GE Aviation: Company Strategy & Performance Analysis
GE Aviation offers a range of aircraft engines and related services to military and commercial customers. The company manufactures jet, turboprop and turboshaft engines, and related replacement parts for commercial and military aircrafts. It also develops aerospace systems and equipment, which include platform computing systems, power generation and distribution products, mechanical actuation products and landing gear and engine components. GE Aviation provides repair and maintenance services for all categories of aircrafts. Its engines are used in a wide range of commercial and military aircraft, including executive and regional aircraft, fighters, bombers and surveillance aircraft, as well as marine applications. Its operations are spread across Europe, Asia, the Americas, the Middle East and Africa. It operates as a subsidiary of General Electric Co. GE Aviation is headquartered in Cincinnati, Ohio, the US.
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Constant technological improvement in products and services led to growth
GE Aviation service orders stood at US$16.3 billion in 2016, registering a growth of 19.9% from US$13.6billion in 2015 owing to the introduction of technologically advanced products and services. Overall, the company’s orders grew at a 2.9% CAGR from US$23.5 billion in 2012 to US$26.3 billion in 2016. The growth in the order backlog is attributed to the signing of new MRO and supply contracts between GE Aviation and companies like StandardAero, WestJet, Republic airways, Colorful Guizhou airlines and Lufthansa Airways.
GE Aviation has considerable order backlogs, which ensure strong top line performance. As of December 2016, the company had a total order backlog of US$154.5 billion, showing an increase of 2.2% over 2015. The company’s backlog increased 2.2% from US$151.2 million in 2015 to US$154.6 million in 2016, out of which MRO backlogs increased from US$116.3 million in 2015 to US$121.3 million in 2016, owing to the growing demand for the latest technologically advanced engines leading to an increase in MRO orders. New generation LEAP engines, which feature 3D-printed fuel nozzles and parts from space-age ceramic composites, continue to drive orders for the company.
Increased shipment of LEAP engines supports segmental growth
The company’s Aviation segment revenue increased from US$24.2 billion in 2015 to US$25.5 billion in 2016, reflecting a growth of 5.3% in 2016. The increase in Aviation segment revenue is mainly due to higher services volume and LEAP engine shipments. This was partially offset by reduced equipment volume driven by a decrease in military shipments. Revenues also grew due to higher engines and services pricing. Prices also increased in response to higher material and conversion costs.
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