uploads/2019/01/Chart-3-Aviation-1.png

Aviation Segment to Drive GE’s Revenues in 2019

By

Updated

Best-performing unit

The Aviation division has been General Electric’s (GE) best-performing business unit in recent quarters. The business unit’s third-quarter revenues increased 12% YoY and accounted for 25% of GE’s total revenues compared to 24% in the year-ago quarter. The division’s orders grew 35% YoY to $9.1 billion in the third quarter.

The Aviation unit’s operating profit increased 25% YoY to $1.7 billion in the third quarter due to higher pricing, increased volumes, and improved product cost productivity. The segment’s operating margin expanded by 240 basis points to 22.3% in the third quarter.

Article continues below advertisement

Equipment and service units

The business segment registered 17% YoY growth in equipment unit revenues mainly due to strong commercial engine sales. However, weak military engine sales partially offset the growth. Equipment orders rose 82% YoY in the third quarter primarily due to a 40% increase in commercial engine orders. On the other hand, orders for military engines fell 35%.

The Aviation division’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 ~21% YoY to $28 million per day from $23.2 million per day in the year-ago quarter.

Aviation outlook in 2019

According to a report by online statistics and market research firm Statista, the worldwide RPK (revenue passenger kilometers) will increase 6% in 2019. The aviation industry’s (JETS) load factors have reported decent growth through December. The outlook in terms of RPK and air cargo growth in million tons remains positive for 2019 and beyond.

GE needs to speed up the delivery of its LEAP engines, which is driving its Aviation segment’s revenues. Last year, the company 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.

GE’s Aviation division competes with Rolls-Royce and United Technologies’ (UTX) subsidiary, Pratt & Whitney.

Advertisement

More From Market Realist