Rolls-Royce's president, civil aerospace, tells  Flight Daily News  that the UK engine manufacturer's broad portfolio and long-term investment strategy leaves it strongly positioned to weather the downturn

How is Rolls-Royce coping with the current downturn?

We're no stranger to adversity, as an industry. Actually over the last eight or nine years there's always been something hitting us. This is one of the toughest markets we've seen in a long time, but over the last few years we've been hit with, for example, programme delays on the A380 and 787. We've maintained a fairly stable, steady, relentless growth through quite a few shocks to the system.

Back in 2001, when we went through 9/11, we had significant debt on the balance sheet, but we now have cash which is obviously a good place to be. It's cash which typically comes under pressure in environments like this, and it also gives you options relative to people who don't have cash. These markets always provide opportunities and if you have cash you have options to evaluate whatever it is that you want to do that perhaps other people can't contemplate doing. It means that we don't have to change our strategy even though the market is pretty tough.

Within civil we'e got a range of original equipment programmes and we're not exposed to any one particular aircraft. We've got a better balance between the original equipment and the spares than we've ever had, and then we're global. The orderbook is right the way around the world so we can withstand regional effects a lot more.

Are you worried out customers cancelling orders?

Actually, we've seen a very modest number of cancellations so far. I don't think anybody's doubting the fact that the civil aerospace business is a growth market. Clearly, in the short-term, it's very difficult to call what's going to happen, but we've made our investment decisions. The Trent XWB, Trent 1000 and BR725 are going to be selling well out into the future. About 58% of our orderbook is beyond 2011 so it's not decimating our orderbook in any measure, while it's clear that there are some requests for deferrals coming through the aircraft manufacturers.

How confident are you that Airbus and Boeing's order backlogs will eventually be delivered?

Back in September-October when the financial system collapsed there were plenty of people who could tell you there was no way all the widebodies could possibly be delivered in 2009 becase there wasn't the financial infrastructure to be able to finance them.

Now I think the general view is largely that there is, putting aside aircraft deferrals because of manufacturing problems. We've got over 100 Trent 700s being delivered this year. We decided we would trust the ability of the markets to find a way to finance, and this year they have. This year I don't think there are any Trent engines that have not been delivered so far, or we anticipate not delivering, due to lack of financing.

We obviously worry about it and we're trying to be very careful with making sure we've got exactly the right amount of inventory, and I think so far we've judged it right.

Has your corporate engine business been hit badly by the dramatic fall-off in demand for business aircraft?

I think probably the one area that's had the most sudden and dramatic reduction that nobody anticipated was the lower end of the corporate market. Deliveries of small engines in the corporate market reduced faster than we anticipated because I don't think we anticipated quite the drop in flying that would happen in that market. That's probably the only part of the market where we didn't call it right. I think the freefall has stopped. Talking to aircraft manufacturers, January and February were really difficult, in March and April they've started to level out and I think at EBACE people were quite optimistic. I think we feel reasonably confident we've got to the bottom of this thing now. The questions are when it will grow and how fast it will grow, but then that applies to the passenger traffic market as well.

What is the status of the RB282, selected to power Dassault's new SMS business jet two years ago?

It's really still in the study stage with Dassault. The RB282 we've positioned as a new two-shaft family with one very clear potential application in the Dassult Falcon, and a number of other possibilities. Some of the aircraft manufacturers are looking at timing and poistioning of their aircraft, so it's still quite a fluid market.

We were selected for the SMS and we've been in a study period with Dassault for some considerable time now as we try and optimise the aircraft. I think all the aircraft manufacturers are looking at how much they can afford to spend, so there are still a lot of different ways that market could develop. Certainly our plan is to launch at the apporpriate time a new family of engines into the market to address probably anything from 10,000lb-thrust right up to the top end. There's no doubt it's fluid at the moment in terms of exactly what the manufacturers want, and that's affecting how we plan this family.

The great thing in this business is that there are always opportunities for people to spend money on developing engines and I guess we're being quite focused and being clear in this environment that there's a really good business case. Until we can do that we'll be thoughtful about what we launch simply because we don't want to lose any focus our big three programmes (Trent XWB, 1000 and BR725).

When do you expect Airbus and Boeing to clarify their plans to replace their current 150-seat aircraft families?

I don't think it's any clearer this year than it was at the last airshow as to exactly what the next generation of single-aisle aircraft looks like. What we're protecting is the basic technology development to allow us to go off any foot, and we're in the fortunate position that we can continue to spend that money.

Have you set a date to bring your proposed Trent assembly facility in Singapore on line?

We're still trying to decide exactly what the start date is. We can probably narrow it down to within a 12-month window. When's the upturn coming? We decided that it was clear we were going to go beyond 300 Trent engines per year. The cap we have here [in Derby] is probably 250-300 per year and rather that continue to just grow one site, for good business continuity reasons, being close to the customer and various other efficiency reasons we wanted two Trent assemly sites. We decided on Singapore after quite an exhaustive comparison.

Then there was the 787 delay which clearly pushed the volume forecast back a little bit, the A380 to some degree, and now of course's there some uncertainty. Essentially we've just put the pause button on there. The process of getting construction bids in Singapore is a lot more competitive now than it was a year ago as well so that's helps us significantly and we we're just left to deciding now exactly when do we need that thing to be operational and it's a judgement as to what point we think we will break through the capacity limit [at Derby].

One of the reasons we chose Singapore is that Singapore Aero Engine Services has proven to be a very effective and efficient venture.

Do you think the industry will be ready to embrace the concept of open-rotor engines by the end of the next decade?

I think the real show-stopper was noise. Everyone worried about noise and that was the first gate we had to get through, the first technology readiness level we had to pass. I think the noise testing that we have done has really transformed the appetite to spend some money looking at this. I think the solution to move all those people that currently fly around in 150-seat aircraft could look very different from the current solution, and I think the aircraft manufacturers are beginning to recognise that it could be a very different world and a very different looking machine flying different ranges, speeds and a different size fuselage etc.

Have you cut back your presence at this year's show?

We don't have a stand. I think you might find the exhibitors generally have cut back and I don't think that's a big surprise to anybody. I think it's going to be a quieter show and attendance will be down. The people that go will be trying to get a sense from everybody else as to what they're seeing in the market. Can they help them forecast when the market's going to increase again? I would hope we might have one or two good things to announce at the show. There are some engine competitions going on, but relative to other shows it will clearly be quiet.

Source: Flight Daily News