GE's Jet Engine Business Could Lose Altitude From Sale Of Its Giant Plane Leasing Operation

General Electric badly needs cash, and it would get a barrelful if it sells GECAS, its $40 billion aviation leasing unit, as rumored. But this would not be a welcome move for GE aero engines.

GE is remarkably successful as a jet engine manufacturer. It’s the biggest in twin-aisle jets, and, through its CFM partnership with France’s Safran, the biggest in single-aisle jets, too. This success rests on three legs.

One is engineering. The company is generally viewed as building the world’s best engine hot sections, which are the primary (but not exclusive) determinant of fuel efficiency. This has not changed.

The second leg is GE’s financial strength. In exchange for up-front contributions to aircraft development programs (helping to pay for certification costs, etc.), GE has been able to argue that its engines should enjoy sole-source status on several important jetliner programs. For decades, Boeing’s 737 has exclusively used CFM engines, while its competitor, Airbus’s A320 series, offers a choice of CFM or Pratt & Whitney engines.

An engine with sole-source status enjoys better pricing than an engine offered in a competition with others. GE’s corporate woes over the past few years have greatly constrained the company’s ability to help here.

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