GE Aviation and Safran expect the LEAP turbofan engine to reach breakeven margins in 2025. There will be a three-percent margin impact this year and in 2023 as the production transits from the CFM56 to the LEAP, but the numbers are looking good beyond 2023. CFM LEAP expected to hit breakeven by 2025.
GE Aviation gave an update on March 10 during the General Electric Investor’s Day in Greenville. This confirmed the statement from Safran at its own Investor’s Day last December that the LEAP is on track for gross breakeven margins no later than 2025 as variable costs go down by fifteen percent until 2024.
GE Aviation CEO of Commercial Engines, Kathy MacKenzie, said that in the past twenty months of the Covid-crisis, the focus has been on yields and the losses of key parts. “We have taken 44 percent of the costs out of the LEAP engine since 2016 and with ongoing actions, we will break even by 2025. So we will deliver revenue growth.”
LEAP and CFM56 production will hit around 1.600 engines this year, up from 845 in 2021. The target for 2023 is slightly below 2.000, but after that, engine production will clear 2.000 on an annual basis. The CFM56 program is expected to have been completed by the end of 2024.
On the GE9X, MacKenzie said that it won’t have a significant impact its GE’s financial performance until it goes into service on the Boeing 777-9 by late 2023 or early 2024.
Shop visits expected to go up by 25 percent
GE Aviation is expecting shop visits of its engine to go up 25 percent this year as air traffic recovers, said Russel Stokes, CEO of Commercial Services. The number of CFM 56s that will require service will grow until the end of the decade, as fifty percent of the 19.100 engines on the installed fleet have yet to see their first shop visit, with 25 percent being there only once. The LEAP will start contributing to shop visits by the middle of the decade.
The widebody engines like the trusted CF6, GE90, and GEnx also take up a significant share, with sixty percent of the installed fleet having done just one visit. The GE90 is forty percent of GE’s service revenues. With its lean and Kaizen approach to efficiency, GE Aviation has succeeded in reducing shop visits and improving the operational performance of its MRO business, boosting on-time deliveries from ten to 78 percent from 2019 to 2020. Actually, Kaizen was mentioned numerous times as the strategy to improve GE’s performance.
GE Aviation continues to spend between six and eight percent of its annual revenues on R&D, which in the past years was around $1.8 billion. It is running technology programs in all areas: electrification, hydrogen optimized platforms, and new technologies, like the RISE technology program that was launched mid-2021.
Supply chain delays included in the production rates
CEO John Slattery confirmed that there are longer lead times in the supply chain on forgings and casting, but “that is fully baked into the production ramp-up we have planned. Certainly, there are always issues, but in the main, we are confident that we can support the airframers on the ramp-up.” As reported, Airbus and Boeing are planning a significant rate increase, with the A320neo-program going to 65 aircraft per month from mid-2023 and likely to 70 or 74 beyond that and Boeing-supplier Spirit AeroSystems looking at a rate of 42 to 47 for the MAX.
Slattery said the GE sourced only one percent of titanium from Russia for the production of two parts and “of those parts, we have over years of supply on the shelves, so I think we are good at that front.”
Active as journalist since 1987, starting with regional newspaper Zwolse Courant. Grand Prix reporter in 1997 at Dutch monthly Formule 1, general reporter Lelystad/Flevoland at De Stentor/Dagblad Flevoland, from 2002 until June 2021 radio/tv reporter/presentor with Omroep Flevoland.
Since mid-2016 freelance aviation journalist, since June 2021 fully dedicated to aviation. Reporter/editor AirInsight since December 2018. Contributor to Airliner World, Piloot & Vliegtuig. Twitter: @rschuur_aero.