Chip Blankenship: Yeah, that’s not exactly how it works. So we pace to the aftermarket to anybody who we work with. We work with CFM shops. We’ve got agreements with other airline shops. We’ve got agreements with independent MRO facilities. So whoever we work with, there’s an aftermarket agreement for how we’re going to terms and conditions and price and turn times, et cetera.
Gautam Khanna: Last question for me was just on cost inflation on industrial. Was there much of a change sequentially in the March quarter relative to the December quarter? And do you expect much of a change in the second half of your fiscal year relative to what we experienced in the second quarter?
Bill Lacey: Yeah, there is — we don’t see any major changes beyond what we expect in inflation. We continue to drive good price and productivity to continue to expand our margins and kind of yield the guidance that we provided on the industrial business.
Gautam Khanna: Thank you, guys.
Bill Lacey: You’re welcome.
Operator: And we’ll take our next question from Tony Bancroft [ph] with Gabelli Funds. Your line is open.
Unidentified Analyst: Thanks so much. Gentlemen, great job in the quarter.
Chip Blankenship: Thank you.
Unidentified Analyst: Chip, since you’ve taken over, you’ve really done a fabulous job. Any thoughts or changes to your thinking. I know we sort of talked about this in the past, but maybe an update on doing something transformational, either a large acquisition or maybe more in the winter without outside your space or even financial engineering sort of some of your contemporaries like IG crane that had something like that. Just maybe just give us an update there on just your thoughts if anything has changed. Thank you.
Chip Blankenship: You’re welcome. So really, I think if you look back at our Investor Day presentation, almost everything that we’re thinking about for the future of the company is represented there in terms of our desire to grow our industrial and aerospace businesses have them be collaborative and synergistic capture all the market opportunities that we see in front of us with the aftermarket in aerospace and the energy transition and the new fuels in industrial. We think that’s plenty of opportunity to work with. As far as M&A goes, we are always looking at bolt-on or strategic ads that might help us achieve those goals that we shared at Investor Day, even more efficient and more impactful way, and that’s kind of where our focus is.
Unidentified Analyst: Great answer. Thank you so much, guys.
Chip Blankenship: You’re welcome.
Operator: We will take our next question from Sheila Kahyaoglu with Jefferies. Your line is open.
Sheila Kahyaoglu: Thanks. Good afternoon. Chip I wanted to ask.
Chip Blankenship: Afternoon, Sheila.
Sheila Kahyaoglu: A few aerospace questions, just given the performance was read. On commercial, starting with maybe the price, how do you think about pricing within OE? You talked about the aftermarket. When we look up 15% in OE and when we kind of look at the engine manufacturers, fleet shipments were flat, but revenues were up 30%, Pratt was up 40% on shipments, but revenues were up 60%. So can you talk about your shipment Delta versus total OE growth?
Chip Blankenship: So our shipments are up quite a bit, and we’ve, in some cases, added some scope. So that has also caused what little step functions inside our up-tick of revenue year-over-year. The — as far as pricing goes, as you know, most of those contracts are very longer-term contracts, some are life of program. Others are just decades. And we are able to capture escalation to some extent. And so the pricing year-over-year can be quite substantial with indexes that have performed quite — have moved quite high in the high inflationary environment. So it’s a combination of shipping a little more number of part numbers, having the escalation clauses come in reasonably favorably. And then also the rate and demand go up from the manufacturer.
So that’s one of the things that we can’t see very well is where the inventory is getting bound up in the system, whether it’s ending up at the airframer in terms of built aircraft all the way in at the flight line delivery and weighting or it’s at the airframer facility in terms of an engine or it’s sitting in the incoming inventory, our part sitting in the incoming inventory of the engine manufacturers. So there’s a lot of spring and damp in the system and demands may have been higher than the shipment that was being achieved by the engine manufacturer quite easily since they’re trying to sort out all their different suppliers and they don’t want to turn people on and off.
Sheila Kahyaoglu: Okay. Got it. That makes sense. And then maybe on military aftermarket, really great performance up 30% for the first half. What’s driving that? And how do you think about the exit rate out of the year? Is there more upside just given supplemental funding coming through as well?
Bill Lacey: Yes. Just on the aftermarket, Sheila, this time last — the first half of last year, we were having some supply chain challenges. So we saw some depressed numbers in the first half throughout the year, though, we saw that improvement come back. And so the comps are a lot higher in the second half. So we see that our — we’re about at the right level and we expect that to sustain through the rest of the year. But again, those comps are going to get tougher because the supply chain did improve last year.
Sheila Kahyaoglu: Okay. That make sense.
Chip Blankenship: Yeah. And Sheila, and working on our opportunities there. I mean, there was some discussion earlier in the call about Lean. We truly believe that’s a growth area for us longer term. As we get our turn times down, we can we can go after more business. So we think there’s opportunity there that we haven’t captured yet.
Sheila Kahyaoglu: And last one on Aero. Is there thing that is the most favorable within the sub-segments that you would call out?
Chip Blankenship: Most favorable mix?
Sheila Kahyaoglu: Yes, in terms of margins, whether it’s defense aftermarket or aero aftermarket.
Chip Blankenship: The commercial aero aftermarket is what I’d say is our place where we can get the best returns. And the situation with delivery is not increasing when the demand is so strong for travel is resulting in the legacy fleet flying longer and harder than we forecast. So, one of the good things that’s different from when we put together this operating plan is we were thinking that we would be coming off of the peak of things like V2500 fuel controls and CFM56-5/HMUs, that these sorts of fuel control overhauls would be less and less and that we would have seen the peak already. But with the current situation, we believe that peak may extend quite a bit. And that’s one of the things we’ve factored into the second half, is that not going down.
