2023-10-17 11:32:50
The specialist in large aircraft engines will cut up to 2,500 jobs in order to reduce costs. It plans to return to the small reactor market and challenge Safran and GE.
Committed to a long-term transformation plan, Rolls-Royce is launching a new round of measures aimed at reducing its costs while increasing efficiency. The aircraft engine manufacturer announced on Tuesday new job cuts involving 2,000 to 2,500 positions, or up to 6% of its global workforce (42,000 people). These clear cuts come following the British group already cut 9,000 jobs during the Covid-19 pandemic, when the aviation sector was shut down around the world. Rolls-Royce also decided to merge engineering, technology and safety functions into a single integrated team to be more efficient and flexible.
Measures justified by Turfan Erginbilgic, former senior executive of British Petroleum, who arrived at the general management of the engine manufacturer at the beginning of 2023 with the objective of building “ a leaner and more efficient organization “. This, in order to bring out “ a Rolls-Royce ready for the future “. The ambitious transformation plan, detailed at the start of the year, gives priority to investments in “ the most profitable opportunities » and diversifications, particularly in energy. Rolls is now developing reactors dedicated to future small British nuclear power plants. Its offer was also selected on the list of six finalists (which includes that of the French EDF) selected to equip these mini-power plants, by the British government, at the beginning of October.
The Ultrafan, the largest aircraft engine in the world
Turfan Erginbilgic also wants to change the corporate culture: “ we urgently need to think differently », insists the general director. This by reconnecting with the spirit of innovation and risk-taking. Objective ? Strengthen the group’s core business, aircraft engines, by developing disruptive reactors (particularly hydrogen) meeting the imperative of reducing the carbon footprint of aviation. To this end, the Director General is accelerating a program launched by his predecessor: the development of the largest aircraft engine ever designed in the world, equipped with new turbine technology, the Ultrafan. A technology demonstrator has been tested since the end of 2022 at its Derby factory, the aim being to have it flying by the end of 2023-beginning of 2024, with a mixture of kerosene and sustainable aviation fuel (SAF) then demonstrate its performance with 100% SAF.
Intended to equip wide-body aircraft, such as the Boeing 777X over the next decade, this giant engine might offer Rolls a comeback on the market for small engines equipping the Airbus A320 and Boeing 737 Max as well as their successors. The new Ultrafan turbine technology can be perfectly adapted to smaller aircraft, such as single-aisle aircraft », Explained Tufan Erginbilgic in June during the Le Bourget air show. “ This technology gives us a competitive advantage and a technological lead over the competition, to participate in the competition on a new medium-haul aircraft program, when the opportunity arises. “. In short, position itself as a competitor to the French Safran, associated with the American GE, within CFM International to supply the engines for the successors of the A320neo and the 737 Max. Since June 2021, the Franco-American tandem has been developing a technological demonstrator, called RISE, which should give rise to a disruptive engine program. In order to facilitate his comeback, the general director of Rolls does not rule out joining forces with partners in a few years.
Strategic turnaround
Such a decision would mark a major strategic turnaround for Rolls-Royce. The latter had in fact decided to exit the small engine market in 2011. Airbus was then preparing the re-engined version of the A320. Associated with the Canadian Pratt & Whitney, the British engine manufacturer had refused to develop a new engine, unlike the French Safran, associated with the American GE within CFM International, which designed the Leap reactor (100% of the 737 market and more 65% of the A320neo). Rolls then made a radical decision: to exit small engines to concentrate on the more lucrative market for large engines equipping long-haul 787 and A350 aircraft and wide-body aircraft such as the 777. The partnership with Pratt, now controlled by the American Raytheon Technologies (RTX), did not resist and was dissolved in 2013. Pratt developed the Pure Power reactor alone but experienced technological, industrial and quality control difficulties (this is still the case today ‘today for the engines equipping the A320neo) and has been decommissioned.
Rolls’ decision proved disastrous, signaling the start of difficulties for the company which accumulated losses, saw its cash flow melt away and decline in the market, following its decision to cut itself off from the small engine segment. It is in fact the largest market in terms of volume (70% of orders), the most dynamic and the most resistant to crises. It is the one that emerged the fastest from the Covid-19 pandemic, in the summer of the same year. Unlike the long-haul market which has still not returned to its pre-Covid levels.
Rolls almost paid dearly for its strategic error. This flagship of British industry and supplier to the armies had to fight for its survival. In October 2020, Rolls had to be recapitalized to the tune of 5 billion pounds, including 2 billion by its shareholders. A few months earlier, the engine manufacturer had launched, in May 2019, a massive restructuring plan, accompanied by thousands of job cuts, mainly in its commercial branch.
Since 2021, the situation has improved. The group returned to profit then fell back into the red the following year, weighed down by the consequences of the war in Ukraine (inflation, raw material costs, logistical difficulties, etc.) as well as Brexit. This year, back in the green in the first half with a net profit (group share) of 1.2 billion pounds, compared to a deficit of 1.6 billion a year earlier. The markets seem to believe that Rolls is, this time, on the road to recovery. The stock has also doubled in value, gaining 131% since the start of the year, to more than 220 euros.
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