GE Aerospace

GE Aerospace’s moat is built on multiple, reinforcing advantages. Intangible assets: FAA/EASA certifications, decades of proprietary materials science (e.g., CMCs) and engine IP, and a world‑class brand in safety and reliability across ~70,000 commercial and defense engines.

The company states roughly 70% of adjusted revenue is services, reflecting life‑cycle contracts on an installed base that powers three out of four commercial flights.

Switching costs: Engine selection is typically locked at aircraft purchase and airlines enter long‑term service agreements (TrueChoice/Rate‑Per‑Flight‑Hour), making switching prohibitively costly and operationally complex.

Efficient scale: Large commercial and defense engines are an oligopoly dominated by GE/CFM, Pratt & Whitney, and Rolls‑Royce; duplicating global MRO networks and installed‑base data is uneconomic for new entrants.

Cost advantages: scale in sourcing, MRO, and parts, plus learning‑curve benefits and field data that improve reliability and predict maintenance.

Evidence of durability includes a services‑heavy backlog and remaining performance obligations of ~$176.3 billion with revenue expected to be recognized largely over the next 10–15+ years, supporting long‑run visibility.

Recent LEAP durability kits gained FAA/EASA certification to extend time‑on‑wing in harsh environments, addressing a key reliability vector and strengthening the moat. Weighted component view: switching costs (95), efficient scale (95), intangible assets (90), cost advantage (80), network/data effects (60), yielding a high‑confidence composite.

Pricing power is evident in aftermarket dynamics and contract structures. In Q3 2025, services revenue grew 28% with internal shop visit revenue up 33% and spare parts up >25%, with management attributing profit growth to services volume, mix, and price.

Long‑term TrueChoice Flight Hour agreements provide predictable, usage‑based pricing that can include escalation and comprehensive coverage, keeping engines under OEM care and enabling favorable pricing over time.

Macro tailwinds further reinforce pricing: Airbus and Boeing delivery constraints are extending aircraft lives, pushing more maintenance and parts demand into GE’s highest‑margin profit pools, a trend that supported raised 2025 outlooks. LEAP durability upgrades also allow GE/CFM to sustain value‑based pricing while improving customer outcomes.

Tariff impacts have been managed through pricing and cost actions, per management’s quarterly updates.

Revenue visibility is anchored by long‑term service obligations and a services mix near 70% of adjusted revenue, which historically converts strongly to cash.

As of September 30, 2025, remaining performance obligations were ~$176.3 billion, with 70% of services RPO slated to be recognized within 10 years and 87% within 15 years, supporting multi‑year planning. This resembles a tollbooth model where utilization and shop‑visit cadence drive revenue.

Offsets to predictability include civil air‑traffic cycles, OEM build‑rate variability, and supply‑chain constraints. Boeing and Airbus production trajectories, along with quality issues and regulatory pacing, remain the gating factors to near‑term engine deliveries, though services can partially counterbalance such swings.

Overall, the contract structure, installed base, and long recognition runway yield above‑average predictability.

The balance sheet is investment grade (Moody’s A3, S&P A‑ as of the Q3 2025 filing) with solid liquidity. At September 30, 2025, total borrowings were ~$20.8 billion and cash, cash equivalents and restricted cash of continuing operations were ~$13.8 billion, implying modest net leverage relative to cash generation.

Credit agreements include a standard net debt‑to‑EBITDA covenant that the company satisfied. Free cash flow conversion has consistently run at or above 100% in recent quarters, and the company continues to access long‑term debt markets at attractive fixed coupons.

Capital return capacity remains strong alongside reinvestment in manufacturing and technology, with management guiding to sustained shareholder distributions while preserving investment‑grade metrics.

Management articulates a clear hierarchy: invest in safety/quality/throughput and next‑gen technology (GE9X, GEnx, T901, CFM RISE), while returning significant cash to owners.

In 2025 the company lifted its 2028 outlook and increased 2024–2026 capital returns to roughly $24 billion, and has been actively repurchasing shares under a $15 billion authorization.

The quarterly dividend was set at $0.36 per share in 2025. Share count declined from 1.074 billion at 12/31/24 to 1.055 billion at 9/30/25 as buybacks accelerated, indicating disciplined deployment.

Capex and targeted footprint investments, including nearly $1 billion in U.S. manufacturing and supply chain for 2025, support durability, output, and quality.

Chairman and CEO Larry Culp has a strong multi‑year record of balance‑sheet repair, lean transformation, and portfolio focus. His employment agreement was extended through 2027, signaling continuity.

Operationally, the proprietary FLIGHT DECK operating model has underpinned throughput and quality gains at both GE and supplier sites, visible in output and services execution. The board is majority independent and has added experienced aerospace leaders.

While CEO compensation is sizable, the structure is equity‑heavy and performance‑linked, aligning with long‑term value creation.