Sheila Kahyaoglu: Great. Thanks for the answers. Thanks Chip.
Chip Blankenship: Welcome.
Operator: And we will take our next question from Michael Ciarmoli with Truist Securities. Your line is open.
Michael Ciarmoli: Hey, good evening guys. Nice results. Thanks for taking the question here.
Chip Blankenship: Thanks Mike.
Michael Ciarmoli: Maybe Chip, just to stay on kind of Sheila’s questioning and you talked about that aftermarket, up pretty strong on a sequential basis on a year-over-year basis. Was there anything — and I know the second quarter tends to be seasonally strong for you, but anything call out? I mean, was it more prime or any different color there aside from these OE challenges, anything in that particular strength?
Chip Blankenship: Yes, there was some provisioning in the quarter. So — and that is — like you said, its seasonal plus some provisioning and then not dropping off on the legacy fleets and having a little bit of LEAP come through and a little bit of GTF fuel nozzles come through, these sorts of things, all happening a little — contributing a little bit to making it better both sequentially and year-over-year.
Michael Ciarmoli: Okay. Okay, got it. And then just maybe all the way back to build rates. I know you kind of said it’s a little bit of a moving target. But GE taking down their LEAP production for the year, I guess, round bus, maybe it’s like 160 engines at this point. I mean were you shipping to them based on that original plan? Do you have line of sight to see if they have excess inventory? I mean, I know, obviously, we got the aftermarket mix and the demand there, but any color on how you’re building to GE’s revised plant?
Chip Blankenship: We’re talking to them continually, as you might imagine. The feedback is that we’re on plan with them and to stay tuned. And so we’re staying tuned and we’re telling you that there’s a range of things to expect for the second half and some of it depends on just how much schedules get pushed out in fourth quarter. We think third quarter as you will kind of baked because it’s — you don’t make sudden moves in the supply chain unless you’re China on-highway. Note to self. But we’re looking at fourth quarter — our fourth quarter and saying there’s probably some movement to expect there. And that’s why we’re focused on the other levers that we had to make sure we can cover anything that gets pushed out.
Michael Ciarmoli : Got it. Got it. And just last one. You just bought up the China again. I mean, is sort of the business, maybe not at these levels, but can you underwrite this sort of work and opportunities in perpetuity. I mean, is there a potential outcome where they bring work in-house, they go something homegrown, I guess, just trying to figure out how confident you guys are in your position there over the long-term with your customers.
Chip Blankenship: Yes. It’s always a risk in our business that an OEM who is very strong, very well funded and very well supported by a deep engineering team can decide to in-source the fuel systems. We’re in strategic discussions with our customers about long-term collaboration and use the term underwriting. We want to underwrite any investment we might make with improved future terms and conditions and commitments. So we’re talking to various customers about how to dampen the volatility. And if we’re going to invest in the next series of fuel systems, we want to have more senses that will only get a return, but be able to plan better. So we’re working on it. I don’t know how it will turn out, but it’s not for the lack of engagement and willingness to talk about it and collaborate with our customers.
Michael Ciarmoli : Got it. Clear. Thanks guys.
Chip Blankenship: Welcome.
Operator: We will take our next question from Noah Poponak with Goldman Sachs. Your line is open.
Noah Poponak: Hey, good evening everybody.
Chip Blankenship: Hey, Noah.
Bill Lacey: Hello, Noah.
Noah Poponak : Have you ever modeled out how large the LEAP becomes as a percentage of the total company earnings whenever that aftermarket stream become hit something close to steady state?
Chip Blankenship: Well, the LEAP plus GTF is a pretty impressive aftermarket stream in our models. We are talking about quite a few years because in our 2026, 2027 type of horizon, we’re still not seeing a huge contribution that that’s more like a 28 to early 30s as far as when it really those come home, if you will, for the repair and overhaul. One thing I’ll tell you is we’re planning to grow the rest of the company alongside that. So I’m not bringing any panic bills about concentration because we’re — we’ve got a lot of other irons in the fire and a lot of other business to grow by the time we’re talking about late ’20s, early ’30s.
Noah Poponak : Okay. That makes sense. The aerospace — if I look at the aerospace margin from the perspective of an incremental margin, in the first quarter, you’re in the mid-30s, but it was a pretty easy compare. Second quarter was a lot tougher compare, but the incremental went up into the 40s. It didn’t sound like anything super abnormal in there, maybe a little bit of mix, I guess, the back half, the guidance implies you kind of dropped back down in the low to mid-30s. And then from May to 2022 outlook is 30 — I’m sorry, the two-year forward outlook, is 30. I guess, do you have a framework for the right kind of stand drop-through in the aerospace business? And I know right now, there’s kind of — you’re getting both pricing costs above very long run normal. But — just trying to get a better sense for what’s possible from you on these aerospace incrementals moving forward.
Chip Blankenship: I’ll let Bill answer the rest of this question. But I mean, it is a mix, it isn’t very important about what the mix is when you calculate that flow through. So our mix, sequential mix got more aftermarket in it by a little bit. So that can pick up a little bit on the flow-through, Bill?
Bill Lacey: Yes. In general, Noah, we feel like that business all deliver 30% to 35% incremental — and so that’s kind of how we look at it. And like Chip said, depending on where we are, that can be higher. But over the long-term, we think about it between 30%, 35%.
Noah Poponak: Okay, great. Chip, you were just talking about in looking at strategic changes to how you sell China on-highway and things of that nature. What would that actually look like? What — are you talking about minimum buys in short windows of time? Or how could that actually manifest?
