Civil aerospace

The civil aerospace business powers over 30 types of commercial aircraft and has a strong position in all sectors of the market: widebody, narrowbody and corporate and regional aircraft. Over 13,000 engines are currently in service with 650 airlines, freight operators and lessors and 4,000 corporate operators. A Rolls-Royce powered aircraft takes off or lands every 2.5 seconds.

The airline industry has shown recovery in 2010, (after significant losses in 2008 and 2009) with above-average passenger and cargo traffic growth and a return to profit for many airlines. Business jet flights also increased, although not to the levels before the downturn. Large cabin business aircraft deliveries, where Rolls-Royce has a strong position, have been more resilient, driven by demand in Asia and Europe, although the US market remains weak. The small- and mid-size aircraft sectors, which are concentrated in the US market, continued to be subdued.

Widebody

We made good progress with the latest members of the Trent engine family, the Trent XWB and Trent 1000. The Trent XWB will power the Airbus A350 XWB and ran for the first time in June – fulfilling a schedule commitment we made four years ago. Seven engines will run in 2011 as part of a comprehensive test programme.

The Trent 1000, which powers the Boeing 787 Dreamliner, has accumulated more than 2,000 hours of test flight time on four aircraft. The engine won several new orders in 2010, taking the total on order to nearly 550. The aircraft is now expected to enter service in the third quarter of 2011.

The business continues to work closely with both large aircraft manufacturers, Airbus and Boeing, to support these programmes.

Of the Trent engines already in service, the Trent 700 confirmed its market leading position on the Airbus A330. It has won more than 90 per cent of orders announced in 2010 and more than 70 per cent in the past five years. Orders were particularly strong in the second half of 2010, with US$5 billion of business announced since the start of July.

Rolls-Royce continued to enjoy success in growth markets. In China, Air China, China Eastern and Cathay Pacific selected Trent XWB and Trent 700 engines. In South East Asia, Thai Airways and Garuda ordered Trent 700s, and in the Middle East, Emirates and Egyptair extended TotalCare service agreements and Tunisair became a new member of the Trent family, ordering Trent 700s.

A Trent 900 engine suffered a significant failure on a Qantas Airbus A380. The cause of this failure, which was specific to the Trent 900 and related to a component in the turbine area, was quickly established and addressed. The A380 fleet has returned to normal operation.

Narrowbody

In the narrowbody market the V2500 engine, produced by International Aero Engines (IAE) in which Rolls-Royce is a major partner, delivered 371 engines in 2010, its highest ever production level. IAE gained significant contract awards from Sichuan Airlines, Vietnam Airlines, TAM Airlines, BOC Airlines and China Southern. There are now more than 4,500 V2500 engines flying with more than 190 customers worldwide.

Corporate and regional

In the small- and medium-size engine market the BR725 remains on schedule for entry into service on the Gulfstream G650 in 2012, following an exemplary flight and engine test programme. The first Embraer Legacy 650 large executive jet, powered by the new Rolls-Royce AE 3007A2 engine, was delivered to a Middle East customer in December.

Services

Revenues from TotalCare long-term support agreements remained resilient in 2010. The proportion of Trent engines in service with TotalCare reached more than 90 per cent, while time and materials activity showed some recovery in the second half of the year. Overall reliability of the Rolls-Royce engine fleet continued to improve with Trent engines achieving on average one million hours between in-flight shut downs, a rate 20 times better than that required by the regulators for approval of Extended Range Twin Operations.

Future

The business continues to plan for the future, with new two-shaft and three-shaft engines. The Advance2 and Advance3 technology programmes are being driven to support the potential for new engine requirements in the latter part of the decade. The business is also continuing its research into open rotor technology, which we believe could provide a step change in engine performance.

Construction work at the Seletar large engine assembly complex in Singapore is well advanced and is scheduled to open in 2012. Work at the new Crosspointe facility in Virginia, US, is also proceeding to plan. While economic prospects remain uncertain in many countries for 2011, traffic growth is improving and we expect to see it return to its historic average of five per cent per annum.

Oil prices have remained generally high, encouraging airlines to retire older aircraft during the economic downturn. The Rolls-Royce powered fleet is relatively young and as a result, more fuel efficient. We are benefiting from the upturn as hours flown under TotalCare agreements continue to grow. This underlines the value of our balanced services and products business model.