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General Electric Company (NYSE:GE)

Deutsche Bank Global Industrials and Basic Materials Conference

June 5, 2014, 09:40 AM ET


Bill Fitzgerald - VP, Commercial Engines – GE Aviation

Kevin McAllister - VP, Engine Services – GE Aviation


John Inch - Deutsche Bank

John Inch - Deutsche Bank

Okay. Good morning, everyone, I hope yesterday was productive for everyone and you got full benefit of your meetings and certainly our fireside chat. We welcome your feedback, as always, right. We're trying to make this conference better. I think this is a better event than last year for lots of reasons. And any suggestions you have, formats, dinner, access, anything like that would be most appreciated.

This morning it gives me great pleasure to introduce the GE Aviation management team. We thought this would be -- firstly, this is one of the unequivocally the best businesses in the world let alone the best businesses at GE.

And we thought it would be extremely important to highlight this company for you and how the company is run and, in fact, what the future opportunity is. Certainly the upward sloping aerospace cycle is no stranger to many of you.

There's also a lot of, frankly, misinformation that is thrown out from this company's competitors in terms of their positions and shares and hopefully we can touch on some of that.

So, it gives me great pleasure to introduce Bill Fitzgerald and Kevin McAllister. And maybe I'd ask you both just to give a quick intro -- rather than me read your bio, a quick intro your background and what you do at GE.

Bill Fitzgerald

Sure, I'm Bill Fitzgerald, I run the Commercial Aviation business at GE, (indiscernible). I have also spent about four years on the rail side. I'm an engineer by training and really enjoy being part of the GE team.

Kevin McAllister

And I am Kevin McAllister, I run our Services business. I have been at GE for 25 plus years. I started in Engineering, I've worked in Technology, have worked in Six Sigma, Services, and then for the last seven years, eight years ran our sales organization for Aviation and Services.

John Inch - Deutsche Bank


Bill Fitzgerald

So, thanks for the opportunity to talk to the group. I want to take you through just a little bit of aviation at a granular level. We have a strong and growing portfolio, it's a $22 billion business with products in the engine and the systems part of the world here and we cover the commercial, military and general aviation space.

Just specifically commercial engines, the part that I run, we make product choices. We are -- development of the next generation products and (indiscernible) I'm sorry. Now, here we go, that's a little bit better.

Kevin's team is really in charge of spares, overhaul, repair, customized service agreements, fundamentally supporting the growing service fleet that's out there. In the military space, we combine the original equipment and the aftermarket into one business.

And on the lower part of the page what you see is three of our newer business segments. Business and general aviation and integrated systems -- the way you should think about that is anything that's smaller than a scheduled flight.

Avionics and digital solutions obviously is flight computing. And then lastly the newest member of the team is the Avio Aero crowd, which was an acquisition a little less than 12 months ago with focus on power transmission and turbo machinery and actually a terrific business which we're delighted about how it is being integrated.

It's an exciting time to be part of GE Aviation because we truly do power the world's fleets. In fact, if you flew here today there's a two out of three chance that you flew on our product.

Basically every two seconds someone in the world an airplane powered by GE technology takes off. We've got a big fleet, 33,900 engines and that fleet will increase by 50% between now and 2020. So, at any given moment in time, there's 2,200 planes up there with 300,000 people resting comfortably who are depending on our engines.

And as John said, look, we feel great about being part of the GE portfolio and this is a terrific business. We have got 8% revenue growth as we grow the install based both on the commercial side of the world and on the military side of the world. And we're investing heavily in the next generation of products while growing our operating cost.

And our focus here is really on the strategic imperatives that many members of General Electric Corporation have shared with you including Jeff. And we're executing on each one of these to continue to increase the capability of this business.

What I thought I would do is just talk a little bit about the commercial equipment environment and where this growth is coming from. It's a good time to be in this space, particularly from an industry environment perspective. Passenger demand is strong and continues to be strong. Load factors are very strong and again, as we help flight around the globe here, planes are full.

And jet fuel dropping in price is really helping the industry. 40% of the airlines' costs are tied to fuel, so seeing a drop in that is a big deal. And that's translating from an airline profit perspective to those profits being positive and increasing and from an aviation perspective that translates into growth from a backlog perspective.

We closed 2013 at record backlogs from an original equipment perspective at $21.6 billion. And as you can see from the charts, the fleet continues to grow here. So, we're pleased that the industry is doing well and that we are working with them to help in delivering those profits.

I thought I'd just talk for a second about the number of new products that are coming out in this space. There's a tremendous amount of new products that are out there. And just to clear the chart, on the left hand side of the page what you see are the original equipment manufacturers. You see the big three, GE, Pratt and Rolls. And then the other two are joint venture partnerships that involve some of the big three.

And the thing that I would point out across this page of many new planes that are out there is, one, GE Aviation is the only manufacturer that's in each of the three spaces, all right.

And the second thing that we are quite proud of is within each of those spaces we've got some terrific sole-source positions in those spaces. On the wide body with the Boeing 747-8 and the latest plane to be announced which is the Boeing 777X powered by the GE9X which I'll talk about.

In the narrow body space sole-source position on the COMAC C919, sole-source position on the Boeing 737 Max. And on the far right the Bombardier global 7000/8000 which is powered by our GE Passport.

The other thing that I would highlight here is just some of the performance from an engine perspective over the last 12 months or so. Our GEnx portfolio is performing enormously well on the wide body space.

In 2013 completed all the performance upgrades. They are now certified and delivering for customers. And since that product entered into service, which was 2011, we have woe 80% of all available orders. So, we feel really good about that.

From a LEAP perspective, the engine is performing very well. As we run through the development program, we have been -- we met or exceeded the on-time delivery from a first engine to test.

The Airbus derivative of that product will fly in the August timeframe on our flying test bed. And I'm on my way to Villaroche in two weeks to go see the Boeing derivative of that product fire for the first time and that will be three or four days early as well. So, we're really quite excited about how each of these products are working and their industry acceptance.

What I thought I would do now is just take you through the two big new product introductions and why we believe these are going to be absolute home runs as we look forward.

Let's start with the LEAP product. The foundation of the LEAP product is really the CFM56 engine. Now, the CFM56 engine is sole-source under wing of the Boeing 737 NG and we've got about 54% market share under wing of the Airbus product.

CFM is a joint venture partnership between GE and Safran in France. And it is 34 years old. It is the most successful joint venture in the aviation industry history. It has delivered an absolutely killer product, 26,000 engines that are out there and it has defined reliability in the space.

And it had to because the industry allows them take off 34,000 times a day. And the fleet is growing significantly. You've all read, as we have, the discussions with the air framers about what is the increase in rate that they would like to see. From 38 to 40 is what they are currently doing now to somewhere between 45 to 47 planes a month.

So, big interest in the current version of this and the LEAP product, which comes into service in 2016, is all about taking that reliable architecture and infusing fuel efficiency capability.

So, the LEAP product will be 15% more fuel-efficient. Its sole-source under wing of COMAC; its sole-source under wing at Boeing and we have got 6,300 orders either placed or committed and we're still two years before entering the service.

So, it's an absolutely terrific product. And here is why customers like it. It is 1% more fuel efficient on the way out the door and we only increase the fuel efficiency over time. From a reliability perspective, it's two times better than its competitor. Maintenance costs are 20% better than its competitor and from an emissions perspective, its 30% better. And this is all against the backdrop of the architecture of the CFM product.

It has got 630 million flying hours here and it takes advantage of the focus by the CFM company on continuous investment in technology. And when there is an opportunity to go improve that product, and we've had 21 times in 30 years that we decided to go do that, we have delivered on time and on spec. So, we're really excited about this product.

Similarly in the wide body space, it's a comparable discussion. The GE90, which is an absolutely killer product and has really -- it's under wing of the Boeing 777X, it has a sole-source position there, changed the game on the four engine aircraft here. It's tremendously fuel-efficient, it has sold enormously well, there are 1,700 engines in the fleet today and that will grow by 50% between now and 2020.

And in the March timeframe of this past year, we were tremendously honored to have Boeing pick us to be the engine under wing of the next generation of that product, basically because the technology is spectacular. By the time this goes into service in 2020, this asset will be 5% better from a fuel efficiency perspective than anything that has even been proposed on paper.

And we're not the only ones that are excited about it. At the Dubai Air Show this past November, we booked $26 billion worth of orders in one day tied to this product being launched with the Boeing Company. Now, I have to tell you, that was a pretty good day, $26 billion in a day, that was absolutely spectacular.

We've got six active customers now and we've got 10 campaigns that are underway for another 200 aircraft as customers vie for slots to make sure that their fleets get to take advantage of this great capability.

And here is what they are excited about. The plane itself will be 20% better than its predecessor, which is pretty good. And the engine will drive 50% of that benefit. And where that technology comes from is GE's focus on investing in technology over time and the list of technologies you see on the bottom part of the page here represent either the third or the fourth generation of technology accomplishments in each of these spaces.

The composite fan blade and I will talk a little bit more about that, is in its fourth generation. The compressor technology has record pressure ratios. Now just how you should think about that, 27 to 1 pressure ratios think about it in terms of fuel efficiency, right. The compressor is the core of the engine; it's what drives the fuel efficiency.

And the thing that I would point out here is six years before entering the service that compressor is running today in our GE Oil & Gas facility over in Masa, Italy. It's running now and performing very well.

From a combustion technology perspective, the Twin-Annual Pre-Swirler technology that we have chosen exceeds any regulatory standard that's either on the books today or proposed. And lastly, ceramic matrix composites just give us an absolutely terrific thermal capability with a third of the weight.

So, thought I would just go one more level in terms of why do we feel confident about it. How should you think about whether we're capable of delivering these technologies and why our approach works? And it's really a function of our focus on continuous improvement over time.

We started the composite fan blade which delivered lighter weight, better fan efficiency in the 1990s. By the time this thing enters into service in 2020, we will be making that fan blade for over 25 years. And we are the only ones in the industry that have this.

And what we have done here is we have iterated both the design and the technology, taking advantage of 3D aero mechanics as we have walked our way towards the 2020 version of this which will have the ability to move 3.5 million cubic feet of air per minute.

And as we have learned on this we have taken the composite fan material and we've moved it into the casing. And now what we have is a fully composite fan module that also is maintenance free as you look out over time. So, an absolutely terrific strategy that is delivering for customers from an efficiency and a weight perspective.

So, just to summarize this and how you ought to think about it at the product level itself. The GEnx engine started its design in 2003, entered into service in 2011, delivering 2.5% better fuel efficiency than its competitor, delivering from a durability perspective and its won 80% of all available orders since it went into service.

We take that technology, we leverage it, we scale it into the LEAP and the Passport. We've got 6,300 orders already two years in advance of entry into service. And then we scale that technology again into the GE9X.

So, our strategy here is about technology development over time and confidence that when we put it into the architecture, which is the most reliable in the industry, it delivers from a fuel efficiency perspective and a durability and reliability perspective.

And with that I am going to hand it to my friend Kevin to talk Services.

Kevin McAllister

Thanks, Bill. Nothing builds a foundation for services better than 33,000 installed engines. It's a great platform for growth and services. And as we look at the environment we're encouraged by a couple of things; third year of very strong revenue passenger kilometer growth, and if you look at IATA's numbers for the first quarter of 5.5%, certainly on track to the numbers that they forecast through 2014.

The other dynamic for us is utilization, how many cycles per day, how many departures per day are happening. And you can see a great 2013 and more growth in 2014. And all that equates to roughly a million more departures on GE and CFM powered aircraft throughout the year.

Departure is a really great story. If you look at where we were in 1995, we were effectively powering one out of every three flights, today powering two out of every three flights, so great growth.

On shop visits, this all translates into two things, one, about a 4% growth in shop visits and a $96 billion portfolio of long-term service agreements for our customers.

Here's a breakout on how that $96 billion breaks out across product lines. You can see CFM56 and LEAP, the narrow bodies is the big bulk, it's the work horse of the industry. And you can see the GE90 engine on the 777 as the second biggest. But you can see pretty good spread of this $96 billion backlog across products.

I think the thing that is most important is the right side of this page and that is to compete across the portfolio of engines that have been flying and engines that will fly; we have got to be ready to have a portfolio of services offering that differentiates GE and wins in the marketplace.

And we do. We have great risk transfer products that are dollar per flight hour and have comprehensive maintenance coverage for the engine. We have overhaul time and material which is really a cost per event product in blocks of engines or on one engine at a time.

We have a great group of MROs around the world we sell to and no one brings a better packaging of new, used and repaired material to the customer base that we do and asset optimization.

I tell you in the industry today people are looking very hard at the residual value of an engine. And we're well-positioned with the TRUEngine program. Our customers for years have been asking to differentiate used engines in a way and TRUEngine now has almost 10,000 engines in the portfolio where we certify with that designation that they have been made to OEM standards and maintained to OEM standards. So, great fundamentals for growth.

I think if you're a longtime GE person this is a chart that makes you most proud because it's a reflection of generations of engineering and technology capability across the decades. If you look at the top its time on wing, these are the wide-body capabilities and every one of those products has fuel burn capability better than their competitors.

On the bottom chart that's the work horse, the shorter cycle narrow bodies and regionals, and all of those we have an advantage in maintenance cost and reliability. When you put together, it means fleets fly longer.

Case in point, if you look at the far right the -6 entered service in 1971, so 43 years later that engine is still flying today proudly with FedEx. If you look at the 80C2, it's been flying -- it was launched in the mid-80s, it's been flying for 30 years, still today. And again if you go to the bottom, the CFM56-3, more than 1,000 airplanes still flying with that engine today 30 years later.

I think the encouraging thing for us also is besides a large installed base, we have the opportunity of a lot of maintenance activities to come going forward. If you look at the overall fleet, nearly 50% of our fleet has not yet had a shop visit.

When you look at the workhorse, the 14,000 plus engines in the field on the CFM56-7 and 5B, those power the A320s and the 737s; it's almost two-thirds have not yet come in for their maintenance event.

And third, you've got to be in the right places at the right products and the right side just clearly says, look, we've got the right distribution of products, thanks to Bill and his team, and we're in the right places around the globe.

One of the real important things for us here is to have a great network of service facilities. We've got nine overhaul facilities; five are ours and four with our Snecma partners. These overall facilities are focused on cost and productivity. How to get the right quality at the right cost point and the right productivity.

Third point repair -- six complimentary repair facilities. These are technology centers-of-excellence on repair. And on the right you, see we're not alone. We have got a great network of customers who like to do their own overhauls and do some third-parties. They have got their own great capabilities. And we're very proud to have them part of our network and have them using our OEM materials.

One of the big traditions of this business that matters is technology can move forward. As a new engine comes out new technology moves in, but the beauty is, it can also move backward into the installed base.

And this is a great example of how across our CFM56, across our CF6-80C2 and across our GE90, we've been able to upgrade engines and deliver to our customers improved fuel burn and better time on wing. This is really important for us as we look at keeping fleets flying over the long-term.

The last thing I want to talk about is this -- a new generation that is very important to services and a big differentiator in GE. And it starts with analytics. Jeff launched in San Ramon a software center-of-excellence. We now have 350 engineers working on analytics. 25 of our customers are now applying full flight data into GE on their flights.

What that means for us is that we're going to go from measuring 15,000 flights in 2013 to 10 million flights in 2015 and 1,500 terabytes. Now, I've actually learned something this year that there's something bigger than a terabyte and it's called a petabyte. So with 1,500 terabytes, we're now going to produce 1.5 petabytes of data in 2015, so a ton of data.

Now, the question is, what do you do with it? We have the highest reliability in the industry. Our products are designed for continuous reliability. But we have an opportunity here to use digital to get productivity, for our customers and for our CSAs.

And if you look at this, here is an example of engines fly all over the world in different operating environments, in different flight profiles. And in this case, we have an engine that within the fleet has a certain portion of the fleet that's flying in very different operating conditions.

If you look at the chart on the right, let's call that the higher risk fleet. Now, what does that mean? There's a compound in the engine that gets distressed more than the rest of the fleet. So, you can see a clear bifurcation in what the rest of the fleet's component distress is and what that subset of the fleet is.

Why is this important? Because it lets us get ahead of the problem, understand how to manage it. In this case, we were able to implement specific inspections and containment actions, maintenance actions that only apply to the fleet that you see on the top and didn't apply to the fleet that -- on the bottom, which means less -- there's more productivity for the fleet on the bottom and better predictability for the fleet on top. That's time on wing benefit for our customers, that's reliability, and that's maintenance cost avoidance for us and for the customer base.

I think minds and machines is something bigger. It is the perfect marriage where physics meets analytics. There are a lot of companies that invest in software, but the ability to marry the horsepower of thousands of engineers with a great analytics platform at the software center-of-excellence gives us capabilities to manage services in ways that are incredible for us.

It's not just finding the problem, it's not just seeing the anomaly, it's the ability to analytically find what portion of fleet is impacted, it's the ability to convert that analysis and the predictive analytics in a way that allows us to manage the flying fleet and manage risk on a go-forward basis. And its prescriptive analytics, IT allows us to decide on what is the best cross point, the best option for us and our customers in order to manage the condition over time.

When you're GE and you look at a $200 billion per year fuel bill and you look at fuel at 40% of our customers cost, there is no question that this is a space that we are very well prepared to bring value. And so, we have fleet efficiency services that's working closely with our airline customers.

Today we're closing in on 40 customers across this portfolio. It's really focused on everything from synchronizing approaches to navigational performance approach, R&P performance, fuel and carbon which is effectively looking at the flight envelope and on the ground and maintenance procedures to say how do you minimize fuel consumption.

And then a great business in Austin Digital that tracks FOQA data and has great analytical skills in its own to go support this. So, these are two big differentiators for us as we move forward.

So, in summary, I want you to know a couple things. Bill and I both want you to know that this is a company that positions to invest and deliver. It's backed by the credibility of generations of engines and a long services portfolio. It's got unprecedented installed base both on the engine side and the services side.

And it's committed to two things; number one, to always have a technology advantage versus our competitors. And number two, to always find a way to bring this new generation of digital capability to enhance our services productivity, to enhance our products and to enhance our overall profitability.

With that, thank you very much, John, and we will turn it over to you for questions.

Question-and-Answer session

John Inch - Deutsche Bank

Sure. And as before, if anyone has a question, please raise your hand. I want to kick things off, let's just cut to the chase. Pratt has been very aggressive at suggesting that gear turbofan has made inroads upwards of 80% or something like this. What is your response to that claim?

Bill Fitzgerald

Look, we're really comfortable with our position in this market and I think the order rate dialogue that was referenced is normal lumpiness in the system. One, we have got a sole-source position under wing at COMAC; two, we have got a sole-source position under wing at Boeing; and third, the product has been offered now for six years and we got around a 50% market share there.

So, we feel very comfortable with the way the customers are responding, we get 6,300 orders or commits and there's a lot of customers that are going to make additional decisions for probably about 1,000 engines between now and the end of the year. So, we're really comfortable with where we are and I think what was referenced is order lumpiness that was maybe a little overblown.

Kevin McAllister

Plus, look, we've got a technology advantage; it translates into a cost advantage for our customers. We're very excited about the portfolio of customers we have around the globe. And it's going to be a great platform to win, very excited about the growth of the LEAP on the A320neo and on the COMAC and the 737MAX going forward.

John Inch - Deutsche Bank

And you just mentioned LEAP; do you actually have a flying engine on LEAP? That has been I think a source of question out there and the market.

Bill Fitzgerald

Well, when you develop an engine, first you go through all the normal on the ground testing. So, we're ahead of schedule on both programs on the ground, we're through our icing tests, the flying test bed which is the first time that the product will fly the engines on the ground stand now preparing for that flying test bed. It will fly in the early August timeframe.

And then the Boeing product, the Boeing variant of that will fly in the early part of next year once we're finished with the Airbus product. And that's part of the natural schedule that's been advertised and we're on or ahead of schedule to that plan.

John Inch - Deutsche Bank

Okay. I want to jump to industrial Internet and come back to a couple of things before. But at the end of the day, I think we all -- mothers keep your kids safe from petabytes or whatever. But I'm curious, the industry internet, you mentioned the 40 customers, what's the revenue stream for you? Is this actually a revenue profit model or is this something that just cements you closer to customers?

And is there any kind of a quantification you could give? I don't want you to name a customer but just an example of what this could mean in terms of revenue and profit.

Kevin McAllister

Yeah, I mean right now with the customers that we have, to me it's about making the productivity better for us and for our customers. And right now a lot of that centers in customers who have long-term service agreements, which makes a lot of sense to GE and makes a lot of sense to our customer base.

At this point, we don't really break out forward revenue on what we expect out of digital. I think you have got to pace this right. Great capabilities have got to be launched and driven with continuing credibility. So, we're really focused on getting it right with these 25 customers, finding ways to enhance their productivity and the productivity of our services portfolio.

And then we will build that business both on a standalone and on an alignment with services as we go forward.

John Inch - Deutsche Bank

So, you see a trajectory though where this could be a standalone business and what pay for these 350 engineers?

Kevin McAllister

Look, it certainly is. If you look at the fuel side of that page today, we have a large number of this customers that have standalone business with those fuel products today.

John Inch - Deutsche Bank

And out of curiosity, so what is it, 33,000 engines are flying, GE engines are flying. What percent of those actually are subject to your own CSA?

Kevin McAllister

As I showed you on a page it is very variable by product line.

John Inch - Deutsche Bank


Kevin McAllister

So, it's different along different product lines. And frankly, we don't target a percentage that we want to have, we really -- you have got to be able to position yourself to be successful with what your customers want. So, every one of those streams I showed, every one of those channels of services opportunities are goodness for GE.

John Inch - Deutsche Bank

Let me ask it a different way then. Is there penetration opportunity for CSAs within the installed fleet? Or is this more -- I suspect it probably is not, it's more about the new engines coming on line. And if that's true, what sort of an attachment rate of CSA's come with all these new engines that you are launching?

Kevin McAllister

Well, we have had -- first of all to answer your first question, CSAs are not purely for new engines that launch. We've had customers who have experienced some volatility or some higher cost shoppings that want the certainty and predictability of $1 per flight hour.

So, we have seen customers that converted from a time and material into a long-term service agreement very successfully. And again, on the new entrants in the business, we're going to figure out how to do it where customers want it.

So, customers who really are focused on a particular risk transfer product to us, we are going to be there to position to do it. If not we will be there to position with one of the other opportunities.

And those airline customers remember that overhaul their own motors, they are going to be looking for more of a materials solution, which is a big part of our business.

John Inch - Deutsche Bank

Well, you just referenced time on wing and you actually alluded to it in the presentation. So whatever the statistic was, more time on wing, how does that actually impact the CSA model, contractual service agreements if anyone doesn't understand what I am talking about?

Kevin McAllister

That is a great question.

John Inch - Deutsche Bank

Because theoretically if it is blowing more that should mean fewer shop visits, is that not the way to think about it or how does this work?

Kevin McAllister

That is a great question, John, and it has got -- here is the answer. As you look at your CSA portfolio you're billing on a fixed cost divided by the number of flight hours. If you fly more hours, better time on wing then you're pricing the deal that is productivity for us. It's also productivity for your customer base. If you look outside that on the material side, it's not just the number of shop visits; it's the consumption at shop visits.

And third, remember that what keeps fleets flying is better economics for your customers. Better economics for the fleet, for your customers means the fleets fly longer and you get more shop visits over the long run.

John Inch - Deutsche Bank

Okay. Maybe just a big ask your question. I mean, we all wish we could be sort of businesses like yours, right. I mean what benefit does being part of then GE -- (indiscernible) is going to kill me. But what benefit does being part of GE provide for you guys? Why doesn't it make more sense to be just an independent company that possibly can pursue lots of these initiatives on your own?

Bill Fitzgerald

We get a big benefit for being part of a broader GE family. It starts with being able to take the research and development -- benefit of the research and development, GRC center and how could we take some of that information and insight and move it across products. Take the ceramic matrix composite which will be in our LEAP product and our GE9X product.

That investment and that learning started at GRC, 10, 15 years ago. Our oil and gas, gas turbines have had ceramic matrix composites running in them for the better part of seven or eight years.

There's probably 20,000 hours' worth of learning there that we can take that learning and fold it into the development of how we use it within the jet engine side of this thing. So there's benefits from medical systems, from an inspection technologies capability. We get a lot out of being part of the GE family, no question about it. And we think we give back as well. So, we're delighted to be part of it and we think we benefit every day.

John Inch - Deutsche Bank

Okay. And then another big picture question so had a lot of new program launches, a lot of cost, very expensive to build and develop these engines, the CSA model has worked very successfully for you over time. Is this fleet I mean it almost goes back to the portion I guess of engines that are flying, but still have to come in for a first shop visit?

Just you underline this up. I mean should we be expecting margin runway in this segment because kind of the counter is look, you guys keep launching these new engines that is great, but it's very expensive and the OE pricing is very aggressive because no wonder you have won such high penetration. So, how does the model all follow through and should we actually be looking to see some margin expansion say by whatever timeframe?

Kevin McAllister

My view is we're relentlessly focused on bringing the rights cost equation to all of these engines that we're winning. We are focused on getting the absolutely best cost structure that's cost capability both on the engines and services side and really continuing to find ways that grow the business on both the topline and bottom line.

John Inch - Deutsche Bank

So that's a yes?

Bill Fitzgerald

We don't make forward projections. But I think the other thing is when you look at our fleets, our fleets are young, Kevin talked about it. The lion's share of the fleets that are out there both of the narrow body and on the wide body space still haven't had their first shop visit yet. So, in terms of potential that's there, I think the potential is pretty big.

John Inch - Deutsche Bank

Yeah, it seems to be so. Okay, I think we're out of time. So, Kevin, thank you very much. (indiscernible)

Kevin McAllister

Thanks John. Really appreciate it. Thank you.

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