GE lifts outlook as air travel boom shrugs off fuel costs
(Oct 20): General Electric Co raised its full-year outlook amid strong aircraft engine demand, in a sign that air travel has yet to retreat despite resurgent jet fuel prices. Adjusted earnings will be US$8 to US$8.10 a share this year, up from a prior range of US$7.65 to US$7.85, the company said as it reported third-quarter earnings on Tuesday.
The company, which does business as GE Aerospace, also raised its prediction for free cash flow, operating profit and adjusted revenue growth for this year. GE said it expects 2027 commercial services to grow at “low-double-digits.” That compares with a prediction for this year of revenue growth “of low 20s” at the Commercial Engines & Services business, GE said.
Still, GE’s shares fell early Tuesday, suggesting the guidance increase disappointed some investors expecting a more bullish update. The new outlook implied that fourth-quarter profit will fall short of Wall Street estimates, a forecast that TD Cowen analyst Gautam Khanna said in a note was “likely conservative.”
The world’s largest maker of jet engines continues to capitalise on robust demand for spare parts and maintenance services that airlines need to keep their planes flying. That business has grown rapidly since the pandemic as lockdowns gave way to a multiyear demand boom for carriers and their suppliers. GE has now raised its guidance eight times since January 2024.
The US war with Iran and the subsequent jump in fuel prices raised concerns about whether the airline industry can sustain its recent momentum. Carriers trimmed flying plans after the US and Israel began strikes on Iran in February, and jet fuel prices recently jumped again after moderating over the summer.
Several large US airlines are slated to provide updates on their businesses this week when they report earnings in the most recent quarter.
GE also took a major step to wrest control over a larger piece of its supply chain by agreeing in September to buy Consolidated Precision Products for nearly US$12 billion. The deal will add a range of highly engineered castings that are crucial to aerospace and defense products to GE’s portfolio.
The company has continued to attract new business, signing a memorandum of understanding with Indian carrier IndiGo for an order of more than 1,000 LEAP-1A engines to power 510 jets from Airbus SE’s A320neo line of aircraft unit. The deal is the largest single order placed for the engines made by CFM International, GE’s joint venture with Safran SA.
The company has also announced deals with Philippine Airlines for GEnx-1B engines to be used on 15 Boeing 787-10 aircraft, and aviation leasing company AerCap Holdings NV’s selection of GEnx-1B engines for 15 Boeing 787 Dreamliners. GE said on Tuesday that year-to-date commercial services revenue increased 26%, with total engine deliveries growing 21%.
