Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Right now, we're going to head back to Brazil to
Speaker 2: hear from the CEO of GE Aerospace G of course,
Speaker 2: a major conglomerate that has split up and gone into
Speaker 2: pieces here over the last few years. Larry Kulp is
Speaker 2: the CEO of GE Aerospace. Guy Johnson, our colleague from London,
Speaker 2: is in Rio for that interview.
Speaker 3: He joins us. Now, Guy over to you.
Speaker 4: Thank you very much, indeed, Yeah, Larry is here. Nice
Speaker 4: to see you. Larry, Thank you very much indeed for
Speaker 4: spending time with us, some time with.
Speaker 1: Us this morning.
Speaker 4: Let's talk about the here and now to start the
Speaker 4: conversation off. And we're in a situation where we've we've
Speaker 4: got an award that's having an impact on aviation, it's
Speaker 4: having an impact on fuel prices. What impacts are you
Speaker 4: seeing right now A G's aerospace as a results of
Speaker 4: what is going on?
Speaker 5: Wellkay, first of all, thanks for the opportunity to visit
Speaker 5: with you this morning. And what we've seen really is
Speaker 5: nothing but a continuation of the strength that we saw.
Speaker 3: Through the first quarter of this year.
Speaker 5: Right It's interesting because we thought we might see some
Speaker 5: change in airline behavior, but we really haven't. I look
Speaker 5: at spare parts orders on a regular basis. We were
Speaker 5: up thirty percent in the first quarter. We've actually seen
Speaker 5: those spare parts growth rates increase to forty percent year
Speaker 5: every year. We've seen retirements tick down. We've seen engine removals,
Speaker 5: which are really a precursor to a shop visit, actually
Speaker 5: tick up at a rate faster than we can complete
Speaker 5: the shop visits currently. So what I think we see
Speaker 5: our airlines very focused on making the most of the
Speaker 5: summer flying season, but also making preparations for the other
Speaker 5: side of the situation in the Gulf, because the lesson
Speaker 5: we all took from the pandemic was things come back.
Speaker 5: They come back sooner, and they come back stronger than
Speaker 5: we would ever have anticipated.
Speaker 4: But you're surprised it's coming later. That, I guess is
Speaker 4: the takeaway from this part of the conversation. You thought
Speaker 4: we may have seen it already.
Speaker 5: I would have thought we would have seen a little
Speaker 5: bit of change in airline behavior, but we haven't seen
Speaker 5: that yet.
Speaker 3: So yes, surprised pleasantly.
Speaker 4: So when it comes and you start to see some
Speaker 4: effects of this coming through, does it start in the Gulf?
Speaker 4: Is there any hint at this point that maybe some
Speaker 4: of the golf carriers start differring, start changing behavior. Is
Speaker 4: that where it begins and it spreads out.
Speaker 5: Well, I think the airlines around the world are being
Speaker 5: impacted in different ways. So depending on where you are
Speaker 5: geographically the market segment you serve, you're seeing different impacts
Speaker 5: or looming impacts on your business and can dely've seen
Speaker 5: a number of airlines that have adjusted their schedules over
Speaker 5: the next several months, So that's happening. But in terms
Speaker 5: of the interface that we have again both with respect
Speaker 5: to keeping the planes they have today in the air
Speaker 5: during this prize summer flying season, but also making preparation
Speaker 5: for the other side of the conflict, the airlines really
Speaker 5: have not changed the way they are servicing today's fleets
Speaker 5: and preparing to expand and modernize.
Speaker 4: But where do you think it? What does it look
Speaker 4: like when it shows up? What does it look like
Speaker 4: when we still we get through the summer, we get
Speaker 4: into the into the fall, into the autumn. What are
Speaker 4: the early things that we kind of watching the aviation
Speaker 4: sext are looking for clues that things are may be
Speaker 4: starting to slow down or there's an effect.
Speaker 1: What do I look for, I would.
Speaker 5: Distract, Well, what we're going to be looking for are
Speaker 5: those same indicators I mentioned earlier, right right, what's happening
Speaker 5: with spare parts orders, what's happening with retirements, what's happening
Speaker 5: with engine removals? Our airlines in a position where they
Speaker 5: can't or have decided not to prepare for the other side.
Speaker 5: We were out a week and a half ago at
Speaker 5: an investor commerce in New York Guy and what we
Speaker 5: basically reiterated, is it in twenty twenty six. Given what
Speaker 5: we see, we feel very good about our services growth
Speaker 5: coming into it at a mid teens rate, and our
Speaker 5: medium term outlook, which has our.
Speaker 3: Pack for twenty twenty seven.
Speaker 5: So I don't want to in any way suggest that nothing
Speaker 5: might happen, but from what we see right now, a
Speaker 5: hyper focus on the near term and preparations for.
Speaker 3: The other side.
Speaker 1: How do you get ready for that? What do you do?
Speaker 4: Are you getting it ready? Are you preparing for a storm?
Speaker 4: Is it kind of what are you thinking about in
Speaker 4: terms of the way you run the business to get
Speaker 4: ready for that? Because that's the lesson of the past.
Speaker 4: The recent pass is get ready use this time wisely
Speaker 4: to prepare for that kind of story.
Speaker 5: Well, I couldn't be more proud of the way the
Speaker 5: g Eerospace team is dealing with both the short term
Speaker 5: and getting ready for possibilities. But again, when you look
Speaker 5: at our business, given the strength of the backlogs that
Speaker 5: we have both in narrow bodies and wide bodies well
Speaker 5: into the twenty thirties, the significant demand that we have
Speaker 5: supporting a million passengers in the air at any one
Speaker 5: point in time with our engines underwing. A lot of
Speaker 5: what we're doing not only in our own operations, in
Speaker 5: our manufacturing and our service footprints, but also in partnership
Speaker 5: with our supplier partners has given us the opportunity to
Speaker 5: put up the numbers that we did in the first quarter,
Speaker 5: to see lead engine deliveries up over sixty percent for example,
Speaker 5: So a lot of good growth. We want to make
Speaker 5: sure that we're in a position to continue you to
Speaker 5: support the airlines in whatever way we do well into
Speaker 5: the next several years.
Speaker 1: You bring up with splashes, let's talk about that.
Speaker 4: From a moment post pandemic, the supply chain has been
Speaker 4: the issue.
Speaker 1: I'm trying to.
Speaker 4: Get the supply chain to work to deliver has been
Speaker 4: the challenge, are you beginning.
Speaker 1: To win that war now? Is that battle turning in
Speaker 1: your favor?
Speaker 4: Do you think you've got this situation under control in
Speaker 4: a way that you haven't for maybe the last few years.
Speaker 5: We have eight quarters now sequentially where we have seen
Speaker 5: significant increases and inputs from our critical supplier partners. I
Speaker 5: think what we've actually done is thrown the winning the
Speaker 5: war framework out the window and gotten into deep technical,
Speaker 5: collaborative problem solving, making sure we're making the most of
Speaker 5: existing resources with our supplier partners while we're investing medium
Speaker 5: to long term in additional capacity. There's no way that
Speaker 5: we take our leap deliveries up over sixty percent in
Speaker 5: the first quarter. No way we have our services revenue
Speaker 5: is up over thirty percent if we weren't improving the
Speaker 5: supply chain. The challenge guy that I think a lot
Speaker 5: of people don't appreciate, is this is a wonderful opportunity
Speaker 5: that we'll be wrestling with for the rest of this decade. Yeah,
Speaker 5: it'll never be a moment where we're finished. Because we
Speaker 5: have to do more in the back half of this
Speaker 5: year than we did in the first half of this year.
Speaker 5: The same will be true in twenty seven and twenty eight.
Speaker 5: That's the beauty of having one hundred and seventy billion
Speaker 5: dollars worth of backlog. We know for the rest of
Speaker 5: this decade we're going to need to get better in
Speaker 5: our own operations and in partnership with our suppliers. But
Speaker 5: if we're bored together, nobody wins. But if we're collaborating,
Speaker 5: everybody does.
Speaker 4: That sounds like you're winning. That sounds like you're in
Speaker 4: a much better place right now. In terms of competition,
Speaker 4: Let's just talk about competition for a moment. You are
Speaker 4: in a good place right now. Scott Kirby at United,
Speaker 4: it's been singing your praises this morning, talking about you
Speaker 4: guys and the job that you're doing. He's talked less
Speaker 4: favorably about the competition Rolls Royce, Rolls Royce has gone
Speaker 4: through is going through a transformation right now.
Speaker 1: It will emerge from that at.
Speaker 4: Some Does competition get tougher further down the road when
Speaker 4: two fan is in a different position, when he's got
Speaker 4: a handle on that business and a handle on his engines,
Speaker 4: does competition get tougher?
Speaker 5: Well, first off, I'm delighted to hear Scott's comments we're
Speaker 5: celebrating with United one hundred years of their operations and
Speaker 5: our partnership with them.
Speaker 3: Scott's a friend. We're focused on the airlines, yep. Right.
Speaker 5: If we focus on the airlines and what they need,
Speaker 5: and that's the beauty of our business.
Speaker 3: Guy. We don't have a one and done transaction.
Speaker 5: We live with these engines from delivery for twenty or
Speaker 5: thirty years, and that is what I think enables us
Speaker 5: to make sure that whether it's a shop visit they
Speaker 5: need completed in the next ninety days or working with
Speaker 5: them with respect to delivering on their skylines, we're in
Speaker 5: a position to make sure we understand their needs and
Speaker 5: then turn around and do everything we can in twenty
Speaker 5: sixth a year of what we call being more customer driven.
Speaker 5: Competition will do what competition does, but we're far more
Speaker 5: focused on our customers today.
Speaker 4: Okay, competition make suffer, I'm taking away from that. But
Speaker 4: you think you've got you've got to handle on it.
Speaker 4: That is that the right interpretation.
Speaker 5: I'll let you and others talk about where our competitors are.
Speaker 5: I think in terms of the way our senior team
Speaker 5: and our board are oriented. Let's be focused on the customer. Okay, customer,
Speaker 5: we'll lead away.
Speaker 4: President She's coming in September to the United States. Should
Speaker 4: I expect big ge orders?
Speaker 5: Well, we were very pleased with the news we had
Speaker 5: in Beijing when both Kelly or Berg from Boeing and
Speaker 5: I were there. Honored to ye be there with the President.
Speaker 5: I think the foundation was laid, the door is opened,
Speaker 5: will be a good bit of work up for the TA.
Speaker 4: So there was an expectation that maybe that that trip
Speaker 4: would have delivered more. Is it a kind of is
Speaker 4: it a two part story? Part one we've seen Part
Speaker 4: two comes in September.
Speaker 5: I think it's a journey and there was an important
Speaker 5: step taking in Beijing, no doubt in my mind.
Speaker 4: Okay, final quick question. We're always done with the current
Speaker 4: generation of engines. We are going to be moving on
Speaker 4: to the next generation of engines, which you see as
Speaker 4: being an open ROTA kind of configuration.
Speaker 1: Yeah, huge blades at the front of the engine.
Speaker 4: Many of the airline CEOs that I talked to at
Speaker 4: the moment say, let's just fix what we've got right
Speaker 4: now and make sure it works properly.
Speaker 1: What we want is for reliability.
Speaker 4: What do you say to that in terms of what
Speaker 4: this next generation of aircraft engines will actually deliver.
Speaker 5: Well, we couldn't agree more. Right here we are in
Speaker 5: twenty twenty six. Our leaf engine is still a relatively
Speaker 5: new engine. Our GE NX, our leading wide body engine
Speaker 5: still relatively new. Our GE ninety really the workhorse in
Speaker 5: the wide body space, probably a teenager, not a mature adult.
Speaker 5: So these are engines that are going to fly for decades,
Speaker 5: and we are working to improve.
Speaker 3: The durability and reliability of those engines.
Speaker 5: That said, we need to be investing in twenty twenty
Speaker 5: six to be ready for that next generation narrowbody that
Speaker 5: may be ten or fifteen years out from where we
Speaker 5: are today.
Speaker 3: If we're not investing today, we're not ready.
Speaker 5: Then we do think that the open fan architecture will
Speaker 5: allow us to a dress those reliability and durability concerns
Speaker 5: as well as deliver the next breakthrough inefficiency and sustainability.
Speaker 1: So it becomes simpler, not more complicated, exactly.
Speaker 5: And that's the technology breakthrough that allows us to do
Speaker 5: both is my friend Jim Collins would say, to employ
Speaker 5: the genius of the end durability and efficiency.
Speaker 4: Larry's Curtesy, Thank you very much, and Dee for spending
Speaker 4: some time with us this morning. Guys, back to you
Speaker 4: in the studio Larry Cole, the CEO of G Aerospace,