FAIRFIELD, Conn. - GE announced second quarter 2014 revenues of $36.2billion, up 3 percent from $35.1 billion in the second quarter of 2013. Net income for the period was $3.5 billion compared to $3.1 billion a year ago.
GE Aviation's GEnx-2B Turbofan
Source: GE Aviation
"GE had a good performance in the quarter and in the first half of 2014, with double-digit industrial segment profit growth, 30 basis points of margin expansion, and nearly $6 billion returned to shareholders," said GE Chairman and CEO Jeff Immelt. "The environment continues to be generally positive."
GE's backlog of equipment and services at the end of the quarter was $246 billion, up $23 billion over the year-ago period with increases in every segment. The Company's investment in technology was reflected in its launch order during the quarter for Tier 4 locomotives, nine HA gas turbines to date, and its order for the oil and gas industry's first 20k-psi rated deepwater drilling system. This week, GE and CFM (a 50/50 joint venture between GE and Snecma) also announced Farnborough Airshow wins of more than $36 billion at list price, including $13 billion with Emirates, $3.3 billion with easyJet, and $2.6 billion with American Airlines.
During the quarter, GE's offer for Alstom's Power and Grid businesses was accepted by the Alstom board and approved by the French government. It is proceeding to works council consultations and is subject to Alstom shareholder approval and customary regulatory approvals. The deal is targeted to close in 2015. This will accelerate the Company's portfolio strategy to achieve 75% of earnings from its Industrial business by 2016.
Immelt concluded, "Our total-year framework is on track and we are committed to delivering for our investors. Investments in R&D are paying off in Industrial segment growth and the share gains we see across the board are reinforced by the Farnborough Airshow this week. GE Capital is returning cash to the parent while becoming more focused on its core business. Our balanced approach to capital allocation is delivering cash to shareowners. With the Retail Finance split-off and Alstom acquisition, we are boldly repositioning the Company for the future."
As commercial aerospace continues to ride the boom, GE Aviation is fortifying its position. In mid-2013, GE Aviation finalized one of its largest acquisitions to date with the purchase of Italy's Avio SpA. Though it is a niche player when compared to engine giants such as GE, Pratt & Whitney, and Snecma, Avio found success via its numerous joint manufacturing activities – a success that made it very attractive to GE.
A long-time collaborator with GE Aviation, the new Avio Aero will strengthen GE's global supply chain capabilities as its engine production rates continue to rise to meet growing customer demand. Avio has supplied components to GE Aviation since 1984 and has content on engines ranging from the large GE90 and GEnx turbofan engines for the commercial aircraft sector to the smaller CT7/T700 turboshaft engine family for civil and military helicopters. These GE engines are strong sellers and are expected to provide a profitable, long-term revenue stream for the company.
In addition, this acquisition will create additional opportunities to offer Avio Aero's products and services beyond the aviation industry. GE plans to pursue new opportunities for Avio Aero in power generation, oil, and marine products – which incidentally complement parent company GE's other operations. Avio Aero's capabilities in transmission systems present potential growth opportunities in multiple sectors, according to the company.
In terms of programs, new engine production continues apace as both Boeing and Airbus work off their tremendous backlogs of aircraft. The desire for more efficient aircraft has led to record orders for the Airbus A320neo and Boeing's new 737 MAX. The new LEAP-X engine, developed by the GE/Safran joint venture CFM International, is being offered on the Airbus A320neo family. Virgin America became the launch customer for the new engine with its order for 30 new A320neo aircraft in mid-2011. Adding to the engine's success was the launch of Boeing's 737 MAX in August 2011. The 737 MAX, a new-engine variant of the Next-Generation 737, will be powered by CFM International LEAP-1B engines. In addition, the engine has been selected to power the COMAC C919 aircraft under development in China.
Another major engine program for GE Aviation is its GEnx family. The first variant, the GEnx-1B, powers Boeing's 787. Though the aircraft program suffered its share of delays, GE Aviation used the time to fine tune the engine and initiate development of several performance improvement packages. A second variant, the GEnx-2B, has been selected by Boeing to power its 747-8. A possible third application on the Airbus A350 XWB has been dropped due to the inability of GE and Airbus to reach a mutually beneficial agreement.