GE Aerospace Morgan Stanley's 14th Annual Laguna Conference

Welcome, Rahul. Thank you, Christine.

Thank you, Christine. Thank you for having us. Obviously excited to be here. There's lots going on. As you guys know, GE Aerospace is a great franchise, one of the largest aerospace and defense fleets, 80,000 aircraft under wing right now, 50,000 on commercial, amongst the fastest-growing in the world, 30,000 on defense. We power two-thirds of the U.S. combat aircraft. So a fantastic franchise. It has been a very busy summer for us. Last time most of us were together was at Farnborough. Prior to that, we reported our second quarter earnings, but we had a really good air show. We got about 1,800 new engine orders at Farnborough, including the largest-ever aerospace order from IndiGo Airlines for the LEAP-1A engine. That was a 1,000-plus engine order. Since then, we also got 100 engine order yesterday, engines and services from the Korean Air.

So really strong commercial momentum in the business. Making really strong strides on the technology side as well as we think about both the current gen and future generation of aircraft. First ever hybrid electric flight at the commercial altitude that flew from U.S. to U.K. Partnership with BETA Technologies and with Boeing, but really excited about what our engineering teams have done on that front and what that can mean for the future of aviation. Last week we announced our largest acquisition as GE Aerospace, standalone company, with CPP. Three main drivers as we think about the CPP acquisition. First and foremost, it is about capacity expansion for ourselves, but more importantly for the industry.

We do think that with the technical expertise and the capital that we can bring, we will improve the delivery performance of CPP, expand the capacity that is out there, and that helps us get our products on time, helps the OEM meet their objectives, which is absolutely critical at this point. Second, as we think about CPP, we announced a new airfoil that we have been working on for a while. It runs much cooler. As we go back and think about the Maverick blade that we introduced on LEAP, it took us a long time to bring that blade to market. Having the manufacturing know-how in-house will shorten that time to market and bring that capability to our customers faster. That was a really important linchpin as we thought about, okay, what do we do on the casting space?

As we worked our way through the strategic and the operational side on the value that we can bring, luckily for us, it works for our shareholders as well. We can add a lot of synergies through the expertise that we can bring, about $200 million of synergies in year 3, doubling by year 6. With that, it will be EPS and free cash flow accretive in year 1 with double-digit ROIC a few years out. So very strong strategic, operational, and financial results from this transaction, which is exactly the framework we look at every time we look at M&A. Talk a little bit about the environment that we are in. Good to see the air traffic growth resume after air traffic being down in the second quarter. Air traffic has been up here in July and in August.

Overall, I am sure Christine will take us there in a minute or 2 as we think about the services outlook, but we are not seeing any change in fleet plans from the airlines. The parked aircraft remain really low from the airlines. The retirements are actually down year-over-year, down about 10%, 26 over 25. So we are really not seeing any long-term change in fleet plans from the airlines. Our own engines that we have removed but not inducted, that is up 60% year-over-year as we sit here today from this current numbers versus last year's numbers. So we feel good about our overall as we think about CES results for the year. CES should have a fantastic year.

Sticking with services, we expect 20% plus growth on the services side, just given the backlog that we are seeing currently that is sitting outside, plus a $170 billion backlog that exists in services over a multi-year period. On the OE side, we continue to make strides. We expect LEAP deliveries to be up high teens year-over-year. On the wide-body side, we are seeing really good momentum. Our GE9X deliveries were up 50% year-over-year in the second quarter with higher growth on installs. Boeing, we were able to ship even more than 50% engines year-over-year basis, and the momentum is continuing there into the third quarter. On the defense side, we expect low double-digit growth with margin expansion in 2026. Overall, it should be a really good year for us.

More than $1.5 billion of profit growth, 100% free cash flow. Strong performance in 2026, and the momentum should continue to 2027 as well. On the services side, we have spoken to that we expect double-digit growth, just given the algorithm that we have of install base, pricing, work scopes, all that kind of sets us up for a runway double-digit growth business. Just given the delinquency that we have right now that we are sitting on, maybe there is some incremental volume as we think about 2027. Obviously, we will give a little bit more color on that as we get into October and then January. Again, things look as good as they possibly can. I am sure we will get a little bit into the air traffic growth and other things that we are seeing in the market, but we feel good.

I think given the operational momentum that we have, given the value that Flight Deck is driving, and given a $210 billion backlog, we feel good about the long-term delivery performance of the company.