Highlights of the year
- Trent 500 entered service on the ultra-long-range Airbus
A340-500. Emirates ordered an additional 20 A340-500/600 aircraft.
The Trent 500 is the only engine offered on this new generation of
A340 aircraft.
- aeromanager.com, our e-business service provider, now has 268
customers.
- The Trent 900 for the Airbus A380 made good progress in
development testing.
- JetBlue ordered V2500 engines for up to 115 more Airbus A320s
the largest single order in the history of the engine.
- Corporate and regional jet milestones – the 1,000th BR700
series engine was delivered; we accumulated a million flying hours
for the BR715 on the Boeing 717; and the AE 3007 engine passed the
ten million flying hours mark.
The civil aerospace industry is emerging from its toughest
recession and Rolls-Royce has created a strong
competitive position. We have established ourselves as the number
two civil aero engine manufacturer, having won 30 per cent of the
market over the past three years. In 2003, we were encouraged by
the continuing level of order activity. We delivered 746 engines
(2002 856 engines) to 48 airlines and 68 corporate customers.
Aftermarket sales were in line with our forecasts, at £1.4 billion,
or 53 per cent of sales. The Rolls-Royce fleet flying
hours increased by eight per cent in 2003. This contrasted with the
fall in world traffic of one per cent due to the war in Iraq and
SARS and reflected our growing, young fleet of engines. Since
September 11, 2001, the Rolls-Royce fleet flying hours
have increased by 16 per cent whilst world flying, measured by
‘world available seat kilometres’, has fallen by five per
cent.
We continue to forecast average growth in revenue passenger
kilometres of approximately five per cent per annum over the next
20 years, leading to a world demand for engines of over US$500
billion. Engines required in the widebody aircraft category will
generate a large part of this growth. In this sector
Rolls-Royce has established a strong position with an
industry-leading 50 per cent world market share.
Rolls-Royce supplies engines over a wide power
spectrum, from 2,000lb thrust to 100,000lb. This has been
accomplished through self-funded research and product development
programmes, collaborations and joint ventures and through
acquisitions. Risk and Revenue Sharing Partners (RRSPs) have
enabled the company to establish a broader product range than would
otherwise have been possible. This investment strategy has produced
a growing market presence across all sectors.
Consequently, Rolls-Royce was able to gain a strong
position in the engine market during the 1990s, as a broad range of
new commercial aircraft was introduced. The rate of introduction of
new products is expected to reduce as fewer new aircraft are now
planned. With fewer new engine programmes, there will be greater
emphasis on improving in-service equipment, developing derivative
technologies and widening our service offering.
The rapid growth in engine deliveries, from the mid 1990s to 2001,
led to a tripling of output. This fell back in 2002 after the
events of September 11 and eased a further 13 per cent in 2003 as
the cycle continued, exacerbated by the Iraq War and SARS. We
expect engine deliveries in 2004 to be similar to the level
achieved in 2003, with a gradual recovery in delivery levels
commencing in 2005.
As deliveries grow in respect of those programmes in which RRSPs
have invested, the payments to partners will increase. The impact
on cost of sales will be mitigated by the components which the
RRSPs provide free of charge. From the Group’s viewpoint, the
higher the RRSP payments, the more successful the programme and the
higher the incremental revenues which accrue to
Rolls-Royce.
The installed base of jet engines has now grown to 10,450 and will
continue to grow. Each engine generates the equivalent of its list
price in spare parts sales over its life. This amounts to US$28.5
billion of future revenues over the next 25 years from engines
currently in service. Additional revenues will be generated from
aftermarket services, such as engine leasing, repair and overhaul
and from growth in the installed base as a result of future engine
deliveries.
We have an innovative strategy to maximise the aftermarket
opportunity. By developing and extending our repair and overhaul
infrastructure, our coverage of Rolls-Royce engine
maintenance has tripled in ten years to over 60 per cent. This
provides a base on which to apply our engine knowledge and advanced
health monitoring to offer integrated services under the TotalCare
and CorporateCare banners. These align customer and
Rolls-Royce objectives and offer long-term security of
revenue.
Our priorities are to focus investment on improving in-service
equipment, to continue to develop derivative technologies and to
widen our service offering. We are driving down costs and improving
operational performance while continuing to concentrate on the
aftermarket and building strong, long-term customer relationships.
It is these actions which will improve margins up to the levels
targeted by the Group. |
 |
 |
|
| Civil aerospace |
2003 |
2002 |
2001 |
2000 |
1999 |
| Turnover £m |
2,694 |
2,739 |
3,443 |
3,150 |
2,544 |
| Underlying PBIT £m |
131 |
150 |
347 |
332 |
312 |
| Net assets £m |
1,100 |
1,219 |
1,124 |
1,116 |
1,066 |
| Order book - firm £bn |
13.4 |
12.2 |
10.0 |
9.4 |
7.8 |
| Engine deliveries |
746 |
856 |
1,362 |
1,091 |
1,080 |
| Installed engine base |
10,450 |
9,910 |
9,212 |
9,322 |
7,447 |
| Employees |
19,800 |
21,100 |
23,900 |
24,600 |
25,700 |
|
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