Yesterday, GE Aerospace hosted our Annual Shareholder’s Meeting. A replay of the meeting, which includes shareholder questions discussed at the meeting, as well as the voting results will be available on our website here.
We’ve also received a number of questions following our earnings call focused on the aftermarket. We’re sharing our top 5 questions and responses below.
We’re looking forward to seeing many of you at the Bernstein Strategic Decisions conference on May 27th, where Chairman and CEO Larry Culp will present.
Thank you for your continued interest in GE Aerospace,
GE Aerospace Investor Relations team
Your top questions answered
1. What planning assumptions are embedded in your second half guidance, and is the 2026 exit rate the way we should think about the services outlook for 2027?
Our second-half guidance reflects a more measured view of commercial services given the evolving macro backdrop. Our assumptions include:
- Global GE Aerospace/CFM departures remaining up flat to low single digits, exiting the year closer to the low-single-digit range.
- Fuel prices remain elevated with further increases into 3Q, before decreasing by year-end.
- A roughly 1/3 reduction in global GDP growth.
That said, the trends through April have continued to show a constructive demand environment. As Larry said on yesterday’s Annual Shareholders Meeting, spare parts orders are up 40% year-over-year in March and April. The number of CFM56 parked aircraft are down from the beginning of the year to the end of April, and 1Q’26 retirements are lower sequentially and year-over-year. While still early days, these are encouraging indicators that retirement rates are holding steady. And, based on conversations with customers, airlines will want clarity on longer term demand trends before making retirement decisions.
While we have not yet issued guidance for 2027, we are confident in the durability of our services business. We expect departures are flat to up low-single-digits in 2026, rebounding as they typically do with faster growth in 2027. When combined with price and workscopes, we expect solid services revenue growth in 2026 and beyond.
2. Walk us through the mechanics on your LTSAs, and what impact could a slowdown in utilization billings have?
Long Term Service Agreements (LTSAs) provide strong visibility into future services growth and represent approximately 40% of our services revenue.
Under LTSAs, customer billings are tied to their operational activity—typically through monthly payments based on contractual usage terms. Importantly, we believe a near-term slowdown in utilization is manageable within our guidance, with less than 5% of our total collections coming from Middle Eastern airlines. Additionally, within our LTSA portfolio, contractual protections can help to protect both cash flow and profit margins.
Revenue and profit are recognized as costs are incurred at the time of the shop visit. We have not seen, and do not expect shop visit deferrals from LTSA customers. Given customers typically pay cash monthly, there is limited cash paid at the time of the shop visit, limiting the customer incentive to delay shop visits, even in a potentially slower demand environment.
3. What CFM56 retirement assumptions are embedded in your guidance, and how sensitive is your outlook to an acceleration in retirements?
Our 2026 outlook assumes CFM56 retirements at approximately 2% of the total fleet. In 1Q, retirements were below 1%, which is below 4Q’25 levels. Additionally, the parked fleet, which is a leading indicator for retirements, was down from the beginning of the year to the end of April.
Our current financial planning assumption is that retirements increase to the 3 to 4% range in 2027. As many of you have shared with us, historically aircraft retirements have not exceeded 3% even during major economic downturns. If retirements were to rise by an incremental 1% across our approximately 19,000 engine installed base, it would represent about 190 additional engines, though the actual impact on our shop visit volume would be lower. Retirement decisions are forward-looking and tied to future traffic expectations. Currently, we continue to see very few parked aircraft, which supports our retirement outlook.
The fleet’s ownership structure also provides stability. About 50% of the fleet is held by lessors who can redeploy assets to meet shifting demand. Among the airline-owned aircraft, roughly 65% are under 20 years old.
In addition, the initiatives by several operators to utilize CFM56 for power generation needs would also help to absorb any potential retirements.
4. How much favorability have you seen from workscope expansion? How much optionality do customers have to reduce workscopes?
Workscope expansion continues to be a structural tailwind for our services business, driven by the natural aging of our fleet.
Roughly 70% of the GE90 fleet has yet to undergo its second shop visit, which is typically larger in scope because it includes compressor work not required during the first shop visit. We are seeing a similar workscope step-up across LEAP and GEnx as those programs transition from quick turns into their first full performance restoration shop visits.
Our visibility into workscopes is also supported by our LTSA portfolio. Under these agreements, we have performance commitments and direct visibility into maintenance planning, for example life limit requirements, which helps support required workscopes.
For CFM56, which is the fleet with lower LTSAs, workscopes can vary but have been stable for the last several quarters. Also, the duration of a shop visit encourages airlines to complete full restorations. By addressing all maintenance needs in a single shop visit, customers stabilize their fleet capacity and eliminate the risk of additional, unplanned downtime in the future.
Additionally, Used Serviceable Material (USM) is needed to enable lighter, more flexible workscopes. While availability is currently limited due to low retirement rates, we continue to monitor retirements as a leading indicator given that there is a 6-to-12-month delay from retirement to USM availability. This visibility ensures we are well-prepared to support our customers as these materials eventually flow back into the market. CFM is also the largest buyer and seller of USM, providing further visibility into availability.
5. What is the trajectory to improve LEAP margin rate to be in line with CES services margins in ~2028?
The LEAP program has made significant progress since services reached breakeven in 2024, and we continue to expect LEAP service margins to align with overall CES service margins by roughly 2028.
The path to margin expansion is supported by several levers:
- First, we expect higher shop visit volume as the LEAP fleet continues to mature. We’re expecting a 25% CAGR (off a 2024 base) through 2030 for LEAP shop visits driving greater utilization of our capacity.
- Second, we are making significant progress in expanding our repair capabilities, and we expect to double the number of LEAP repairs developed this year. A repaired part can be more than 50% lower cost than a new part, which helps to lower customer’s cost of ownership and improve turnaround times.
- As we move toward 2028, the mix of shop visits will include internal shop visits from service contracts priced post the launch phase of the program.
- We are also benefiting from a favorable shift in our service mix. We continue to scale our external network, with third-party providers now representing approximately 15% of LEAP shop visits, up from 10% in 2024 and on track for 30% by the end of the decade.
Together, these levers support our expectation for continued LEAP services margin expansion.