⚠ Making the Engine Last Twice as Long Halves the Shop VisitsModerate threat

GE Aerospace (GE) — threat to the moat

GE Aerospace is deliberately halving the frequency of its own annuity, and is right to.

There is no way to make this threat sound smaller than it is: the whole of GE Aerospace's commercial profit derives from engines coming off the wing, and the company is actively engineering them to come off less often.

Durability: who gains and who paysThe airlineaircraft availability, lower cost of ownershipGE under a service agreementfewer overhauls it must fund — margin upGE under spare parts agreementsfewer parts sold — revenue downThe mix between the twonot disclosedServices gross margin, 2022-202540.9% to 45.0%The LEAP-1B kit cuts over from the beginning of 2027, mid-ramp.
The fleet that will dominate the next twenty years is being rebuilt to need servicing half as often.

The LEAP-1B durability kit is certified, is expected to deliver roughly two times the time-on-wing, and cuts over from the beginning of 20271. The LEAP fleet is in a significant production ramp and is expected to overtake the mature CFM56 as the industry's largest fleet2. So the fleet that will dominate the next twenty years of aftermarket is being rebuilt, mid-ramp, to need servicing half as often.

The offsetting arguments are genuine. A fleet twice the size needing half as many visits each generates the same number of visits. Under long-term service agreements, where GE bears the overhaul cost, durability converts directly into contract margin — which is part of why the services gross margin has risen four years running to 45.0%3. And an engine that stays on the wing is an engine that stays in the fleet rather than being replaced by a competitor's.

The argument that does not work is the one that says durability does not matter. It matters, and the company's own service contracts are where it matters most — the ten-to-twenty-five-year agreements whose profitability is estimated on the expected timing and extent of future overhauls4. A step change in time-on-wing changes those estimates in GE's favour, and changes spare-parts volumes against it.

Read services revenue against the size of the installed base rather than growth in isolation. Internal shop visit revenue is compounding at twenty-plus per cent now because a decade of deferred maintenance is arriving at once. The test comes after 2027, when the durability cutover and the ramp are both in the numbers.

References
  1. ReportedThe LEAP-1B durability kit is certified, is expected to deliver roughly two times the time-on-wing, and cuts over from the beginning of 2027.
    GE Aerospace second-quarter 2026 earnings release (Exhibit 99.1 to Form 8-K of July 16, 2026) — total company GAAP and non-GAAP results, segment revenue, orders and operating profit, free cash flow, the raised full-year 2026 guidance for adjusted revenue growth, operating profit, adjusted earnings per share and free cash flow, the LEAP-1B durability kit certification, the XA102 and GE426 defence programmes, the NASA hybrid-electric ground tests, and the chief executive's commentary. — Q2 2026 · publ. 16 July 2026 · source ↗
  2. ReportedThe LEAP fleet is in a significant production ramp and is expected to overtake the mature CFM56 as the industry's largest fleet.
    GE Aerospace Form 10-K, FY2025 - Item 1 Business — segment descriptions for Commercial Engines & Services and Defense & Propulsion Technologies, the CFM International 50-50 non-consolidated joint venture with Safran Aircraft Engines, the commercial engine platforms (LEAP, CFM56, GEnx, GE9X, CF6, GE90), the defence platforms (F110, F404, F414, T408, T700, T901, LM2500), the Propulsion & Additive Technologies brands, the CFM RISE programme, the customer description including airframers and sole-source positions, and the segment revenue and services shares. — FY2025 · publ. January 2026 · source ↗
  3. Moat Explorer calcUnder long-term service agreements, where GE bears the overhaul cost, durability converts directly into contract margin — which is part of why the services gross margin has risen four years running to 45.0%.
    Moat Explorer calculation from GE Aerospace's reported figures. Equipment gross margin: sales of equipment less cost of equipment sold was $(314)M in 2022, $(582)M in 2023, $(67)M in 2024 and $(223)M in 2025, about $1.2 billion cumulatively, and about -1.8% of equipment sales in 2025 against -0.7% in 2024. Services gross margin: (18,345-10,836)/18,345 = 40.9% in 2022, 42.4% in 2023, 43.8% in 2024 and (30,163-16,586)/30,163 = 45.0% in 2025. Services RPO of $163,029M against services revenue of $30,163M is 5.4 years, and $163,029M of $190,564M is 86%. LEAP deliveries of 1,570 + 1,407 + 1,802 + 1,030 in the first half of 2026 total 5,809 since the start of 2023. LEAP was 1,802 of 2,386 commercial engines in 2025, 75.5%. — FY2022-FY2026 · publ. September 2026 · source ↗
  4. ReportedIt matters, and the company's own service contracts are where it matters most — the ten-to-twenty-five-year agreements whose profitability is estimated on the expected timing and extent of future overhauls.
    GE Aerospace Form 10-K, FY2025 - Report of Independent Registered Public Accounting Firm — the critical audit matter on revenue recognition for certain Aerospace long-term service agreements, which notes that the agreements generally range from 10 to 25 years, that revenue is recognised on the percentage-of-completion method, and that the key assumptions requiring significant management judgement are customer utilisation, the expected timing and extent of future overhaul services, future costs of materials and labour, and forward-looking information. — FY2025 · publ. January 2026 · source ↗
Sources
Generated September 23, 2026