The Aviation segment has been General Electric’s (GE) best-performing business unit in recent quarters. The segment’s third-quarter revenues rose 12% YoY (year-over-year) and accounted for 25% of General Electric’s total revenues—compared to 24% in the third quarter of 2017. The segment’s orders rose 35% YoY to $9.1 billion.
In the third quarter, the Aviation segment’s operating profit increased 25% YoY to $1.7 billion due to higher pricing, increased volumes, and improved product cost productivity. The division’s operating margin expanded by 240 basis points to 22.3% in the third quarter.
Equipment and service units
The Aviation segment registered a 17% YoY growth in equipment unit revenues mainly due to strong commercial engine sales. The growth was offset by weak military engine sales. The third-quarter equipment orders rose 82% mainly due to a 40% increase in commercial engine orders. On the other hand, the military engine orders fell 35%.
The Aviation segment’s services revenues grew 9% YoY in the third quarter due to a rise in shop visits and a 20% increase in the spares rate. The spares rate increased to $28 million per day from $23.2 million per day in the third quarter of 2017.
Aviation outlook in 2018
The International Air Transport Association expects that the worldwide RPK (revenue passenger kilometers) will increase 6%–7% in 2018. The aviation industry’s (JETS) load factors have reported decent growth through November. The outlook in terms of RPK and air cargo growth in million tons remains positive for 2018 and beyond.
General Electric needs to speed up the delivery of its LEAP engines, which is driving its Aviation segment’s revenues. On April 7, General Electric announced a $6.5 billion deal with American Airlines (AAL), which picked General Electric’s GEnx engine to power its Boeing (BA) 787 Dreamliner fleet.
General Electric’s Aviation segment competes with Rolls-Royce and United Technologies’ (UTX) Pratt & Whitney.