GE Aerospace Cuts LEAP Forecast Again as 2Q Sales Drop

In a challenging turn of events, GE Aerospace has once again lowered its production forecast for the LEAP engine, marking the second downward adjustment this year. The company, headquartered in Ohio, now projects a flat to 5% growth in LEAP production for the remainder of the year, a significant decrease from the 10-15% forecast in April and the original 20-25% target set at the beginning of the year.

Commercial engine deliveries in the second quarter saw a notable decline, dropping 26% year-over-year to 402 units. Specifically, sales of LEAP engines, produced in collaboration with Safran Aircraft Engines through their joint venture CFM International, fell by 29% to 297 units. These engines are critical to Boeing's 737 MAX program and Airbus' A320 family of narrow-body jets.

GE Aerospace attributed the reduction in sales to ongoing raw material shortages and bottlenecks at 15 supplier sites. Additionally, slower production rates from airframers have compounded these supply chain issues, leading to further disruptions.

Industry experts have raised alarms about the fragile state of aerospace supply chains, which have struggled to meet the surging demand for air travel post-COVID-19 pandemic. To mitigate these challenges, GE Aerospace is expanding its manufacturing capacity and boosting output from its domestic suppliers.

Despite these hurdles, commercial engine orders in the second quarter rose by 23% year-over-year to 808 units, with LEAP orders increasing by 33% to 615. However, the defense segment faced significant setbacks, with engine deliveries plummeting 62% to 87 units and orders dropping 83% to 62 units, largely due to timing issues.

On a brighter note, GE Aerospace has increased its full-year earnings guidance, driven by robust demand for its aftermarket services, which account for over two-thirds of its revenue. The company now anticipates an operating profit of $6.5 billion to $6.8 billion for 2024, up from the April forecast of $6.2 billion to $6.6 billion.

Maintenance, repair, and overhaul (MRO) services saw a surge in orders, growing by over 30% in the second quarter. To enhance efficiency, GE Aerospace plans to invest $1 billion in its MRO facilities, aiming to reduce turnaround times by 30% from 2023 levels. Notably, turnaround times for LEAP shop visits improved to 86 days from 100 days a year earlier.

Despite these operational successes, GE Aerospace's profit for the second quarter dipped by 4% to $1.4 billion, while revenues increased by 4% to $9 billion.