GE 2005 Annual Report Download - page 12

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(12)
Aviation and Aviation Financial Services
Aviation produces, sells and services jet engines, turboprop and turbo shaft engines, and related replacement parts
for use in military and commercial aircraft. Our military engines are used in a wide variety of aircraft including
fighters, bombers, tankers, helicopters and surveillance aircraft and our commercial engines power aircraft in all
categories of range: short/medium, intermediate and long-range, as well as executive and regional aircraft. We also
produce engines through CFM International, a company jointly owned by GE and Snecma Moteurs of France; and a
new engine is being designed and marketed in a joint venture with the Pratt & Whitney division of United
Technologies Corporation.
We provide maintenance, component repair and overhaul services (MRO), including sales of replacement
parts, for many models of engines, including repair and overhaul of engines manufactured by competitors.
The worldwide competition in aircraft jet engines and MRO (including parts sales) is intense. Both U.S.
and export markets are important. Product development cycles are long and product quality and efficiency are
critical to success. Research and development expenditures, both customer-financed and internally funded, are
important in this business, as are focused intellectual property strategies and protection of key aircraft engine design,
manufacture, repair and product upgrade technologies.
Potential sales for any engine are limited by, among other things, its technological lifetime, which may vary
considerably depending upon the rate of advance in technology, the small number of potential customers and the
limited number of relevant airframe applications. Aircraft engine orders tend to follow military and airline
procurement cycles, although these cycles differ from each other.
Aviation Financial Services is a global commercial aviation financial services business that offers a broad
range of financial products to airlines, aircraft operators, owners, lenders, investors and airport developers. Financial
products include leases, aircraft purchasing and trading, loans, engine/spare parts financing, pilot training, fleet
planning and financial advisory services. We operate in a highly competitive environment. Our competitors include
aircraft manufacturers, banks, financial institutions, and other finance and leasing companies. Competition is based
on lease rates and terms, as well as aircraft delivery dates, condition and availability.
The U.S. commercial aviation industry continues to face challenges and financial pressure that affect a
portion of our commercial aviation business. Many carriers are experiencing major restructuring and reorganization,
including bankruptcies. These companies have experienced marginal returns and in some cases losses resulting from
competitive pressures and increased fuel costs.