By Rajesh Kumar Singh, Shivansh Tiwary
(Reuters) -GE Aerospace said on Tuesday it was relying on price increases and cost control to mitigate the impact of tariffs on its business as the aircraft engine maker reaffirmed its full-year earnings forecast and its shares rose.
President Donald Trump’s trade war has created the biggest uncertainty for the aerospace industry since the COVID pandemic. With little clarity on how consumers will behave in the face of a potentially worsening economy, some GE customers are struggling to accurately forecast their business. In an interview, CEO Larry Culp said he recently met with Trump and urged him to restore a tariff-free regime for the aerospace industry under the 1979 Civil Aircraft Agreement. He credited the industry’s decades-old duty-free status for creating a $75 billion annual trade surplus.
“We’ll continue to press this point respectfully in the hopes that we can re-establish in effect what we had prior to the recent tariff moves,” he told Reuters.
Culp said the tariffs will cost the company more than $500 million this year. He said GE Aerospace’s position was “understood” by the administration, but added “it’s not the only item they’re solving for.”
GE Aerospace expects tariffs to persist through the end of this year, and that heightened tariffs would raise costs for itself and its suppliers, warning of delays in spare engine deliveries. . Yet its 2025 forecast did not assume changes in planemakers’ delivery schedules, further tariff escalation or a global economic recession. As earnings season starts to ramp up, other U.S. companies have said tariffs are affecting their business. Consumer company Kimberly-Clark cut its profit outlook Tuesday, saying tariffs will cost them an additional $300 million for this year.
The company’s shares were up 5.5% in afternoon trade. Scott Mikus, an analyst at Melius Research, said GE Aerospace’s decision to back its full-year forecast in an uncertain environment is a “win.”
To mitigate the effect of tariffs, GE Aerospace is making greater use of foreign trade zones and available trade programs like duty drawbacks. It is also employing cost controls and a tariff surcharge to protect its margins.
It now expects flight departures, which drive aftermarket services business, to decline in North America this year. The trade war is also expected to hit its spare engines and spare parts deliveries to China.
Culp said while the company is watching demand trends closely, the measures taken so far along with an order backlog of $170 billion would help produce an adjusted earnings of $5.10 per share to $5.45 per share this year.
“There are a lot of things that are unique about GE Aerospace that we think will help us weather the current headwinds,” he said.
The company has a dominant share in the engine market for narrowbody jets and enjoys a strong position in widebodies. More than 70% of its commercial engine revenue comes from parts and services.
It reported an adjusted profit per share of $1.49 for the quarter through March, topping analysts’ average estimates of $1.27. The company’s adjusted revenue for the first quarter rose 11% to $9 billion.
(Reporting by Rajesh Kumar Singh in Chicago and Shivansh Tiwary in Bengaluru; Editing by Anil D’Silva, Chizu Nomiyama and David Gregorio)
