where you'd have that quick? Go a step up in retirement rates?

Larry Culp: Miles, maybe I'll speak to Price and Rahul can take retirements. I think if you just step back for a moment, I think you know, well, our pricing philosophy, we make significant investments in next generation platforms, obviously provide a lot of value to our customers while taking on considerable risk. We really try to price more broadly with appropriate returns around those commitments in mind. I think the way we looked at Price here is really.

Miles. Maybe I'll speak to price and uh, Rahul can take retirements. Yeah, I think if you just step back for a moment, I think you, you know, well our our pricing philosophy, we uh, we make significant investments in in Next Generation platforms.

Obviously uh, provide a lot of value to our customers while taking on considerable risk. So we we really try to price.

Mi Walton: More more broadly with appropriate returns. Uh, around those uh those commitments in in mind, I think the way we've looked at Price here is really

Larry Culp: To have price more than offset inflation in 2025 between what we're doing in CES services, you know, call it up at a mid single digit level on a net basis. That includes spare parts, right, where in some instances we might do a little bit better than that. It's really dependent on which program we're talking about. I think as we look forward.

Larry Culp: We're probably looking at something on a mid single digit basis at a gross level, low single digit on a net basis, at least with respect to spare parts. Also, keep in mind that as we move past launch, I think Rahul touched on this in his prepared remarks. We anticipate to see better pricing dynamics, and fundamentally it's all about moving beyond launch. Right. LEAP is well into the life cycle now, but it does take time to see that fall through. Typically, call it eight years thereabouts post an agreement to really see that in the P&L. A lot of volume here, work scope expansion in a number of areas, a little bit of price, that's how you get to that double digit top line number that we're looking at between now and 2028. Rahul, did you want to talk to retirements?

Mi Walton: To have price more than offset inflation in 25 between what we're doing and, and CES Services, you know, call it, um, up at a mid single digit level on a, on a net basis, uh, that includes spare parts, right? We're in sentences that we might, uh, do a little bit better than that. It's really dependent on on, on which program we're talking about. But I think as we look forward,

We looking at something on a mid single digit basis, at a gross level, low single digit, uh, on a, on a net basis at least with respect to, uh, to to spare parts. Uh, but also keep in mind that is is we move past launch. I think ruffle touched on this, in his, uh, prepared remarks, we anticipate to see better, uh, better pricing Dynamics and fundamentally, it's all about moving beyond launch, right? Leave, uh, is is well, into the life cycle now, uh, but it does take time to, uh, to see that fall through typically.

Mi Walton: Call it 8 years thereabouts, uh, post an agreement to really see that in the p&l. Uh, so a lot of volume here Works scope expansion in a, in a number of areas, a little bit of price. That's how you get to that that double digit Topline number that we're looking at between, uh, between now and 28.

Rahul Ghai: Yeah, I can talk retirements. Miles, you're right. I mean, the last couple of years have been really low. I mean, even this year, through the first six months of the year, retirements for CFM56 have been running below where we were in 2024. If I remember correctly, 2024 was below 2023. The retirements have been trending extremely low. As you would expect, as the fleet ages, this should pick up, right? That's been our expectation. Now, we've been proven wrong on that one before. Ultimately, what it comes down to is what do you expect in new aircraft deliveries and where you expect departure growth to be. What's built into our assumptions is that both Airbus and Boeing kind of reach their stated goals over the next three to four years.

Rahul Ghai: If you add up what Airbus aims to deliver and you add up what Boeing aims to deliver, that leads to about a 6% to 7% increase in, you know, installed base growth right over where, you know, 19,000 to 20,000 narrow body aircraft that are flying today. You say, okay, the departures, we expect the departures to be up, call it 3% or so, you know, low single digits, and you can say 3% to 4%. That gets us to our ratio of 3% to 4% somewhere in that zone.

Mi Walton: Yeah, did you want to talk to retirement? Yeah, I can talk retirement. So, so mi, you're right. I mean, the, the last couple of years have been really low, I mean, even this year, uh, through the first 6 months, uh, of the year, retirements for cfm56 have been running below where we were in 24, and if I remember correctly, 24 was below 23. So the retirements have been trending, um, extremely low. Uh, but as you would expect that a as the fleet ages, this, this should pick up, right? And that's been our expectation. Now, we've been, um, you know, proven wrong on that 1 before, but if you ultimately, what it comes down to is what do you expect in new aircraft deliveries and where you expect departure growth to be? Um, so, what's built into our assumptions? Is that both Airbus and Boeing kind of reach their stated goals, uh, over the next couple of years, you know, 3 to 4 years and as those. And if you, you know, add up, what? What? Airbus aims to deliver and you add up, what Boeing it's, you know, aims to deliver that leads.

Rahul Ghai: Now, we don't have a precise insight into that number, but I think we decided, Miles, so that everybody understands our fundamental assumptions going into what we are projecting for CFM56 shop visits, because that's the fundamental driver of where the shop visits are going to be and the number that we'll see. So that's our.

Mi Walton: To about a 6 to 7% increase in um you know, installed base growth, right? Um, over where, you know, 19 to 20,000 narrow body aircraft that are flying today and then you say, okay the departures, we expect the departures to be up, call it 3% or so, you know, low single digits and you can say 3 to 4 percent so that gets us to our ratio of 3 to 4% somewhere in that zone. Now we don't have a precise uh, insight into that number but I think we we decided

Mi Walton: Miles that everybody understands our fundamental assumptions going into what we are projecting for cfm56 shop visits because that's the fundamental driver of where uh the shop is is going to be. And and and the number that we'll see

Larry Culp: Okay, thank you. Thank you, Miles.

Myles Walton: Okay, thank you.

So, that's awesome.

Larry Culp: Thank you, Miles.

Mi Walton: Okay, thank you.

Thank you miles.

Operator: The next question comes from Sheila Kahyaoglu with Jefferies.

Mi Walton: The next question comes from Sheila Caillou with Jeffries.

Blair Schorr: Good morning, guys.

Sheila Kahyaoglu: Good morning, guys.

Operator: Thank you.

Sheila Kahyaoglu: Thank you.

Blair Schorr: Maybe if we could talk about.

Sheila Kahyaoglu: Maybe if we could talk about.

Blair Schorr: LEAP aftermarket profitability. It's been a major contributor to CES performance year to date. Can you talk about, you talked about profits equal in the 2030 timeframe, which based on the revenue buckets you give, would mean margins pretty close to CFM56 levels. If you could talk a bit about the margin profile across CSAs and external for LEAP and how that progresses today to 2028 to 2030.

Sheila Kahyaoglu: LEAP aftermarket profitability. It's been a major contributor to CES performance year to date. Can you talk about, you talked about profits equal in the 2030 timeframe, which based on the revenue buckets you give, would mean margins pretty close to CFM56 levels. If you could talk a bit about the margin profile across CSAs and external for LEAP and how that progresses today to 2028 to 2030.

Sheila Caillou: Good morning guys. Um thank you maybe if you could talk about

Larry Culp: Yeah, sure.

Next Level. So if you could talk a bit about the margin profile across the essays and external for leap and how that progresses today to 28 to 2030,

Rahul Ghai: Yeah, sure.

Sheila Caillou: Yeah.

Rahul Ghai: We, you know, overall we're very pleased with how LEAP is progressing. Right. If you, you know, we're kind of hitting our key milestones here for LEAP both on financial performance and operational performance, and the share has been higher than what we expected. Financially, we've always targeted the program to break even this year, and that's on track. We expected OE to break even next year. That's on track. Obviously, the installed base, as we said in our prepared remarks, we expect the installed base to be up 3x. If you look at fundamental what are the drivers of LEAP service profitability, I would say there are a few. One, as the LEAP shop visits grow.

Rahul Ghai: We will leverage our fixed investments in the MRO shops at a greater rate. The fixed cost will get utilized at a higher rate. Therefore, that should help improve the profitability. The second is around price. You know, we spoke about kind of the mid single digit growth, low single digit pricing on CLP, plus the pricing discipline that we've been driving for pricing new shop visits. That's the second piece in the LEAP puzzle. The third, I would say, is the growing aftermarket channel. Again, I said that earlier. We expect about 30% of the shop visits to be external.

So she'll be, you know, overall it's going to be very pleased with how leap is progressing, right? If you, you know, you're kind of hitting our key Milestones here for for leap, both on financial performance and operational performance. Um and and the share has been higher than what we expected. So on finally, we've always targeted the program to to break even this year and that's that's on track. We expected owe you to break even next year, that's on track. Uh, and then obviously the install bases. We, you know, said that in in our prepared remarks, we expect the installed base to be up 3x. So if you look at fundamental, what are the drivers of Leep Service profitability? I would say there are. There are few 1 as the leap shop visits grow. Um, we will leverage our fixed investments in the mro shops at a greater rate. So, the, the the, the fixed cost uh, will will get utilized at a higher rate, therefore that that should help improve the

Profitability. The second is around price. You know, we spoke about kind of the the mid single-digit growth, slowed single digit pricing uh on CLP. Plus um, the pricing discipline that we've been driving for pricing new sharp visits, so that's the second piece, um, in the leap puzzle.

Rahul Ghai: By the time we get to 2030, that drives the spare parts revenue stream, which is now beginning to grow as we get into 2025, but will continue to expand. The last piece is going to be repairs. I mean, I think we spoke about it in our prepared remarks as well. You saw that when we were together in Celma, you know, some initial work that we started to do around that. You know, that's the final piece, and I think you put all that together. We are seeing good progress on LEAP service profitability in 2025, and I think that will continue to improve as we get into the outer years. Profit equals CFM56 margins. Profit equals CFM56 by 2030. Overall, I would say the LEAP service margins should start approaching our overall service margins by the time we get into that time frame.

The, the third I would say is the growing aftermarket Channel. Um, again, I said that earlier, so you know, we expect about 30% off the shop with its to be external. Um,

Larry Culp: Great, thank you.

Sheila Kahyaoglu: Great, thank you.

Sheila Caillou: By the time we get to 2030 so that drives the spare parts Revenue stream, which is now beginning to grow as we as we in 2025, but it will continue to expand. And the last piece is going to be repairs. I mean that I think we, we spoke about it in our, uh, prepared remarks as well. And you saw that, you know, when we were together in Selma, you know, some initial work that we started to do around that. So, um, you know, that's the, that's the final piece and I think you put all that together. Um, we are seeing good progress on leap, service profitability in 25, and I think that'll continue to, to improve as we get into the outer years profit equals, uh, cfm56. Margins. Um, I see a property equals cfm56 by 2030 and overall, I would say, the leap service. Margins should start approaching our overall service margins. By the time we get into that time frame.

Rahul Ghai: Thank you.

Sheila Caillou: Great. Thank you.

Thank you.

Operator: The next question comes from Doug Harned with Bernstein.

Sheila Caillou: The next question comes from Doug Harnet with Bernstein.

Larry Culp: Good morning. Thank you. Good morning, Doug. I'd like to discontinue on that topic because when you look out, first I wanted to make sure to clarify when you said LEAP services profitability should be comparable to overall service profitability or specifically to CFM56. I guess the question I have is you're at the very early stages in terms of performance restoration, shop visits, so a lot of the heavy work. How do you get comfortable in projecting what, you know, so far out, five years out, to really have the confidence you're going to be able to get to those margins that are like CFM56? Yeah. Well.

Doug Harned: Good morning. Thank you.

Rahul Ghai: Good morning, Doug.

Doug Harned: I'd like to discontinue on that topic because when you look out, first I wanted to make sure to clarify when you said LEAP services profitability should be comparable to overall service profitability or specifically to CFM56. I guess the question I have is you're at the very early stages in terms of performance restoration, shop visits, so a lot of the heavy work. How do you get comfortable in projecting what, you know, so far out, five years out, to really have the confidence you're going to be able to get to those margins that are like CFM56?Yeah. Well.

Um, good morning. Thank you.

Speaker Change: Hi, good morning, Doug. I I I'd like to discontinue on that topic because when you look out, well first, I wanted to make sure to clarify, when you said uh leave uh, Services profitability should be comparable to overall service profitability, or specifically to CFM 506.

Sheila Caillou: and then,

Sheila Caillou: I guess the question I have is you're at the very early stages in terms of, um, performance restoration shop visits, so a lot of the heavy work

How do you get comfortable in projecting what? You know so far?

Sheila Caillou: Out.

Sheila Caillou: 5 years out to really to really have the confidence. You're going to be able to get to those margins that are like cfm56.

Rahul Ghai: Doug, just to clarify my comment.

Larry Culp: Here.

Rahul Ghai: Here.

Rahul Ghai: When Sheila asked about the service margins, our comment was that LEAP service margins should equal overall service margins, not CFM56. Right. Just to clarify that, they should be close to the overall service margin levels. That's one. Second, if you look at the trajectory, and I can start and Larry can jump in here, I mean, part of that is improvement in LEAP durability. If you see the improvement here that we've seen over the last couple of years, everything that we've been speaking to and driving to, we've been hitting those milestones. Obviously, LEAP-1A durability is now at CFM56 levels for everything that we are shipping now and everything that we are overhauling in our MRO shops. That's one.

Yeah well um so Doug just to clarify my comment here. Um this we and when she lost about the service margins and our comment was that leap service margins should equal overall service. Margins not cfm56. Right? So just to kind of clarify that um so you know they should be quote close to the overall service margin levels. So that's 1 second if you look at kind of the, you know, looking at the trajectory and I can start and let you can jump in here. I mean part of that is

Rahul Ghai: If you look at our trajectory on GE90 or GEnx, you know, 60% to 70% of those fleets are under a long term service agreement, and the profitability on those programs is above our overall service profitability. We have enough experience with these long term service agreements that, you know, we can do this, we can do it right. We're conservative in how we model it. With improvement in durability, that's the, you know, that's the remaining piece of the puzzle, which we feel much better about today than we did a couple of years ago. Larry, anything you want to add?

Today, then we did a couple of years ago.

Larry Culp: No, I think you hit it right. We try to model conservatively up front, continue to push product performance, witness the durability kit with LEAP, and make sure that we are executing not only from a safety quality perspective, but from a delivery cost perspective. Whether it be the fixed cost leverage you talked about, the variable cost improvements we ought to get from repairs, let alone the turnaround effect we see from repairs, there are a whole host of things that help the bottom line, put it all together. You get our outlook here at least through 2028.

Is that anything you want to add? No, I mean I think you hit it, right? We we try to model conservatively upfront.

Sheila Caillou: Continue to push product performance. Witness the durability kit with leaf.

Sheila Caillou: And make sure that we are executing not only from a safety and quality perspective, but from a delivery cost perspective. So whether it be the fixed cost, leverage you talked about the variable cost improvements, we ought to get from repairs, let alone the turnaround.

Sheila Caillou: Effect, we see from repairs. There are a whole host of things that help the, uh, help the bottom line, put it all together.

Sheila Caillou: You get, uh, our outlook here at least through 28.

Larry Culp: Very good. Thank you. Thank you, Doug.

Doug Harned: Very good. Thank you.

Rahul Ghai: Thank you, Doug.

Very good. Thank you.

Doug Harnet: Thank you, Doug.

Operator: The next question comes from Scott Mikus with Melius Research.

The next question comes from Scott mucus, with Milius research.

Rahul Ghai: Morning, Larry and Rahul.

Scott Mikus: Morning, Larry and Rahul.

Larry Culp: Nice quarter and good presentation. Thanks, Scott. Good morning. I wanted to ask a question about the new HPT blades and the LEAP-1A and LEAP-1B that should result in better margins on both, just through spare part sales, but also by extending the time on wing for the CSA contracts. I'm just wondering how long are you expecting it to take to retrofit the roughly 9,000 plus LEAPs that are already delivered? As those retrofits happen, should we expect you to be booking favorable contract margin reviews as those retrofits ramp up?

Scott Mikus: Nice quarter and good presentation.

Rahul Ghai: Thanks, Scott. Good morning.

Morning Larry and Rahul nice quarter and good presentation.

Scott Mikus: I wanted to ask a question about the new HPT blades and the LEAP-1A and LEAP-1B that should result in better margins on both, just through spare part sales, but also by extending the time on wing for the CSA contracts. I'm just wondering how long are you expecting it to take to retrofit the roughly 9,000 plus LEAPs that are already delivered? As those retrofits happen, should we expect you to be booking favorable contract margin reviews as those retrofits ramp up?

Speaker Change: Thank you, Scott. Good morning.

Speaker Change: I wanted to ask a question about the new hbt blades and the leap 1 a and leap B um that should result in better margins on both just through spare parts sales. But also by extending the time on wing for the CSA contracts. So, I'm just wondering, how long are you expecting it to take to retrofit, the roughly 9,000 plus leaves that are already delivered? And then as those retrofits happen to be expecting, you to be booking, favorable contract margin reviews as is retrofits ramp up.

Larry Culp: Scott, maybe just a couple of key markers here. Again, we received certification for the durability kit for the LEAP-1A late last year. I think Rahul mentioned in his prepared remarks, we're now fully in production both with Newmake and in the aftermarket. We're not going to go out necessarily and try to upgrade everybody overnight. That will be a multi-year process as the field of engines come in for their next shop visit. Think years, not months in that regard. Clearly, as we talk about the LEAP installed base growing by, what, a factor of 3 between now and 2030, all of those as will be covered. We updated the outlook here for the durability kit for the LEAP-1B.

Speaker Change: Got uh, maybe just a couple of key. Uh, key markers here. Again, we uh, we received certification for the durability kit for the leap 1A, uh, late last year, I think, Rahul mentioned, in his prepared remarks, we're now fully in production, both with new mag and in the aftermarket. Uh, we're not going to go out necessarily and try to upgrade everybody overnight. That will be a multi-year process as the uh the field of dungeons come in for their next shot visit. So, you know, think think years not months in that regard. But clearly as we talk about the leap, install base, growing by what a factor of 3 between now and 2030. All of those days will be covered.

Larry Culp: Thinking about early next year, we'll go through a similar process in feathering that in both with respect to Newmake and in the aftermarket, and again with respect to the fleet that's out there, upgrade those as they come in. You put that together, I think we are again encouraged with the outlook here, in part because of the improved durability performance. We know that's top of mind for customers, but in turn, we also are going to have a more producible blade that is going to help us. It's already helping us on the LEAP-1A deliver better output. Part of the services revenue number, even in the quarter here up 29%, is a function of improved supply chain performance to include, but not limited to, the new HPT blade.

Speaker Change: We updated the, uh, the outlook here for the durability kit, kit for the leap 1B, uh, thinking about early next year, we'll go through a similar process and Feathering that in both, with respect to new make and in the aftermarket. And again, with respect to the uh, the fleet that's out there. Upgrade those as they uh, as they come in. So you you you put that together. I think we are again. Encouraged with the outlook here in part because of the improved durability performance. We know that's top of mind for customers but in turn

Speaker Change: We also are going to have a more producible. Uh, blade, that is going to help us. It's already helping us on the leap. 1 a, uh, deliver better output. So, part of the, the services,

Speaker Change: Revenue number even in the quarter here up 29% is a function of uh, improved supply chain performance, uh, to include, but not limited to the uh, the new hbt blade.

Rahul Ghai: All right, thank you.

Scott Mikus: All right, thank you.

Larry Culp: Thank you.

Speaker Change: All right. Thank you.

Speaker Change: Thank you.

Operator: The next question comes from Seth Seifman with JP Morgan.

Speaker Change: The next question comes from Seth Siteman with JP Morgan.

Larry Culp: Hey, thanks very much and good morning. Morning, Seth. I wanted to ask about the trajectory of margin going into next year given kind of the step down that's implied for the second half. When we think about, you know, we look at it 2028 and we see something that's, you know, above where we are this year and last year. There's a starting point potentially in the second half of this year that's considerably lower. How do we think about how we bridge there kind of from the second half of this year through 2026 and then getting to that destination in 2028?

Seth Seifman: Hey, thanks very much and good morning.

Rahul Ghai: Morning, Seth.

Seth Siteman: Hey, thanks very much and uh good morning.

Speaker Change: Good morning. Seth

Seth Seifman: I wanted to ask about the trajectory of margin going into next year given kind of the step down that's implied for the second half. When we think about, you know, we look at it 2028 and we see something that's, you know, above where we are this year and last year. There's a starting point potentially in the second half of this year that's considerably lower. How do we think about how we bridge there kind of from the second half of this year through 2026 and then getting to that destination in 2028?

Rahul Ghai: Yeah, Seth, as we think about 2026 first, there's tons of momentum coming out of 2025. You know, we spoke earlier about improved our revenue expectations, we improved our profit expectations, and you know, part of that is just driven by our supply chain improvements. Part of that is driven by the macro environment being slightly better than what we thought back in April. It's a combination of factors that's allowing us to improve our 2025 outlook, and those things should continue into 2026 as well. Now as you think about 2026 specifically.

Speaker Change: I wanted to ask about the trajectory of um margin going into to next year given kind of the the step down that supplied for implied for the second half. When we think about you know we look at a 2028 and and we see something that's uh you know, above where we are this year and and last year but there's a starting point potentially in the second half of this year. Uh that's considerably lower. Um so so how do we think about how we Bridge their uh kind of from the second half of this year kind of through 26 and then and then getting to that uh destination in 28

Speaker Change: Yeah. That uh, so as we think about 26 first, there's tons of momentum, coming out of 25.

Rahul Ghai: We take the different pieces of our business on commercial equipment, sufficient backlog extends multiple years. As Larry said in his prepared remarks, we kind of sold out through the end of the decade. We are not expecting a big disruption. We expect to kind of stay the course here with improving our engine output and improving shipments. On the commercial services side, there is some uncertainty in the environment, but it feels a lot better than it did three months ago. Right. More importantly, as you think about our business, our basic growth algorithm of the business has not changed. Right.

Rahul Ghai: On the services side, even in an uncertain economic environment, you know, you talk about, you know, LEAP installed base growth, you talk about LEAP share of cycles being up almost six points versus where we were in 2023, you know, the number of engines coming off wing that is going to be up in 2025, that's going to be up in 2026, you know, and that is irrespective of number of cycles they're going to fly now, that's just the number of cycles they've previously flown. That is good as well. We are increasing the wide-body work scopes, you know, combine that with a mid single-digit price increase. All that gives us reasonable confidence about our service business as we think about 2026 and achieving the growth targets that we've outlined.

Speaker Change: Output and improving shipments on the commercial Services side, there is some uncertainty in the environment, but it feels a lot better than it did 3 months ago, right? And more importantly, as we think about our business, our basic growth algorithm of the business has not changed right on the services side, even in an uncertain economic environment. You know, you talked about, uh, you know, leap install based growth. You talk about, um, leap share of Cycles being up, almost 6 points versus where we were in 2023.

Rahul Ghai: On DPT, you know, it should be steady. You know, business got $20 billion backlog today, so that should be good as well. While the economy may play a role here, I think overall we feel good. In regards to your question around second half to 2026, I just would not index too much on a quarter or a half, right, because there are factors that can impact performance. If you look at the second half, I think we spoke earlier about corporate expenses being more skewed towards the second half, R&D being.

Speaker Change: You know, the number of engines coming off Wing that is going to be up in 25, that's going to be up in 26, you know? And that is irrespective of number of cycles that are going to fly. Now that's just the number of Cycles, they've previously flown. So that is good as well. And then we increasing the, the, the wide body work Scopes, you know, combine that with the mid single digit price increase, so all that gives us reasonable confidence about our service business. As we think about 26, and the achieving this growth targets that we've we've outlined

Speaker Change: and on DPT not not, you know, it should be steady, you know, business got 20 billion, dollar backlog today, um, so that's that should be good as well. So while you know, the economy may play a role here, I think overall, we feel good and then in regards to your question around second half to 26. I, I just would not index too much on a quarter or a half, right? Because there are factors that can impact performance. Like, if you look at the second half, I think we spoke earlier, um, about you know, corporate expenses being more skewed towards the second half.

Rahul Ghai: Stepping up here between first half and second half. Same thing you take with the 9X shipments. They're all sitting in the second half versus being split throughout the year. I would, you know, as you think about run rating into 2026, I think the full year is a better baseline just to normalize those things, and then you project forward.

Larry Culp: Great, thanks very much.

Seth Seifman: Great, thanks very much.

Speaker Change: Of R&D being, you know, uh, stepping up here between first half and second half, same thing, you take for the 9x shipments, they're all sitting in the second half versus being spread throughout the year. So I would, you know, as you think about run rating into 26, I think the full year is a better Baseline just to normalize those things. And then you project forward.

Speaker Change: Great. Thanks very much.

Operator: The next question comes from Gavin Parsons with UBS.

Gavin Parsons: The next question comes from Gavin Parsons with UBS.

Larry Culp: Thanks, guys. Good morning. Morning. Good morning.

Gavin Parson: Thanks, guys. Good morning.

Larry Culp: Morning.

Rahul Ghai: Good morning.

Gavin Parsons: Thanks guys. Good morning.

Morning. Good morning.

Larry Culp: You know, obviously strong CES order growth in the quarter, but you still do have that conservatism in the second half of the year that you talked about. Is that informed by behavior changes from airlines, your conversations with customers, or just erring on the side of caution? You know, as MAX and LEAP deliveries ramp up, are you hearing any fleet planning changes in terms of retirements from your customers?

Gavin Parson: You know, obviously strong CES order growth in the quarter, but you still do have that conservatism in the second half of the year that you talked about. Is that informed by behavior changes from airlines, your conversations with customers, or just erring on the side of caution? You know, as MAX and LEAP deliveries ramp up, are you hearing any fleet planning changes in terms of retirements from your customers?

Rahul Ghai: Thanks, Gavin. I would.

Gavin Parson: Thanks,

Larry Culp: Gavin. I would.

Um, you know, obviously strong, CES order growth in the quarter but you still do have that conservatism. And the the second half of the year that you talked about is that informed by Behavior changes from Airlines or your conversations with customers or just airing on the side of caution. And then similar question you know as Max and and leap deliveries ramp up. Are you hearing any Fleet planning changes in terms of retirements from your customers? Thanks.

yeah, but I, I would

Larry Culp: To the first question, I don't think we've got a tremendously different perspective on the second half here today than we did 90 days ago.

Gavin Parsons: the first question.

I don't think we've got a

Rahul Ghai: Right.

Larry Culp: Right.

Larry Culp: We've got a second quarter where departures were in line with the first, up 4%. We watch that on a daily basis. We've said for the full year we think we'll end up being up low single digits, which would suggest a flattish, slightly up back half. I don't think our commentary in that regard is too far out of line with.

Gavin Parsons: Different perspective on the second half here today than we did 90 days ago. Right? We've got a second quarter where departures were in line, uh, with the first up 4% and we watched that on a daily basis.

We've said for the full year, we think we'll end up being up low single digits, which would suggest a a flattish slightly up back half.

Larry Culp: What you're hearing from the airline. Some have suggested maybe that's a touch conservative. We've been called worse. We'll take that. I think with respect to skylines, I don't think we've seen any change in customer behavior, whether it be what we're doing with Boeing on the MAX, on the widebody platforms, with Airbus on the neo.

Gavin Parsons: Uh, but I don't think our commentary in that regards too, too far out of line with, uh,

Gavin Parsons: What you're hearing from the airline some have suggested, maybe that's a, a touch conservative. We, we've been called worse, we'll uh we'll take that.

Gavin Parsons: I think with respect to Skyline,

Larry Culp: Those backlogs are real. Those annual step ups in production are where we're focused.

Gavin Parsons: I don't think we've seen any change in customer Behavior, right? Whether it be what we're doing with uh, with Boeing, on the Max, on the wide body platforms with Airbus on the Neo.

Those those backlogs are real those annual step-ups and production are where we're focused.

Larry Culp: At every turn. We haven't really seen that evolve or change. In many respects, you put that together, it's what undergirds the outlook. The improvement in the outlook for 2028. Right. The foundational platforms are going to be used for longer, be it in the narrow body or the wide body space. We know we have a lot of not only demand to service, but momentum in doing so as we think about how Flight Deck is helping us improve deliveries. Anytime you print a new LEAP engine increase of 45% year over year, you know you've got momentum. Again, shout out to the supply base. They're working hard, working well, working with us. In terms of customer behavioral changes, we really haven't seen much new or different in that regard over the last 90 days.

At, uh, at at every turn. But we haven't really seen that, uh, evolve or or, or change. So it, it many respects, it's all you put that together. It's what undergirds? The Outlook, the, the Improvement of the outlook for 2028, right? That foundational platforms are going to be used for longer uh, be it. The narrow body or the wide body space and we know we have uh,

Gavin Parsons: A lot of not only demand to service but momentum in doing. So, as we think about how flight deck is helping us improve deliveries, I mean, anytime you print a, uh, a new mag engine increase the 45% year-over-year, you know, you've got momentum again, shout out to the supply base there, they're working hard working, well, working with us.

Gavin Parsons: Uh, but in terms of customer behavioral changes, we really haven't seen uh, much new or different in that regard over the last 90 days.

Larry Culp: I appreciate it. Thank you.

Gavin Parson: I appreciate it.

Larry Culp: Thank you.

Gavin Parsons: I appreciate it.

Gavin Parsons: Thank you.

Operator: The next question comes from Ron Epstein with Bank of America.

Ron Epstein: The next question comes from Ron Epstein with Bank of America.

Larry Culp: Hey. Yeah, good morning, guys. It seems like since the Paris Air Show, the discussion around RISE has changed. It really does seem like you all feel much more confident in the technology and in the program. In fact, you know, your competitors, you know, trying to say, no, no, no, that won't work. It really does seem like there's flags getting put in the ground. I guess broadly, what makes you all feel so good about RISE today? If it doesn't end up being an unducted fan, is there a ducted option?

Ron Epstein: Hey. Yeah, good morning, guys.

Larry Culp: Goodmorning, Ron.

Ron Epstein: It seems like since the Paris Air Show, the discussion around RISE has changed. It really does seem like you all feel much more confident in the technology and in the program. In fact, you know, your competitors, you know, trying to say, no, no, no, that won't work. It really does seem like there's flags getting put in the ground. I guess broadly, what makes you all feel so good about RISE today? If it doesn't end up being an unducted fan, is there a ducted option?

Speaker Change: Sunrise has changed.

Speaker Change: Um, it really does seem like you all feel much more confident in the technology than in the program and in fact you know your competitors you know trying to say no no no that won't work. And it really just seemed like there's, you know, Flags getting put in the ground. So I guess, broadly, what what makes you all feel? So good about rise today. And if it doesn't end up being an unducted fan, is there a ducted option?

Larry Culp: Ron, we're really looking forward to putting the full team on stage in Paris. I think everybody understands why we adjusted that original plan and are here in an abbreviated form.

Ron Epstein: Ron, we

Ron Epstein: Were really looking forward to putting the full team on stage, uh, in Paris.

Larry Culp: I'm glad you think we planted the flag. It was a flag we planted several years ago at the air show, but we were going to be as full throated in Paris as hopefully we are today with respect to our confidence, and our optimism about the RISE development program, technology development program. Just as a reminder for everybody, and in particular the open fan architecture, why to your first question, do we feel so good about it? I think it's really a combination of all the progress that we're making in the labs. Again, I'll underscore technology development, but we now have over 350 program tests at the module subsystem level that is not only focused on that propulsive efficiency gain we talk so much about, but also durability.

Ron Epstein: H, I think everybody understands why we adjusted uh, that original plan and are here in an abbreviated form. Uh,

Ron Epstein: I'm glad you. You think we

Ron Epstein: Planted the flag. Uh,

Ron Epstein: With a a flag, we planted several years ago at uh at the air show.

Ron Epstein: Uh, but we were going to be as full-throated in Paris as hopefully we are today with respect to our confidence and our optimism.

About the rise development program, technology development program. Just as a reminder for everybody uh and in particularly open fan architecture

Uh, why to your first question? Do we feel so good about it?

Ron Epstein: I think it's really a combination.

Of all the progress that we're making in the labs again, I'll underscore technology development but we now have over 350.

Larry Culp: To be able to again leverage everything that we've done, not only in predecessor wide body platforms, but narrow body here as well, I think just sets us up to have confidence to go with this architecture. More to come. This is a multi-year effort, ground test, flight test, all of that. I think when you combine that with what we're hearing from so many in the industry who understand the pivot to relying more on propulsive than thermal efficiency. We had Mohamed Ali, who runs technology and operations, up on stage in Toulouse just a couple of months ago talking about the joint work we're doing with Airbus in that instance, and their own thoughts around what that next generation aerobody is going to require in the latter part of the next decade. We're all in.

Program tests at the module subsystem level, right? That is not only focused on that propulsive efficiency gain and we we talk so much about but also durability.

Ron Epstein: And to be able to again leverage everything that we've done, not only in in predecessor, widebody platforms, but narrow body here as well. I think just sets us up to uh to have confidence to go with uh, go with this architecture.

Ron Epstein: More to come. Alright, this is a multi-year effort, ground test, flight test, all of that.

Ron Epstein: But then, I think, when you combine that with what we're hearing from, so many in the industry, right? Who understand the

The pivot to relying more on propulsive than thermal efficiency. Uh, we had Muhammad

Larry Culp: Ron, on Open Fan, not to be strident about it, but really to just make sure that we're making the investments today and all the underlying technology components that are going to deliver on that next generation narrow body propulsion platform that the industry will need.

Ali, who runs technology and operations up on stage. Uh and to lose just a couple of months ago, right talking about the joint work we're doing with with Airbus and, and that instance, and their own, uh, their own thoughts around. What that next Generation narrow body, is going to require in the latter part of the, uh, the next decade. So we're all in Ron on open fan, uh, not to be striding about it, but really to just make sure that we're making the Investments today and all the underlying technology components that are going to deliver.

Labor on that next Generation. Narrow body propulsion, uh, platform that the industry will need

Larry Culp: Got it. Thank you. Thank you.

Ron Epstein: Got it. Thank you.

Larry Culp: Thank you.

Got it. Thank you.

Ron Epstein: Thank you.

Operator: The next question comes from David Strauss with Barclays.

The next question comes from David Strauss with Barclays.

Rahul Ghai: Thanks.

David Strauss: Thanks.

Larry Culp: Good morning.

David Strauss: Good morning.

Rahul Ghai: Morning, David.

Larry Culp: Morning, David.

Larry Culp: Good morning.

Rahul Ghai: Good morning,

David Strauss: Thanks, good morning.

Rahul Ghai: David wanted to ask a couple questions on the OE side of things, I.

Rahul Ghai: David

David Strauss: wanted to ask a couple questions on the OE side of things, I.

Ron Epstein: Morning, David. Good morning, David.

Larry Culp: Guess, first of all, starting with 9X, the production rate assumptions that are underlying your, your loss forecast on the 9X.

David Strauss: Guess, first of all, starting with 9X, the production rate assumptions that are underlying your, your loss forecast on the 9X.

Ron Epstein: Wanted to ask a couple questions on the the OE side thing, I guess. First ball starting with, uh, with 9x. Um, the production rate assumptions that are underlying your, uh,

Rahul Ghai: If you can give us some detail.

David Strauss: If you can give us some detail.

Larry Culp: What you're assuming for LEAP deliveries.

David Strauss: What you're assuming for LEAP deliveries.

Rahul Ghai: Out in 2028, and then how much you think you know better LEAP profitability.

David Strauss: Out in 2028, and then how much you think you know better LEAP profitability.

Larry Culp: On the OE side, and GEnx profitability can offset some of that incremental GE9X headwind.

David Strauss: On the OE side, and GEnx profitability can offset some of that incremental GE9X headwind.

Rahul Ghai: Thanks.

David Strauss: Thanks.

Larry Culp: Okay.

Ron Epstein: Your loss forecasts on the 9x, if you can give us, uh, some detailed there, uh, what you're assuming for. Uh, leap deliveries out in 2028 and then um how much you think, you know, better lead profitability on the OE side and Gen X. Profitability can offset some of that uh that incremental, 9x headwind. Thanks.

Rahul Ghai: I'm taking notes here, David, as I'm trying to answer the question.

Ron Epstein: Um,

Larry Culp: There are a few there. I think he started on the 9X and thus the 777X. Maybe it's context. Right. We're excited to be underway. We have started shipping engines to Boeing and are working with them, as you would imagine, on EIS. I think we're encouraged by what we hear from customers. Right. Witness the 60% win rate versus competition. We've got over 1,000 engines now in backlog, so the market really wants to see this.

I'm taking notes Here. David as I'm trying to answer the question there. There, there, there are a few there. I think it started on the, on the 9 action and thus, the triple 7x. Yeah, um, yeah, maybe is is context, right? We're uh, we're excited to be underway.

Ron Epstein: We have started shipping uh engines to Boeing and are working with with them as you would imagine on on Eis.

Ron Epstein: I think we're encouraged by what we hear, uh, from customers. Write witness the, uh, the 60% win rate versus competition. We've got over a thousand engines now in backlog.

Larry Culp: Platform, this engine come forward. We know that at EIS, it will be the most tested engine, really, in the company's history. We've got over 30,000 cycles behind us now, 8,000 endurance cycles. That's a significant test regimen. Again, leveraging what we've learned, particularly in hot and harsh environments, we've got over 1,600 dust ingestion tests that are behind us. We continue to learn and iterate there. I think we're on our second generation, both the HPT blades and the CMC nozzles. A lot happening in this regard. Rahul, maybe you can hit some of the modeling assumptions, but we're excited to be underway, and I think this is going to be a winning platform in the marketplace.

Ron Epstein: so, the market really wants to see this, uh,

Ron Epstein: This platform this engine come forward, we know that at Eis it'll be the most tested engine really in the company's history.

Ron Epstein: We've got over 30,000 Cycles behind us now. Uh 8,000 endurance Cycles. So I mean that's that's a significant uh test regimen and again leveraging. What? We've learned particularly in hot and harsh environments we've got uh over uh 1600

Rahul Ghai: Yeah, absolutely. On the losses, I think Larry touched on some of the trends that are underpinning this, David. We shipped our first engines to Boeing last year, and we're increasing our shipments to Boeing this year and in 2025.

Rahul Ghai: All in the second half of the year. These are initial shipments with kind of the highest losses. We do expect a couple of hundred million dollars of profit headwind in 2025, and that is no change to prior expectations. Now we're working to get the cost down. We expect to take about 30% of the cost out by the time we hit the 50th unit, another 30% out by the time we get to the 250th engine. We will start moving past kind of, you know, peak losses, which we expect a year after.

David Strauss: Continue to learn and uh, iterate their. I think we're on our second generation, both the hbt blades and the the CMC nozzles. So a lot happening in this regard. Um, maybe you can hit some of the modeling assumptions, but we're uh, we're excited to be underway and I think this is going to be a, um, a winning platform in the marketplace. Yeah, absolutely. So on on the, on the losses, I think Larry touched on some of the, you know, the, the the trends that are underpinning, this David? We shipped our first uh, engines to Boeing last year and we are increasing our shipments to Boeing this year in 2025. Um,

Rahul Ghai: Entry into service for the, for the platform. Right. Which we are still expecting that to be in 2026.

David Strauss: All in the second half of the year and these are initial shipments, good kind of the highest losses. So we do expect a couple of hundred million dollars of profit headwind in 25, uh, and that is no change to to Prior expectations. Now, we're working to get get the cost down. Uh, we expect to take about 30% of the cost out. By the time we hit the 50th unit, another 30% out by the time we get to the 250th engine so we'll move start moving past kind of, you know, Peak losses, which we expect uh a year after. Um,

Larry Culp: So.

Rahul Ghai: So.

Rahul Ghai: As you think about the 2028 guidance that we provided, you know, the losses per engine start to come down. Still, since the volume is still growing, we do expect the losses to be a few hundred million dollars higher in 2028 versus where we are in 2025. You're seeing then we move past that, and we expect the program to get profitable as we get into the 2030s. That's our expectation of the LEAP trajectory. I think, Larry, sort of a question on LEAP volume, if you want to take that.

David Strauss: Entry into service for the, for the, for the platform, right? Which we are still expecting that to be in 2026. So,

Larry Culp: Yeah, I think David was asking about 28, if I heard him correctly, just maybe to back up for a moment. I think we're again encouraged by the momentum we've got not only here in the quarter, but in the half, right, quarters. Up new make 38% for the first half, year over year, up 10. I think that as we generate more momentum with Flight Deck, as past the labor disruption they had in the second quarter, we're still confident around our deliveries for this year. We've said previously we'd be up 15% to 20%.

And then as we think about the 28 guidance that we provided the, you know, the the losses per engine start to come down, but still, as since the volume is still growing, we do expect the losses to be a few hundred million dollars higher in 28 versus where we are in in in 25. So you're seeing kind of then we move past that and we expect the program to get profitable as we get into the 2030s. So that's our expectation of the, of the leap trajectory. Um, I think Larry's the, the sort of the question on on leap volume if you want to take that. Yeah, I I think I think David was asking about, 28, if I heard him correctly, just maybe the back up for a moment. I think we're again. Encouraged by the momentum. We've got

David Strauss: Only here in the quarter but in the half, right? I mean the quarter was up, new make 38% for the first half year-over-year up 10.

David Strauss: and I think that as we,

Larry Culp: No change in that outlook here in 2025. That puts us, I think, on a path to deliver, what, 2,500 LEAPs in 2028. Plenty of work to do not only with Safran, but all of our suppliers. That's what we're here for. I think we can look at the second quarter and the first half and point to a number of signs of improving performance.

David Strauss: Generate more momentum with flight deck is the prime gets passed, the the Labour disruption they had in the second quarter, you know, we're still confident around our deliveries for this year, we've said previously, we'd be up 15 to 20%. Um, no, uh, no change in that outlook here in 25th is I think on a path to deliver what 2500 leads in in 2028, plenty of work to do and not only with with sran, but

David Strauss: But all of our suppliers. But that's uh that's what we're here for. And again, I think we can look at the second quarter in the first half and point to a number of signs of uh

David Strauss: Improving performance.

Larry Culp: Great. Thanks for hitting them all.

David Strauss: Great. Thanks for hitting them all.

Great, thanks for hitting them all.

Larry Culp: Glad we caught them all.

Operator: The next question comes from Gautam Khanna with TD Cowen.

Speaker Change: The next question comes from Gotham Cana with TD Cowen.

Larry Culp: Thanks.

Gautam Khanna: Thanks.

Rahul Ghai: Good morning and nice presentation, guys. Morning.

Gautam Khanna: Good morning and nice presentation, guys.

Rahul Ghai: Morning.

Larry Culp: Thank you. Good morning.

Speaker Change: Thanks. Good morning and nice presentation, guys.

Speaker Change: Thank you. Good morning.

Larry Culp: I was wondering if you could elaborate on the state of the supply chain.

Gautam Khanna: I was wondering if you could elaborate on the state of the supply chain.

Rahul Ghai: You guys have given us good updates.

Gautam Khanna: You guys have given us good updates.

Larry Culp: In the past, how that's progressing.

Gautam Khanna: In the past, how that's progressing.

Speaker Change: I was wondering if you could elaborate on the state of the supply chain, you guys have given us. Good updates in the past how that's progressing.

Larry Culp: Where the pinch points still are, also.

Gautam Khanna: Where the pinch points still are, also.

Speaker Change: Um, where the pinch points still are.

Rahul Ghai: If you could just comment on your.

Gautam Khanna: If you could just comment on your.

Larry Culp: Expectations of gross inflation over the supply chain, inflation over the forecast period. Thanks. Sure. Well.

Gautam Khanna: Expectations of gross inflation over the supply chain, inflation over the forecast period. Thanks.

Larry Culp: Sure. Well.

And also, if you could just comment on your expectations of growth inflation, over the um supply chain inflation over the uh forecast period. Thanks

Speaker Change: Sure. Well.

Larry Culp: You know, again, I think with the proof points that we've shared this morning, not only in terms of output, but also input, I think we're really encouraged by what we're able to do with Flight Deck and as a function of this new organizational construct that we put in place earlier this year, let alone what we're seeing from an input perspective from suppliers. I can remember vividly a year ago when we weren't necessarily getting what we needed in terms of volume, but the variability around delivery to expectations, to commitments, rather, was all over the place. That's just.

Speaker Change: No longer in terms of output, but but also input.

Speaker Change: I think we're.

Really encouraged by what we're able to do.

Speaker Change: With white deck. And as a function of this organizational construct that we put in place earlier this year, let alone what we're seeing from an input perspective from uh, from suppliers.

Speaker Change: I mean, I can remember vividly a year ago, when we weren't necessarily getting what we needed in terms of volume.

Larry Culp: Hard enough to ramp. When you don't have that visibility, that certainty, it's even harder. That's why we call out not only the 10% sequential improvement first quarter to second quarter, just in sheer volume that we're getting from our critical support. Again, when we say our priority or critical supplier, we're really talking about 12 companies across 18 sites. For them to be delivering to their commitments in the 95% range just makes life a whole lot easier. Frankly, what I'm most excited about, you don't see in these numbers. We see it day in, day out.

But the variability around delivery to expectations to commitments rather, uh, was all over the place and that's just it's just it's hard enough to ramp. But when you don't have that, that visibility that certainty, it's even harder.

Speaker Change: and that's why we call out, not only the 10% sequential

Speaker Change: Improvement. First quarter to second quarter, just in sheer volume that we're getting from our our critical suppliers. And again when we say our our our priority or critical Supply, we're really talking about 12 companies across 18 sites.

but for them to be delivering to their commitments,

Speaker Change: In the 95% range.

Larry Culp: Just the way our supply chain, our engineering, and our quality teams have come together to be quicker, to be deeper in our technical problem solving, and to have, frankly, a higher level of expectation with respect to countermeasures, both short and long term, all the while taking that to the supply base, who I think by and large would hopefully tell you.

Speaker Change: But frankly, what I'm most excited about, you don't see in these numbers, we see it day in day out, but just the way our supply chain, our engineering, and our quality teams have come together to be quicker to be deeper.

Speaker Change: In our technical problem solving and to have, you know, frankly a higher level of expectation, with respect to counter measures, both short and uh long term.

All the while taking that to the supply base.

Larry Culp: Outside of our earshot that they're working with a different GE Aerospace, that we're more constructive, we're more collaborative.

so, I think by March would hopefully tell you with with

Speaker Change: Outside of our earshot.

Speaker Change: That they're working with a different GE Aerospace that we're more constructive or more collaborative.

Larry Culp: We want to be their best customers, right, because we know there's no way we serve the airlines and the airframers who depend on us without having the best possible supply base in the world. Again, a lot of proof points here. What I see qualitatively supports that all the more. We need to do more in the second half than we did in the first half. We need to do more next year than we did this year. We'll be talking about this for a while. I don't want anyone to think, okay, well, check the supply chain box, that's done, anything.

Speaker Change: We uh, we want to be their best customers, right? Because we know, there's no way we serve the Airlines and the air framers who depend on us.

Without having the best possible Supply base in the world. So uh again a lot of proof points here. What I see, qualitatively supports that, all the more

Speaker Change: But we need to do more in the second half that we did in the first half. We need to do more next year than we did this year. We'll be talking about this for a while. I don't want anyone to think, okay, well check the supply chain box that's done, uh, anything but

Larry Culp: Again, lots of proof points that suggest we're all moving in the right direction.

Speaker Change: Again, lots of proof points. That suggest we're we're all moving in the right direction. Yeah.

Rahul Ghai: To hit your other point on inflation, Gautam, I think it goes hand in hand with what Larry said about the continued ramp that we need to see from our suppliers. The material delivery environment is expected to remain tight. You know, we're not expecting that this magically gets better. You see the ramp that we need to deliver on, both on the OE side and on the aftermarket side. I mean, you think about where Boeing and Airbus, the benchmarks that they are putting on.

Speaker Change: Um,

Speaker Change: And then to hit your other point on inflation. Gotham, I think it goes hand in hand with what Larry said about.

Speaker Change: You know, the continued, um, ramp that we need to see from our suppliers. So the material delivery environment is expected to remain tight. You know, we're not expecting that this magically gets better and you see the ramp that

Rahul Ghai: In the market, the expectations will be up 50% to 60% from where we are in terms of total aircraft output in the next three years or so. You combine that with the aftermarket growth that we need to deliver on and the defense market. We expect the supply chain environment to remain tight, and that drives a higher inflationary environment than we've seen in the past. We are really not expecting any let off in the inflation that we have been seeing here over the last couple of years. We're expecting a consistent environment from where we are. As you said, as we were walking through the profit drivers for 2028, we are expecting that overall, given what we've outlined in pricing this morning, the pricing will cover inflation. That's the building blocks for the 2028 profit.

Larry Culp: I think as we improve those deliveries, Rahul, not only in terms of volumes but just the improved linearity, right, I think about the labor productivity we saw in the second half, or, excuse me, the second quarter. I think about a number of our key facilities like Lynn that have gotten off to a very good start here in July, right. Just with those inputs coming in at a higher level, coming in more predictably in a more linear fashion, we're just able to mitigate some of that material price inflation so much more effectively than we saw in 2024 or 2023.

Speaker Change: and I think, as we improve those deliveries for a whole

Speaker Change: not only in terms of volumes but just the the improved linearity, right? I think about the labor productivity. We saw in the second half or excuse me, the second quarter. I think about a number of our key facilities like Lynn that have gotten off to a very good start here in July, right? Just with those inputs coming in at a higher level, coming in more predictably in a more linear fashion. We're just able to

Larry Culp: Thank you, guys. Thank you.

Gautam Khanna: Thank you, guys.

Speaker Change: mitigate some of that material price inflation so much more effectively absolutely than, uh, than we saw in 2014 or 2013. Yeah.

Larry Culp: Thank you.

Speaker Change: Thank you guys.

Thank you.

Larry Culp: You.

Operator: The next question comes from Jason Gursky with Citi.

The next question comes from Jason gursky with City.

Larry Culp: Hey, good morning, everybody. Good morning. Hey, Larry, I'm going to just go back to some of the comments that you made about the international defense outlook. I think you used the word localization maybe in your words. Just kind of curious how you think the company is going to participate in the growth of European defense budgets that we're likely to see over the next decade. Do you need to find additional partners to take advantage of this growth? Do you need to make some investments either organically or inorganically in the region to assure that you are local enough in the views of the Europeans to take on some of this new work? Thanks.

Jason Gursky: Hey, good morning, everybody.

Larry Culp: Good morning.

Jason Gursky: Hey, Larry, I'm going to just go back to some of the comments that you made about the international defense outlook. I think you used the word localization maybe in your words. Just kind of curious how you think the company is going to participate in the growth of European defense budgets that we're likely to see over the next decade. Do you need to find additional partners to take advantage of this growth? Do you need to make some investments either organically or inorganically in the region to assure that you are local enough in the views of the Europeans to take on some of this new work? Thanks.

Hey, good morning everybody.

Speaker Change: Good morning.

Speaker Change: Hey Larry. I'm going to just go back to some of the comments that you made about the international um defense Outlook and I think you use the word localization uh maybe in your word. So just kind of curious how you think the company is going to participate in the growth of European Defence budgets that were likely to see you over the next decade. Do you

Do you need to find additional Partners or to take advantage of this growth? Do you need to make some Investments either organically or inorganically in the region to assure that

Speaker Change: You know, you are local enough in in the views of the Europeans to to take on some of this new work. Thanks.

Larry Culp: Well, I think that with respect to Europe in particular, but even more broadly, the optimism we have around defense growth is going to be fundamentally within defense and systems, and it will really be around these existing programs that we've got really across the board, both in rotorcraft, and in combat jets, trainers as well.

Speaker Change: well, I think that with respect to Europe in particular, but but, but even more, broadly, the, uh, the optimism we have around defense growth is

Going to be fundamentally uh, within Defence and systems.

Larry Culp: Those increased budgets, I think, play into our existing footprint very well. It's a little bit of what you see with the F110 agreement as well. Frankly, those international contracts tend to be priced a bit better.

And it will really be around these existing programs, uh, that we've got, uh, really across the board, both in rotorcraft and in in combat Jets trainers as well. Um,

Speaker Change: so,

Speaker Change: those increased budgets.

Speaker Change: Play into our existing footprint very well.

Speaker Change: Um, it's a little bit of what you see with the f110.

Larry Culp: They're structured more like commercial agreements than not. We get not only the revenue but the margin hit. Part of what we don't get to show you, I think today, doing this virtually as opposed to having the team on stage in Paris, is putting the spotlight on Avio Aero, which is our native European defense position in Italy. Very strong position with the MOD there, with exposure to the Eurofighter, Eurodrone, GCAP, all of the core programs there. They'll be a focal point for us here as we go forward. Are we open to other partnerships, other arrangements? Of course.

Than uh, than not. So we get not only the revenue but the, uh, the margin hit.

Speaker Change: Part of what we don't get to show you. I think today doing this virtually as opposed to having the team on stage in, uh, in Paris is, you know, putting the spotlight on AIO Arrow.

Speaker Change: Which is our uh, Native European Defense position in uh in Italy.

Larry Culp: Frankly, we like where we are positioned today, both from a US base as well as from Avio, and know that again, given the backlogs, I think both Rahul and I have pointed to, we're going to have a good growth trajectory on top of or before we get any additional major orders from any of those customers, be it again in Europe or more broadly.

Speaker Change: Very strong position with the mod there, uh, with exposure to, the Euro Fighter, gyro drone gcap. All of the, uh, the core programs there. Uh, and they'll, they'll be a a focal point for us here as we go forward. Are we open to other Partnerships? Other arrangements of course.

Speaker Change: Uh, but frankly, we we, we like, where we are positioned today. Both from a us-based, as well as from AIO and know that again, given the backlog. I think both Rahul and I appointed to

Speaker Change: We're going to have.

a good growth trajectory on top of uh or before we get any additional uh major orders

Speaker Change: from from any of those customers be again, in Europe or, uh, more broadly

Larry Culp: Great, thank you.

Jason Gursky: Great, thank you.

Great. Thank you.

Operator: The next question comes from Ken Herbert with RBC Capital Markets.

Ken Herbert: The next question comes from Ken Herbert with RBC Capital markets,

Larry Culp: Yeah, hi, good morning, Larry and Rahul.

Ken Herbert: Yeah, hi, good morning, Larry and Rahul.

Larry Culp: I wanted to ask about the 15% higher revenues associated with narrowbody services through 2028. Just curious if you could parse that out a bit and specifically from a couple of angles, one sort of sounds like much of that is CFM56. And I'm wondering if you've seen within that any fundamental change in airline spending, like greater percentage of engines seeing a second or third shop visit, or how much of this is really just supply chain unlock and better turnaround times, and your ability to obviously get better flow through.

Ken Herbert: Yeah. Hi, good morning Larry and roel, um, wanted to ask. Yeah, I wanted to ask about the, the 15% higher revenues associated with narrow body, uh, Services through 2028. Um, just curious, if you could parse that out a bit and specifically, from from a couple of angles, 1, sort of sounds like much of. That is cfm56. Uh, and I'm wondering, if, if you've seen within that, any fundamental change in in Airline spending, like, greater percentage of engines, you know, seeing a second or third shot, is it, or how much of this is really just

Ken Herbert: Supply chain unlock and and better turnaround times and your ability to obviously get better flow through.

Rahul Ghai: Yeah, it's a great question, Ken. So, I think what you're touching on. Let me, if I just step back for a second before I get into the narrow body. You know, what we did this morning is we improved our services outlook from where we were back in March of last year by, call it, $4 billion. And that's a combination of two things. One, we improved our.

Rahul Ghai: Expectations of growth in the future. We went from high single-digit growth expectation to a double-digit growth expectation expectation. That's coming from a higher starting point in 2024. So you put both of them together, you know, the services revenue are up, you know, approximately $4 billion from where we were back in March of last year. That is a fairly broad-based improvement in outlook, Ken. It's coming both from narrowbody and from widebody. So if you're getting into the narrowbody where you were a second ago, I think that there are kind of two things that are driving the narrowbody improvement. One, as we said earlier, we're seeing 600 incremental shop visits for CFM56 between now and 2028 than where we were back last year.

Ken Herbert: Yeah, it's a great question canceled. You know, if you I think what you're touching on the, let me, if I just step back for a second before I get into the narrow body, you look, you know, once we did this morning is, you know, we improved our services Outlook from where we were back in March of last year by calling it 4 billion dollars and that's a combination of 2 things 1. We improved our um,

Ken Herbert: Expectations of growth in the future. We went from high single digit growth expectation to a double digit growth expectation. Um and that's coming up a higher starting point in 2024. So you put both of them together, you know, the services Revenue are up, you know, approximately 4 billion dollars from, from where we were back in, uh, March of last year. And that is a fairly broad-based improvement in our

Rahul Ghai: So that is fewer retirements, you know, and also just the airlines keeping their fleets longer. I mean, as you see, even some of the lessors talk about it. They talk about the fact that they are renewing leases at kind of close to 90 to 95% from where they were just 30 to 40% a few years ago. So these fleets are just continuing to fly longer, and that's what we're seeing. Also seeing an increase in LEAP installed base. Right. So the LEAP installed base is growing, and that is driving an improvement in outlook. So the narrow body, the combination of both CFM56 and LEAP, and the same thing is happening on the widebody side as well. I mean, wide body, you saw we spoke about the GE90 share as it's being 100% share as it's higher kind of the growth and installed base there.

Ken Herbert: Outlook. Um, again, it's coming both from narrow body and from white body. So, if you could getting into the narrow body, where you were a second ago, I think that, that kind of 2 things that are driving the narrow body Improvement 1. As we said earlier, we seeing 600 incremental, sharp visits for cfm56 between now. Um, and 28 and where we were back last year. So that that is fuel retirement, you know, and also just the, the airlines keeping their fleets longer. I mean, as you see even some of the Lesser stock about it, they talk about the fact that they are renewed leases at kind of close to 19.95% for where, you know, they were just, you know, 30 to 40% a few years ago. So these fleets are just continuing to fly longer. And that's what, that's what we're seeing. Also seeing an increase in leap, uh, installed base, right? So the meat to install base is is growing and that is driving an improvement in in Outlook. So so the narrow body is a combination of both CFS and 56, and leap. And the same thing is happening on the wide body side as well. I mean wide body, you saw, we spoke about the g90 sharp as it's been

Rahul Ghai: So it's the exact same replica on the widebody side. So I think it's a fairly broad-based improvement in outlook that's giving us that incremental $4 billion of revenue versus where we were in March, and overall about $8 billion of revenue growth on services between now and 2028, which is driving the profit.

Ken Herbert: 100 sharp as a higher GNX, kind of, you know, uh, the growth in installed based there. So, it's it's the same. It's, it's the exact same replica on the, on the white body side. So, I think it's a fairly broad based Improvement in Outlook, uh, that's giving us that, uh, you know, incremental portion of dollars, of Revenue, versus where we were in March, and overall about 8 billion dollars of Revenue growth on Services between now, and and 2028.

Blair Schorr: Liz, we have time for one last question.

Blaire Shoor: Liz, we have time for one last question.

Ken Herbert: Which is driving the prophet.

Speaker Change: Liz. We have time for 1 last question.

Operator: This question comes from Noah Poponak with Goldman Sachs.

Noah Papa: This question comes from Noah Papa next with Goldman Sachs.

Larry Culp: Hey, good morning everyone.

Noah Poponak: Hey, good morning everyone.

Rahul Ghai: Morning Noah.

Noah Papa: Hey, good morning, everyone.

Larry Culp: Good morning. Noah, can you hear me okay? I just landed in the airport. It's a bit noisy. Loud and clear. Hopefully you were on a GE engine. I was powered by the LEAP-1B. So that's, that's a win.

Larry Culp: Good morning. Noah.

Noah Poponak: can you hear me okay? I just landed in the airport. It's a bit noisy.

Larry Culp: Loud and clear. Hopefully you were on a GE engine.

Speaker Change: Morning Noah, good morning. Noah, can you hear me? Okay, I just landed in the airport. It's a bit noisy.

Noah Poponak: I was powered by the LEAP-1B. So that's, that's a win.

Loud and clear. Hopefully, you were on a g engine.

Speaker Change: I was powered by the leaf 1 base and that's that's a win.

Larry Culp: Thank you for your question.

Speaker Change: Thank you for your question.

Larry Culp: I wanted to ask, you know, we've been in this world where air travel growth has been decelerating. Aftermarket growth has not. You know, part of that is the aging of the fleet. A lot of that is pent up demand that's being created by part component labor availability and then the pricing that that creates. All of which you've alluded to to different degrees. And so I was, I wonder if you can quantify the duration of the pent up demand. Will it take you one, two, three years to get through that? And when you built the 25 to 28 framework, are you assuming all of that pent up demand and the price that comes with it versus did you just assume the normal core algorithm of the fleet becomes the shop visits in a normal world?

Noah Poponak: I wanted to ask, you know, we've been in this world where air travel growth has been decelerating. Aftermarket growth has not. You know, part of that is the aging of the fleet. A lot of that is pent up demand that's being created by part component labor availability and then the pricing that that creates. All of which you've alluded to to different degrees. And so I was, I wonder if you can quantify the duration of the pent up demand. Will it take you one, two, three years to get through that? And when you built the 25 to 28 framework, are you assuming all of that pent up demand and the price that comes with it versus did you just assume the normal core algorithm of the fleet becomes the shop visits in a normal world?

Speaker Change: Um,

Speaker Change: what I wanted to ask, um, you know, we've been in this world where

Speaker Change: Is not um, you know, part of that is the Aging of the fleet.

Speaker Change: A lot of that is.

Speaker Change: Pent up demand that's being created by Art component labor, availability. And then the pricing, that that creates all of which you've alluded to to different degrees. And so

Speaker Change: I was I wonder if you can quantify the duration of the pent-up demand will, will it take you 1, 2, 3 years to get through that and when you build the 25 to 28 framework,

Speaker Change: Are you assuming all of that pent-up demand and the price that comes with it versus? Did you just assume the normal core algorithm of the fleet becomes the shot visits in a in a normal world?

Rahul Ghai: Well.

Larry Culp: Well.

Speaker Change: well, it's it's

Larry Culp: It's a hard question to answer quantitatively.

Speaker Change: it's it's a it's a hard question to answer quantitatively.

Larry Culp: I think you touched on many of the factors that work in the business's favor. And our favorite, you didn't touch on our increased share cycles. Right. Which helps leverage off the underlying installed base growth. And not only are some of these foundational platforms like the CFM56 or the GE90 staying in service longer, they're approaching those higher caliber shop visits as well, which is another positive mix effect. But I think with respect to the outlook here.

Speaker Change: Uh, I think you touched on many of the factors that work in, in the business's favor in our favor.

Speaker Change: You didn't touch on our increased share Cycles.

Right uh which helps lever off the uh the underlying installed base growth. And not only are some of these foundational platforms like to see if I'm 56 or the ge90.

Speaker Change: Staying in service longer.

Speaker Change: They're approaching those uh, higher calorie, shop visits as well, which is another positive mix uh, mixed effect.

Larry Culp: No, it's really, I think, looking at what we can, what we need to do to satisfy that $175 billion backlog. Right. Which is maybe the one quantitative way that catches most of what we've just touched on. And in turn, we're clearly going to be working that down over the next three years. Is whatever is pent up there flushed in three years, five years? I think that's hard to tell. Right. So many moving pieces. But again, even in this environment.

But I think with respect to the the outlook here.

Speaker Change: No. It it's really I think looking at

Speaker Change: What we can, what we need to do to satisfy that 175 billion backlog.

Speaker Change: Right. Which is maybe the the 1 quantity way that catches most of of what we've just touched on.

Speaker Change: And in turn, you know, we're, we're clearly going to be working that down over the next 3 years is is is whatever is pent up there. Flushed in 3 years, 5 years. I think that's that's hard to tell, right? So many moving pieces.

Larry Culp: To look at that backlog, to see what we're seeing on the part of customers with respect to existing fleets, let alone their skylines, their fleet plans, we come forward today with a revised update, largely on the back of the confidence born of that backlog in their plans.

Speaker Change: But again, even in this environment.

Speaker Change: to look at that backlog to see what we're seeing on the part of customers, uh, with respect to existing fleets, let alone, their their skylines, their Fleet plans,

Speaker Change: We uh we come forward today with the Verizon update. Largely on the back of uh confidence born of of that backlog in their plans.

Larry Culp: Okay, and Larry, maybe if I could sneak one in on the OE side just since I'm last here, it's sort of been asked, but just has something specifically and singularly broken wide open in the supply chain improvement process. You sound a lot better. You know, we see the Boeing numbers are finally clicking into the rates they've talked about, maybe even a little faster than they last said.

Noah Poponak: Okay, and Larry, maybe if I could sneak one in on the OE side just since I'm last here, it's sort of been asked, but just has something specifically and singularly broken wide open in the supply chain improvement process. You sound a lot better. You know, we see the Boeing numbers are finally clicking into the rates they've talked about, maybe even a little faster than they last said.

Speaker Change: Okay.

Speaker Change: and Larry, maybe if I could make 1 in on the OE side just since I'm last here, it's it's sort of been asked but just

Larry Culp: Was there one bottleneck that's now solved, or is this just sort of the triangulation of the many different efforts that have been ongoing?

Noah Poponak: Was there one bottleneck that's now solved, or is this just sort of the triangulation of the many different efforts that have been ongoing?

Speaker Change: Has something specifically in singularly broken wide open in, in the supply chain improvement process. Just you, you sound a lot better. You know, we see the Boeing numbers are finally clicking into the rates. They've talked about maybe even a little faster than they last said, um, was there 1 bottleneck? That's now, solved or is this just sort of the triangulation of the many different efforts that have been ongoing?

Larry Culp: No, I wish it would have been one bottleneck. We had stopped talking about this a long time ago.

Rahul Ghai: Right.

Larry Culp: Right.

Larry Culp: But it's a moving target because the volumes keep increasing, thankfully, and it's never been about one commodity, one supplier again. We wish it were so simple, I think, in terms of what we can control between Flight Deck and our new technology and operations organization.

Speaker Change: No. I wish it would have been 1. Bott neck. We did, we had stopped talking about this a long time ago, right? But it's a moving Target.

Speaker Change: Because the volume's keep increasing thankfully uh and it's never been about 1 comma. Uh yeah, we wish it were so simple. I think in terms of what we can control,

Larry Culp: We're better at deploying lean principles. We've got an outstanding team working more closely together, deep in the organization, deep with suppliers to put those tools to their highest and best use. Again, that's why we cite the input progress. You see that, in turn, in the output numbers that we've cited throughout the call here. But more to do. We'll be talking about supply chain again, I think, for rather the next several years. I'm really encouraged and frankly proud of what our team has done. Again, a shout out to the supply base has been there virtually every step of the way. We all know we have this wonderful opportunity to satisfy that existing backlog while inventing the future of flight. We'll wrap here and we'll get back to work.

Speaker Change: Between flight deck and our new technology and operations organization.

Speaker Change: We're better at deploying. Lean principles and we've got an outstanding team. Working more closely together. Deep in the organization, deep with suppliers,

To put those tools to their highest and best use.

Speaker Change: And again, that's why we cite the input.

Progress. You see that in turn in the output uh numbers that we've cited throughout uh the call here?

Speaker Change: But more to do. So we'll be talking about supply chain again. I think more rather than the next several years but I'm really encouraged and frankly proud of what our team has done.

Speaker Change: Again a shout out to the supply base has been there uh virtually every step of the way, but we all know we have this wonderful opportunity.

To satisfy that existing backlog while I'm in the future flight.

Speaker Change: so uh, we'll wrap here and

Blair Schorr: Larry, any final comments?

Blaire Shoor: Larry, any final comments?

Speaker Change: we'll get back to work.

Larry Culp: Blair, thanks. And thanks to you and the team for preparing this so well, particularly twofold. Now, what was going to be in Paris and here this morning? No, I would just say that again. We think GE Aerospace is an exceptional franchise with real tremendous competitive advantages. The updated outlook that we provided here reinforces our optimism about our path ahead, and we think we're well positioned to deliver significant value creation for shareholders. We went long today, but we really do appreciate the time you invested in the presentation and obviously your interest in our company.

Larry: Larry, any final comments.

Larry: Blair thanks. And thanks to you and the team for uh preparing this uh

Larry: It's like 2-fold. Now, what was going to be in Paris and uh here this morning? No, I I would just say that again. We think G spaces is an exceptional franchise.

Larry: With real tremendous competitive advantages.

Larry: The applicant value creation.

Larry: For shareholders.

We went long today.

But we really do appreciate the time you invested in the presentation and obviously your interest in our company.

Operator: Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.

Larry: Thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating.

Larry: you may now disconnect

Larry: Mhm.

Larry Culp: Sa.

Larry Culp: Sam.

Larry Culp: Sa.

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