WEBVTT - GE CEO Talks Company's Evolution

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>Right now, we're going to head back to Brazil to

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<v Speaker 2>hear from the CEO of GE Aerospace G of course,

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<v Speaker 2>a major conglomerate that has split up and gone into

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<v Speaker 2>pieces here over the last few years. Larry Kulp is

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<v Speaker 2>the CEO of GE Aerospace. Guy Johnson, our colleague from London,

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<v Speaker 2>is in Rio for that interview.

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<v Speaker 3>He joins us. Now, Guy over to you.

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<v Speaker 4>Thank you very much, indeed, Yeah, Larry is here. Nice

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<v Speaker 4>to see you. Larry, Thank you very much indeed for

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<v Speaker 4>spending time with us, some time with.

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<v Speaker 1>Us this morning.

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<v Speaker 4>Let's talk about the here and now to start the

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<v Speaker 4>conversation off. And we're in a situation where we've we've

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<v Speaker 4>got an award that's having an impact on aviation, it's

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<v Speaker 4>having an impact on fuel prices. What impacts are you

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<v Speaker 4>seeing right now A G's aerospace as a results of

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<v Speaker 4>what is going on?

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<v Speaker 5>Wellkay, first of all, thanks for the opportunity to visit

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<v Speaker 5>with you this morning. And what we've seen really is

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<v Speaker 5>nothing but a continuation of the strength that we saw.

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<v Speaker 3>Through the first quarter of this year.

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<v Speaker 5>Right It's interesting because we thought we might see some

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<v Speaker 5>change in airline behavior, but we really haven't. I look

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<v Speaker 5>at spare parts orders on a regular basis. We were

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<v Speaker 5>up thirty percent in the first quarter. We've actually seen

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<v Speaker 5>those spare parts growth rates increase to forty percent year

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<v Speaker 5>every year. We've seen retirements tick down. We've seen engine removals,

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<v Speaker 5>which are really a precursor to a shop visit, actually

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<v Speaker 5>tick up at a rate faster than we can complete

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<v Speaker 5>the shop visits currently. So what I think we see

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<v Speaker 5>our airlines very focused on making the most of the

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<v Speaker 5>summer flying season, but also making preparations for the other

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<v Speaker 5>side of the situation in the Gulf, because the lesson

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<v Speaker 5>we all took from the pandemic was things come back.

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<v Speaker 5>They come back sooner, and they come back stronger than

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<v Speaker 5>we would ever have anticipated.

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<v Speaker 4>But you're surprised it's coming later. That, I guess is

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<v Speaker 4>the takeaway from this part of the conversation. You thought

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<v Speaker 4>we may have seen it already.

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<v Speaker 5>I would have thought we would have seen a little

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<v Speaker 5>bit of change in airline behavior, but we haven't seen

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<v Speaker 5>that yet.

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<v Speaker 3>So yes, surprised pleasantly.

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<v Speaker 4>So when it comes and you start to see some

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<v Speaker 4>effects of this coming through, does it start in the Gulf?

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<v Speaker 4>Is there any hint at this point that maybe some

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<v Speaker 4>of the golf carriers start differring, start changing behavior. Is

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<v Speaker 4>that where it begins and it spreads out.

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<v Speaker 5>Well, I think the airlines around the world are being

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<v Speaker 5>impacted in different ways. So depending on where you are

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<v Speaker 5>geographically the market segment you serve, you're seeing different impacts

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<v Speaker 5>or looming impacts on your business and can dely've seen

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<v Speaker 5>a number of airlines that have adjusted their schedules over

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<v Speaker 5>the next several months, So that's happening. But in terms

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<v Speaker 5>of the interface that we have again both with respect

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<v Speaker 5>to keeping the planes they have today in the air

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<v Speaker 5>during this prize summer flying season, but also making preparation

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<v Speaker 5>for the other side of the conflict, the airlines really

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<v Speaker 5>have not changed the way they are servicing today's fleets

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<v Speaker 5>and preparing to expand and modernize.

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<v Speaker 4>But where do you think it? What does it look

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<v Speaker 4>like when it shows up? What does it look like

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<v Speaker 4>when we still we get through the summer, we get

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<v Speaker 4>into the into the fall, into the autumn. What are

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<v Speaker 4>the early things that we kind of watching the aviation

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<v Speaker 4>sext are looking for clues that things are may be

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<v Speaker 4>starting to slow down or there's an effect.

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<v Speaker 1>What do I look for, I would.

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<v Speaker 5>Distract, Well, what we're going to be looking for are

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<v Speaker 5>those same indicators I mentioned earlier, right right, what's happening

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<v Speaker 5>with spare parts orders, what's happening with retirements, what's happening

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<v Speaker 5>with engine removals? Our airlines in a position where they

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<v Speaker 5>can't or have decided not to prepare for the other side.

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<v Speaker 5>We were out a week and a half ago at

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<v Speaker 5>an investor commerce in New York Guy and what we

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<v Speaker 5>basically reiterated, is it in twenty twenty six. Given what

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<v Speaker 5>we see, we feel very good about our services growth

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<v Speaker 5>coming into it at a mid teens rate, and our

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<v Speaker 5>medium term outlook, which has our.

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<v Speaker 3>Pack for twenty twenty seven.

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<v Speaker 5>So I don't want to in any way suggest that nothing

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<v Speaker 5>might happen, but from what we see right now, a

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<v Speaker 5>hyper focus on the near term and preparations for.

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<v Speaker 3>The other side.

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<v Speaker 1>How do you get ready for that? What do you do?

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<v Speaker 4>Are you getting it ready? Are you preparing for a storm?

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<v Speaker 4>Is it kind of what are you thinking about in

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<v Speaker 4>terms of the way you run the business to get

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<v Speaker 4>ready for that? Because that's the lesson of the past.

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<v Speaker 4>The recent pass is get ready use this time wisely

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<v Speaker 4>to prepare for that kind of story.

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<v Speaker 5>Well, I couldn't be more proud of the way the

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<v Speaker 5>g Eerospace team is dealing with both the short term

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<v Speaker 5>and getting ready for possibilities. But again, when you look

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<v Speaker 5>at our business, given the strength of the backlogs that

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<v Speaker 5>we have both in narrow bodies and wide bodies well

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<v Speaker 5>into the twenty thirties, the significant demand that we have

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<v Speaker 5>supporting a million passengers in the air at any one

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<v Speaker 5>point in time with our engines underwing. A lot of

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<v Speaker 5>what we're doing not only in our own operations, in

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<v Speaker 5>our manufacturing and our service footprints, but also in partnership

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<v Speaker 5>with our supplier partners has given us the opportunity to

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<v Speaker 5>put up the numbers that we did in the first quarter,

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<v Speaker 5>to see lead engine deliveries up over sixty percent for example,

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<v Speaker 5>So a lot of good growth. We want to make

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<v Speaker 5>sure that we're in a position to continue you to

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<v Speaker 5>support the airlines in whatever way we do well into

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<v Speaker 5>the next several years.

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<v Speaker 1>You bring up with splashes, let's talk about that.

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<v Speaker 4>From a moment post pandemic, the supply chain has been

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<v Speaker 4>the issue.

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<v Speaker 1>I'm trying to.

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<v Speaker 4>Get the supply chain to work to deliver has been

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<v Speaker 4>the challenge, are you beginning.

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<v Speaker 1>To win that war now? Is that battle turning in

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<v Speaker 1>your favor?

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<v Speaker 4>Do you think you've got this situation under control in

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<v Speaker 4>a way that you haven't for maybe the last few years.

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<v Speaker 5>We have eight quarters now sequentially where we have seen

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<v Speaker 5>significant increases and inputs from our critical supplier partners. I

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<v Speaker 5>think what we've actually done is thrown the winning the

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<v Speaker 5>war framework out the window and gotten into deep technical,

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<v Speaker 5>collaborative problem solving, making sure we're making the most of

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<v Speaker 5>existing resources with our supplier partners while we're investing medium

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<v Speaker 5>to long term in additional capacity. There's no way that

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<v Speaker 5>we take our leap deliveries up over sixty percent in

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<v Speaker 5>the first quarter. No way we have our services revenue

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<v Speaker 5>is up over thirty percent if we weren't improving the

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<v Speaker 5>supply chain. The challenge guy that I think a lot

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<v Speaker 5>of people don't appreciate, is this is a wonderful opportunity

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<v Speaker 5>that we'll be wrestling with for the rest of this decade. Yeah,

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<v Speaker 5>it'll never be a moment where we're finished. Because we

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<v Speaker 5>have to do more in the back half of this

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<v Speaker 5>year than we did in the first half of this year.

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<v Speaker 5>The same will be true in twenty seven and twenty eight.

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<v Speaker 5>That's the beauty of having one hundred and seventy billion

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<v Speaker 5>dollars worth of backlog. We know for the rest of

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<v Speaker 5>this decade we're going to need to get better in

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<v Speaker 5>our own operations and in partnership with our suppliers. But

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<v Speaker 5>if we're bored together, nobody wins. But if we're collaborating,

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<v Speaker 5>everybody does.

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<v Speaker 4>That sounds like you're winning. That sounds like you're in

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<v Speaker 4>a much better place right now. In terms of competition,

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<v Speaker 4>Let's just talk about competition for a moment. You are

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<v Speaker 4>in a good place right now. Scott Kirby at United,

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<v Speaker 4>it's been singing your praises this morning, talking about you

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<v Speaker 4>guys and the job that you're doing. He's talked less

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<v Speaker 4>favorably about the competition Rolls Royce, Rolls Royce has gone

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<v Speaker 4>through is going through a transformation right now.

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<v Speaker 1>It will emerge from that at.

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<v Speaker 4>Some Does competition get tougher further down the road when

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<v Speaker 4>two fan is in a different position, when he's got

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<v Speaker 4>a handle on that business and a handle on his engines,

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<v Speaker 4>does competition get tougher?

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<v Speaker 5>Well, first off, I'm delighted to hear Scott's comments we're

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<v Speaker 5>celebrating with United one hundred years of their operations and

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<v Speaker 5>our partnership with them.

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<v Speaker 3>Scott's a friend. We're focused on the airlines, yep. Right.

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<v Speaker 5>If we focus on the airlines and what they need,

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<v Speaker 5>and that's the beauty of our business.

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<v Speaker 3>Guy. We don't have a one and done transaction.

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<v Speaker 5>We live with these engines from delivery for twenty or

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<v Speaker 5>thirty years, and that is what I think enables us

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<v Speaker 5>to make sure that whether it's a shop visit they

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<v Speaker 5>need completed in the next ninety days or working with

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<v Speaker 5>them with respect to delivering on their skylines, we're in

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<v Speaker 5>a position to make sure we understand their needs and

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<v Speaker 5>then turn around and do everything we can in twenty

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<v Speaker 5>sixth a year of what we call being more customer driven.

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<v Speaker 5>Competition will do what competition does, but we're far more

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<v Speaker 5>focused on our customers today.

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<v Speaker 4>Okay, competition make suffer, I'm taking away from that. But

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<v Speaker 4>you think you've got you've got to handle on it.

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<v Speaker 4>That is that the right interpretation.

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<v Speaker 5>I'll let you and others talk about where our competitors are.

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<v Speaker 5>I think in terms of the way our senior team

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<v Speaker 5>and our board are oriented. Let's be focused on the customer. Okay, customer,

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<v Speaker 5>we'll lead away.

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<v Speaker 4>President She's coming in September to the United States. Should

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<v Speaker 4>I expect big ge orders?

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<v Speaker 5>Well, we were very pleased with the news we had

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<v Speaker 5>in Beijing when both Kelly or Berg from Boeing and

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<v Speaker 5>I were there. Honored to ye be there with the President.

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<v Speaker 5>I think the foundation was laid, the door is opened,

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<v Speaker 5>will be a good bit of work up for the TA.

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<v Speaker 4>So there was an expectation that maybe that that trip

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<v Speaker 4>would have delivered more. Is it a kind of is

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<v Speaker 4>it a two part story? Part one we've seen Part

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<v Speaker 4>two comes in September.

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<v Speaker 5>I think it's a journey and there was an important

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<v Speaker 5>step taking in Beijing, no doubt in my mind.

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<v Speaker 4>Okay, final quick question. We're always done with the current

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<v Speaker 4>generation of engines. We are going to be moving on

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<v Speaker 4>to the next generation of engines, which you see as

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<v Speaker 4>being an open ROTA kind of configuration.

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<v Speaker 1>Yeah, huge blades at the front of the engine.

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<v Speaker 4>Many of the airline CEOs that I talked to at

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<v Speaker 4>the moment say, let's just fix what we've got right

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<v Speaker 4>now and make sure it works properly.

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<v Speaker 1>What we want is for reliability.

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<v Speaker 4>What do you say to that in terms of what

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<v Speaker 4>this next generation of aircraft engines will actually deliver.

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<v Speaker 5>Well, we couldn't agree more. Right here we are in

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<v Speaker 5>twenty twenty six. Our leaf engine is still a relatively

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<v Speaker 5>new engine. Our GE NX, our leading wide body engine

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<v Speaker 5>still relatively new. Our GE ninety really the workhorse in

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<v Speaker 5>the wide body space, probably a teenager, not a mature adult.

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<v Speaker 5>So these are engines that are going to fly for decades,

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<v Speaker 5>and we are working to improve.

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<v Speaker 3>The durability and reliability of those engines.

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<v Speaker 5>That said, we need to be investing in twenty twenty

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<v Speaker 5>six to be ready for that next generation narrowbody that

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<v Speaker 5>may be ten or fifteen years out from where we

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<v Speaker 5>are today.

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<v Speaker 3>If we're not investing today, we're not ready.

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<v Speaker 5>Then we do think that the open fan architecture will

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<v Speaker 5>allow us to a dress those reliability and durability concerns

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<v Speaker 5>as well as deliver the next breakthrough inefficiency and sustainability.

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<v Speaker 1>So it becomes simpler, not more complicated, exactly.

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<v Speaker 5>And that's the technology breakthrough that allows us to do

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<v Speaker 5>both is my friend Jim Collins would say, to employ

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<v Speaker 5>the genius of the end durability and efficiency.

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<v Speaker 4>Larry's Curtesy, Thank you very much, and Dee for spending

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<v Speaker 4>some time with us this morning. Guys, back to you

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<v Speaker 4>in the studio Larry Cole, the CEO of G Aerospace,