AEROSPACE

Profile: rolls-royce

With a 49% increase in profits in 2005 and over 54,000 aero engines now in service, Rolls Royce is powering ahead in this technology-intensive sector. The company has delivered consistent organic growth through the introduction of new products and significant expansion of its aftermarket services capability and associated partnership contracts. An organisation that faced bankruptcy in the 1970s which resulted in the sale of its auto division has since become a leader across the power systems arena - Now operating in four key global markets of civil aerospace, defence aerospace, marine and energy, Rolls Royce has invested heavily in both technology and business innovation: Over the past 15 years the civil business has edged out competitors such as Pratt & Whitney to become global number two to GE. At the same time, the company is now providing products and services to 160 of the world’s armed forces. Innovation has been central to the company’s strategy for over a decade and is now delivering global impact.

Rolls Royce has developed strong relationships with suppliers and customers alike, encouraging all stakeholders in the supply chain to share the fruits of innovation. Alongside its own R&D centres, Rolls Royce has built a network of 25 university technology centres around the world. These ‘UTCs’ have been established with the leading institutions in specific technology areas, such as fuel cells, combustion and aerodynamics, and are run on long term contracts: The company has access to the world’s leading researchers in targeted spaces as well as first pick of top engineers for its internal R&D activities. While many of the original UTCs were in Europe, Rolls Royce has now opened similar facilities in the US across Asia which are all now major open innovation sources for technology development across all four business sectors.

In the services arena, Rolls-Royce has been at the vanguard of changing the industry business model from product supply through the introduction of an innovative ‘through-life’ services capability to deliver greater value for customers. The company’s main operations room has live satellite feeds providing continuous monitoring of 3,000 engines for 45 of the world’s airlines. The ‘TotalCare’ arrangement with these airlines has Rolls-Royce covering risks and costs of any downtime and repairs in return for an hourly fee for every engine in flight. Airlines pay this, confident that Rolls Royce is tracking performance and continuously improving the reliability of its engines. With continued growth in the number of Rolls Royce engines in service, many with longer services lives, revenues from aftermarket services have increased by 60% over the past five years. This innovative business approach has led to higher margins for the aftermarket business, whilst at the same time providing value added service to the customer.

In 2005 Rolls Royce continued to grow its order book to £22.9bn with aftermarket services accounting for 38% of this. With a record £11.3bn of new orders booked in the year, the company gained double digit growth in both revenue and profits. Significant civil contributors included 881 engines deliveries, £3bn of new orders for Trent engines and £2bn of new service contracts. In the defence market, there were 565 engine deliveries and services contributed 55% of the £1.4bn of sales. Setting the pace for the future were the launch of the Trent 1700 to power the new Airbus A350, the successful maiden flight of the A380, powered by the Trent 900 engine, as well as further orders linked to the Boeing 787. In addition, there was testing of the TP400 engine for the A400M military transport aircraft and continued development work for the Joint Strike Fighter programme. As Rolls Royce seeks to close its margin gap on GE’s larger engines division, 2006 is promising further growth in civil engine deliveries, greater in-service support and increased profits across the group as a whole.

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