Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Now I want to welcome to our global TV and
Speaker 2: radio audiences. I'm Danny Berger. Let's head down to the
Speaker 2: Farmborough air Show for Bloomberg. Sky Johnson is with the
Speaker 2: ge Aerospace chairman and CEO, Larry Kolchkai, Hi.
Speaker 1: Sonny Am, Thank you very much, indeed Danna, Yes, welcome
Speaker 1: back to the farm bra Asha here in the UK.
Speaker 1: As you say, Larry Culp is with me. Larry, great
Speaker 1: to see you, Thanks for spending some time with us. Look,
Speaker 1: the first thing I've got to ask you is why
Speaker 1: that we sitting in front of a very big seven
Speaker 1: four seven with your name on it.
Speaker 3: Well, it's the Geero Space name guy.
Speaker 1: Good to be with you.
Speaker 3: This is our flying test bet. As you say, this
Speaker 3: is a seven four seven Dash four hundred. This is
Speaker 3: basically our airborne laboratory upon which we test all of
Speaker 3: our engines. There's a lot of talk here at Farmborough,
Speaker 3: as there often is it the air shows, around the
Speaker 3: future of flight. We wanted to bring the flying test
Speaker 3: bed to have to Farmbrough just to reinforce and help
Speaker 3: people understand everything that we do onboard and inside the plane,
Speaker 3: to make sure that we're bringing forward the best possible
Speaker 3: engines from a safety and reliability perspective.
Speaker 1: You're going to test the next generation of engines for
Speaker 1: narrow bodies at the seven three seven or the eight
Speaker 1: three twenties on this because there's a big debate here
Speaker 1: at Farmboro about whether it's it's open rota or the
Speaker 1: traditional kind of deducted jet engine for that gender next generation?
Speaker 1: Is this the aircraft you'd used to test that?
Speaker 3: Very much so, so even though it's a wide body engine,
Speaker 3: we can test virtually any engine that we might fly
Speaker 3: across our portfolio under development on the flying test bed.
Speaker 1: Cool, let's talk a little bit about the show and
Speaker 1: what has happened here. I'm sure you've been absolutely snowed
Speaker 1: under meeting after meeting. What I've what I've seen come
Speaker 1: out of the show is again huge numbers of orders
Speaker 1: for aircraft, which means huge numbers of orders for engines.
Speaker 1: You've just landed a huge deal in India as well. Well.
Speaker 1: The backlog is getting bigger and bigger. Larry. It's a
Speaker 1: nice problem to have, but at some point you're going
Speaker 1: to have to invest in additional manufacturing kit in order
Speaker 1: to fulfill some of these huge orders that you're taking. Well, guy,
Speaker 1: it's been very busy.
Speaker 3: We've been here since Saturday, and I don't think we've
Speaker 3: had a better air show from an orders perspective. We've
Speaker 3: had a number of announcements. I think the one you're
Speaker 3: referring to is one we let out yesterday afternoon, over
Speaker 3: a thousand engines with Indigo Airlines in India. Really excited
Speaker 3: about that multi year commitment. There are others. I won't
Speaker 3: take our limited time here to go through the roster
Speaker 3: of them. There are many narrow body and wide body.
Speaker 2: Guy.
Speaker 3: We've been investing in our manufacturing footprint, in our supply
Speaker 3: chain for years. We know that a good air show
Speaker 3: is interesting. But we're on a multi year ramp both
Speaker 3: with our commercial customers and in defense. Right we're sold
Speaker 3: out into the early twenty thirties. So whether it be
Speaker 3: investments fixed capital, just as importantly investments in people and process,
Speaker 3: those are the things that enabled us, say in the
Speaker 3: first half of this year, to increase our engine deliveries
Speaker 3: by over thirty percent.
Speaker 1: Year over year.
Speaker 3: We're going to need to be driving that sort of improvement.
Speaker 3: That's what it grows for years to come.
Speaker 1: Does that pace increase, Does the cadence of that start
Speaker 1: to increase as you say you sold out for years
Speaker 1: and years to come.
Speaker 3: Well, I don't think we need to necessarily compound at
Speaker 3: thirty percent, but we're going to have to do more
Speaker 3: in the second half of this year, yep, than we
Speaker 3: did in the first half, and twenty seven is going
Speaker 3: to need to be bigger than twenty six. So we
Speaker 3: know we're on a multi year ramp. And what I'm
Speaker 3: so excited about we said this last Thursday at our
Speaker 3: earnings call. We've got nine quarters in a row now
Speaker 3: where we've seen double digit sequential increases from our suppliers
Speaker 3: that are probably prone to pace us the most, which
Speaker 3: tells me they're investing. We're collaborating to break bottlenecks where
Speaker 3: they exist, and we're able to get more from them.
Speaker 3: In turn, we're able to deliver more to our airframe
Speaker 3: and airline customers.
Speaker 1: Do you think you're going to have to invest more
Speaker 1: in that you did highlight there was something that really
Speaker 1: stood out in terms of what you said on that
Speaker 1: earning school, But is there something do you think you're
Speaker 1: gonna have to invest more in that supply chain? We've
Speaker 1: talked about kind of investing in your capital infrastructure. Do
Speaker 1: you think you're going to have to invest in these
Speaker 1: is that M and A stories that maybe you think
Speaker 1: about in order to just get that supply chain to
Speaker 1: where you want it to be.
Speaker 3: There's more to come, without doubt, most of that will
Speaker 3: be organic right within our operations. Some of it will
Speaker 3: come by way of collaboration. I'm sure they'll be inorganic
Speaker 3: investments as well. We've done a number of small acquisitions
Speaker 3: with suppliers that were better off, frankly, under our roof
Speaker 3: than at arms Linked. But at the end of the day,
Speaker 3: it's not about ownership. It's about problem identification and breaking
Speaker 3: those constraints. Again, I think we've made a lot of
Speaker 3: progress the last few years in partnership with a number
Speaker 3: of our key suppliers, large and small, many of them here.
Speaker 1: More to come, Okay, there's been so much new flow
Speaker 1: as we've been here at the show. One of them
Speaker 1: has been around what is happening with oil prices and
Speaker 1: the fact that we're seeing them heading back up again
Speaker 1: as a result of what's happening in the Gulf right now.
Speaker 1: If I talk to Kelly over a Boeing, if I
Speaker 1: talk to Gyoma at Airbus, They're like, this is in
Speaker 1: some ways good news for us because what it does
Speaker 1: is it encourage our customers, the airlines, to invest in
Speaker 1: the most up to date aircraft, most fuel efficient aircraft
Speaker 1: that they can get their hands on. For you, though,
Speaker 1: I just wonder whether it's a slightly different story because
Speaker 1: what we do see as well is that the airlines
Speaker 1: look at their older fleets and go, maybe we should
Speaker 1: retire some of those older aircraft. But the spare past
Speaker 1: business is a big margin driver for you. How do
Speaker 1: you see the balance working there?
Speaker 3: Well, I would say what's good for Boeing or good
Speaker 3: for Airbus is good for General Electric.
Speaker 1: Okay, there's no two ways about that.
Speaker 3: But the other piece of the equation right now, guy,
Speaker 3: that you didn't touch on, frankly, as demand. Every airline
Speaker 3: CEO that has been at Farnborough, those that we talked
Speaker 3: to just a few weeks ago at IATA in Rio,
Speaker 3: all have remarked about how strong demand has been even
Speaker 3: in the face of some of the oil price disruptions
Speaker 3: since the springtime. So we're looking at a situation where
Speaker 3: we have very strong aftermarket demand, we have very strong
Speaker 3: new make demand and again, we can never forget about defense.
Speaker 3: So we have our we have our work cut out
Speaker 3: for us on a multi year basis. We know we're
Speaker 3: going to have to ramp We're going to make those investments,
Speaker 3: drive those process improvements. But that work is underway at
Speaker 3: Geerero Space and that work will continue.
Speaker 1: One of the big discussions here has been almost about
Speaker 1: the aircraft. It's not here and that's the next generation
Speaker 1: of narrow body. We talked about it a little bit
Speaker 1: earlier on to get a tested on this seven four
Speaker 1: seven the engine for that. You're pushing quite hard for
Speaker 1: the open road to technology. You think that's the future.
Speaker 1: You think it's going to be simple and easier to maintain,
Speaker 1: have some fairly big cost efficiencies that come with it.
Speaker 1: The airframe is aren't they yet? They don't appear ready
Speaker 1: judging by the conversations that I've had to be ready
Speaker 1: to make a decision on that. How like can they
Speaker 1: leave it? When do you think that decision is going
Speaker 1: to come?
Speaker 3: Well, we had an announcement yesterday in concert with Airbus
Speaker 3: YEP with CFM International. We were talking about our new
Speaker 3: flying tests that equivalent for the open fan architecture. It's
Speaker 3: a Technology Development Program guys. As you well know, this
Speaker 3: is a multi year effort. We do think the open
Speaker 3: fan architecture provides both efficiency and maintenance or cost of
Speaker 3: ownership benefits. So we think we will ultimately be able
Speaker 3: to deliver to the airlines the ultimate customer an opportunity
Speaker 3: to do both. It's not yet a.
Speaker 1: Product, so there's work to do here.
Speaker 3: There's plenty of time for us all to work that out.
Speaker 3: But every next generation in our body has always come
Speaker 3: forward with a step function improvement and performance. Very hard
Speaker 3: to justify the investment to develop one, let alone buy
Speaker 3: one without that. We're confident that the open fan architecture
Speaker 3: is going to be the enabler in that regard, Larry, So.
Speaker 1: It's a pleasure. Thank you very much, Deep spending a
Speaker 1: little bit of time with us here at the farmber Aha.
Speaker 1: We greatly appreciate it. Larry Culp, the CEO of ge Aerospace,
Speaker 1: joining us here at Farmborough