What Drives Growth on the Defense Side?

Today we are breaking down GE Aerospace. We did cover GE several years ago, but that episode focused on Larry Culp's turnaround of the conglomerate. 

Ramesh Narayanaswamy, co-founder and portfolio manager of Tourbillon Partners, joins me to explore what is now a pure-play aerospace business. We discuss the unique dynamics of the aerospace supply chain and the long-cycle nature that differentiates this industry. We also explore the complexity of aircraft engine manufacturing and how GE exemplifies the powerful model of selling services attached to equipment. Please enjoy our conversation on GE Aerospace.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page⁠⁠⁠⁠⁠ here.⁠⁠⁠⁠⁠

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Show Notes

(00:00:00) Welcome to Business Breakdowns

(00:01:52) Overview of GE Aerospace

(00:04:01) Commercial Jet Engines: Market and Segments

(00:08:16) Military and Defense Applications

(00:10:07) Financials and Revenue Streams

(00:15:57) The Legacy and Transformation of GE

(00:20:31) Jet Engine Industry and GE's Role

(00:22:04) Challenges and Partnerships in Jet Engine Manufacturing

(00:28:39) Revenue Models and Customer Segments

(00:30:29) Understanding the OE and Aftermarket Revenue Models

(00:31:50) The Profitability of Aftermarket Services

(00:34:25) Revenue Models in the Aftermarket

(00:36:11) Growth Strategies and Market Dynamics

(00:39:38) Impact of Economic Cycles and Resilience

(00:43:33) Capital Intensity and Return on Capital

(00:47:12) Competitive Landscape and Technological Risks

(00:55:07) Valuation Approaches and Market Perception

(00:57:39) Key Takeaways and Lessons from GE