A：For GE Aerospace's second quarter 2026, the financial results included robust commercial services with overall orders and revenue up, an operating profit that grew, and an increase in EPS. The revenue growth was supported by a 32% increase in commercial services revenue and a 31% increase in total engine deliveries. The company also experienced a 43% growth in free cash flow with a conversion rate over 140%.

A：Operational improvements credited to Flight Deck include a reduction in production lead time, final time, and inspection time. Specifically, there was a 50% reduction in final time for a critical component in Massachusetts, a 56% reduction in final time at Selma, Brazil, and an improvement in inspection time facilitated by the implementation of detailed visual work instructions and Edd inspection technology.

A：Flight Deck is contributing to GE Aerospace's capacity to meet growing demand by streamlining processes, enhancing supplier collaboration, and using AI for automation. This has led to a halving of demand signals and a near 90% reduction in processing time, resulting in improved supplier material input and increased efficiency in operations.

A：Significant milestones for the Leap engine include the grand opening of a new maintenance facility in Fort Worth that recently inducted its first Leap 1B engine, the completion of the certification for the Leap IB Durability Kit, and upgrades to the Hpt blade, which is expected to deliver a twofold improvement in time on wing. Additionally, the company has seen nearly 100 days reduction in turnaround times for the Leap engine.

A：Strategic moves and new agreements related to future flight technologies include an expansion of the NASA Electrified Powertrain flight demonstration project, with Beta Technologies joining to modify the EPF aircraft. The company is also advancing the Xa 102 adaptive cycle engine program, with the completion of an assembly readiness review and moving towards preliminary design review for both the GE Hood and GE Ng, which are set to operate on small and medium combat aircraft respectively. These developments align with the company's focus on translating experience and investments into value for customers and driving long-term growth.

A：G Aerospace's orders grew 17%, revenue increased 24%, and operating profit was $2.7 billion, up 18% in the latest quarter.

A：G Aerospace's year-to-date revenue was up 20%, with an operating profit increase of nearly $800 million, and free cash flow grew over $1 billion. The second quarter built on the strong first quarter performance.

A：In the second quarter, G Aerospace's Commercial Services orders grew 18%, services were up 22%, and equipment was up 7%. Revenue increased 27%, with services growing 26%. Internal shop visit revenue grew 25%, and spare parts sales increased significantly. However, spare parts delinquency grew 20% sequentially.

A：Dpt's profit was $2.7 billion, up 20% from higher services, volume, and price.Margins were down 160 basis points to 27.3% from installed engine growth, including GE Nx investments and inflation.

A：G Aerospace's Dpt segment saw orders increase 12%, a defense book-to-bill ratio of 1 in the quarter and 1.7 in the first half, and total Dpt backlog grew to over $30 billion. Revenue grew 16%, with defense and systems revenue up 4%, and profit increased 18% with margins up 13 basis points to 13.8%.

A：G Aerospace has raised its full-year guidance, expecting overall revenue to grow in the high teens, up from prior expectations of low double digits. It now anticipates CES growth of around 20%, commercial services growth of low teens, and Dpt growth of low double digits.

A：G Aerospace's commercial services backlog stands at roughly $170 billion, up nearly $30 billion from the end of 2024. Given the sustained demand environment and existing backlogs, it enters the third quarter with a strong position, expecting to fulfill its outlook for 2026.

A：G Aerospace projects operating profit to be in a range of $10.55 to $10.75 billion and has raised its EPS guidance to a range of $7.65 to $7.85 per share, indicating an expectation of higher free cash flow growth.

A：The reduction in the overdue and delinquent backlog is expected to benefit the company by contributing to revenue growth and improving working capital and cash flow.

A：The company's structural tailwind for growth is largely due to the natural aging of the installed base, work scope, and potential price increases, which are expected to contribute to a structural tailwind.

A：The company did not raise guidance initially because of the uncertain environment and potential tail risks, which included concerns regarding customer behavior during the conflict.

A：The company has learned that it should be better prepared for the other side of uncertainty and has gained insights into the resilience of demand, particularly in the aftermarket, which has demonstrated a strong ability to compound value through complex macroeconomic conditions.

A：The company expects shop visits to grow by approximately 25% from the current point till the end of the year, primarily due to the existing installed base growth. Durability upgrades are factoring into this growth, with upgrades pulling forward future work and contributing to the company's focus on the external channel's growth. The investments in spare parts and repairs are expected to contribute to reduced shop costs, which in turn will continue to improve as volume grows and the company leverages its fixed cost investments more efficiently.

A：Over 40% of the fleet is now equipped with the durability kit for the Leap 1, and the expected impact is a doubling of time on wing, which puts the performance in line with Cfm engines.

A：The expected timeline for the full retrofit of both the Fleet 1 A and Leap 1 B fleets is until the early 2030s.

A：The growth potential for future work scope is a result of the natural aging of the installed base and the movement from quick turn and early check visits to performance restoration shop visits on both wide body and narrow body platforms.

A：The work scope for Cfm 56 engines is comparable to the legacy narrow platform, with the latter having a significant number of engines that have yet to undergo their first shop visit and a substantial portion that haven't even seen their second shop visit.

A：The growth in CFM 5056 work scopes is being driven by better volume, better pricing, and higher material availability, which has allowed for the fulfillment of heavier work scopes that could not be completed earlier due to material unavailability.

A：GE recognizes hybrid electric technology as a key pillar of their technology development program, both on the commercial and defense sides. The investment in this technology, including the collaboration with Beta on the turbo generator program, is seen as crucial for future technological portfolios.

A：Despite the financial pressures from higher fuel prices, GE recognizes that both they and the airlines are pricing in profitability. GE aims to reward themselves for the significant investments and capability enhancements they provide to their customers. Inflationary headwinds are present, but GE plans to maintain a consistent pricing approach for spare parts in the current year as compared to the previous year. In the long term, incremental pricing on platforms like Leap and GE90 will continue to increase, which will help Leap to achieve Cfm 56 profit levels by 2030.

A：With the peak pain from durability issues and operational headwinds behind them, and considering the strong shape of shop visits, one would expect an improvement in incremental margins from higher throughput and productivity. However, it's unclear if there are significant offsets to consider or if there is a clear line of sight to a margin greater than 30%.

A：The three large issues on margins are 1) strong install engine growth, 2) Leap services margins, which are expected to be in line with the total services portfolio by 2028, and 3) the cost of the 9x initial units, which have the highest cost units. The first issue is about growth needed to meet demand and support the installed base. The second issue is about service margins, and the third issue pertains to the high cost of the initial units, which are expected to peak by 2028 and improve thereafter.

A：The company expects its overall margins to be largely flat at the total company level, primarily because services, which are the highest margin and drive the most significant dollar growth, are a major part of the portfolio. As headwinds abate, the inherent mix advantage of the business is expected to continue, leading to margin expansion for both CES and the total company beyond 2028.

A：Concerns have been raised that the new generation cost of ownership for engines is much higher and potentially unsustainable compared to legacy operating models. The company is addressing these concerns by continuing to support customers through measures such as having adequate spare engine coverage, reducing turnaround times, and avoiding extended non-revenue situations for the engines. Long-term, the company aims to address the issues by implementing the durability kit for both Leap 1 A and Leap IB engines and supporting the retrofit of the installed base promptly.

A：The company acknowledges normalization in spare engine ratios but notes that the number of spare engines shipped continues to grow, which means that the spare engine ratios are not coming down. This is due to the company's growth in install engine shipments. The number of spare engines delivered in the first half has increased, and the company expects this trend to continue into 2027, stabilizing at the run rate level by the end of the year.