Chairman & Chief Executive Officer, General Electric Co
GE Aerospace Evolves Amid Strong Aviation Demand
CEO of GE Aerospace Larry Culp spoke with Bloomberg's Co-Anchor of The Opening Trade Guy Johnson about GE's recent corporate restructuring and the company's current position and strategic outlook within the aerospace industry.
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About H. Culp
In the second quarter of 2026, Culp stated that GE Aerospace raised its full-year guidance, citing the strength of the first half and momentum for the remainder of the year. He described the company's challenge as primarily supply-side, noting that the company had seen nine consecutive quarters of double-digit sequential increases from key suppliers. Culp said the company is focused on collaborative problem-solving with suppliers and making organic and inorganic investments to break bottlenecks. He also noted that the company’s commercial backlog stood at $170 billion and that the installed base is expected to grow at a low- to mid-single-digit rate through the rest of the decade. Earlier in the year, Culp said that the company was reducing its full-year departures outlook due to the conflict in the Middle East, but added that aside from current events, the company would have been discussing an increase to guidance. He stated that spare parts orders were up 30% in the first quarter and later increased to 40% year-over-year. Regarding future technology, Culp said the company believes the open fan architecture will provide efficiency and cost-of-ownership benefits for the next generation of narrow-body aircraft, though he noted it is not yet a product and that investment is needed now to be ready for a market that may be ten to fifteen years away.
Transcript (26 segments)
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Host0:00
Now, we're gonna head back to Brazil to hear from the CEO of GE Aerospace. GE, of course, a major conglomerate that has split up and gone into pieces here over the last few years. Larry Culp is the CEO of GE Aerospace. Guy Johnson, our colleague from London, is in Rio for that interview. He joins us now. Guy, over to you.
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Guy Johnson0:17
Thank you very much indeed. Yeah. Larry is here. Nice to see you, Larry. Thank you very much indeed for spending some time with us this morning. Let's talk about the here and now to start the conversation off. And we're in a situation where we've got a war that's having an impact on aviation. It's having an impact on fuel prices. What impact are you seeing right now for GE Aerospace as a result of what is going on?
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H. Culp0:41
Well, Guy, first of all, thanks for the opportunity to visit with you this morning. And what we've seen really is nothing but a continuation of the strength that we saw through the first quarter of this year. It's interesting because we thought we might see some change in airline behavior, but we really haven't. I look at spare parts orders on a regular basis. We were up 30% in the first quarter. We've actually seen those spare parts growth rates increase to 40% year over year. We've seen retirements tick down. We've seen engine removals, which are really a precursor to a shop visit, actually tick up at a rate faster than we can complete the shop visits currently. So what I think we see are airlines very focused on making the most of the summer flying season, but also making preparations for the other side of the situation in the Gulf because the lesson I think we all took from the pandemic was things come back. They come back sooner, and they come back stronger than we would ever have anticipated.
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Guy Johnson1:38
But you're surprised it's coming later. That, I guess, is the takeaway from this part of the conversation. You thought we may have seen it already.
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H. Culp1:45
I would have thought we would have seen a little bit of change in airline behavior, but we haven't seen that yet. So, yes, surprised, pleasantly so.
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Guy Johnson1:53
If you when it comes and you start to see some effects of this coming through, does it start in the Gulf? Is there any hint at this point that maybe some of the Gulf carriers start deferring, start changing behavior? Is that where it begins and it spreads out?
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H. Culp2:07
Well, I think the airlines around the world are being impacted in different ways. So depending on where you are geographically, the market segment you serve, you're seeing different impacts or looming impacts on your business. We've seen a number of airlines that have adjusted their schedules over the next several months. So that's happening. But in terms of the interface that we have, again, both with respect to keeping the planes they have today in the air during this prized summer flying season, but also making preparation for the other side of the conflict, the airlines really have not changed the way they are servicing today's fleets and preparing to expand and modernize.
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Guy Johnson2:47
But where do you think it what does it look like? When it shows up, what does it look like? When we get through the summer, we get into the fall, into the autumn. What are the early things that we kind of watching the aviation sector looking for clues that things are maybe starting to slow down or there's an effect? What do I look for in the industry?
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H. Culp3:07
Well, what we're gonna be looking for are those same indicators I mentioned earlier. What's happening with spare parts orders? What's happening with retirements? What's happening with engine removals? Are airlines in a position where they can't or have decided not to prepare for the other side? We were out a week and a half ago at an investor conference in New York, Guy, and what we basically reiterated is that in 2026, given what we see, we feel very good about our services growth coming in at a mid-teens rate and our medium term outlook, which has our pack for 2027. So I don't wanna in any way suggest that nothing might happen. But from what we see right now, a hyper focus on the near term and preparations for the other side.
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Guy Johnson3:52
How do you get GE ready for that? What do you do? Are you getting it ready? Are you preparing for a storm? What are you thinking about in terms of the way you run the business to get ready for that? Because that's the lesson of the recent past is get ready. Use this time wisely to prepare for that kind of story.
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H. Culp4:07
Well, I couldn't be more proud of the way the GE Aerospace team is dealing with both the short term and getting ready for possibilities. But, again, when you look at our business, given the strength of the backlogs that we have, both in narrow bodies and wide bodies, well into the 2030s, the significant demand that we have supporting a million passengers in the air at any one point in time with our engines underway, a lot of what we're doing not only in our own operations, in our manufacturing, in our service footprints, but also in partnership with our supplier partners has given us the opportunity to put up the numbers that we did in the first quarter to see LEAP engine deliveries up over 60%, for example. So a lot of good growth. We wanna make sure that we're in a position to continue to support the airlines in whatever way we do well into the next several years.
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Guy Johnson4:58
You bring up the supply chains. Let's talk about that for a moment. Post pandemic, the supply chain has been the issue. Trying to get the supply chain to work to deliver has been the challenge. Are you beginning to win that war now? Is that battle turning in your favor? Do you think you've got this situation under control in a way that you haven't for maybe the last few years?
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H. Culp5:17
We have eight quarters now sequentially where we have seen significant increases in inputs from our critical supplier partners. I think what we've actually done is thrown the winning the war framework out the window and gotten into deep technical, collaborative problem solving, making sure we're making the most of existing resources with our supplier partners while we're investing medium to long term in additional capacity. There's no way that we take our LEAP deliveries up over 60% in the first quarter. No way we have our services revenues up over 30% if we weren't improving the supply chain. The challenge, Guy, that I think a lot of people don't appreciate is this is a wonderful opportunity that we'll be wrestling with for the rest of this decade. There'll never be a moment where we're finished because we have to do more in the back half of this year than we did in the first half of this year. The same will be true in '27 and '28. That's the beauty of having a $170 billion worth of backlog. We know for the rest of this decade, we're gonna need to get better in our own operations and in partnership with our suppliers. But if we're together, nobody wins. But if we're collaborating, everybody does.
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Guy Johnson6:25
That sounds like you're winning. That sounds like you're in a much better place right now. In terms of competition, let's just talk about competition for a moment. You are in a good place right now. Scott Kirby at United has been singing your praises this morning talking about you guys and the job that you're doing. He's talked less favorably about the competition, Rolls-Royce. Rolls-Royce is going through a transformation right now. It will emerge from that at some point. Does competition get tougher further down the road when he's got a handle on that business, a handle on his engines? Does competition get tougher?
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H. Culp7:03
Well, first off, I'm delighted to hear Scott's comments. We're celebrating with United a hundred years of their operations and our partnership with them. Scott's a friend. We're focused on the airlines. If we focus on the airlines and what they need, and that's the beauty of our business, Guy, we don't have a one and done transaction. We live with these engines from delivery for twenty or thirty years. And that is what I think enables us to make sure that whether it's a shop visit they need completed in the next ninety days or working with them with respect to delivering on their skylines, we're in a position to make sure we understand their needs and then turn around and do everything we can in 2026, the year of what we call being more customer driven. Competition will do what competition does, but we're far more focused on our customers today.
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Guy Johnson7:50
Okay. Competition may get tougher. I'm taking away from that, but you think you've got a handle on it. Is that the right interpretation?
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H. Culp7:59
I'll let you and others talk about where our competitors are. I think in terms of the way our senior team and our board are oriented, let's be focused on the customer. Customer will lead the way.
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Guy Johnson8:11
President Xi is coming in September to the United States. Should I expect big GE orders?
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H. Culp8:16
Well, we were very pleased with the news we had in Beijing when both Kelly Ortberg from Boeing and I were there, honored to be there with the president. I think the foundation was laid. The door is open, and there'll be a good bit of work for the person signing.
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Guy Johnson8:30
Expectation that maybe that trip would have delivered more. Is it a two-part story? Part one, we've seen. Part two comes in September.
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H. Culp8:39
I think it's a journey, and there was an important step taken in Beijing, no doubt, in my mind.
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Guy Johnson8:44
Okay. Final quick question. We're always done with the current generation of engines. We are gonna be moving on to the next generation of engines, which you see as being an open rotor kind of configuration with huge blades at the front of the engine. Many of the airline CEOs that I talk to at the moment say, let's just fix what we've got right now and make sure it works properly. What we want is reliability. What do you say to that in terms of what this next generation of aircraft engines will actually do?
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H. Culp9:13
We couldn't agree more. Here we are in 2026. Our LEAP engine is still a relatively new engine. Our GE9X, our leading wide body engine, still relatively new. Our GE90, really the workhorse in the wide body space, probably a teenager, not a mature adult. So these are engines that are gonna fly for decades, and we are working to improve the durability and reliability of those engines. That said, we need to be investing in 2026 to be ready for that next generation narrow body that may be ten or fifteen years out from where we are today. If we're not investing today, we're not ready then. We do think that the open fan architecture will allow us to address those reliability and durability concerns as well as deliver the next breakthrough in efficiency and sustainability.
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Guy Johnson10:00
So it becomes simpler, not more complicated.
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H. Culp10:01
Exactly. And that's the technology breakthrough that allows us to do both. As my friend Jim Collins would say, to employ the genius of the AND, durability and efficiency.
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Guy Johnson10:13
Larry, it's great to see you. Thank you very much indeed for spending some time with us this morning. Guys, back to you in the studio. Larry Culp, the CEO of GE Aerospace.