The world's dominant jet engine duopoly with a $400B+ installed base, decades of recurring aftermarket revenue, and a pure-play aerospace business after GE's historic breakup
Chris Hohn
TCI Fund Management
Est. ~20.5% of total portfolio
“We invest in businesses with very high barriers to entry, pricing power, and long-duration competitive advantages. GE Aerospace fits this profile perfectly — you cannot replicate a jet engine duopoly.”
The Business
- GE Aerospace is the world's leading jet engine manufacturer, producing the LEAP engine (with Safran, via CFM International), GE9X, GEnx, and other engines powering commercial and military aircraft
- Revenue splits between Commercial Engines & Services (~75%) and Defense & Propulsion Technologies (~25%)
- The aftermarket business (spare parts, MRO, long-term service agreements) generates the majority of profits at very high margins
- FY2025: $45.9B revenue, $8.7B net income, 18.7% operating margins, $7.3B free cash flow
Why They Own It
“We invest in businesses with very high barriers to entry, pricing power, and long-duration competitive advantages. GE Aerospace fits this profile perfectly — you cannot replicate a jet engine duopoly.”
- GE Aerospace operates in a duopoly with Pratt & Whitney — together they make virtually every large commercial jet engine in the world
- The installed base of 40,000+ engines generates decades of recurring, high-margin aftermarket revenue through mandatory MRO services
- FY2025: $45.9B revenue (+18%), $8.7B net income, $7.3B free cash flow — a business accelerating post-separation
- The post-breakup pure-play structure allows focused capital allocation and margin expansion without legacy conglomerate overhead
- Global air travel growth is secular — passenger miles are expected to double over the next 20 years, driving engine orders and aftermarket demand
What the investor sees
GE Aerospace trades at roughly $200/share with a market cap of approximately $220B, or 25x FY2025 earnings. Hohn's thesis is that this premium is justified because the aftermarket revenue stream is extremely high-quality: long-duration, recurring, and growing. As the installed base ages and air travel grows, aftermarket revenue compounds for decades. The LEAP engine is now the dominant narrow-body engine globally, locking in future service revenue through the 2040s and beyond.
Financial Snapshot
$45.9B
revenue FY2025
$8.7B
net income
~$220B
market cap
$8.14
eps
18.7%
operating margin
$7.3B
free cash flow
18.5% YoY
revenue growth
40,000+
installed engine base
The Moat
- Duopoly market structure — GE and Pratt & Whitney are the only manufacturers of large commercial jet engines, with 30+ year product cycles
- Installed base lock-in — once an airline selects a GE engine, it is locked into GE's aftermarket ecosystem for 25-30 years of maintenance and parts
- Massive barriers to entry — developing a new jet engine costs $10B+ and takes 10-15 years, with regulatory certification adding further barriers
- Aftermarket pricing power — spare parts and MRO services are priced at significant premiums because airlines have no alternative suppliers
- Technology moat — decades of R&D and billions in cumulative investment create engine technology that competitors cannot replicate
What Could Go Wrong
Boeing 737 MAX production issues — GE's LEAP engine revenue depends on Boeing ramping production, which has been delayed repeatedly
Supply chain constraints — aerospace supply chains remain stressed, limiting engine delivery capacity
Military budget sensitivity — defense segment revenue depends on government spending, which can fluctuate with political priorities
Regulatory and safety risk — engine defects or safety incidents could create massive liability and reputational damage
Cyclicality in new engine orders — while aftermarket is steady, new engine orders fluctuate with airline capex cycles
Catalysts
- Boeing 737 MAX production ramp — higher production rates mean more LEAP engine deliveries and future aftermarket revenue
- Aftermarket revenue acceleration — the large installed base is aging, driving higher MRO spending per engine
- Margin expansion — post-separation cost structure allows operating margins to expand toward 20%+
- Share buybacks — GE Aerospace has authorized significant buyback programs, driving per-share value growth
- Global air travel recovery — international travel continuing to recover post-COVID, driving engine utilization and aftermarket demand
In Their Own Words
“The quality of GE Aerospace's earnings is exceptional. Aftermarket revenue from an installed base of 40,000+ engines is as close to annuity income as you can find in industrials.”
“We are long-term investors. We look for businesses that can compound at high rates for decades. The global aviation market provides that runway for GE Aerospace.”