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So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM,
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Bloomberg Audio Studios Podcasts, Radio news.
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Now I want to welcome to our global TV and radio audiences, I'm Dani Burger.
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Let's head down to the Farnborough Air
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show where Bloomberg Sky Johnson is with
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the GE Aerospace chairman and CEO Larry Koch.
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Guy
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I certainly am. Thank you very much indeed, Danny. Yes. Welcome back to the Farnborough Air show here in the uk. As you say, Larry Culp is with me. Larry, great to see you. Thanks for spending some time with us. Look, the first thing I've got to ask you is why on earth are we sitting in front of a very big 747 with your name on it?
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C
Well, it's the GE Aerospace name. Guy. Good to be with you. This is our flying testbed, as you say. This is a 747 400. This is basically our airborne laboratory upon which we test all of our engines. There's a lot of talk here at Farnborough, as there often is at the air shows around the future of flight. We wanted to bring the flying testbed to Farnborough just to reinforce and help people understand everything that we do on board and inside the plane, to make sure that we're bringing forward the best possible engines. From a safety and reliability perspective, you
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B
get to test the next generation of, of engines for four narrowbodies like the 737 or the A3 20s on this because there's a big debate here at Farnborough about whether it's it's open rotor or the traditional kind of ducted jet engine for that next generation. Is this the aircraft you'd use to test?
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Very much so. So even though it's a wide body engine, we can test virtually any engine that we might fly across our portfolio under development on the flying testbed.
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Cool. Let's talk a little bit about the show and what has happened here. I'm sure you've been absolutely snowed under meeting after meeting. What I've, what I've seen come out of the show is again, huge numbers of orders for aircraft, which means huge numbers of Orders for engines. You've just landed a huge deal in India as well. The backlog is getting bigger and bigger. Larry, it's a nice problem to have but at some point you going to have to invest in additional manufacturing kit in order to fulfill some of these huge orders that you're taking.
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C
Well Guy, it's been very busy. We've been here since Saturday and I don't think we've had a better air show from an orders perspective. We've had a number of announcements. I think the one you're referring to is one we let let out yesterday afternoon. Over a thousand engines with Indigo Airlines in India really excited about that multi year commitment. There are others, I won't take our limited time here to go the roster of them. There are many narrow body and wide body. Guy, we've been investing in our manufacturing footprint in our supply chain for years. We know that a good air show is interesting but we're on a multi year ramp both with our commercial customers and in defense. Right. We're sold out into the early2030s. So whether it be investments in fixed capital, just as importantly investments in people and process, those are the things that enabled us say in the first half of this year to increase our engine deliveries by over 30% year over year. We're going to need to be driving that sort of improvement, that sort of growth for years to come.
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B
Does that pace increase, does the cadence of that start to increase? As you say, you're sold out for years and years to come?
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C
Well, I don't think we need to necessarily compound at 30% but we're going to have to do more in the second half of this year than we did in the first half and 27 is going to need to be bigger than 26. So we know we're on a multi year ramp. And what I'm so excited about, we said this last Thursday at our earnings call. We've got nine quarters in a row now where we've seen double digit sequential increases from our suppliers that are probably prone to pace us the most. Which tells me they're investing, we're collaborating to break bottlenecks where they exist and we're able to get more from them. In turn, we're able to deliver more to our airframe and airline customers.
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Do you think you're going to have to invest more in that? You did highlight. That was something that really stood out in terms of what you said on that earnings call. But is there something, do you think you're going to have to invest more in that supply ch I, we've talked about kind of investing in your capital infrastructure. Do you think you're going to have to invest in that? Is that M and A stories that maybe you think about in order to just get that supply chain to where you want it to be?
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There's, there's more to come with that. Without doubt. Most of that will be organic, right within our operations. Some of it will come by way of collaboration. I'm sure there'll be inorganic investments as well. We've done a number of small acquisitions with suppliers that were better off, frankly, under our roof than at arm's length. But at the end of the day, it's not about ownership, it's about problem identification and breaking those constraints again. I think we've made a lot of progress the last few years in partnership with a number of our key suppliers, large and small, many of them here. More to come.
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B
Okay. There's been so much news flow as we've been here at the show. One of them has been around what is happening with oil prices and the fact that we're seeing them heading back up again as a result of what's happening in the Gulf right now. If I talk to Kelly over at Boeing, if I told Guillaume at Airbus, they're like this is, this is in some ways good news for us because what it does is it encourages our customers, the airlines, to invest in the most up to date aircraft, most fuel efficient aircraft that they can get their hands on. For you, though, I just wonder whether it's a slightly different story because what we do see as well is that the airlines look at their older fleets and go, maybe we should retire some of those older aircraft. But the spare parts business is a big margin driver for you. How do you see the balance working there?
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C
Well, I would say what's good for Boeing or good for air above is good for General Electric. There's no two ways about that. But the other piece of the equation right now, guy, that you didn't touch on, frankly, is demand. Every airline CEO that has been at Farnborough, those that we talked to just a few weeks ago at, at IATA in Rio, all have remarked about how strong demand has been even in the face of some of the oil price disruptions since the springtime. So we're looking at a situation where we have very strong aftermarket demand, we have very strong new make, and again, we can never forget about defense. So we have our, we have our work cut out for us on a multi year basis. We know we're going to have to ramp, make those investments, drive those process improvements. But that work is underway at GE Aerospace and that work will continue.
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One of the big discussions here has been almost about the aircraft that's not here and that's the next generation of narrowbody. We talked about it a little bit earlier on. You're going to test it on this 747, the engine for that. You're pushing quite hard for the open road to technology. You think that's the future? You think it's going to be simpler, easier to maintain, have, have some fairly big cost efficienc processes that come with it? The airframe is out there yet they're not, they don't appear ready judging by the conversations that I've had to be ready to make a decision on that. How late can they leave it? When do you think that decision is going to come?
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Well, we had an announcement just yesterday in concert with Airbus, with CFM International. We were talking about our new flying testbed equivalent for the the Open Fan Architecture. It's a technology development program. Guys, as you well know, this is a multi year effort. We do think the Open Fan Architecture provides efficiency and maintenance or cost of ownership benefits. So we think we will ultimately be able to deliver to the airlines the ultimate customer, an opportunity to do both. It's not yet a product so there's, there's work to do here. There's plenty of time for us all to work that out. But every next generation narrow body has always come forward with a step function improvement and performance. Very hard to justify the investment to develop one, let alone buy one. Without that. We're confident that the Open Fan architecture is going to be the enabler blur in that regard.
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Larry, it's also a pleasure. Thank you very much indeed for spending a little bit of time with us here at the Farnborough Show. We greatly appreciate it. Larry Culp, the CEO of GE Aerospace, joining us here at Farnborough.
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