John Rose has been chief executive of Rolls-Royce plc since May 1996, having joined the company in 1984, and is the current president of the Society of British Aerospace Companies (SBAC). He talked about Rolls-Royce's prospects with Alan Dron.
Question: What's the best guess for when the next air transport industry cyclical downturn will begin?
Answer: From our perspective, from the delivery schedules from the airframers, there's going to be a downturn in deliveries next year.
The depth [of the downturn] will be a function of two things - the economic condition of the airlines, which clearly is not homogenous region by region, and the momentum that comes from the replacement cycle, which I think will be a bigger feature of this cycle than the last. We are reaching the point where, for technical and economic reasons, aircraft really have to be replaced.
Q: What effect is the downturn likely to have on Rolls-Royce?
A: During the last cycle, we reached a new level of 400 engines (per year) in 1992. We sustained that right through the 1990s then moved to a new platform; we moved 900 engines and this year, will move close to 1,100.
I think the broadening of our portfolio and the fact that we have been gaining market share will act as a cushion to any market effects from this cycle.
We have been growing our market share of the civil business. We've got a much greater number of applications - we're on 30 airframes, and on half of those we are the only engine, compared with six airframes some years ago. If Fokker had gone bust in 1990, when it took 25% of our engines, it would have been an exciting moment for us.
Q: Is any sector of the airline industry likely to fare better than another in the slow-down?
A: The corporate and regional jet sector appears to perhaps be operating on a different cycle. The assumption was it was all going to be about replacing turboprops, but actually it appears to be creating a new market.
Jet-powered 50-seater aircraft are flying routes that couldn't be flown by either turboprops or 100-seater jets.
In recessionary times [a 50-seater] will be put on to a route served by a 100-seater, so some people in the regional sector argue that, in recessionary times, they will actually grow faster than in a booming market.
Q: A few years ago, a 30-seat passenger jet would have seemed preposterous and there is now talk of a 19-seater. Are the days of turboprops numbered?
A: There are areas where turboprops are useful - for example, military transport aircraft - and we've got a good position on the C-130J, but post-Saab 2000, we have no civil turboprops.
There will be routes where turboprops will remain appropriate, but if you're interlining or have international passengers, people will want more 'seamless' experiences.
Q: What is the future for International Aero Engines (IAE), where one of the partners, Pratt & Whitney, has developed its PW6000 and is planning to go ahead with its PW8000 geared turbofan, which is in the same thrust category as IAE's V2500?
A: Our view is that there's still scope to develop the V2500.
We think there's a good argument for improving that product and it can be wholly competitive in the sector.
Q: What is the future of the Trent 8104, now that Boeing's market research has said that the 777X needs an engine with more power than the 110,000lbs the power-plant has so far delivered?
A: When Boeing has decided what the requirements are for the growth 777, we will be able to meet them.
What we have done is proven all the technologies that are necessary to get us to 115,000lbs so, were Boeing and a customer to choose Rolls-Royce for the 777, it would be a very low-risk choice.
One of the advantages of doing the Trent family is that we have more large engine product development experience than anyone else at the moment.
Obviously we are in constant dialogue with Boeing.
Q: Ten years from now, do you believe there will still be the 'big three' engine manufacturers?
A: Yes. We are a very consolidated industry. Over the next 20 years there is a $500 billion market opportunity with three people essentially aiming at it.
It will depend on any particular programme on whether we are in bed with another [engine manufacturer]. There seems to be plenty of room.
Source: Flight Daily News
