TIP854: GE Aerospace: Chris Hohn’s Biggest Bet w/ Daniel Mahncke & Shawn O'Malley

GE Aerospace operates as a high-quality, mission-critical player in the aviation industry, benefiting from a massive installed base of engines and significant regulatory moats. The business model centers on the aftermarket, where service contracts and spare parts generate the vast majority of profits, often yielding returns on invested capital near 40%. While the company faced historical struggles as a conglomerate, CEO Larry Culp’s strategic split and focus on operational efficiency transformed it into a streamlined, cash-generative entity. Despite the company's strong competitive position and a $210 billion backlog, current valuations at 40 times free cash flow present significant risks, as future growth depends on Boeing and Airbus production rates and the normalization of maintenance cycles. Ultimately, the company’s long-term success hinges on its ability to maintain pricing power in the aftermarket while navigating supply-side constraints and potential regulatory scrutiny.