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The revival of GE is hanging on the nascent aerospace business, but it is challenging

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The revival of GE is hanging on the nascent aerospace business, but it is challenging

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Large passenger plane perches on top of a runway: a GE revival hangs on an emerging, but firm, space business

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The revival of GE is hanging on the nascent aerospace business, but it is challenging

The jet engines are back, and just in time to get General Electric out of the funk it has been stuck in since prior the pandemic.

The multinational giant, besieged for years by corporate gaffes and now carrying a turnaround effort led by CEO Larry Culp, reported a rebound in its core airline business on Tuesday, with sales up 10% to $4.8 billion in the second quarter and orders up 47%. But there’s also a strange problem: Rebound can actually happen in flight الطيران injury General Electric’s lengthy-term business.

A fairy tale of a horror story and back

To usher in the twenty-first century, General Electric has been a ostentatious symbol of American ingenuity. Co-founded by Thomas Edison and JP Morgan (the man, not the bank), GE started the millennium with $600 billion in capital. Then came the 2008 financial crisis, a series of bad acquisitions, and years of corporate commotion. Now, General Electric has a market capitalization of $114 billion.

Just prior the pandemic, the company was finally start to regain some of its footing: cut debt, sold assets, revamped operations, and sponsor aviation as a bread-and-butter business. This strategy was soured a bit when the pandemic put airlines into no-fly mode, but even the revival of air travel presents downsides to GE:

  • Increased sales of unused aircraft come at the expense of money GE makes maintaining older aircraft. A quarter of the world’s 22,200 commercial aircraft remain unused, according to Jefferies analysts, and 20% of those aircraft are out of production and may never see the sky again.
  • Jefferies analysts expect airlines to cling to aircraft under 26 years old, which will result in a 2023 global fleet 4% larger than it was in 2019, accompanied by an 11% increase in income for aircraft service. But a scenario in which airlines retire at a younger age could have grave negative revenue implications for the aviation aftermarket industry.

High hopes in heaven, for now: Things are looking up for GE in the near term. On Tuesday, the company reported $18.3 billion in second-quarter revenue, beating analyst expectations.

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