General Electric Company (GE) — Q3 2025 Earnings Call Transcript

Thanks, Dustin. Welcome to GE Aerospace's third quarter 2025 earnings call. I'm joined by Chairman and CEO, Larry Culp; and CFO, Rahul Ghai. Many of the statements we're making are forward-looking and based on our best view of the world and our businesses as we see them today. As described in our SEC filings and website, those elements may change as the world changes. Additionally, Larry and Rahul, consistent with prior quarters, will speak to total company and corporate financial results and guidance on a non-GAAP basis. Now over to Larry.

Blaire, thank you, and good morning, everyone. At GE Aerospace, our purpose is simple. We invent the future of flight, lift people up and bring them home safely. Every moment, nearly 1 million people are flying with our technology under wing, an incredible responsibility that we take seriously. FLIGHT DECK, our proprietary lean operating model, is how we turn strategy into results, and our exceptional third quarter and year-to-date results demonstrate FLIGHT DECK in action. We're making meaningful progress to accelerate delivery of our services and products to meet robust customer demand. Our commitment to ongoing investments in LEAP durability and the future of flight is centered on delivering value to our customers. Guided by our purpose, our team is energized every day to define flight for today, tomorrow, and the future. Let's take a closer look at our third quarter performance. Orders were up 2% with solid growth in commercial services, partially offset by the timing of equipment orders in commercial equipment and defense. Year-to-date, orders are up 13% with services up 31%. In the third quarter, revenue grew 26%, and profit was $2.3 billion, also up 26%, driven by strong deliveries across aftermarket, OE, and defense. This supported a 44% growth in EPS to $1.66 and over 130% free cash flow conversion. In Commercial Engines and Services, or CES, we're servicing and growing the industry's most extensive commercial installed base. Services demand remains robust with orders up 32% and services revenue up 28%, as improved material availability helped fulfill customer demand, driving total CES operating profit growth of 35% year-on-year. In Defense and Propulsion Technologies, or DPT, we're improving delivery of our leading platforms while developing mission-critical technology. We delivered very solid results with higher output supporting revenue growth of 26% with profit up 75%. Given our year-to-date results, combined with our fourth quarter expectations, we're raising our full year guidance across the board. I want to thank our team and our supplier partners for delivering for our customers and for another quarter of strong performance. Shifting to Slide 5. We continue to experience significant demand for our services and products, and we're encouraged by how FLIGHT DECK is taking hold across the supply chain to deliver on our roughly $175 billion backlog. Much of this improvement is due to the progress within our technology and operations team, bringing together our safety, quality, engineering, supply chain, and manufacturing teams to hardwire problem-solving, resulting in improved delivery for our customers. Our team is working better cross-functionally to deliver improved outcomes and in turn, accelerating the same type of collaboration with our supply base. For example, this quarter, we partnered with a critical supplier to address several key constraints utilizing FLIGHT DECK tools such as problem solving, 5S, and standard work. This resulted in the supplier improving first-time yields meaningfully and, in turn, delivering a more than 2x increase in their output. Our priority suppliers also continue to improve shipments against their targets, shipping more than 95% of committed volume for the third consecutive quarter. Greater stability enables us to meet our commitments. As a result of these actions, material input from our priority suppliers continues to grow, up 35% year-over-year and up high single digits sequentially. We continue to advance on our durability roadmap with our next iteration of the LEAP-1A HPT blade now in production, which will further enhance output. As you can see, operational momentum is building, leading to significant growth. CES services revenue was up 28% with internal shop visit revenue up 33% and spare parts revenue up more than 25% year-over-year. Total engine deliveries were up 41% year-over-year and 18% sequentially. Commercial units were up 33%, including record LEAP deliveries, which were up 40% year-over-year in the third quarter. Year-to-date, commercial units were up 19%, with LEAP up 21%. Based on this progress, we now expect to grow LEAP deliveries more than 20% for the full year, up from our prior outlook of 15% to 20%. Defense units were up 83% year-over-year, marking the second consecutive quarter of defense output exceeding 80% growth. Additionally, while CFM56 continues to fly for longer and with LEAP's fleet size expected to triple by 2030, FLIGHT DECK is also helping us expand our capacity and capabilities to reduce turnaround times and improve shop visit output, two top priorities to meet the demands of our customers. For example, we've made progress with LEAP turnaround time at our Malaysia MRO shop. Our team there improved flow and delivered a 30% reduction in engine disassembly time. As a result of actions like these, total LEAP internal shop visit output grew by more than 30% in the third quarter. We're also investing in incremental capacity to support our customers' growing fleets. This quarter, our XEOS MRO facility in Poland completed its first LEAP shop visits. Our LEAP third-party MRO network also continues to grow rapidly with external shop visits up roughly twofold. In addition, we collaborated with our leasing partner for LEAP to reduce the time it takes to redeploy spare engines between customers, resulting in improved spare engine availability. We're also investing nearly $1 billion in our supply chain to expand capacity, and we're counting on our suppliers to also make investments to support the growth ahead. While this is progress, we know there is much more work to do to improve LEAP turnaround times to meet customer expectations. We're accelerating our use of FLIGHT DECK, taking lessons learned and applying them across our network to deliver a better experience for our customers. This quarter clearly marked another step forward with year-to-date commercial services revenue and total engine deliveries, both up 25%. We're well positioned to ramp further as we go into 2026. Turning to Slide 6. One of the FLIGHT DECK behaviors that guides our company is to be customer-driven in all that we do. Earlier this month at our GE Aerospace Research Center, we had the opportunity to share how our experience across 2.3 billion flight hours and our roughly $3 billion of annual R&D investment is enabling continuous improvement in our field performance. For reference, we've posted these materials on our Investor Relations website, and I encourage you to take a look. We're applying insights from our experience and investments to improve reliability and durability of our products as time on wing remains critical for our customers. For example, the lessons learned from 15 years of enhancing the GEnx durability over 2x are being applied to LEAP to achieve the same level of improvement. We're increasing our investments in LEAP services technologies such as our analytics-based maintenance, which predicts the optimal time for a shop visit and repairs, reducing reliance on new material, benefiting both cost of ownership and turnaround times. Combined with our progress on delivery, we're actively working to meet customer expectations on LEAP. We're also applying similar lessons from GEnx and LEAP durability to our next generation of engines. We just launched our second dust test on the 9X, which will continue to mature the design pre-entry into service. This builds upon over 30,000 cycles of testing, including 9,000 endurance cycles, which will make the 9X the most tested engine in our history. Earlier this month, we began similar dust testing on next-generation HPT blades for our RISE compact core development. This marks the earliest we've ever started this type of testing in development. While we're investing in compact core to mature RISE technologies, there could be applications of these learnings for today's fleet as well. We recently announced the first ever Chief Mechanic and Architect for our Open Fan technology, making durability a top priority in engine design with an uncompromising commitment to safety. Our focus on delivering for our customers across current and future platforms is driving success in the marketplace. A couple of key wins this quarter are worth noting: Korean Air announced the largest fleet commitment in its history with 103 Boeing aircraft powered by GEnx, GE9X, and LEAP-1B engines plus long-term services. We also secured a commitment from Cathay Pacific for GE9X engines to power 14 additional 777X aircraft, bringing their total commitment to 35 777Xs powered by our GE9X. These wins build upon our solid backlog and we are sold out in effect, both on LEAP and GEnx through the rest of this decade. Stepping back, we know our customers are counting on us to deliver reliability, predictability, time on wing, and at the right cost of ownership. With FLIGHT DECK, we're making daily progress to meet those objectives, supporting their and our growth. Rahul, over to you.

Larry, thank you, and good morning, everyone. GE Aerospace delivered another strong quarter marked by robust services growth and an improvement in engine deliveries, driving substantial earnings and free cash flow. Revenue was $11.3 billion, up 26%, with both segments growing over 25%. Operating profit was $2.3 billion, up 26%. Services volume, price, and productivity were partially offset by OE growth, investments, and higher corporate costs. Operating margins were flat at 20.3%, with margin expansion in both segments offset by corporate cost timing. Adjusted EPS was $1.66, up 44% from increased operating profit, a lower tax rate, and a reduced share count. Free cash flow was $2.4 billion, up 30% from higher earnings with over 130% conversion. Working capital and AD&A combined increased by roughly $300 million from increased inventory. Cash flow from long-term service agreements continued to be favorable, and days sales outstanding declined 3 days year-over-year. Year-to-date, revenue is up 21% and operating profit is up more than $1.5 billion from 25% growth in commercial services. We have delivered $5.9 billion of free cash flow, up nearly $1.3 billion year-over-year at 115% of net income. Given the momentum during the first 9 months, we are poised to deliver another solid year. Going deeper into the drivers of 44% year-over-year EPS growth. The increase in operating profit drove nearly $0.35 or 70% of the improvement in EPS, with increased segment profit in CES and DPT, partially offset by higher corporate and other costs of roughly $300 million. The increase in corporate was primarily from timing of reserves for environmental, health and safety expenses. Eliminations were roughly $140 million, up about $30 million year-over-year. Additionally, our tax rate declined from approximately 20% to 15% from benefits of long-term planning projects and timing of favorable audit settlements, improving EPS by $0.10. Impact from stock buyback actions and a reduction in interest expense also contributed to EPS growth. Taking a closer look at our businesses. Starting with CES in the quarter, orders were up 5%, with services up 32% and equipment down 42% due to the timing of some wide-body and regional orders shifting from Q3 to Q4. Revenue grew 27%, with services up 28%, internal shop visit revenue grew 33% from higher volume, wide-body work scopes, and price. Spare part sales were up over 25% as improved material availability supported increased output. Equipment revenue grew 22%, with engine deliveries up 33%, including LEAP, up 40%. This more than offset a sequential and year-over-year decline in spare engine ratio. The life of program, the spare engine ratio for LEAP remains in the low double digits. Profit was $2.4 billion, up 35%. Services margins were strong, driven by higher volume, price, and a favorable shop visit and spare parts mix. This more than offset the impact of higher installed deliveries, including 9X shipments and an increase in R&D spend. Segment margins expanded 170 basis points to 27.4%, with services revenue growth, mix, and price more than offsetting OE growth and impact from adverse mix. Year-to-date, CES has delivered revenue growth of 24%, operating profit of $6.6 billion, up $1.7 billion year-over-year with margin expansion of 210 basis points while delivering around 20% increase in engine shipments. Moving to DPT. Orders were down 5% due to timing across quarters. Defense book-to-bill remained above 1 in the quarter and is 1.2x year-to-date. Our total DPT backlog is at $19 billion, up $1.5 billion year-over-year. Revenue grew 26% in the quarter. Defense and Systems revenue was up 24%, driven by higher engine volume, up 83% year-over-year and improved pricing. Propulsion and Additive Technologies grew 29%, with all businesses growing over 20%. Profit of $386 million was up 75% year-over-year. Higher volume in Defense and Avio, customer mix, price, and lower losses at additive offset continued investments and inflation. Margins expanded 380 basis points to 13.6%. Year-to-date, DPT has delivered 11% revenue growth and $1 billion of profit, up 27% with 170 basis points of margin expansion. Turning to guidance on Slide 11. Given the strong year-to-date performance and trajectory entering the fourth quarter, we are raising our full-year guidance across the board. We expect revenue to grow high teens, up from our prior outlook of mid-teens. At CES, we now expect growth of low 20s, up from our prior outlook of high teens. This is driven by higher services revenue, which we now expect to grow low to mid-20s, up from high teens. We continue to expect equipment to grow high teens to 20%. We now expect DPT growth of high single digits, up from mid- to high single digits previously. Operating profit is now expected to be in the range of $8.65 billion to $8.85 billion, up $400 million at the midpoint from the prior guide. CES operating profit is now expected to be in a range of $8.45 billion to $8.65 billion, up $450 million at the midpoint from the prior guide. This reflects the drop-through from roughly $1 billion improvement in services revenue in the second half versus our prior guide and favorable services mix. We expect DPT profit to be in the $1.2 billion to $1.3 billion range, up $50 million at the midpoint versus the prior guide, reflecting year-to-date performance from improved deliveries. Corporate costs and eliminations are expected to be roughly $1 billion. Additionally, we are improving our interest expense and tax rate outlook for the year and now expect interest expense of approximately $850 million and a tax rate of 17.5%. Taken together, we are raising our EPS guidance to $6 to $6.20, up $0.40 at the midpoint from the prior guide. We are also raising our free cash flow guidance to $7.1 billion to $7.3 billion, up $500 million at the midpoint, primarily from higher earnings. We are all set to close out another excellent year in 2025 and well positioned for continued growth heading into 2026.

Rahul, thank you. I'm encouraged by our progress this quarter, which builds upon our leadership positions across both commercial and defense and in turn, supports the improved financial outlook we're sharing today. GE Aerospace has sustained competitive advantages. With the industry's largest fleet, 78,000 engines and growing, we have accumulated over 2.3 billion flight hours and have certified 7 commercial engine programs in the last 20 years. This experience base keeps us close to our customers and provides unmatched insights on performance, making us the partner of choice. We use these insights to continuously improve our services and products, delivering reliability, predictability, time on wing, and lower cost of ownership. We offer the best performing products underwing across our narrow-body, wide-body, regional, and defense platforms. Our world-class engineering teams combined with roughly $3 billion in annual R&D investment drive next-gen technology to improve durability, efficiency, and turnaround times, along with advanced defense capabilities. Through FLIGHT DECK, we're turning strategy into results with a relentless focus on safety, quality, delivery, and cost, always in that order. The GE Aerospace team is poised to deliver exceptional value to our customers and shareholders, and I'm confident in our path ahead. So with that, let's open it up to questions.

Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask one question so we can get to as many people as possible. Dustin, can you please open the line?

Maybe if we could peel back the layers behind the services outperformance up 25% year-to-date, which is pretty phenomenal. And on a dollar basis, up $750 million sequentially, Q3 versus Q2. So how much of that is pure volume unlock through FLIGHT DECK in the supply chain versus tariff price surcharges or any other factors that you would say play into it? And why the step down sequentially in Q4?

Yes. Sure, let me start. So I agree with you, we had a really strong quarter on services. We were expecting high-teens growth for the year, and year-to-date results; we are at about 25%. So now we've raised the outlook for the year to be low to mid-20s growth. The improved outlook is both in our shop visit revenue and in the spare parts. A lot of that from the strength that we observed in the third quarter. So if I start with the shop visits, we've had year-to-date growth of, call it, 22%. What's driving that, as you hinted at, is improved material availability is driving higher volumes. So that's a big piece of that. Along with that, the work scopes continue to increase, so that's helping as well. The demand environment just continues to be strong. I mean, year-to-date, our inductions have outpaced output even with the results that we have delivered. This improvement in output is especially visible in LEAP, that is up 30% year-to-date, and part of that is the incremental capacity that we've set up for LEAP. On the spare parts, the year-to-date results have been equally strong, growth of more than 25%. Orders have remained strong. As Larry mentioned, our services orders growth of greater than 30% year-to-date, but the improved material availability is now helping us achieve those orders and execute on the demand that we are seeing. As we look at the fourth quarter, our backlog still remains strong, 90% of the spare parts that we need to ship in the fourth quarter are in the backlog, which is 15 points higher than where we have been historically. So really strong external LEAP shop visits up 2x is helping mid-single-digit growth in total worldwide shop visits in CFM56 is helping. So all that. So again, as we look at that, it set us up well, not only for 2025 but also for '26. As we think about the fourth quarter, we typically have a seasonal step down in our third quarter to fourth quarter revenue, largely driven by spare parts because you don't expect the same level of improvement on material availability, a little bit of seasonality in demand. But still, if you step back and look at the full year, really strong year and versus where we were in July, more than $1 billion of revenue increase in the services revenue, and that's a large part responsible for the incremental $450 million of guidance raise on profit for CES.

You mentioned the improvement in margin and the outlook for LEAP in services potentially reaching overall service margins by 2028. That's a strong trajectory. Can you explain your plans and what gives you confidence in this, considering that you are still in the early stages of PRSVs? I'm curious about your understanding of the costs associated with full shop visits. How do you view the LEAP services margin in 2028, and what role do price and cost play in that?

Doug, the roadmap to 2028 concerning LEAP is something we are actively managing every day. It involves a combination of the field performance that you mentioned and our operations with FLIGHT DECK. We aim to ensure material availability and the improvements reflected in our third-quarter financial results, as well as in the operational data points Rahul referred to earlier. As we look ahead, we have been improving our supply base, and the field performance highlights the durability kit with the 1A that is currently deployed. The cost reductions we are achieving through productivity, which will enhance material availability in our shops, align with our expectations. There is still significant work to be done before 2028, but with the various tools at our disposal and the product enhancements we have, we are confident in both our current results and the path forward, appealing both to investors and customers. Rahul, do you have anything to add?

Just a couple of points to add here, Doug. Larry mentioned the improvements in the FLIGHT DECK. We discussed the enhancements we are implementing this year in LEAP output. Looking ahead to 2030, we expect the internal shop visit growth of 30% year-over-year to continue. Volume will play a significant role in that. Regarding the external channel, we mentioned earlier that it has increased twofold year-over-year, which opens up the spare parts revenue stream for us. We also talked about our investments in repair technology, which help lower the cost of shop visits and increase our shop visit output. All of these factors are contributing positively. Durability remains steady, and with the introduction of the durability kit, we are confident that we can reach CFM56 levels of performance on LEAP-1A and soon on 1B as we move toward 2028. These elements give us assurance about the trajectory of LEAP.

I was hoping to touch on capital deployment. The operations are all going fantastic, you're generating a ton of cash, the stock price is reflecting it. Where and how do you balance capital deployment, share repurchase in particular at this point vis-a-vis your stock price? You haven't slowed down your pace. So I imagine that gives us a good indication that you still think there's good value there. But is the dial going to turn towards M&A at any point do you think in the near future?

Myles, I would say that the capital allocation approach that we and the Board have taken since the spin is very much intact. I don't really see that changing materially anytime soon. We've talked about what we've described as a balanced approach, first and foremost, making sure we're reinvesting in the business to drive technology improvements we've talked about here on this call, which you know well, and the footprint required to support the growth. Of course, we are going to return capital to shareholders and reserve some when those M&A opportunities, large or small, come along that makes sense. We're proud of the fact that we've increased our shareholder returns since the spin of, what, 4x. As we said back in the summertime, we've increased our return of cash to shareholders to $24 billion in the '24 to '26 period, which is up 20% from where we were at the spin. From an M&A perspective, we want to make sure we're looking at anything and everything that might make sense in the neighborhood, but investors should continue to see from us a disciplined approach where we really look for strategic fit, then operational value-add and in turn, financial returns. Your question, I think, recognizes the tremendous capacity that we have. But again, organic reinvestment and return of capital to shareholders will be the first two priorities. That gives us ample room, given the cash flow projections that we have, to look at things that fortify our existing positions. We were really excited about our $300 million investment in BETA Technologies, a company that some people are well aware of, others maybe not so much. We really like the team, and our collaboration to co-develop a hybrid electric turbo generator will yield benefit to both of us, both in defense applications and ultimately in the commercial space.

I wanted to zero in on the spare's performance a little bit within services and kind of given our usual starting point for how to think about spares is like departure growth and so outpacing that by a bit, and also dramatically outpacing the outlook that you had for 2025 at the start of the year. So when we think about what's driving that, is it all material availability? Is there a part of that that comes from outfitting LEAP shops out in the network? If so, what's kind of the tail on that, that allows spares growth to exceed that underlying departure level? Given the mix of engines that do internal shop visits versus the mix of engines that are not on internal plans, should we think about CFM56 being the main driver of spares growth?

Yes. So Seth, let me start there. I think you had a lot of the data points that actually drove the performance kind of in your question here. So if we start unpacking that, I think if you look at the spare parts performance, obviously, we spoke to the orders growth. Orders have remained really strong. What's driving the orders growth besides the increase in departures where you started is a lot of pent-up demand. If you look at the number of shop visits that will be done in 2025 globally, worldwide shop visits are still below where we were in 2019. So there's a lot of pent-up demand here on volume. That's a big piece of why the total demand is kind of outpacing the departure growth. The second is the increase in work scopes. We've been talking about an increase in work scopes both internally and externally. If you look at GE90 as an example, 70% of the shop visits haven't gone in for a second shop visit. We're beginning to see the second shop visits come through, and that could be 60% to 70% heavier than the first shop visit. So the same thing is happening on LEAP and nx. You spoke about material availability. That's an unlock here as well because we've spoken about the delinquency continuing to increase. Our output has been increasing, but we are still behind on meeting demand and that continued even into this quarter, right, even with the spare parts growth we've had. As we look forward into '26, we still expect that. We expect departures growth of where we have been in 2025, kind of 3% to 4%, but the number of engines that will come off wing are going to be up double digits. We do expect this difference between departure growth and spare parts demand to continue for a while, just given everything I've said, plus the engines that are going to come off wing. So hopefully, that answers the question.

Rahul, would you be able to share any of your current thinking on 2026 at this point, particularly as it relates to CES revenue growth and then margins as well? More broadly, is there anything you think is important for us to keep in mind as we sharpen the pencil on 2026?

Let me begin, and Larry, please feel free to chime in. Looking ahead to 2026, especially on the commercial side, the current environment appears more positive compared to three months ago. Previously, we anticipated flat to low single-digit growth in departures for the second half of the year. Now, it's expected to be solidly in the 3% to 4% range, suggesting that air traffic growth has stabilized. The outlook for 2026 is improved from a few months ago. However, it's crucial to note that the fundamental dynamics of demand and performance in the CES business remain unchanged. The installed base is increasing for both wide-body and narrow-body aircraft. As I mentioned earlier, the number of engines requiring a shop visit is expected to rise by double digits in 2026 based on their flight cycles. This will contribute to demand, and the work scopes for wide-body, along with a reasonable low single-digit price increase, are anticipated. We expect the services business to keep growing. As for growth in 2026, we do not foresee a repeat of the performance seen in 2025; instead, we expect it to normalize towards our projected double-digit growth levels over the medium term. The new equipment business has a robust backlog, and we anticipate 2,000 LEAP engine shipments and additional 9X shipments, as our volume assumptions for 9X remain unchanged since our last meeting in July. We expect losses on 9X to more than double year-over-year as we look towards 2026, which will counter some of the positive contributions from services. Additionally, we foresee continued mid-single-digit revenue growth and some margin expansion in DPT, as discussed in July. When considering all these factors, productivity is an advantage, but we are also dealing with inflation and the 9X losses, which will limit our margin expansion opportunities. Despite this, we remain optimistic about 2026, anticipating strong revenue and profit growth alongside cash generation. We view 2026 as a stepping stone towards 2028. That encapsulates our current perspective. Larry, do you have anything to add?

No, just maybe that, right? We're just in the process of wrapping up our strategy reviews. We'll spend the fourth quarter working through the details of the '26 budget. I think Rahul did a nice job there providing the general contours of that work that is underway. We'll take the Board through it at the end of the year, and then we'll come back in earnings and talk about '26 in more detail is basically our practice here. Net-net, I think we're more or less in line with the '28 framework we talked about back in July with a lot of good tailwinds in terms of the demand environment and clearly, operational momentum building with FLIGHT DECK, putting those two dynamics together, I think that's what you're going to see come January.

Yes. Shifting gears a bit, you mentioned the work on the hybrid electric turbo generator and its potential impact on defense. Your defense business performed well in the last two quarters. Could you provide more details about your activities in defense and the research and development aspects? More importantly, what insights have you gained from the commercial sector, given your extensive experience with commercial engines, that could be applied to the defense industry, where most other contractors lack that kind of experience?

Well, Ronald, I can maybe take those in reverse order. A lot of the work that you see or a lot of the work that we've referenced vis-a-vis supply chain with our team in FLIGHT DECK courses through the results, both on the commercial side and on the defense side. Talk about a quarter where you've got revenues up 26%, profit up 75%. Notably, the defense engine output was up 83%. We hung an 8 handle on that for the second quarter in a row, I believe. That really speaks, I think, to the strength of the backlog there, maybe some of the underperformance a year ago, but the outstanding work that the teams have done, leveraging a lot of what we've done in commercial and in turn the shared supply base. When we look at what we could do, if you will, more commercially, I think we are keen to take advantage of the moment at the Pentagon to share some of our best practices with respect to moving at pace through development cycles, perhaps and how we think about sustainment models to be creative and responsive to some of the investment and budgetary realities that are out there. Ron, you know well that the investment we've seen that we've put into the business, both government-funded and our own, has been concentrated on next-gen platforms, be they sixth-gen propulsion in conjunction with the NGAP program with an eye toward both the opportunities with the Air Force and the Navy, but everything that we're doing to upgrade the Apaches and the Black Hawks with the ITAP, the T901 engine. There's a lot that's in progress with respect to future platforms. I think there are some real opportunities not only to fulfill this incredible backlog we have in defense but at the same time, rethink some of the business models, either internal to our customers or in collaboration with them. Here and now, we’re making sure we're reducing the delinquency and servicing the backlog, as Rahul mentioned a moment ago. Fortunately, the good work that's driving the results on the commercial side is helping us a great deal on the defense side as well.

A quick question for Larry. You mentioned durability a number of times in your initial comments. I just wonder following up from that, how the initial performance has been on that new blade on the LEAP-1A? And how long is it going to take to roll that blade out across the installed base?

We are very pleased with how the durability kit is performing on the LEAP-1A, particularly the new blade that is central to this kit. We anticipate it will result in a twofold improvement, with 8,000 cycles in harsh environments and 17,000 cycles in neutral conditions. So far, everything is on track with no surprises. We are currently in the certification process for the LEAP-1B equivalent and expect it to come through the pipeline in the first half of next year. This is a multi-year initiative to upgrade the installed base, and having the LEAP-1A durability kit in production is beneficial. We are addressing the aftermarket now and will do the same with Boeing once certification is complete. There have been no unexpected outcomes so far. While we have a lot of work ahead, we are fundamentally optimistic about how this will enhance durability and improve performance for our customers.

I was wondering if you could elaborate on where you're seeing the greatest improvement in supply chain material availability because it's been pretty consistent year-to-date. Has it been any breakthroughs, or if you could give us some color inside baseball, please?

Yes. It's hard to say that we have seen a breakthrough. I really think it is the cumulative compounding effect of all the good work that's been underway with intensity and urgency over the last 18-plus months, particularly with the supply base. If you segment where we're seeing that improvement, wide-body versus narrow-body, legacy platforms versus new platforms, large suppliers that you would know by name, some on the call my own versus smaller companies you may have never heard of. I can't pull any major theme out because we depend on all of them, and this has been a universal challenge as the airframers have been ramping the aftermarket, given airline demand doing the same. A third stream in the form of defense demand holding on us and our supply chain. I think the common denominator is where we've been able to go in around these priority suppliers, which are either under current constraints or anticipated bottlenecks and really getting out on the factory floor, staring down a problem on a machine or an assembly line, whether it be throughput or yields, and really driving deep problem-solving, truly collaborative. Our best engineers with our suppliers' best engineers, not trying to negotiate on the factory floor, but to identify the problem, contain it in the short term and put it in permanent corrective action going forward. There are fits and starts that we manage in that regard every day, every week. But I think we've gotten better at that. Going forward, we want to be not just excellent in that near-term problem-solving, but we want to ensure we're investing time and talent in getting out ahead of those issues, both in the medium and long-term. So as we look at readiness going into '26, let alone some of the longer-term conversations that we might have, say, with Airbus as they talk about rate 75 and the path there as Boeing now has the latitude to go up to the next rate break, making sure that we've got visibility and that we're communicating the same with our airframer partners. It's just critical for our planning purposes and theirs. No one breakthrough other than just the relentless application with urgency of our FLIGHT DECK tools deep into the supply base wherever we have a constrained or bottleneck. It's that simple, and it's not that hard.

Dustin, we have time for one last question.

Quick question on commercial aftermarket revenue growth. Historically, for the industry, it has been strongly correlated with flight activity and ASK growth, but the commercial services revenue growth has continued to reaccelerate despite the deceleration in ASK growth. So has anything structurally changed about the business model that could cause your aftermarket growth to decouple or sustainably outperform ASK growth over the long term? Or is it simply just strength driven by heavier work scopes, better throughput because of a healthier supply chain and the FLIGHT DECK productivity?

Yes, Scott. The disconnect we're seeing with our demand outlook and the departure growth goes fundamentally back to the pent-up demand on shop visits. As I said earlier, shop visits in '25 are going to be below 2019 levels. The increase in work scopes we're seeing, especially on the wide-body side, both on GE90 and GEnx as those migrate to the next level of shop visit. That's a big piece of that. The growth of our external LEAP channel – LEAP external shop visits was up 2x in the quarter. As we think longer term for the year, we expect LEAP external shop visits to be kind of in the mid-teens, slightly above that range. And as we project that to 2030, we expect that to be 30%. That will drive a huge amount of spare parts growth. Not only will the LEAP shop visits ramp, but also the participation of the external channel grows. Then combine those with a little bit of price increase that we drive every year. These are the fundamental reasons why we're seeing this increase in demand. It's pent-up demand, work scopes, and then growth of the external channel.

Larry, any final comments?

Blaire, thank you. Just to close, GE Aerospace is an exceptional franchise with enduring competitive strengths and a clear path for continued value creation. Our updated outlook today reflects growing confidence in that trajectory as we deliver for our customers, our shareholders, and the flying public. We appreciate your time this morning and your interest in GE Aerospace.