International travel boom drives surge in demand for aircraft engines, GE Aviation (GE.US) adjusts full-year performance outlook.

GE Aerospace, the traditional industrial giant in the United States, completed its split and left behind its legal entity and core assets in the aerospace business. GE Aviation (GE.US) announced its latest performance report before the US stock market on Thursday, raising its full-year performance outlook. Its profit performance exceeded the unanimous expectations of Wall Street analysts, showing that this global giant in jet engine manufacturing is able to avoid disturbances related to the Iran conflict and fully capitalize on the increasing international travel demand during the FIFA World Cup hosted by the United States, Mexico, and Canada. According to the company's performance statement released on Thursday, the adjusted earnings per share for this year are expected to be between $7.65 and $7.85, higher than the previous highest forecast of $7.40. It also significantly exceeded the average expectation of analysts of about $7.56. The company also raised its free cash flow, revenue growth, and operating profit performance guidance. The company's forecasts were all raised comprehensively, indicating that despite trade disputes, rising inflation, and political conflicts between the United States and Iran affecting the markets, the demand for air travel will remain strong. Operating under the name "GE Aviation," the company has raised its performance outlook seven times since January 2024 and there are almost no signs of weakness in the demand for its core aviation spare parts and maintenance services. In the second quarter, the company's adjusted earnings per share were $2.02, higher than the average analyst expectation of $1.86. Adjusted revenue also increased significantly by 24% year-on-year, to $12.63 billion. CEO Larry Culp stated in the declaration that the better-than-expected quarterly performance was due to "strong growth in commercial services business" and a significant increase in engine deliveries in the first half of the year. The company also warned in a regulatory filing that it expects "supply chain constraints and inflation to persist, and we continue to take actions to mitigate their impact." In the second quarter, the company's adjusted operating profit increased by 18% year-on-year to $2.746 billion, and free cash flow increased by 43% to $3.027 billion, significantly faster than the profit growth, indicating strong cash conversion ability in the aftermarket services business. Orders also rose by 17% to $16.5 billion, with the company's total backlog orders exceeding $210 billion, providing high visibility for future revenue and profit. Before the start of regular trading on the New York Stock Exchange, as of 6:49 am, the company's stock price fell by less than 1%. As of the close of Wednesday, the stock had risen by about 17% year-to-date, outperforming the 11% increase in the S&P 500 index. Culp has transformed GE Aviation into a highly stable company in an industry prone to occasional severe fluctuations. In recent years, this once diversified conglomerate has narrowed its focus to the aviation and defense sectors through a lengthy separation process, divesting its energy and healthcare businesses in the meantime. Though this move has benefited the company, it has also made it more vulnerable to turbulence in the aviation travel market. GE Aviation has already indicated this year that fuel supply conditions and downward revisions in global economic growth expectations could have short-term impacts. Culp has become an important voice in advocating for the reduction of tariffs by the U.S. government. He stated that lower tariffs would help promote greater development in this global industry. In a recent interview, the CEO stated that the company is "almost every day" in discussions with the Pentagon or the White House about increasing production, saying, "We fully support the president's goal of ensuring we get the best products to our warfighters as quickly as we can." The company continues to invest in new technologies and completed testing of a hybrid electric propulsion system at its facility in Ohio in June. The engine is being developed through the National Aeronautics and Space Administration's electrified power systems flight demonstration project, and the next step will be flight testing. Its aerospace research center in northern New York recently demonstrated an aerospace industry application driven by artificial intelligence technology, which can generate complete design layouts for hypersonic scramjet engines in a matter of seconds. GE Aviation believes that this technology has the potential to significantly shorten product design cycles and reduce costs. What is the connection between GE Aviation and GE Aerospace, GE Vernova? GE Aviation and GE Vernova (GEV.US) both originated from the original American industrial giant GE Aerospace, but are now independent publicly traded companies. The original GE Aerospace split from GE Healthcare (GEHC.US) in January 2023, and then split its energy business, GE Vernova, on April 2, 2024. After the split was completed, the remaining parent company officially transformed into GE Aviation (i.e., GE Aerospace), and continued to use the New York Stock Exchange code "GE." Therefore, GE Aviation is not a newly spun-off subsidiary, but a continuation of the legal and listed entity of the original GE Aerospace after the split; GE Vernova is an independent publicly listed company since April 2024. The business and investment logic of these major companies originating from GE Aerospace have also completely differentiated. GE Aviation focuses on commercial and military aircraft engines, spare parts, and maintenance services, with its profit core being the high continuity of post-sales cash flow brought by a large installed base of engines. On the other hand, GE Vernova takes over GE's gas-fired power generation, wind power, grid, and electrification businesses, with a significant business being the current shortage of gas turbines for AI data centers worldwide, and its valuation is driven more by global power demand, AI data center construction progress, gas power generation expansion, and grid upgrades. The biggest difference between GE Aviation and the old GE Aerospace is that its business has shrunk from a diversified industrial conglomerate to a pure aviation and aerospace company. The original GE spanned across aviation engines, gas-fired power generation, wind power, grid, healthcare equipment, and finance. The core business of GE Aviation can be summarized as "commercial aircraft engines + full-life cycle aftermarket services + military propulsion technology." The company is currently divided into two business segments: Commercial Engines and Services (CES), which designs and manufactures engines for narrow-body, wide-body, regional, and business jets, with representative products including LEAP, CFM56, GEnx, GE90, and GE9X, and generates continuous revenue through spare parts sales, engine overhauls, long-term service agreements, etc.; and Defense and Propulsion Technology (DPT), which covers military aircraft engines, key aviation systems, advanced propulsion, and additive manufacturing technology. With about 50,000 commercial engines and 30,000 military engines installed, aftermarket services account for about 70% of the company's total revenue, so GE Aviation does not simply rely on new engine deliveries but has a clear "equipment-first, decades of maintenance cash realization" business model.