A General Electric logo on the engine of a Boeing 777-9 aircraft, near Paris, on June 18.BENOIT TESSIER/Reuters
General Electric GE-N on Tuesday raised its full-year profit forecast for a third time this year after quarterly earnings topped Wall Street estimates on robust demand for jet engine parts and services and a better performance in its renewable business.
In an interview, CEO Larry Culp said the company is aiming for a 20 per cent to 25 per cent year-on-year increase in the engine deliveries in 2024 – lower than a revised 40 per cent to 45 per cent annual growth this year.
Still, hitting the target will not be easy as it requires quarter-on-quarter improvements in the supply chain, he said.
“Our suppliers have work to do to continue to drive the sequential improvements,” he told Reuters. “There’s no silver bullet here.”
LEAP engines, which GE produces in a joint venture with France’s Safran, power the narrow-body aircraft of Boeing Co and Airbus. However, persistent shortages of labour and parts have left the company’s suppliers hamstrung.
The company said supplier delinquencies shot up 25 per cent in the third quarter from a quarter ago. It forced GE to trim the delivery growth target for LEAP engines this year by at least 5 percentage points and push out some of the deliveries into 2024 and 2025.
A slowdown in deliveries puts a question mark over plans at Boeing and Airbus to ramp up output. It is also a setback for airlines’ efforts to modernize their fleets. Carriers are already dealing with the fallout of a rare manufacturing flaw in Pratt and Whitney’s popular Geared Turbofan (GTF) engines that could ground hundreds of Airbus jets in coming years.
GE has said it is aligned with Boeing and Airbus on demand for LEAP jet engines through the end of 2024. Culp said the company is working hard to deliver to the expectations of its customers.
When asked if plane makers need to review their output goals in view of the persistent supply constraints, Culp said airframers would be “paced by their slowest, their weakest supplier.”
To help ease the bottlenecks, GE has deployed its machinists and engineers at the facilities of its suppliers. Those measures have helped improve output and the problem is no longer broad-based.
But the demand for both aftermarket services and new engine deliveries is so strong that GE and its suppliers need to do more, Culp said.
“If we needed six of something per week from a certain supplier in the second quarter, that number probably went to seven in the third, goes to eight in the fourth,” Culp said. “There’s no simple solution here.”