Leap Engine Targets Missed By General Electric Aviation Though Demand Remains Strong

General Electric Aviation has announced that the first half of the fiscal year has been good especially concerning production of aircraft engines. In Q2 GE Aviation delivered Leap engines numbering 93. This was an increase of 12 units as it had delivered 81 units in Q1. It was below the forecast of 100 though that the conglomerate had set.

In this fiscal year, the aviation giant intends to manufacture between 450 and 500 engines and so far it has delivered 174 in the first half of the year.

Better engines

Leap engines are currently being made by CFM which is partnership between French firm Safran and GE Aviation. These new engines have improved fuel efficiency and are quieter compared to the older ones. CFM now manufactures Leap 1B engine which is used by Boeing as well as Leap 1A which is used by Airbus.

According to Wells Fargo’s lead aerospace analyst, Sam Pearlstein, the number of engine units delivered by GE fell short of expectations.

“To achieve the low end of 2017’s targeted 450-500 Leap deliveries, Q3 and Q4 shipments each would need to rise 30 percent sequentially,” wrote Pearlstein in a client note.

In 2019 GE Aviation aims to increase production of Leap engines fourfold to reach a figure of 1,900. This is in order to meet an expected increase in demand from Boeing and Airbus when they both raise production of single-aisle commercial airplanes – Airbus A320 and Boeing 737 Max.

Giant player

Results and numbers from General Electric Aviation are closely monitored by the supply chain of the aviation sector. This is because of the aviation giant’s big presence in the new engine market which it sells to military as well as commercial aircraft buyers. GE Aviation is also a player in the aftermarket as it also sells service and spares agreements. The aviation unit of General Electric also leases commercial aircraft through GE’s own airplane leasing and buying arm.

In the latest quarterly results sales for General Electric Aviation reached $6.5 billion and the pre-tax profit was $1.5 billion. Though there was a decline of 16% in the sale of engines to original aircraft manufacturers, the drop was offset by higher services revenues which increased by 13%.

Despite the decline in sales, demand remains strong. At the recently concluded Paris Air Show GE Aviation managed to get commitments and orders worth over $31 billion. This comes at a time when production at two new GE Aviation facilities located in Alabama is expected to begin in 2018.