⚠ The Customer Sets the Price and Audits the CostHigh threat

GE Aerospace (GE) — threat to the moat

A customer that is also the regulator, the auditor and the legislature sets a different price from an airline.

The defining feature of Defense & Systems is stated in GE Aerospace's own segment discussion: a key underlying driver is government funding, as most of the revenue is derived from funding that flows through the United States Department of War budget, or equivalent international budgets1.

What a government customer also isBuyermost of Defense & Systems revenue, via one budgetFunder$1,409m of the $2,989m spent on research in 2025Auditorcost visibility on the contractExport authoritythe $5bn F110 vehicle serves allied nationsThe result12.3% against the commercial segment’s 26.6%Hindustan Aeronautics ordered $1.6bn of F404-GE-IN20 engines in 2025.
The price of a customer who can see your costs is fourteen percentage points of margin.

A customer that is also a regulator, an auditor and a legislature behaves differently from an airline. It can examine the cost base, cap the margin, compete the programme, change the quantity, or cancel it. It can also change its mind for reasons that have nothing to do with the product — a budget resolution, an administration, an alliance.

GE Aerospace's exposure runs through the whole chain. It regularly works with government customers on development of classified and unclassified advanced products, including combat engines, hypersonics and unmanned applications2, and $1,409 million of its 2025 research and development was customer and partner funded, primarily by the United States Government3. Development funded by the customer is development the customer has a claim over.

The international side adds a second layer. The 2025 Indefinite Delivery/Indefinite Quantity contract from the US Air Force valued up to $5 billion supports foreign military sales of F110-GE-129 engines to allied nations4, and an order from Hindustan Aeronautics for F404-GE-IN20 engines was valued at $1.6 billion5. Both depend on export approval, which is a foreign-policy decision.

What offsets it is that the same rigidity works in the supplier's favour once a platform is selected. An engine certified into a fighter stays there for the aircraft's service life, and the aircraft may serve forty years.

Set the segment margin against the commercial one — 12.3% against 26.6% in 20256. That gap is the price of a customer who can see your costs.

References
  1. ReportedThe defining feature of Defense & Systems is stated in GE Aerospace's own segment discussion: a key underlying driver is government funding, as most of the revenue is derived from funding that flows through the United States Department of War budget, or equivalent international budgets.
    GE Aerospace Form 10-K, FY2025 - Segment Operations — Defense & Propulsion Technologies: segment revenue split between Defense & Systems and Propulsion & Additive Technologies, equipment and services revenue, segment profit and margin, defence engine unit deliveries, the DPT remaining performance obligation, the US Air Force F110-GE-129 Indefinite Delivery/Indefinite Quantity contract valued up to $5 billion, the Hindustan Aeronautics F404-GE-IN20 order valued at $1.6 billion, and the government-funding discussion. — FY2025 · publ. January 2026 · source ↗
  2. ReportedIt regularly works with government customers on development of classified and unclassified advanced products, including combat engines, hypersonics and unmanned applications, and $1,409 million of its 2025 research and development was customer and partner funded, primarily by the United States Government.
    GE Aerospace Form 10-K, FY2025 - Item 1 general and Item 2 Properties — the installed base of approximately 50,000 commercial and 30,000 military engines and the statement that it supports an aftermarket representing approximately 70% of revenue, the FLIGHT DECK operating model, customers in approximately 120 countries, the facility count, human capital and employee numbers, the intellectual property discussion, the research and development table splitting company-funded from customer- and partner-funded spending, and the engine testing milestones. — FY2025 · publ. January 2026 · source ↗
  3. ReportedIt regularly works with government customers on development of classified and unclassified advanced products, including combat engines, hypersonics and unmanned applications, and $1,409 million of its 2025 research and development was customer and partner funded, primarily by the United States Government.
    GE Aerospace Form 10-K, FY2025 - Item 1 general and Item 2 Properties — the installed base of approximately 50,000 commercial and 30,000 military engines and the statement that it supports an aftermarket representing approximately 70% of revenue, the FLIGHT DECK operating model, customers in approximately 120 countries, the facility count, human capital and employee numbers, the intellectual property discussion, the research and development table splitting company-funded from customer- and partner-funded spending, and the engine testing milestones. — FY2025 · publ. January 2026 · source ↗
  4. ReportedThe 2025 Indefinite Delivery/Indefinite Quantity contract from the US Air Force valued up to $5 billion supports foreign military sales of F110-GE-129 engines to allied nations, and an order from Hindustan Aeronautics for F404-GE-IN20 engines was valued at $1.6 billion.
    GE Aerospace Form 10-K, FY2025 - Segment Operations — Defense & Propulsion Technologies: segment revenue split between Defense & Systems and Propulsion & Additive Technologies, equipment and services revenue, segment profit and margin, defence engine unit deliveries, the DPT remaining performance obligation, the US Air Force F110-GE-129 Indefinite Delivery/Indefinite Quantity contract valued up to $5 billion, the Hindustan Aeronautics F404-GE-IN20 order valued at $1.6 billion, and the government-funding discussion. — FY2025 · publ. January 2026 · source ↗
  5. ReportedThe 2025 Indefinite Delivery/Indefinite Quantity contract from the US Air Force valued up to $5 billion supports foreign military sales of F110-GE-129 engines to allied nations, and an order from Hindustan Aeronautics for F404-GE-IN20 engines was valued at $1.6 billion.
    GE Aerospace Form 10-K, FY2025 - Segment Operations — Defense & Propulsion Technologies: segment revenue split between Defense & Systems and Propulsion & Additive Technologies, equipment and services revenue, segment profit and margin, defence engine unit deliveries, the DPT remaining performance obligation, the US Air Force F110-GE-129 Indefinite Delivery/Indefinite Quantity contract valued up to $5 billion, the Hindustan Aeronautics F404-GE-IN20 order valued at $1.6 billion, and the government-funding discussion. — FY2025 · publ. January 2026 · source ↗
  6. ReportedSet the segment margin against the commercial one — 12.3% against 26.6% in 2025.
    GE Aerospace Form 10-K, FY2025 - Segment Operations — Defense & Propulsion Technologies: segment revenue split between Defense & Systems and Propulsion & Additive Technologies, equipment and services revenue, segment profit and margin, defence engine unit deliveries, the DPT remaining performance obligation, the US Air Force F110-GE-129 Indefinite Delivery/Indefinite Quantity contract valued up to $5 billion, the Hindustan Aeronautics F404-GE-IN20 order valued at $1.6 billion, and the government-funding discussion. — FY2025 · publ. January 2026 · source ↗
Sources
Generated September 23, 2026