Quarterly new review from Rolls-Royce: First Quarter, 2008

Thursday, 3 April 2008

During the first quarter of 2008, Rolls-Royce demonstrated the value of its broad portfolio and of its consistent strategy of investing in technology and capability and access to global markets.

The continuing strength of the market was underlined by the announcement of around $14.7 billion of new business in the first three months of 2008. This included firm and option orders plus long-term service agreements worth $14.4 billion for the Trent engine family, already making 2008 the company’s second most successful year for Trent orders.

A major milestone was also reached in Trent production with the groundbreaking of the new $225 million ‘Facility of the Future’ in Singapore. This will be the most modern Rolls-Royce production assembly and test facility for large commercial aero engines. It will also be its first such facility in Asia, bringing Rolls-Royce closer to customers, including its long-term partner Singapore Airlines, whose future fleet will include engines assembled locally.

The Trent 700, the first member of the Trent family to enter service, continued to demonstrate competitive advantage, retaining its leading position on the A330 with a 53 per cent market share. It won $6.4 billion of business during the quarter, with orders and options for up to 192 engines, all covered by long-term service agreements. This included the AirTanker consortium’s winning bid in March to power the UK Ministry of Defence’s new fleet of 14 Airbus A330 tanker aircraft. Rolls-Royce will not only supply Trent 700s but will also provide full support for the engines. Its share of this contract is estimated to be worth more than £700 million over the programme’s 27-year life.

Growing success in international markets was illustrated by the marine business’s first offshore contract in China, worth £58 million. Rolls-Royce will design and equip two of its UT 788 offshore support vessels for China Oilfield Services Ltd.

The company’s product portfolio continued to expand, with the launch in March of the BR725, its fourth new engine launch in just over 12 months. The engine will power Gulfstream’s new flagship corporate jet, the G650, in a sector where Rolls-Royce is already the world’s leading supplier with a 34 per cent share of the market. The engine combines proven features of the BR700 and Trent engine families with new technologies derived from the Group’s ‘Vision’ technology acquisition programmes.

Another new engine programme, the RR300 gas turbine for Robinson Helicopters' new R66, became the first engine to roll off the newly-commissioned small engine assembly line at the Rolls-Royce facility in Indianapolis, US. The engine has also received both FAA Type and Production Certification ahead of schedule.

In January, Rolls-Royce took a further step in its continuing programme to improve its global efficiency and competitiveness. Proposals were announced to improve the efficiency of its overhead structure by reducing managerial, professional and clerical staff by up to 2,300 on a worldwide basis.

In February, Rolls-Royce announced its Preliminary Results for 2007, reporting strong progress during the year. The company delivered underlying sales and profit growth across all businesses and good cash flow, despite the continuing challenges of a weak US dollar and increased unit costs. The order book increased by 76 per cent to a record £45.9 billion at the end of December as a result of a strong order intake across all businesses. Underlying sales increased by six per cent to £7,817 million and underlying profit before tax increased by 13 per cent to £800 million (2006 £705 million).

The Group will issue its interim management statement at the Annual General Meeting on 7 May 2008.

Business highlights

Civil Aerospace

  1. Value of orders. Announced orders during the quarter were worth around $13 billion.

  2. Trent 700 orders. The largest single order was from US Airways for Trent 700s to power up to 30 A330-200s twinjets. THAI Airways International selected the engine for a new fleet of eight Airbus A330s, while an order from Hong Kong Airlines involved 20 aircraft, entering service from 2010. Oman Air chose the Trent 700 for seven aircraft and Turkey’s leading cargo carrier, MNG Airlines, for up to three aircraft. An order from EgyptAir involved up to eight A330s. MatlinPatterson Global Advisers LLC selected Trent- powered A330 freighters, with the six aircraft being leased to MatlinPatterson portfolio companies. All the Trent 700s are covered by TotalCare agreements.

  3. Trent XWB orders. Taiwan’s China Airlines, Synergy Aerospace of South America and Bangkok Airways ordered new A350 XWB fleets with Trent XWB engines. China Airlines and Synergy will each take up to 20 aircraft , including Trent TotalCare agreements, while the Bangkok order was for up to six twinjets. Rolls-Royce has now been selected to power 409 A350 XWB aircraft, for which it is the only engine currently available.

  4. Trent 1000 orders. Business worth $2.6 billion was announced with Virgin Atlantic for Trent 1000 engines to power up to 43 Boeing 787 Dreamliners. The arrangement includes a full-life TotalCare agreement which will be used to develop an environmental partnership to find ways of improving engine performance to reduce the airline’s carbon footprint. Spain’s Air Europa and Latin American carrier LAN Airlines SA also selected the Trent 1000, with TotalCare packages, for their 787s. Air Europa’s order involved eight firm aircraft, while LAN selected the Trent 1000 for six aircraft to be leased from International Lease Finance Corporation (ILFC). Air Astana, Kazakhstan’s national airline, selected Trent 1000 engines for up to six 787-8s.

  5. Trent 500 orders. Iberia ordered an additional three firm and three option Airbus A340-600s, for which the Trent 500 is the sole engine. The follow-on order, with a TotalCare agreement, could see Iberia’s A340-600 fleet grow to 19 aircraft.
  6. Trent 900 orders. Singapore Airlines inaugurated its Singapore – London Airbus A380 service on 18 March. Earlier, it placed a follow-on order for Trent 900s for an additional nine firm A380s, bringing its fleet to 19 aircraft. All the Trent 900s will be maintained by Rolls-Royce through TotalCare.

  7. New record for CorporateCare® packages. This was set in 2007 with 194 engine maintenance management contracts. More than 700 corporate aircraft are now under the company’s management programmes.


  1. Value of orders. Announced orders during the quarter were worth around $1.5 billion.

  2. Future Strategic Tanker Aircraft (FSTA). The £13 billion contract to the AirTanker consortium could be worth more than £700 million to Rolls-Royce, which is a shareholder and sub-contractor to AirTanker. Rolls-Royce will build Trent 700 engines for the A330-200 tankers, as well as providing Mission Ready Management Solutions® support for the propulsion system over the 27-year life of the programme.

  3. AE2100D3 for Canada. Rolls-Royce has been selected as the propulsion system provider for the Canadian Air Force's fleet of 17 Lockheed Martin C-130J tactical lift aircraft powered by AE2100D3 advanced turboprop engines. Value of the business is more than $135 million, excluding 20-year in-service support. Aircraft delivery is scheduled for 2010.

  4. TP400-D6 update. Europrop International (EPI) delivered the last of the four TP400-D6 flight test engines to power the first Airbus A400M and reached the milestone of 1,000 hours of engine ground testing. Installation of engines on the first flight test aircraft is now underway.

  5. Heli-Expo round-up. Announcements included the delivery of the 30,000th Model 250 engine and the 35,000 flight hour milestone for the LHTEC family of CTS800 engines. Rolls-Royce also released its annual ten-year forecast of worldwide turbine helicopter deliveries which projects 15,711 turbine helicopters, valued at $141 billion and $13.3 billion, for engines over the period 2008-2017.

  6. F136 progress. The GE Rolls-Royce Fighter Engine Team successfully completed the Critical Design Review, which validated the design of the F136 engine for the F-35 Lightning II. High-altitude afterburner tests on an F136 engine at the US Air Force Arnold Engineering Development Center were completed. A second test engine continues running at a new GE testing facility near Cincinnati, US. The F136 has achieved more than 600 hours of full-engine testing and is currently fully funded by the US Government for FY2008.


  1. Value of orders. Announced orders during the quarter were worth around $116 million.

  2. First China offshore order. Rolls-Royce won its first contract from China, worth £58 million, for design and equipment systems for offshore support vessels. China Oilfield Services Ltd (COSL) will operate two UT 788 CDs, the world’s most advanced vessels in support of oil and gas exploration and production.

  3. Vietnam agreement. A memorandum of understanding (MoU) was signed with Vietnam Shipbuilding Industry Group (Vinashin) in Hanoi under which the two companies will work together to help develop Vietnam’s fast-growing marine industry.


  1. Value of orders. Announced orders during the quarter were worth more than $150 million.

  2. New Petrobras order. The Brazilian state oil company, Petrobras, ordered an additional four industrial RB211 gas turbine power generation packages, valued at $73 million, for use on its new P-56 offshore platform.

  3. RB211s for paper power. Two contracts from paper manufacturers in Spain and Portugal were received for RB211-GT61 gas turbine powered electrical generating sets to be used in co-generation plants. Both are covered by ten-year TotalCare® service agreements.

  4. More Avon 200s. Dubai Petroleum is upgrading a further six industrial Avon gas generators, following a previous order for four conversions to the Avon 200 standard, all for offshore platforms in the Fateh gas field.


  1. First Asian UTC. The first Rolls-Royce University Technology Centre (UTC) in Asia opened at Pusan National University (PNU) in Busan, South Korea. It will focus on thermal management, particularly the development of high-efficiency lightweight heat exchangers. These offer potentially large environmental benefits as the pressure increases on industry to address climate change.

  2. Clean Sky launch. Europe's largest-ever aerospace research programme, "Clean Sky" – in which Rolls-Royce is an industrial partner – has been launched in Brussels. This joint technology initiative, which targets a sustainable air transport industry, will run for seven years with a budget of €1.6 billion. Rolls-Royce will lead certain projects within the Sustainable and Green Engine demonstrator programmes.

Corporate responsibility

  1. Project Enthuse. Rolls-Royce is one of the industry partners contributing towards the UK’s Project Enthuse, a new £30 million partnership between the private, public and charitable sectors to offer much needed training to science teachers, enabling the UK to produce the next generation of world-class scientists. It will be linked to the company’s prestigious Science Prize programme.

Need more information?