Rolls-Royce forecasts 40 percent better Trent time-on-wing by 2027

In the next four years, Rolls-Royce forecasts a 40 percent improvement of time-on-wing for all large widebody engines. This will drive product durability and extend engine life and component life limits. Shop visit costs for an XWB engine should be reduced by 50 percent. President of Civil Aerospace, Rob Watson, presented these targets during Tuesday’s Capital Markets Day in London. The improvements are among the strategic initiatives to improve margins of the Civil Aerospace business unit by mid-term or 2027. Over the past years, the engine maker incurred heavy losses from numerous durability issues on the Intermediate Pressure Compressor, Intermediate Pressure Turbine, High-Pressure Turbine, and Low-Pressure Turbine blades and disks on the Trent 1000 and 1000 TEN on the Boeing 787. The Trent 7000 on the Airbus A330neo had similar issues, albeit at a smaller scale. Extensive redesigns and program updates already has resulted in improved durability of the Trent 1000. Recently, similar updates to the 7000 should benefit this engine as well. More updates derived from the UltraFan demonstrator are set to be introduced in 2025. “We have been improving the design of the HPT blades in our Trent 1000 and 7000 engines to give them a longer operating life. And where we have life-limited parts, we are focused on extending that life as it is often the expiring of these parts that drives shop visits,” said Rob Watson. “But when we get to a shop visit, we are focused on reducing the costs of each visit across all engine types. By mid-term, we will have halved the cost of a Trent XWB shop visit. In fact, it will be the cheapest of the Trent overhauls. This is a major opportunity for us, given its position in the product portfolio towards the end of the decade.” The introduction of AI and other new technologies to improve repair capabilities or better parts design will contribute to lower costs. XWB durability While the XWB-84 on the A350-900 is performing very well, the durability of the XWB-97 on the A350-1000 was the subject of much discussion two weeks ago at the Dubai Airshow. Emirates President Sir Tim Clark questioned the durability of the XWB-97 in harsh environments, criticizing the low time on wing. He claimed that the -97 can only do a quarter of the 2.000 to 2.500 flight cycles that Emirates requires the engine to do. Clark said that Emirates will not order the A350-1000 until durability is improved. Rolls-Royce already responded to the criticism during the airshow week. Comments made back then by Marketing Director Jason Sutcliffe to AirInsight were almost identical to those from CEO Tufan Erginbilgic today: “The best engine in the industry is the XWB-84. It it’s the most efficient, most durable, and most reliable engine. The XWB-97, a higher-trust engine is a very good engine in benign environments. Only in very harsh environments like sand and dust in Middle East countries, it is doing less well.” “But we are improving time on wing for all the engines. That also includes the -97 and it will improve in that period significantly. It will be like the -84. It will further improve in benign environments but also significantly improve in non-benign environments.” Improving margins Rob Watson went a little deeper into how Civil Aerospace plans to improve its operating margin from 2.5 percent last year to 15 to 17 percent by 2027. One factor is more engine deliveries. Rolls-Royce expects Pearl business jet engine deliveries to grow by eight to nine percent per year over the mid-term period. Three new platforms from Bombardier, Gulfstream, and Dassault will be powered by Pearl engines in the coming years and form a solid basis for the future. As the installed base is growing to 250 to 300 business engines and flying hours grow, after-market growth will contribute to higher margins. Business engines should deliver a 100 percent operating growth over the mid-term period by reducing unit costs, improving commercial services, and implementing ‘value-driven’-pricing. Large widebody engine deliveries are expected to grow from 190 last year to 300 to 350 per year by 2027. Major refurbishments will go from 250 to between 700 and 750 per year. Annual shop visits are set to grow from just over 1.000 to 1.100 and 1.200 per year. Engine flying hours will grow from 10 million to 18 million by 2027, or up 120 to 130 percent from pre-Covid levels. For widebody engines, the OEM focuses on six levers to improve margins. “Keeping our engine flying for longer, value-driven pricing, contractual rigor, staying focused on controlling shop visits and product costs, and extending time on wing,” said Watson. Simplifying the organization and driving efficiencies is already resulting in benefits like third-party spending and capital allocation. “We are absolutely focused on keeping our engines flying and earning for as long as possible,” said Watson. This will generate additional revenues from service agreements and shop visits. For example, for the Trent 700 on the Airbus A330, Rolls is looking at contract extensions on aircraft passenger service as well as contracts for passenger-to-freighter conversions. These freighters will keep the A330s in service for many years to come, given that the Trent 700 has an 80 percent market share of all A330P2Fs. Negotiating better contracts By value-driven pricing, Rolls-Royce means that it is reviewing and renegotiating all customer Long-Term Service Agreements (LTSA). Aftermarket service contracts will be based on the risks and services that better balance the interest of the OEM and customer. It is a topic that was addressed by Erginbilgic almost immediately after he joined the company at the start of 2023. Cost escalations of LTSA contracts have already benefitted Rolls-Royce in HY1 of 2023. “When it comes to pricing, we take commercial actions because we need to reflect the risks. Per rate, you should expect this going forward every year.” Chief Financial Officer Helen McCabe said in her presentation that what she referred to as “LTSA balance growth” should produce £0.8 to £1.2 billion higher revenues per year by 2027. Rob Watson presented the new contracts as a win/win for both Rolls-Royce and its customers. “We are identifying areas where we can provide additional value to our customers, such as additional service coverage and engine availability while securing better terms for Rolls-Royce. By doing this, we increase our operating margin and in some contracts, release some of our onerous contract provisions.” Finally, Rolls-Royce is focusing on its high-performing suppliers. “We are transferring work to them from underperforming parts of the supply chain. Of the total £2.5 billion spent on the external supply chain, £685 million is spent with this group. Since 2020, we have awarded £3.0 billion in work to our high-performing suppliers.” Suspiciously absent from Rolls-Royce Civil Aerospace's mid-term strategy are no immediate investments in hydrogen. The focus is on highly efficient gas turbines that will run on 100 percent sustainable aviation fuel (SAF). Such as the Virgin Atlantic Boeing 787-9 that operated the first commercial service on 100 percent SAF from London Heathrow to New York JFK today. “What we can do is focus on ever-more efficient gas turbines. Whatever the fuel source, it will be a gas turbine powering large aircraft for decades to come. Here, our UltraFan technologies play a critical role,” said Rob Watson. But even as Rolls-Royce intends to sell its Electrical business as it is no longer seen as a key priority, Erginbilgic is positive that hybrid-electric solutions will find their way into regional aircraft. “That’s why I said in my presentation that we should keep the capabilities to support the aerospace, defence, and power system businesses.”

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