GE Aviation Taking Off – Analyst Blog

GE Aviation, a subsidiary of General Electric Co. (GE), and its joint venture partners, CFM International and the Engine Alliance, recently received orders worth $16 billion for engines and services collectively. The company entered the deals at the 2010 Farnborough Air Show.

 

The $16 billion deals received by the company comprise $11 billion orders for engine and $5 billion orders for a long-term service agreement. The orders were received from companies like Emirates, Air China, China Eastern Airlines, GE Capital Aviation Services, Afriqiyah Airways, Air Arabia , TAAG (Angola Airlines), Qatar Airways and Republic Airways.

 

General Electric also extended its software and solutions business, generating $4 billion annual revenue, with the launch of its new digital services called myEngines at the Farnborough Air Show. myEngines is a collection of digital applications designed to improve productivity and manageability of a fleet of engines being used by the customers. LAN Airlines, GE’s first customer for myEngines, will use GE’s new digital solution in its entire fleet of CF6-80C2, GE90-115B, CFM56-5B and –5C engines.

 

The company also expanded its ecomagination portfolio through the introduction of its OnPoint Fuel & Carbon Solutions, designed to reduce fuel consumption of aircrafts by about three percent. Ecomagination signifies GE’s commitment to imagine and build innovative solutions to today’s environmental challenges while driving economic growth.

 

The aviation companies, such as General Electric, Honeywell International Inc. (HON), United Technologies Corporation (UTX) and Boeing Co. (BA), are receiving huge number of orders, which indicates that the industry is recovering from economic slump. With the start of the 2010 Farnborough Air Show Emirates Airlines of Dubai, a major airline in the Middle East, ordered 30 of Boeing’s 777 jets in a deal worth nearly $7 billion. General Electric’s Commercial Aviation Services (“GECAS”) unit ordered 40 Boeing 737-800s and 60 Airbus A320s at Farnborough, for a combined sale value of around $8 billion.

 

The recovery in the aviation industry is being led by an increase in the number of people traveling to countries like India, China and Brazil, which are the emerging markets with substantial business growth prospects. The demand for jetliners has primarily increased due to enormous airline traffic in the Middle East.

 

Headquartered in Evendale, Ohio, GE Aviation is a leading worldwide supplier of large and small jet engines for military and commercial aircraft. This division of General Electric Co. operated under the name of General Electric Aircraft Engines (“GEAE”) till September 2005. GE Aviation’s main competitors in the engine market are Rolls-Royce and Pratt & Whitney.

 

We currently maintain our Neutral rating on General Electric, with a Zacks #3 Rank over the next one-to-three months.