Rolls-Royce launched its TotalCare maintenance programme for commercial operators nearly 20 years ago. Since then, the UK manufacturer has sold the hour-based aftermarket services to the vast majority of its customers, and revenue from the scheme has become a central pillar of Rolls-Royce civil aero engine business.
But market changes – in particular, the growing significance of lessors and a changing fleet composition – has prompted the engine maker to adjust its aftermarket strategy.
Airlines and lessors have demanded a broader range of maintenance options as the number of mature engines covered by the programme rises and aircraft transition to second-hand operators.
Meanwhile, the burgeoning backlog for Rolls-Royce Trent XWB engines – the sole powerplant available for the Airbus A350 – has posed capacity challenges for the manufacturer's MRO network, established with select partners.
MORE LESSORS
Rolls-Royce senior vice-president for lessors Simon Goodson admits that the manufacturer did not recognise until recent years the leasing sector's growing influence while it sold long-term service agreements to airlines as part of aircraft sales.
Some 90% of Trent engines are enrolled under TotalCare contracts today, says Rolls-Royce.
While around 16% of the manufacturer's engine fleet was owned by lessors in 2005, that proportion has grown to a third today and is set to increase to half by the current order backlog's end around 2025.
Rolls-Royce concedes that TotalCare was primarily designed with operators' requirements in mind. Services and pricing were devised so that airlines could transfer operational risks to the manufacturer, with the OEM providing, for example, spare engines to cover unscheduled shop visits. Meanwhile, carriers could count on agreed, regular maintenance payments without uncertainty about overhaul costs at the end of an engine's run period.
Goodson acknowledges that there have been challenges in remarketing aircraft that reached the end of their first lease term. But he rejects the notion that the full-service programme has been an obstacle in finding second-hand customers: "We don't see that TotalCare was a reason why aircraft were not moving."
Lessors and other members of the aircraft financing sector have reported difficulties in finding operators for used widebody types such as A330s and Boeing 777s with engines covered by hour-based service agreements, but Rolls-Royce senior vice-president of customer strategy and marketing Richard Goodhead insists that this applies equally to aircraft powered by General Electric or Pratt & Whitney engines.
One complicating factor when it comes to placing aircraft with secondary operators has been a growing volume of available, used aircraft, argues Goodson. While first-hand operators are likely to order entire fleets from manufacturers, carriers using second-hand aircraft tend to buy equipment in smaller batches.
This, Goodson asserts, poses challenges in efficiently remarketing aircraft without extended ground-time. But he insists that Rolls-Royce-powered aircraft "are moving" into the second-hand market.
Nevertheless, he says "we have been misaligned for some time" with the leasing sector. "Clearly," he adds, "we need to approach this market differently."
Accordingly, Rolls-Royce has launched initiatives under the banner "LessorCare" – not a new product or set of services today, but a "project" to develop "flexible and innovative services" in collaboration with leasing companies, the manufacturer says.
MATURE APPROACH
In 2014, Rolls-Royce introduced TotalCare Flex, a range of hour-based services dedicated to mature engine operators intending to retire that equipment. Options include employment of replacement engines from a pool instead of shop visits, of used serviceable material, or of "shortbuild" overhauls to facilitate a limited number of flight cycles.
The scheme is not just aimed at reducing maintenance cost, but also to "slowly release asset value", says Goodhead.
Earlier this month, the manufacturer launched a fixed-price overhaul scheme, dubbed "SelectCare". While TotalCare was designed to maximise time on wing, cover operational risks, and provide operators with predictable maintenance costs, SelectCare primarily targets overhaul-cost stability over a certain period.
Rolls-Royce suggests that operators of new-generation aircraft favour service agreements that allow them to transfer risks of unscheduled MRO to manufacturers. However, as the equipment matures and airlines gain knowledge about its performance and technical support, Goodhead says operators become more prepared to absorb risks and manage maintenance themselves.
The manufacturer plans to offer Trent operators time-and-materials-based overhaul services, with a choice between authorised third-party facilities and shops at least part-owned by Rolls-Royce.
In November 2015, the engine maker disclosed its approved maintenance centres will compete against each other to win from Rolls-Royce overhauls under TotalCare contracts, after such work was in the past directed to shops based on geographical areas of responsibility.
For time-and-material-based services, the maintenance facilities will even be able to compete against each other directly.
SEEKING INDEPENDENTS
Rolls-Royce MRO services director Simon Smith says there will be an "increasing focus on independents" in the manufacturer's support network.
Delta TechOps was revealed in October 2015 as a partner for the support of Trent XWB, 7000 and BR715 engines. More such "announcements" are to be made this year, says Smith.
A central question is to what extent Rolls-Royce will be prepared to share spare-part supply with competitors. The manufacturer is opening up its MRO network to include more external shops. But as materials can account for 80% of overhaul costs, a lively supplier market requires a competitive source market for spare parts and component repair schemes as well as variety in shop ownership.
Smith says employment of used serviceable material will increase as demand for time-and-materials-based overhauls will grow. In such an environment, he adds, Rolls-Royce expects to compete against other spare-part suppliers in the market for Trent engines, as it has been the case for RB211 engines.
Goodson asserts that a key objective now is to establish a network of overhaul shops that can conduct time-and-materials-based services in order to assure lessors and operators that there will be choice in maintenance of second-hand equipment.
However, Rolls-Royce will likely "incentivise" customers to use its facilities, he indicates.
The engine maker's aftermarket services are "evolving" as part of a "journey", says Goodhead. But he adds: "We have not arrived."
Updated to correct the spelling of Simon Goodson's surname
Source: Cirium Dashboard
