Market & Product

The future looks bright

“It’s a great honor to be back. I’m thrilled to be here…I’m a big fan, I might be your biggest fan.
I really do believe that Avio Aero is stronger as part of GE Aviation and I believe that the original vision we had, that was to create a center of excellence for GE Aviation in Europe, here in Avio Aero has started to come to reality.”
We’re starting to see very positive results thanks to the work we’ve done together.
Since we’ve been together we’ve launched the GE9X which is a great program. We’ve grown in helicopter gearboxes within the EADS – Airbus platform. Thank you, Tom and all the team. And we’re just getting started, we’ve got a lot more to do together.
Much of which is repositioning Avio Aero to be a very high technology company on the cutting edge of aerospace. Not just for GE Aviation, but for the entire industry. So I want also to thank you all for the hard work you’re doing right now with all of our customers.
I had the opportunity to be at the PAS last week and got very very positive feedback about the hard work at Avio Aero, recovering the production schedule in the supply chain. So hats off to all of you, and I want to thank you very very much for your work because you’re making a difference and our customers appreciate it. They understand the difficult challenges we have and they’re with you. They want Avio Aero to be a very strong supplier and partner for all of them. And I’m talking about Rolls Royce, Pratt & Whitney, Airbus: they’re all very interested in your success because a strong Avio Aero is a strong supply chain for them and they see that is a big advantage going forward.
Let me talk a little bit about the PAS: a very positive air show for GE Aviation. We added close to 19 billion dollars of additional commitments to our orders. Which isn’t a bad week of work, if you think about it!
Lots of LEAP orders for the new A320 neo and the 737 max, some really good orders on the 777 with the GE90, a few GE9x orders at Qatar Airlines and a big order on the 747-8, GEnx-2b for 20 new airplanes, which is 80 new engines, from Volga-Dnepr a Russian cargo operator. The beauty of the 747 is that every airplane has four engines on it. So 80 new engines plus spares for Volga-Dnepr, which was a big deal: is about 1.2-1.3 billion dollars closed on the Wednesday of the show. So it put our total over 19 billion, which I think from the engine manufacturing point of view anyone got close to 19 billion. So we certainly had the strongest show among the engine manufacturers. And I think it’s a real tribute to the positioning of the product, we’ve put the engines in really good shape. We positioned the portfolio very  well for a great future and really the challenge we got over the next 3 to 4 years is just delivering on the commitments we made to our customers. Which are big, we’ve a lot to do.
 If you take a look at the LEAP engine, for which I know the guys in Brindisi are helping with the manufacturing, we have to mention also the work that has been done here on the geared fan with the gear system.
Airbus is talking about rates of 63 airplanes a month, that’s 126 engines a month! If we win half of those, that means that we’ve got 60 engines a month, two a day, or more, that are just LEAPs and then if you look at the other half that’s 60 gearbox systems a month we have to develop for the geared fan. Huge responsibility for GE Aviation and for Avio Aero.
At full production we’re looking at numbers like 1900 a year for engines. Close to 8 engines a day we have to produce to make all of the LEAP engines we need to support the 737 and A320 programs.
The GE9X is for the new generation of the 777, which will be right around the corner because 2020 is not that far away and we have to be in full rate production by 2020-2021 on the next generation of the GE90 after we put the LEAP in service.
We have just a tremendous amount of work to do, we have a big execution challenge ahead of us, customers are really depending on us to deliver the technologies that they’ve committed to us. They’re very proud of their order book, they’re very proud that they’re customers of Avio Aero and GE Aviation and they look forward to taking delivery of our brand-new equipment. And for that equipment to be as good in this generation as the equipment they used to fly in  the previous generation.
The mood at the show was very positive for commercial aviation.  The demand for air travel probably has growth of 6% this year across the whole world, after the 5% growth of last year. Think about a world where every year we get more passengers by 5-6% which is driving the equipment order book strongly as it does.
I would say the opposite is true in the military field right now. In the United States we have this budget control act which is otherwise known as a sequestration which is trying to reduce the inventories in our military from their peaks that occurred during the peak of the overseas operations in the Middle East. Then the US built up a lot of inventory when it was overseas and now they’re burning down that inventory in the defense budget. We’ll ship 20% fewer units to the military this year than last year. And we expect to see it go down another 15% in 2016. A 35% reduction over 2 years. And that’s really not an indication of the defense industry having trouble, it’s more the reality of having so much inventory in the US. Then it doesn’t make sense to continue to order.
But the flying hours and the parts are just about at their floor. We’re seeing they’re flying now, we’re seeing a little bit of growth in the number of hours being flown by the military equipment and a little bit of growth in the spare parts. There’ll be a slight increase in spare parts orders in the next couple of years.
In general, if you look at GE Aviationacross all of the segments what you see is a business that is poised to really transition itself to the next generation of technologies, and you’re in the center of that. Whether it’s the geared system for the geared fan, the turbine on the GE9X, the new gearbox for the new helicopters, the EBM sintering, the additive manufacturing center or the cold flow center in Poland. You are right in the center of new technologies that GE Aviation is working so hard to bring to the marketplace and industrialize. And you see a business that is transitioning its entire portfolio in the commercial space and doing it at a time when the industry is strong. The best time to do it.
There are two types of challenges in this world: when things are very good and you have to keep up with the demand, and the challenges when things are very bad and you have to keep up with the reduction in the demand. We happen to be in the first one, where our goals and challenges fulfill on all the great commitments at a time when the industry is very healthy.
I’m very proud to have you as part of that team and to spend this time with you and visit all of you. This has really been a dream of mine to bring Avio Aero into the GE family for probably the last 15 years. It was a real honor to have the opportunity to do it two years ago. And you never let me down, you guys are great and I appreciate your work to fulfill on our commitments to make a great GE Aviation.
We had been working together before the acquisition for over 25 years, you don’t work together unless there’s a real value. So, never think that the people in GE didn’t have a tremendous respect and appreciation for you before we bought you. We wouldn’t have worked with you for over 25 years if we didn’t. Now, since the acquisition I think we’re more committed, I am more committed, to grow AA as a center of excellence for Aviation in Europe. You have a great future ahead of you, do me a favor: just enjoy it, work hard, together, learn and make sure we’re better than anyone else.
"You have a great future ahead of you, do me a favor: just enjoy it, work hard, together, learn and make sure we’re better than anyone else."