Rolls-Royce on Friday reported “significant” progress on fixes to the troubled Trent 1000 turbofan along with a 25-percent increase in 2019 underlying operational profit, led by a £195 million organic improvement within the Civil Aerospace division. Speaking during the company’s 2019 full-year earnings call, Rolls-Royce CEO Warren East said last year’s £578 million cash cost associated with Trent 1000 work would mark a peak in spending on the related redesigns, certifications, and customer support functions such as engine replacements. The company did not change the outlook it delivered during its November earnings presentation for the third quarter, meaning it continues to expect AOGs to reach a “single-digit position” by the middle of this year, down from the current level of about 35.
“During the year we’ve made pretty good progress, good progress in actively managing the situation, continuing to extend our MRO capability and capacity,” said East. “We are now in a position where eight out of nine design changes are done.” Rolls-Royce expects certification of a redesign of part of the Trent 1000 Package B intermediate-pressure compressor sometime during the second half of the year. Otherwise, it has gained certification on seven of the eight changes completed. East reported that the ninth task—design work on the high-pressure turbine blade in the Trent 1000 TEN—continues to progress well and remains on schedule for a first-half 2021 entry into service.
The rather upbeat address by East came days after a second case in which a major Trent 1000 operator abandoned Rolls for the competing General Electric GEnx, when All Nippon Airways ordered up to 20 GE-powered 787-9s and -10s. Last year, Air New Zealand chose alternative GEnx-1Bs to power eight incoming Boeing 787-10s after having to ground five of its 13 Boeing 787-9s due to Trent problems.
Still, East characterized the second half of 2019 as one of substantial operational and financial improvement, underpinning optimistic projections for this year. However, Rolls-Royce’s guidance for 2020 does not take into account the effect of the Covid-19 virus. In fact, some 10 percent of the company’s civil aerospace backlog resides in China, while 20 percent of its engine flying hours derive from routes touching Greater China.
“In terms of contingencies and how we can mitigate [the effects of the virus], we’re the same as any other business,” explained East. “So we look at the financial impacts and what can we do about deferring expenditure, what can we do about deferring investment, what can we do in terms of deferring or freezing hiring, and what can we do about the actual staff costs that we take on a day-to-day basis…We’re pulling on all those levers.”