GE's CFM joint venture has been a part of best selling narrow body aircrafts quite recently. CFM's LEAP series engines power the Boeing B737 MAX aircrafts and majority of Airbus A320neo-family aircrafts. They have also caught the imagination of Chinese COMAC that the COMAC C919 will also be powered up by the Leap engines.
Whereas Airbus A320neo-family operators can choose engine options from CFM's LEAP-1A and the Pratt & Whitney's Geared turbofan (GTF) engines , Boeing B737 Max and upcoming C919 operators can choose the only option of CFM's LEAP engines .
Year 2020 has been harsh for the global aviation industry, General Electric was not an exception by losing around 33% of revenue compared to previous year to a value of $22 billion.
While engine orders dropped 41% to $21.6 billion, free cash flow fell to zero from $4.4 billion in the pre-pandemic year 2019.
Despite the pandemic, GE maintained the long-term profit potential alive,and on Friday, it won another big order for Narrow body aircraft engines and services, which highlights it's long term growth prospects.
GE's aviation venture earns from building and servicing aircraft engines. In 2019, the business generated $9 billion of revenue from selling engines for commercial jets, while commercial engine services fetched another $15.2 billion.
On Friday, CFM and IndiGo -- India's largest airline -- announced that IndiGo had selected the LEAP-1A to power an additional 310 Airbus jets it has on order.
Both the companies also signed a long-term service agreement for these turbofan engines. This marks CFM's largest order ever (by number of engines), that surpassed the 2019 Indigo order to power 280 A320neo-family aircrafts.
The 2019 Indigo order was a big boost for CFM, as IndiGo's previous choice was Pratt & Whitney's GTF for its first 140 A320neo-family deliveries. However, Reliability issues, Inflight shut downs and increased maintenance costs for the early GTF engines brought Indigo Closer to CFM leap engines.
The new IndiGo deal will require as good as 700 engines, that includes spares. The single deal has outnumbered the complete order of 351 engines in 2020.
While GE did not reveal the value of current mammoth CFM order, one can imagine from the $20 billion value of 2019 IndiGo order .
As the air travel recovery accelerates over the next year or two, GE Aviation's revenue and profit should recover toward 2019 levels. The segment will also benefit from growth in its military aviation business; management expects military revenue to reach $8.3 billion by 2025, up from $4.4 billion in 2019 and $4.6 billion last year.
Meanwhile, GE Aviation continues winning engine and services deals -- particularly at its CFM joint venture -- that will generate meaningful revenue and earnings well into the 2030s.
Pictures : Safran , Indigo , Airbus .
