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Give and Take: How GE Aviation is Profiting from the GE Store

GE Aviation, one of GE’s largest and most profitable units, generated $24 billion in revenues in 2014. Talking to investors this week just before the Dubai Air Show, David Joyce, its chief executive, said the powerful mix of GE’s technological breakthroughs and the overall growth in airline traffic is keeping him bullish about GE Aviation’s outlook.

Joyce said that one of the key factors powering GE Aviation’s growth was the GE Store – the way that GE shares technology and knowledge between businesses. He said the GE Store was creating a network effect that allowed GE engineers to borrow technology from colleagues elsewhere, move fast, and leapfrog competition.

GE Aviation, in fact, owes its very existence to the GE Store. The company’s first product some 80 years ago was an aircraft turbo supercharger developed by a gas turbine engineer employed by GE’s power generation business.

But Joyce’s unit doesn’t just take from the GE store. It also gives back. Take a look at out examples. (GE Reports will be at the Dubai Air Show next week. Subscribe our newsletter to receive more coverage.)

Taking from the Store:

GEnx FETT d38259m_

GEnx – In 2001, there was a downturn in the aviation industry following 9/11 and the dot.com market shakeout. But instead of slashing R&D spending, GE invested in the GEnx, a brand new engine for the Dreamliner and the latest Boeing 747 aircraft, the 747-8.  Drawing on its deep reservoir of materials science, the engine went into production in 2010, and the company shipped engine No. 1,000 this month. Overall, airlines from around the globe have ordered 1,600 GEnx engines to date.

1000 GEnx

Building up Global Operations – Experts project air traffic in China to grow 7.5 percent annually over the next 20 years. As a result, jet engine makers will deliver more than a third of all new jet engines in the Asia-Pacific region over the next two decades. GE projects that its engine fleet size in the region will triple by 2031. GE Aviation has been taking advantage of the inroads made by other GE businesses that have been local mainstays, such as GE Healthcare. Joyce’s units is also benefiting from access to other shared resources in China, such as the Shanghai Technology Center, which runs innovation programs with Chinese customers.

CMCblade

CMCs from Power & Water – GE Power & Water and GE Global Research have been experimenting with a GE-developed super material called ceramic matrix composites (CMCs). After a successful run inside a 2-megawatt gas turbine, GE Aviation decided to test parts made from CMCs inside jet engines. Today, CMCs are one of the key technologies inside the LEAP next-generation jet engine developed by CFM International, a joint company between GE and France’s Safran (Snecma). Even though the engine won’t enter service until next year, it’s already the best selling jet engine in GE’s history. CFM has have received more that 7,000 orders and commitments for the LEAP valued at more than $125 billion.

Giving Back:

LEAPnozzle2

Additive manufacturing – GE Aviation was the first business to experiment with 3D printing and successfully produced the first commercially viable 3D-printed GE part: a component for the LEAP’s fuel nozzle. Now other GE businesses such as GE Healthcare, GE Oil & Gas and GE Power & Water are all experimenting with the technology and looking for ways to incorporate GE Aviation’s insights in its designs.

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Services – Servicing jet engines is a fundamental part of GE Aviation’s business model. Its comprehensive service agreements (CSAs) – they are really long-term service contracts – are outcome-oriented to make sure airlines have the resources they need to keep their planes running. In return, these contracts provide predictable long-term and high-margin revenues to Joyce’s business. Other GE businesses are now using the same strategy to create multi-decade long relationships with their customers.

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Business support in tough cycles – Now that Aviation is in a bullish cycle, profits earned from jet engines can be used to support businesses powering through harder times. For example, earnings from GE Aviation have made possible GE Oil & Gas’ purchase of the subsea equipment and services company Advantec, as well as other acquisitions. GE says that it is this diversity that creates balance sheet stability and constancy in investment.

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