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The General Electric logo is seen on the company's building in Belfort, France, on Oct. 19, 2019.VINCENT KESSLER/Reuters

General Electric Co. saw less cash outflow than estimated in the second quarter, even as the coronavirus pandemic pummelled demand in its aviation business, resulting in a wider-than-expected quarterly loss.

The Boston-based industrial conglomerate reported cash outflow of US$2.1-billion from industrial operations, a tad lower than a quarter ago and considerably below its own estimate of between US$3.5-billion and US$4.5-billion for the quarter.

All of its industrial units reported lower sales and a double-digit decline in orders during the quarter. The steepest fall was at its aviation unit, usually GE’s most profitable and most cash-generative business segment.

The company’s shares tumbled 4.4 per cent to US$6.59 in midday trading.

The aviation unit, which makes engines for Boeing Co. and Airbus SE, had already been reeling from the grounding of Boeing’s 737 Max planes. With the pandemic bringing global travel to a virtual halt, its troubles have worsened.

Boeing on Wednesday said it would further cut the production of commercial jets and delay the planned increase in the build rates of the 737 Max to early 2022 from 2021.

GE, meanwhile, is taking heart from an improvement in flight departures globally, which it expects would boost the unit’s services business.

“We’ve started to see some early signs of improvement in June and July,” chief executive Lawrence Culp said. “Nonetheless, we remain cautious going into the second half, given the uncertainty associated with the pandemic.”

A recovery in the aviation business is critical for Mr. Culp, who is trying to turn around the company by improving free cash flow and cutting debt.

While the company sees a slow recovery in the aviation business, it expects free cash flow to be better in the second half of the year and turn positive in 2021.

With the pandemic-induced economic recession hammering sales, companies are focusing on improving decremental margin, or the effect a decline in sales has on income, by cutting costs.

GE reduced aviation headcount by 11 per cent during the quarter as part of a plan to cut 25 per cent of its global work force this year. The cuts helped improve decremental margin at the unit to 59 per cent from 62 per cent in the first quarter.

Analysts at Gordon Haskett Research Advisors, however, dubbed the progress as “weak,” warning the lagging impact of the pandemic could further hurt the performance of the services part of GE’s aviation business in the third quarter.

GE said it is launching a program to fully monetize its stake in Baker Hughes over about three years to reduce its debt.

On an adjusted basis, GE reported a loss of 15 cents a share compared with a loss of 10 cents a share estimated by analysts, according to IBES data from Refinitiv. Revenue declined 24 per cent year-on-year to US$17.7-billion.

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