GE Aerospace (GE): Powering American Excellence In Jet Engine

GE Aerospace: History and Legacy of Innovation

General Electric, or GE, started as the Edison General Electric Company in 1889 and turned into a diverse industrial conglomerate with an increasingly finance-focused outlook in the 1990s and 2000s.

As part of this diversification, it entered the airplane business in 1917, when the USA entered World War I.

The US government needed a company to provide its nascent Air Force with its first airplane engine “booster”: also called a turbosupercharger, installed on a piston engine, it used the engine’s exhaust gases to drive an air compressor to boost power at higher altitude.

GE, an energy company, has extensive experience with turbines for power plants and has transferred this expertise to plane turbines and engines.

Today, the company’s energy activity is gathered in the GE Vernova, which we covered in a dedicated report: “GE Vernova (GEV): Meeting the Global Surge in Power Demand”.

GE Aerospace History

The Aerospace division, now GE Aerospace (GE +1.09%),  became quickly the driving force behind American excellence in jet engine manufacturing. Among its many historic achievements, a few can be mentioned:

• Mass manufacturing of turbosuperchargers enabled aircraft to fly higher, with heavier payloads.
• America’s first jet engine.
• The first turbojet engines to power flights at two and three times the speed of sound.
• The first high bypass turbofan engine, allowing for enhanced fuel efficiency, reduced noise emissions, and improved overall performance.

For a while, GE Aerospace was solely a military jet engine manufacturer, having equipped the US Air Force in WW1, WW2, Korea, and the Cold War.

Using the TF39 military engine as a template, it developed its first civilian engine in 1971, the CF6 engine.  It would turn out to have the largest installed base of any widebody engine in history, with the latest version, the CF6-80C2, still in production today.

The Rebirth of GE Aerospace: From Conglomerate to Aerospace Leader

Since its foundation as an energy company, and then its extension as a plane engine manufacturing company, GE lost its way in the 1990s.

During this period and in the 2000s, GE started to make multiple acquisitions and diversification moves to turn it into a giant industrial conglomerate, with activities spreading into healthcare, telecommunication, computing, entertainment, etc.

This turn started in 1981 under the direction of the company’s CEO, Jack Welch, who focused on the company’s financial performance first and engineering prowess second.

Source: Reuters

He was also renowned for his ruthless approach to management. He notably pioneered the practice of annually firing 10% of the employees with the lowest ratings on internal reviews, earning him a comparison to a neutron bomb, leaving only the empty building after him (“Neutron Jack”).

Another trend of this period was the financialization of the company, with the rise of GE Capital, the banking arm of the company. At one point, GE Capital was a $500B company, making 2/3^rd of GE’s profits.

GE Capital hands were in everything from credit cards to insurance, to mortgages. At the time, this was all seen as a smart, low-cost way to boost profits. “And you don’t have to build a factory,” Welch supposedly enthused.

At the time, acclaimed as a revolution in management, Welch’s methods would ultimately prove to be almost fatal to the company.

Source: Amazon

Creative accounting and over-reliance on the banking branch came to a crash in 2008. The company had to divest at bargain prices many branches like NBC-Universal, GE Plastics, GE Water, and GE Appliances.

This created an almost 2-decade-long crisis, with a decline in aviation sales due to the pandemic, made worse. Ultimately, this led to the split of the company into 3, with each sub-segment more concentrated on a unique technological advantage and able to go its own way.

So the old GE conglomerate is now history and replaced by GE Vernova (the energy branch) (GEV +1.21%), GE Healthcare (GEHC -0.4%) (Medical devices, imaging, and software), and GE Aerospace.

GE Aerospace: Products, Services, and Market Strategy

GE Aerospace By The Numbers

Now, leaving behind the trouble of both the Welsh era and the pandemic, GE Aerospace is a force to reckon with in the airplane engine industry.

For example,  at any given time, up to 950,000 people are flying on GE-powered aircraft, with 3.4 billion passengers flying with GE technology per year. These impressive numbers are reached because no less than 3 out of 4 commercial flights are powered by GE Aerospace’s fleet of 44,000 engines in service.

More than 70% of the commercial engine revenues are derived from service & maintenance, and 55% of the defense engines revenues.

Products

The company’s main activity is split between its civilian/commercial activity, and its defense activity, both focused on jet engines.

Source: GE Aerospace

GE Aerospace produces engines powering military aircraft like the F-15, F-16, and F/A-18 Super Hornet. GE also develops advanced engines like the XA100 for future military aircraft. 

The military would like more range (…), more thrust, and they need more better thermal management. (…) We know our XA100 is the only engine that can  fulfill that mission. It’s the only engine that has been tested. We have two of them.

Larry Culp – CEO of GE Aerospace

Overall, the civilian segment is the most central for GE Aerospace, making up 72% of revenues. The company’s engines are used extensively by both Boeing and Airbus’ flagship models.

Source: GE Aerospace

This is not to say that the defense segment is not important, as it is often the occasion for GE’s engineers to push the limit of what is possible, and develop new technologies that are later transferred to the commercial branch.

GE Aerospace is also producing for the defense sector “aeroderivative marine gas turbines”, to provide power to military vessels. These turbines have the capability to burn a wide variety of fuels and meet existing and proposed environmental regulations.

Meanwhile, the defense products profit from the commercial airplane activity, as they provide GE the economies of scale that can then be reused in the production of military jet engines.

Services

As aircraft engines are critical and fragile pieces of equipment, GE Aerospace makes most of its revenues from the regular maintenance and repair services, with sales of the engine only 25% of the revenues in its entire life cycle.

Source: GE Aerospace

Overall, a sold engine is expected to keep generating revenues for the next 40 years.

GE Aerospace Markets

Both GE Aerospace’s civilian and military markets are driven by long-term growth trends.

The commercial flight sector is expected to grow quicker than global GDP, as more developing countries reach the threshold where flying becomes affordable for a large part of the population. Renewal of existing aging fleets of aircraft is also helping more sales of new engines.

For the defense sector, growing geopolitical tensions and defense budgets, as well the need for modernization of military aircraft fleets in the context of the return of Great Power competition, and the US facing peer adversaries (Russia, China) is also expected to grow demand for GE Aerospace engines.

Source: GE Aerospace

What Makes GE Aerospace Competitive? Scale, Experience, and Defense

GE’s position as the world’s largest engine manufacturer puts it in a position to have a few key advantages against the rest of the industry.

Scale

The first one is simply scale, with R&D costs spread around many more unit sales. This also puts GE Aerospace in the comfortable position of having many years of backlog of orders for its engines, making its revenues for the upcoming years very predictable.

The large scale of the existing fleet of engines in service gives GE Aerospace the world’s strongest MRO network (Maintenance, Repair, and Overhaul). As airplanes generally need check ups, maintenance and repair when they land, this is a definitive strength of GE sales pitch to aircraft manufacturers, as this will make airline companies more likely to be sure their planes can be serviced anywhere in the world.

Experience

Another advantage is long expertise in the field, especially in design and manufacturing. Large facilities running at full production capacity, with predictable demand for years, will tend to be more profitable, as the capital expenditures are used optimally.

While this can also be limiting innovation, the established structures and tested safety profiles are beneficial in a conservative industry like aeronautics, looking first and foremost for safety and reliability.

Defense Contracts

The dual presence in the defense and civilian sectors is one last business moat for GE, as defense contracts are notoriously difficult for newcomers to penetrate.

This not only gives the company some “guaranteed” revenue streams, but also provides GE with a customer willing to take risks with new designs, and deeper pockets, as long as better performances can be expected.

Later down the road, these innovations can then be transposed to the civilian market, once any issues and difficulties, as well as the requirement for low-cost mass manufacturing, have been ironed out.

 The Future of GE Aerospace: Green Engines and Operational Reform

New Engines

Line Renewal

The company’s new generation of engines has been launched in the 2010s and is focused on improving fuel efficiency.

Source: GE Aerospace

This is of course a matter of saving money for airlines, who work in an extremely competitive industry with very thin margins, and where less fuel consumption can be a matter of life or death for airline companies.

But this will also help airlines to match their emission reduction targets, with likely penalties in the upcoming decades for the ones which stay too polluting.

Engines Of The Future

For this reason, the 2030s onward for GE Aerospace will be centered on the “RISE” engines (Revolutionary Innovation for Sustainable Engines) still in development.

It aims to achieve the same noise, speed, and altitude of today’s aircraft, but with 20% more fuel efficiency and more importantly, 100% compatible with both hydrogen and Sustainable Aviation Fuels (SAF).

These alternative fuels are largely considered the only viable option for zero-emission air transport, at least as long as battery technology has not achieved radical improvement in density to allow for electric airplanes, something which will probably take several more decades.

GE Aerospace Reform

In the post-Welch era, the company had to overhaul all of its design and industrial processes to go back to the technical and operational excellence that had built its reputation, and had somewhat been gutted by the drive for financial efficiency at all cost.

Numerous reforms have been conducted to overhaul the company’s operations:

• Consolidating facilities for better control and internal communications.
• Streamlining internal processes and reducing overhead.
• Overhauling GE’s supply chain to identify weak points and causes for delays, done both through closer relations with suppliers and diversification of supply.

This was notably implemented on the LEAP engine production line, where capital investment was reduced by 50% and labor productivity increased by 50%.

These reforms led GE to identify the suppliers responsible for >80% of late or failed deliveries, which can put a halt to the entire assembly line.

They are now working to solve these issues by investing in external suppliers (sometimes up to the complete acquisition of the supplier) and a much closer relationship to anticipate problems sooner, notably with a daily management of the supply.

“The shortages that cause us to be late on deliveries really come from about 15 different suppliers across our supply chain.

We have 550 engineers going in to work with those suppliers to identify bottlenecks, identify constraints, and really solve those problems.”

Larry Culp – CEO of GE Aerospace

As these reforms already delivered a 25% increase in commercial engine delivery, it can be said the company seems on the right track.

GE Aerospace Manufacturing: U.S. Investments and Innovation

From 2010 to 2016, GE Aerospace invested $4.3 billion in the USA to create new factories and to expand existing sites.

GE is planning to do another round of $1B of investment in manufacturing capacities in the USA in 2025, doubling the investment it did during the previous presidency. The investment comes with plans to hire 5,000 U.S. workers in manufacturing and engineering roles.

“Investing in manufacturing and innovation is more critical than ever for the future of our industry and the communities where we operate. Together, this will keep the United States at the forefront of aerospace leadership”

Larry Culp – CEO of GE Aerospace

Among the most advanced capacities of GE can be mentioned:

• The Auburn Additive manufacturing, with rows of very advanced 3D printers installed to produce thousands of fuel nozzle injectors for the LEAP engine each year.
• The CMC Fastworks Laboratory in Evendale, integrating the production of ceramic matrix composite (CMC) components.
• Asheville CMC manufacturing mass-producing CMC components for commercial and military engines in North Carolina.
• The expanded Peebles Test Operation in rural Adams County, Ohio, composed of 11 engine test sites, including two large indoor sites.

Overall, the large quantity of materials made in the USA should help limit the impact of tariffs. However, as GE Aerospace also counts among its most important clients the European Airbus, it could be caught in the crossfire if 50%+ tariffs are imposed on the EU and retaliatory tariffs are imposed on US exports.

Besides the location of its industrial production, GE Aerospace also counts on more cost controls and price hikes to protect it from the effects of tariffs.

GE’s Open Flight Deck: The Future of Avionics Innovation

GE Aerospace is a part of the “Open Flight Deck” initiative since 2017, in a industrial and academic partnership that includes BAE Systems, Rolls-Royce, Coventry University and the University of Southampton.

This looks to address the huge barrier to adopting new technologies on the flight deck due to the high cost of change and certification. This will instead develop an open standard for industry that allows interfacing functional ‘apps’ to be developed, which are then easier and quicker to deploy.

“Open Flight Deck will deliver order-of-magnitude reductions in the cost of change, future proofing platforms by enabling regular upgrades of flight deck applications.  This technology will deliver significant benefits to future aircraft manufacturers, airlines and pilots.”

Alan Caslavka, president of Avionics for GE Aviation.

This approach was pioneered on the Boeing 787 where a similar platform enables suppliers to plug in modules within an overall platform architecture, giving the aircraft manufacturer the flexibility to upgrade systems or choose the best suppliers for individual subsystems.

By setting these new standards, GE Aerospace and BAE are looking to create the next template for the industry, which could ultimately force other competitors to join in, or risk being left behind.

GE Aerospace Financial Overview: Growth, Buybacks, and Outlook

Revenues, operating profit, and free cash flow have been steadily growing since 2023 and should keep doing so in 2025.

Source: GE Aerospace

This was in large part driven by the improving efficiencies at the manufacturing level, with not only lower costs, but also more engines produced per year, leading to catching up on the massive $140B order backlog.

Historically, GE Aerospace has been a very shareholder-friendly company, even in the post Welch-era where innovation, manufacturing efficiency and engineering quality have taken back the front seat of the company’s concerns.

Returns to shareholders are mostly in the form of share buybacks, with $1.9B in buyback in Q1 2025 and $0.3B in dividends.

Most of the costs associated with the split from GE Vernova and GE Healthcare are now over, with an estimate of around $220M only remaining.

The company is also very financially secure, as it has a cash balance of $12.4B for a total borrowing of 19.6B in Q1 2025.

Conclusion

GE Aerospace is a giant in a profitable but also very technical niche: jet engine design and manufacturing.

As a pioneer of the industry, it is still ahead today when it comes to innovation, with fuel efficiency and acceptance of green fuels likely the next step after decades centered on increased performance.

Meanwhile, military aircraft are another source of income and essentially subsidize innovation for the rest of the company.

This does not mean that the company is without competitors or potential disruptors, like for example supersonic airplanes, or the arrival of Chinese COMAC planes on the market (for now only in China and Asia).

But as most of the existing aircraft fleets will require maintenance for decades, and new designs of aircraft are still mostly reliant on GE engines, the company is almost guaranteed to enjoy several more decades of a dominant position in the market.

As the troubles of the hyper-financialization strategy of the 2000s are now being left behind, the company is likely to keep innovating and stay a center of excellence in American manufacturing.

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