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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Let's get to a conversation with Larry Kulp, chairman and

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Speaker 2: CEO of GE Aerospace. In an exclusive interview with Bloomberg,

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Speaker 2: he passed through the issues lingering over the aviation industry.

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Speaker 2: Here's Culp speaking with our own Husbland.

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Speaker 1: I mean in Singapore, Larry, when he comes to the

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Speaker 1: aerospace industry, it's been settled with supply chain disruption, supply

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Speaker 1: chain issues and challenges. When will we see the end

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Speaker 1: of those challenges?

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Speaker 3: Well, in many respects, it's all about demand, and we

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Speaker 3: look out both in terms of demand for new engines

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Speaker 3: under wing on new airplanes and the support that we

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Speaker 3: provide the airlines for their existing fleets continuing to be strong.

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Speaker 4: Really for the rest of this decade. It's a good.

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Speaker 3: Problem to have, and we'll need to increase our output.

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Speaker 3: We'll need to work with our suppliers to increase their

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Speaker 3: outputs to us. I think every year probably between now

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Speaker 3: and twenty nine or thirty at a minimum, so it'll

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Speaker 3: be with us for a while.

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Speaker 4: But I think we're making a lot of progress.

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Speaker 1: The thing is some had anticipated and ended the problem

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Speaker 1: by twenty twenty seven, but By the sound of it,

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Speaker 1: it's going to be longer than that. Perhaps we could

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Speaker 1: see a lost decade for the aerospace industry. Would that

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Speaker 1: be a fair assumption.

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Speaker 3: I don't think we're going to lose a decade by

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Speaker 3: any stretch. Again, I think given how strong demand is

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Speaker 3: and the progress we and others are suppliers, our airframeer

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Speaker 3: customers are making will continue to drive output again because

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Speaker 3: the demand is so strong. We'll talk about the supply chain,

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Speaker 3: but I don't think this will be a lost decade.

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Speaker 3: I think this will be a very important decade as

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Speaker 3: the industry recovers from the pandemic, modernizes fleets, expands fleets

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Speaker 3: with more fuel efficient aircraft.

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Speaker 1: But realistically, what can be done.

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Speaker 3: Well it really for us is all about making sure

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Speaker 3: we're the best possible partner, the best possible collaborator with

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Speaker 3: our suppliers. The vast majority of the input challenges that

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Speaker 3: we have, the shortages that cause us to be late

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Speaker 3: on deliveries really come from about fifteen different suppliers across

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Speaker 3: our supply chain. We have five hundred and fifty engineers

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Speaker 3: going in to work with those suppliers. Identify bottlenecks, identify

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Speaker 3: constraints and really solving those problems so that we can

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Speaker 3: drive better output from their operations, inputs into hours and

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Speaker 3: in turn to the airlines and the airframers.

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Speaker 1: Let's talk specifically about the latest supply chain disruptions and

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Speaker 1: shortage and that has to do with the costings of

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Speaker 1: high pressure turbine blades. What's the story there? When can

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Speaker 1: that issue be resolved?

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Speaker 3: Well, I think there are a host of issues. Again,

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Speaker 3: when you look across the supply chain that we're managing,

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Speaker 3: We've got about fifteen different suppliers across a number of

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Speaker 3: different commodities, which are really where we're being paced. So

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Speaker 3: I think in every instance, I really like the progress

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Speaker 3: that I'm seeing teams collaborating on the shop floor identifying

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Speaker 3: the issues that are really the problem. It may be

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Speaker 3: a process yield in some instances, it may be something

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Speaker 3: as simple as staffing, perhaps a second shift, and others.

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Speaker 3: But by working those problems together, we're driving better output.

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Speaker 3: We had a small handful of suppliers just here in

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Speaker 3: the most recent quarter where we increased our output sequentially

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Speaker 3: by eighteen percent, not year over year, but from the

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Speaker 3: second quarter to the third quarter. It's that type of

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Speaker 3: work the cumulative effect of that type of work, which

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Speaker 3: will help us.

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Speaker 1: So when it comes to the costings, that issue could

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Speaker 1: be resolved in the next give me a timeframe.

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Speaker 3: I don't want to talk about specific commodities with specific

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Speaker 3: timeframes again, because the demand curve steps up every year

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Speaker 3: for the rest of this decade. So even if we

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Speaker 3: were in a position where we had solved a particular shortage,

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Speaker 3: there's going to be more demand, thus more output required

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Speaker 3: next year. So we'll need to continue to drive those

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Speaker 3: capacity expansions, those process improvements for quite some time. But

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Speaker 3: I think we're fortunate to have that sort of outlook

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Speaker 3: in our business.

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Speaker 1: The aerospace industry is also seeing of the challenges. We're

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Speaker 1: seeing fulty pots in planes still in s is. How

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Speaker 1: concerning is that for you?

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Speaker 3: Well, it's a high priority for us because some of

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Speaker 3: that activity has actually involved engines, and just a couple

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Speaker 3: of weeks ago, our Supply Chain Integrity Coalition issued a

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Speaker 3: report had a series of recommendations that we think will

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Speaker 3: improve the safety and and the security of the supply chain.

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Speaker 3: Not many people appreciate that what we do it's not

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Speaker 3: only manufacture engines, but we support those engines for twenty

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Speaker 3: sometimes thirty years over their entire life cycle. So the services,

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Speaker 3: the parts, the repairs that we provide in the aftermarket

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Speaker 3: are a critical part of what we do for the airlines,

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Speaker 3: and we all need to make sure that there are

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Speaker 3: no counterfeit parts in that supply chain. And that's a

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Speaker 3: good bit of what the coalition the Coalitions work was

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Speaker 3: aimed to do.

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Speaker 1: Is there some sperhaps that it is a sign that

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Speaker 1: we've reached the limit of innovation on conventional aircraft for instance.

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Speaker 4: No, not at all.

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Speaker 3: I think that if you look at what we're doing,

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Speaker 3: just say, in the narrow body segment with our leap engine,

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Speaker 3: we're providing a generational step function improvement in fuel efficiency.

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Speaker 3: It's part of the reason that demand is so strong,

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Speaker 3: because airlines not only want to expand they want to

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Speaker 3: modernize because of that fuel efficiency, which also translates into

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Speaker 3: real sustainability gains. We have been very public over the

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Speaker 3: last three years about our next generation narrowbody engine, a

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Speaker 3: program which we call RISE, which is really stands for

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Speaker 3: Revolutionary Innovation and Sustainable Engines. So there will be new

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Speaker 3: planes that come to market probably sometime in the middle

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Speaker 3: or the latter part of the next decade. We want

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Speaker 3: to make sure we're investing today in the technologies the

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Speaker 3: innovations that are going to provide the next step function

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Speaker 3: improvement in fuel efficiency and thus sustainability.

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Speaker 1: Letter we know that ge powers the Triple seven X.

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Speaker 1: Its delivery has yet again been delayed, extending the delay

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Speaker 1: to about five years. Now. How confident are you that

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Speaker 1: perhaps those planes will be delivered in twenty twenty six.

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Speaker 1: What's the complication there?

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Speaker 3: Well, I think there's a lot happening there. We'll let

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Speaker 3: Kelly Ortberg and the team at Boeing talk about the

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Speaker 3: schedule for the Triple seven X. I think their last

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Speaker 3: comments talked about an entry into service in twenty twenty six.

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Speaker 3: We're thrilled to be the only engine underwing with our

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Speaker 3: new nine X engine. When I talk to customers, they

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Speaker 3: tell me two things. They love that airplane and they

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Speaker 3: wish they had it yesterday. I think the fact that

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Speaker 3: customers are very key to see Boeing work through the

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Speaker 3: development and the certification tasks that lie ahead of them

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Speaker 3: is really good news for Boeing. Is good news for

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Speaker 3: us because that's going to be a heck of an

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Speaker 3: airplane once it enters into service.

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Speaker 1: Allies like Kathy have expressed a disappointment. I mean, is

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Speaker 1: there a sense? I mean, are you confident twenty twenty

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Speaker 1: six is actually viable?

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Speaker 3: That's the plan that we're working on with Boeing. We

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Speaker 3: know that's the plan that they're working on with every

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Speaker 3: ounce of energy and dedication that they can provide.

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Speaker 1: You talked about your nine X engine. It's been problematic

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Speaker 1: as well. There are a few challenges there that have

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Speaker 1: been cracks. Can you talk us through what is happening,

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Speaker 1: what the root cause is, and how are you trying

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Speaker 1: to fix it.

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Speaker 3: I think you may be referring to a piece of

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Speaker 3: equipment that is attached to the nine X engine, which

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Speaker 3: is a Boeing supplied part, not a GE Aerospace supplied part.

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Speaker 3: So the engine has performed very well over the last

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Speaker 3: several years. It was certified back in twenty twenty. There's

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Speaker 3: plenty of work that we still need to do to

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Speaker 3: be able to ramp side by side with Boeing, but

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Speaker 3: in terms of the core integrity of the engine, we're

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Speaker 3: in very good shape.

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Speaker 1: So you're saying that it is not on GE to

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Speaker 1: fix the problem, it is on Boeing to fix that.

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Speaker 3: I think I think the crack that you're referring to

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Speaker 3: is a function of a Boeing supplied component, not a

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Speaker 3: ge engine.

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Speaker 1: Do you see when do you see testing resuming for

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Speaker 1: the Triple seven X. Is there is there a sense

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Speaker 1: that you're getting in your conversations with.

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Speaker 3: Boeing that's really for Boeing to speak too publicly in

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Speaker 3: terms of the schedule for that the resumption of that testing.

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Speaker 1: Larry, although you talked about how are you optimistic about

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Speaker 1: the outlook for the aviation sector, talk to us about

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Speaker 1: the kind of demand you anticipating and which region is

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Speaker 1: driving that optimism.

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Speaker 3: Well, I think it's really a global phenomena. As people

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Speaker 3: have traveled more and they've been keen to travel all

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Speaker 3: the more post of the pandemic. We're seeing the airlines

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Speaker 3: work their assets, fly those planes like like never before.

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Speaker 3: And at the same time, we're seeing airlines around the world,

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Speaker 3: but particularly here in the Asia specific region and in

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Speaker 3: the Middle East, looking to expand their fleets of both

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Speaker 3: narrow bodies and wide bodies.

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Speaker 4: That's all good.

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Speaker 3: For the industry and why I say that this will

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Speaker 3: really be a demand driven challenge, a challenge we happily accept.

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Speaker 4: For the rest of this decade, Can.

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Speaker 1: You put a number to it? Are you as optimistic

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Speaker 1: now as you were at the start of the year

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Speaker 1: for instance?

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Speaker 3: Certainly more optimistic again because we see the flying public

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Speaker 3: continuing to fly. Just the comments from the airline CEOs

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Speaker 3: the last couple of weeks, in conjunction with their earnings calls,

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Speaker 3: has reiterated that bolishness. And every customer that I talked

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Speaker 3: to that has planes on order, be they Airbus or

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Speaker 3: Boeing airplanes, are very keen to see those planes delivered

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Speaker 3: and those planes added to their fleets.

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Speaker 1: So what Asia versus Middle East versus Europe I mean

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Speaker 1: in terms of growth?

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Speaker 3: Well, certainly Asia pack and the Middle East I would say,

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Speaker 3: is outgrowing what we're seeing in North America and in

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Speaker 3: Europe in terms of new airplane delivery, and probably also

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Speaker 3: at this point in terms of traffic increases.

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Speaker 1: Are you concerned about growth because the IMF has just

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Speaker 1: cut its growth projection for the year. We're seeing countries

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Speaker 1: like China, for instance, undergoing a sluggish economy having great

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Speaker 1: difficulty turning around its economy. Is that impacting kind of

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Speaker 1: demand that you're anticipating.

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Speaker 3: I think at this point we don't really see those

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Speaker 3: economic concerns directly material impacting demand and our industry. Again,

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Speaker 3: because the life cycles of these machines are so long,

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Speaker 3: the order books really reach out into the next decade. Now,

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Speaker 3: that could change, and we're not either oblivious or completely

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Speaker 3: immune from some of the economic pressures that people are

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Speaker 3: concerned about. But at this point, we really think that

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Speaker 3: we have a strong undercurrent of demand on both the

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Speaker 3: new make and on the aftermarket side, which should continue

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Speaker 3: for the foreseeable future.

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Speaker 1: When you speak to leaders in the business world, a

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Speaker 1: lot of them say that one of the risks is

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Speaker 1: actually the US election. How are you assessing that risk

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Speaker 1: to your business?

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Speaker 3: Well, we'll have an election here what a week from tuesday,

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Speaker 3: and we'll get on the other side of that. Ge

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Speaker 3: has worked with both Democratic and Republican administrations for over

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Speaker 3: a century. So whatever the outcome, I know, having been

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Speaker 3: born in Washington, DC, that we will will move forward

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Speaker 3: as a company and we will work with whatever administration's

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Speaker 3: in place, as we have over the last several gues.

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Speaker 1: It doesn't matter who the president is. It doesn't matter

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Speaker 1: if it's Trump and his perhaps is his plans to

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Speaker 1: impose TARIS and China. That does not impact how you

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Speaker 1: view your business, does not impact your strategy.

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Speaker 3: Well, I think that we'll see how the winning candidate

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Speaker 3: moves forward from a policy perspective. I'm highly optimistic that

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Speaker 3: will work constructively with whoever wins the election.

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Speaker 1: I'd like to touch in China, it has big ambitions

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Speaker 1: Comac C nine one nine. So if we've seen orders

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Speaker 1: of about three hundred coming from the big Chinese carriers,

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Speaker 1: what do you make of that number?

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Speaker 3: Well, it would suggest that the Chinese carriers like that airplane.

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Speaker 3: We'd like to think one reason they like that airplane

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Speaker 3: is because we have our leap one sea engine underwing

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Speaker 3: sole source in that regard, and I think Comac and

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Speaker 3: the Chinese are quite serious about their intentions with that airplane.

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Speaker 3: And that demand that you just cited really is the

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Speaker 3: beginning of the market acceptance of that aircraft.

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Speaker 1: Do you think it can be a game changer? Do

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Speaker 1: you think it will reshape the landscape in the aerospace business?

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Speaker 3: Well, I think that we will see over time how

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Speaker 3: successful Comac and the market acceptance of that airplane is.

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Speaker 3: But it would be very foolish, I think, to bet

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Speaker 3: against Comac and their customers.

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Speaker 1: What are its biggest challenges well, I.

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Speaker 3: Think anytime that you bring a new aircraft to market

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Speaker 3: in a marketplace as complex as ours. Again, as we

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Speaker 3: were talking earlier, there is not only the ramping of

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Speaker 3: the supply chain to produce more of those airplanes every year,

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Speaker 3: but the regional and ultimately the global support network that

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Speaker 3: those airplanes will require that's.

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Speaker 4: Going to be that's a serious undertaking.

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Speaker 3: I think Komac understands that clearly and will do everything

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Speaker 3: they can to master that challenge.

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Speaker 1: Larry Colp, we thank you so much for your insights today.