GE Aerospace branding is seen at the Farnborough International Airshow, in Farnborough, Britain, July 22, 2024. REUTERS/Toby Melville

By Rajesh Kumar Singh and Shivansh Tiwary

(Reuters) -GE Aerospace raised its earnings forecast for this year on Tuesday, and said a stabilization in air traffic has brightened the company's outlook for next year.

The aerospace giant also reported a material improvement in jet engine deliveries and lifted the estimate for LEAP engine deliveries this year.

The Ohio-based company dominates the engine market for narrowbody jets and has a strong position in widebodies. More than 70% of its commercial engine revenue comes from parts and services.

RECOVERY IN AIR TRAFFIC

However, strong air travel demand as well as delays in production of new planes have forced airlines to keep flying older, less fuel-efficient jets and spend billions on maintenance.

That has benefited engine makers, which earn most of their profit from high-margin, long-term contracts for parts and maintenance.

GE Aerospace said air traffic has stabilized after the tumult in the first half of the year. It now expects aircraft departures, which drive aftermarket services business, to be up 3% to 4% in the second half of the year.

In an interview, CEO Larry Culp said he had meetings with dozens of airline chiefs from across the globe last week, who were all upbeat about the outlook for the current quarter as well as next year.

"We're going to be busy," he told Reuters.

GE Aerospace now expects adjusted profit per share in a range of $6.00 to $6.20 for 2025, compared with its prior expectation of $5.60 to $5.80.

Its shares were up about 2% at $307.61 in mid-day trade.

LEAP ENGINE DELIVERY FORECAST

Strong demand also creates a high-stakes conflict of interest between satisfying airframers, who need engines for new aircraft production, and airlines, who need timely maintenance and parts for their existing fleets.

Airbus , for example, has publicly complained about engine delays hampering its production. The European planemaker has a number of fully assembled aircraft parked on the ground waiting for their engines.

Culp said the company's efforts to fix supply chain problems are showing results, helping make progress in catching up on jet engine delays to Airbus in the third quarter. He expressed confidence that CFM International, jointly owned by Safran and GE Aerospace, will be able to meet Airbus' engine delivery target for this year.

GE Aerospace now expects the deliveries of LEAP engines, which power narrowbody jets of Airbus and Boeing, to be up more than 20% year-on-year in 2025. That compares with its previous forecast of a 15% to 20% increase.

COST COMPLAINTS

Engine shortages as well as reliability issues have driven up the costs for airlines, leading to growing discord between suppliers and carriers across the industry. Several airlines are pushing back against engine makers on price increases.

Turkish Airlines has warned that it could switch a recently announced order for Boeing's 737 MAX jets to Airbus if talks with CFM failed to make progress. At the heart of the THY dispute is who should bear the most risk on the cost of long-term repairs, industry sources have said.

Culp likened the threat to negotiating "new deals in public." He said the company's pricing strategy reflects the value it provides to customers.

"I've never been in an industry, where price increases are necessarily welcomed and warmly embraced," Culp said.

GE Aerospace's adjusted profit for the quarter through September came in at $1.66, beating expectations of $1.45, according to data compiled by LSEG.

(Reporting by Rajesh Kumar Singh in Chicago and Shivansh Tiwary in Bengaluru. Editing by Arun Koyyur, Mark Potter and Nick Zieminski)