The paragraph is an introduction to the GE Aerospace Fourth Quarter 2024 Earnings Conference Call. The operator, Liz, welcomes participants and announces that the call is in listen-only mode. Blaire Shoor, the Head of Investor Relations, introduces the call, mentioning that CEO Larry Culp and CFO Rahul Ghai will discuss financial results and guidance on a non-GAAP basis. Larry Culp congratulates Blaire on her promotion and highlights GE Aerospace's accomplishments in 2024, particularly its transformation into a standalone public company. The company's focus remains on ensuring the safety of nearly 1 million passengers using their technology at any given moment.

The paragraph highlights GE Aerospace's achievements and advancements over the year. The company launched its FLIGHT DECK operating model, emphasizing safety, quality, delivery, and cost. GE secured major commercial and defense engine orders, including commitments from American Airlines and British Airways, and delivered engines to the Polish Armed Forces. They achieved certification for the LEAP-1A HPT durability kit, which enhances engine performance. Significant technology advancements were also noted, including progress in the RISE program for open-fan engines, collaborative efforts with Boeing, NASA, and the Oak Ridge National Laboratory, and a successful hybrid electric propulsion system test with the U.S. Army. These initiatives aim to propel the company into the future with improved engine design and hybrid electric propulsion applications.

In 2024, GE Aerospace achieved significant financial success, with double-digit increases in revenue, profits growing by $1.7 billion, and free cash flow up by $1.3 billion. The fourth quarter saw strong demand, with orders rising 46%, revenue growing 16%, and profit almost 50%. For the full year, the Commercial Engines & Services division saw a 50% increase in orders and a 25% profit increase, while Defense & Propulsion Technologies recorded a 6% rise in revenue and 17% profit growth. Looking ahead to 2025, GE Aerospace anticipates continued momentum, projecting low double-digit revenue growth, profit between $7.8 billion and $8.2 billion, EPS growth of 15%, and free cash flow between $6.3 billion and $6.8 billion. The company also plans to increase share repurchases and raise dividends by 30%, subject to Board approval.

The paragraph discusses the financial and operational progress of GE Aerospace between 2023 and 2025, emphasizing profit and cash flow growth. The company is focused on improving its supply chain and engine production, utilizing the FLIGHT DECK system to address constraints. Notable achievements include increased material inputs, CES services revenue growth, and enhancements in engine unit production, particularly in defense. However, some targets were not fully met due to material constraints. To meet future demand, GE Aerospace is uniting its engineering and supply chain teams into a new organization, Technology & Operations, led by Mohamed Ali, to drive improvement and efficiency.

The paragraph outlines the company's efforts to enhance its LEAP engine aftermarket capacity and service capabilities. By implementing a cross-functional team and aligning demand schedules, the company aims for improved deliveries and increased material inputs in 2025 and beyond. Key actions include eliminating waste using FLIGHT DECK technology, redesigning engine flow for higher output, and significantly investing in MRO facilities and repair technologies to lower costs and improve turnaround times. The company is also building a stronger third-party MRO network. Entering 2025, the company reports strong demand for its services and products, highlighted by increased orders and significant service contracts with airlines like El Al and flydubai.

The paragraph highlights significant achievements and financial performance of GE Aerospace. It mentions the inaugural flight of the Airbus 321XLR using LEAP-1A engines, new orders for engines for Royal Jordanian's Boeing 787-9s and China Airlines' Boeing 777-9s, and a $1.1 billion contract with the U.S. Army for T700 engine production. GE Aerospace is also acquiring Northstar Aerospace to enhance its capabilities. Financially, the company closed 2024 with a strong quarter, reporting a 46% increase in orders, 16% revenue growth, 49% profit increase, and improved margins and EPS. Free cash flow rose by 21%, with working capital benefiting primarily from long-term service contract billings.

The paragraph discusses the company's financial performance and challenges, highlighting significant growth in orders, revenue, and profit for the year despite ongoing material supply issues. Orders increased by 32%, with a strong emphasis on services. Revenue grew by 10%, and profit rose by 30% to $7.3 billion, with improved margins and EPS. Free cash flow also increased significantly. The CES segment saw a 50% rise in orders, supported by strong demand for services and equipment, despite supply chain constraints affecting delivery volumes. Spare parts and internal shop visit revenue grew, and the company made progress in catching up on spare engine deliveries. Although LEAP deliveries declined, customer mix and pricing offset lower volumes. Overall, the company achieved growth across key metrics amidst supply challenges.

The paragraph reports strong financial results for CES and DPT with significant growth in orders, revenue, and profit. CES profit increased by 44% to $2.2 billion, with an expanded margin of 28.2%, alongside substantial yearly gains in orders, revenue, and profit. DPT experienced a 22% rise in orders due to strong demand in Defense & Systems, contributing to a backlog increase to $18 billion. PAT showed modest growth with profit rising 2%. Corporate costs were reduced, reflecting GE Aerospace's standalone operations, with a significant cut in expenses and a complete exit from GE Healthcare.

The paragraph discusses GE Aerospace's financial outlook, highlighting over 100% return of free cash flow to shareholders through share buybacks and dividends. For 2025, GE Aerospace anticipates mid-teens revenue growth in its CES segment, driven by increased service demand, equipment revenue, and engine volume growth. Profit is projected between $7.6 billion and $7.9 billion, though partly offset by higher R&D spending and GE9X deliveries. In DPT, revenue is expected to grow mid- to high-single digits, with profit between $1.1 billion and $1.3 billion due to increased defense deliveries. Corporate costs should remain under $1 billion. Overall, GE predicts low double-digit company revenue growth and an increase in profit by around 10%, with EPS expected to rise approximately 15%.

The paragraph discusses GE Aerospace's positive outlook and performance. They anticipate reducing the tax rate to below 20% and benefiting from share repurchases, totaling $12 billion by 2025. The company expects free cash flow of $6.3 billion to $6.8 billion, driven by higher earnings, though offset by increased CapEx and cash tax payments. GE Aerospace is set for another year of growth, with a focus on safety, quality, and customer service. In 2024, they significantly grew revenue, earnings, and cash, returning over $6 billion to shareholders. Their competitive advantage lies in their platforms and industry-leading services, contributing to sustainable flight. They plan to continue delivering growth and returning cash flow to shareholders.

In the paragraph, the speaker expresses support for those affected by the Southern California fires, highlighting the use of their engines in firefighting aircraft and reaffirming their commitment to safety. During the Q&A session, Scott Deuschle from Deutsche Bank asks about the profitability trajectory of the LEAP engines. Rahul Ghai responds, noting that LEAP services became profitable in 2024, with program breakeven expected in 2025 and OE profitability in 2026. He attributes better-than-expected profitability to factors like increased spare parts sales, improved pricing, reduced warranty costs, and more shop visits.

The paragraph discusses the improving profitability and margins of a program expected for 2025, driven by increased shop visits and higher external spare parts volume. External shop visits are projected to rise from just over 10% in 2024 to 15% in 2025, contributing to future profitability. The program is on track to achieve performance similar to CFM56 levels by 2028. Larry Culp emphasizes the growth in the installed base and aftermarket opportunities, as LEAP new unit production is anticipated to increase by 15% to 20% this year. Improving supply base management and progress with the LEAP-1A engine enhance the program's market position, with a 300 basis point increase in cycle share for 2024.

In the paragraph, the speaker, Rahul Ghai, addresses a question from Myles Walton about the projected operating profit growth for 2025 compared to 2024. Although the initial estimate was a $1 billion increase, the new guidance indicates $750 million growth. Ghai explains that the company is performing well overall with expectations of adding $2.5 billion in profit over two years, which is better than previously thought. The 2025 profit growth is attributed mainly to an increase in services revenue, expected to rise by $3 billion, with stable service margins despite the increased share of LEAP. Corporate eliminations and productivity gains also play a role.

The paragraph discusses the current focus and future expectations for the GE9X engine program, primarily associated with Boeing's 777X aircraft. It highlights the challenges and progress made, including starting shipments and extensive testing, as the aircraft resumes flight tests. The GE9X faces a financial headwind of a couple hundred million dollars in 2025 due to increased engine shipments, though profit growth is anticipated in the long term with revenue expansion in their other division, DPT. The paragraph also touches on the competitive backlog of nearly 1,000 engines and optimism for the wide-body program's success over time.

The paragraph discusses a financial performance update related to CES margins in Q4, led by Sheila Kahyaoglu's inquiry. Rahul Ghai explains that CES had a strong quarter, exceeding expectations due to a favorable services mix despite slower shop visit volumes. The focus was on spare parts, which performed well, partly due to managing supply chain challenges. There was a favorable engine mix, and they managed to catch up on spare engine deliveries, particularly for LEAP engines, where the spare engine ratio is in low double digits. This resulted in a favorable shift towards spare parts over internal shop visits.

The paragraph discusses expectations for CES (Commercial Engine Services) revenue and growth. It anticipates a gradual decline rather than a steep drop-off in spare parts demand due to current market conditions. For 2025, spare parts sales are expected to increase by low double digits, while shop visit revenues are projected to rise in the mid-teens, driven by high single-digit growth in shop visit volumes and expanding work scopes. This includes wide-body programs like the GE90 and GEnx engines advancing to more extensive shop visits, with modest price increases factored into the service portfolio. Revenue is supported by a strong backlog of spare parts, ensuring a solid start to the year. Despite a lack of repetition in certain high revenue events from the previous year, CES's revenue for the quarter should align with full-year expectations. The discussion ends with a segue to a new question from Doug Harned regarding commercial services growth.

The paragraph features a conversation between Larry Culp and analysts regarding expected growth and challenges in the aviation industry. Culp mentions that there's broad-based demand strengthening, but they need to address supply chain issues and operational execution to meet demand. Although they wouldn't rule out higher performance, Culp emphasizes that the challenge won't be demand-related in 2025. He also refrains from providing specific details about the engine split between Airbus and Boeing but indicates alignment with both for increased production. The upcoming focus includes addressing backlog and operational execution to leverage pent-up demand.

The paragraph discusses the strategy and future planning for LEAP engine maintenance concerning third-party service providers. Initially, most shop visits have been performed internally by Safran and GE, with about 90% currently done in-house. However, the external network is gradually increasing its role, and by 2025, around 15% of shop visits are expected to be external, rising to 25% as contracts are sold to third-party MRO partners. This trend is projected to continue beyond 2030. The involvement of external partners is anticipated to boost spare parts sales, thereby improving margins on the program. Additionally, despite these shifts, margins on internal service contracts have remained stable, with recent years showing strong service profitability.

In the article paragraph, David Strauss inquires about the free cash flow forecast for 2025, specifically regarding working capital components like inventory, LTSA cash, and AD&A. Rahul Ghai explains that most of the cash growth in 2025 will be driven by earnings, with working capital and AD&A being positive contributors. He mentions that the inventory buildup will be less than in 2024 and expects some liquidation due to improved deliveries. Contract assets, favorable in 2024, will be less so in 2025 due to increased shop visits. The AD&A outflow is expected to remain consistent with 2024 levels, slightly higher perhaps. Overall, the positive contributions from working capital and AD&A will be offset by higher expected cash tax payments and increased CapEx, maintaining conversion above 100%, though slightly lower than in 2024. The operator then introduces the next question from Jason Gursky, who congratulates Blaire on a new role.

In the paragraph, the speaker, Larry Culp, reflects on labor productivity in the company relative to pre-pandemic levels. He notes the importance of prioritizing operators and eliminating waste to improve labor productivity. However, despite improvements, this hasn't yet led to better on-time delivery or labor productivity due to reliance on external suppliers. He mentions progress with material inputs and supplier reliability, which he anticipates will improve labor productivity in the future, particularly in 2025. The paragraph concludes with the operator introducing the next question from Gavin Parsons, who wishes to discuss supply chain issues further.

The paragraph discusses the ongoing challenges and improvements in the supply chain for LEAP-1A engine blades. Despite achieving certification, output is still constrained due to dependencies on critical suppliers. Efforts are being made to address bottlenecks, with over 500 employees working with suppliers to enhance production. Progress is gradual, marked by small gains, and is expected to continue similarly into 2025. Improvements are required to meet demand from major clients like Boeing and Airbus, as they increase production rates. The focus remains on better preparedness for the coming year, emphasizing the need for a coordinated ramp-up in production.

The paragraph discusses the challenges the company faces in balancing the demands of supplying both new engine production and the aftermarket, particularly for LEAP engines, with expectations of a 15% to 20% increase in production in 2025. Rahul Ghai highlights ongoing improvements in engine output, noting an expected year-over-year growth in the second and third quarters despite a softer start for DPT in the first quarter due to strong results last year and internal investments. Overall, the company's revenue for the first quarter is anticipated to align with full-year expectations, with profit potentially flat or slightly down compared to the fourth quarter, but strong growth and expanding margins on a year-over-year basis. The paragraph concludes with Blaire Shoor indicating time for one last question from Robert Spingarn of Melius Research.

In the paragraph, Robert Spingarn inquires about RTX's strategic prospects, particularly regarding potential business expansion beyond propulsion, given the company's strong financial position. Larry Culp responds by reiterating their capital allocation framework, emphasizing a focus on shareholder returns while not ruling out mergers and acquisitions, notably small, strategic additions. He refrains from commenting on specific opportunities but appreciates the question. Culp concludes by praising the global team's performance in 2024 and expressing optimism about meeting industry demand in the coming year. The conversation is then wrapped up by the operator.

This summary was generated with AI and may contain some inaccuracies.