General Electric’s (GE) Aviation segment is expected to be the main driver of the company’s fourth-quarter revenue.
Analysts expect the segment to report revenue of $7.87 billion in the quarter, up 9.1% from the previous year’s quarter.
The Aviation segment has been GE’s best-performing unit in recent quarters. In the third quarter, the segment’s revenue rose 12% YoY (year-over-year) and accounted for 25% of GE’s total revenue compared to 24% in the previous year’s quarter. The segment’s order value increased 35% YoY to $9.1 billion in the third quarter.
The segment’s operating profit rose 25% YoY to $1.7 billion in the third quarter due to increased volumes, higher pricing, and improved product cost and productivity. The segment’s operating margin expanded 240 basis points YoY to 22.3% in the third quarter.
The segment’s equipment unit sales increased 17% YoY on strong commercial engine sales partially offset by weak military engine sales. Its equipment orders soared 82% mainly driven by a 40% jump in commercial engine orders, primarily resulting from strong orders of the GEnx and LEAP engines. However, military engine orders fell 35%.
The Aviation segment’s services revenue rose 9% YoY in the third quarter mainly driven by a 20% rise in the spares rate and increased shop visits. The spares rate increased to $28 million per day from $23.2 million per day in the previous year’s quarter.
Aviation industry in 2018
The International Air Transport Association said that it expected worldwide RPK (revenue passenger kilometers) to increase 6.5% in 2018. The aviation industry’s (JETS) load factors reported decent growth in 2018 through November. The report also says that the outlook in terms of RPK and air cargo growth in million tons remained positive in 2018.
GE has sped up the delivery of its LEAP engines, a move that’s driving its Aviation segment’s revenue. Last year, in a $6.5 billion deal, the GEnx engine was picked up by American Airlines (AAL) to power its Boeing (BA) 787 Dreamliner fleet.
GE’s Aviation business unit competes with Rolls-Royce and United Technologies’ (UTX) wholly-owned subsidiary Pratt & Whitney.