GE Aviation service business stays strong during downturn
As the aviation industry deals with the global economic downturn, GE Aviation's Services business is providing stable, long-term revenues while helping customers cope with the challenging environment.
GE Aviation has an installed base of more than 8,000 engines in service, while CFM International, a 50/50 joint company of GE and Snecma (SAFRAN Group), has more than 13,000 engines in service. They are the foundation for GE Aviation's Services, with 2008 revenues approaching $7 billion.
Only 40 percent of the GE and CFM installed fleet have had their first shop visit, and the revenue generated from servicing them through their 30+ year operating life can approach seven times the revenue from the original engine sale. With such a young engine fleet, much of this revenue has yet to be realized. Several large fleets, such as CFM56-5B and -7B engines for narrow-body aircraft, are entering their maintenance period, with service activity growing at about 15 percent annually.
GE Aviation's long-term maintenance and material solutions, called OnPoint solutions, are tailored to the operational and financial needs of customers for any size fleet. GE's backlog of OnPoint solution agreements reached $55 billion in 2008, up more than 9 percent from 2007. In addition, the Services business has a pipeline of almost $30 billion of new orders for other service products. Backed by GE's global network, OnPoint services include overhaul, on wing support, new and used-serviceable parts, component repair, technology upgrades, engine leasing, integrated systems support and diagnostics and integrated systems.
"More customers are seeking predictable maintenance and material costs, access to technology upgrades and increased engine residual value that GE Aviation offers," Tom Gentile, vice president and general manager of GE Aviation's Services business.
GE Aviation has invested more than $150 million between 2007 and 2009 in its 11 overhaul and repair operations for upgraded technologies and equipment to ensure customers receive the latest component and maintenance repairs in a timely manner. GE is also expanding its network of airline and third-party service providers, which are committed to utilizing GE's material and licensed repair technologies. In the last year, ST Aerospace, Aveos, TEXL (a unit of the Swire Group) and Iberia have joined Air France/KLM, JAL, Standard Aero, MTU, EGAT (Taiwan) and IHI as global network service providers for GE and CFM engines.
"As GE Aviation's Services business has grown, we have developed a more customer-focused global services strategy, based on our extensive global network of providers," said Gentile. "Customers can have their engines maintained at a GE Aviation's Services facility or at one of GE's global network providers. Either way, these customers have access to the same high-quality OEM (original equipment manufacturer) parts and repair services."