General Electric Company (GE)

[JPetroInc]

GE Aviation ramps up engine production for Boeing 737 Max, but warns of headwind

By Andrew McIntosh – Staff Writer, Puget Sound Business Journal

May 7, 2019, 5:44am PDT / Updated May 7, 2019, 11:49am PDT

https://www.bizjournals.com/seattle/news/2019/05/07/ge-aviation-ramps-up-engine-production-for-boeing.html



GE Aviation more than doubled its production of LEAP engines for Boeing and Airbus single-aisle jets in the first quarter of 2019, the company says.

The company shipped 424 LEAP engines to jet manufacturers in the first three months of 2019, versus 186 in the prior year, which was welcomed news for Boeing's Renton 737 jet factory. LEAP engines are made only for Boeing and Airbus single-aisle jets.

GE Chief Financial Officer Jamie Miller said during a conference call to discuss quarterly earnings results that as of March 30 it was just two weeks behind schedule on its LEAP engine deliveries for Boeing, a 50 percent recovery since January. All Airbus deliveries were on time, Miller said.

Executives also warned that GE is facing $200 million in possible future costs in the second quarter of 2019 if the Boeing 737 Max remains grounded through June and deliveries continue to be suspended. The Max was grounded in March after a second deadly crash within six months.

Miller said that GE has not changed its engine production plans, but its cash flow may be affected because its gets paid when aircraft deliveries resume.

The late LEAP engine deliveries throughout the second half of 2018 and early 2019 hampered Boeing because the jet maker was unable to meet its objective of hitting 52 jets a month at the Renton factory and was unable to meet customer delivery deadlines. It also incurred extra costs renting space in Renton to park Max jets on a municipal airport's property.

GE Chairman and CEO Larry Culp said that GE is "confident" in the 737 Max and that the company has a "strong partnership" with Boeing.

Cowen & Co. analyst Gautam Khanna said the latest production numbers are positive, adding that CFM and GE should be fully caught up in May. The grounding has also given GE an opportunity to get out in front of engine maintenance.

"We are working closely with Boeing through the (Max) recertification process," Culp said. "And while the planes are on the ground, we are conducting proactive scheduled maintenance on the engines."

A Boeing spokesman said the company had no information to share about engine deliveries.

GE hopes to quadruple its LEAP engine deliveries to 1,900 this year, a goal that was set in 2017. GE Aviation reported $7.95 billion in revenue for the latest quarter, up 12 percent compared to $7.1 billion a year ago.