RR has started 2018 with a little setback, but remains optimistic for the rest of the year.

Rolls-Royce has recognised a charge of £227 million ($315 million) in its full-year results relating to costs associated with addressing in-service technical issues on Boeing 787 and Airbus A380 engines.

The charges offset an increase in underlying revenues, up 12% to £3.8 billion, as the company delivered 483 large aircraft engines – a rise of 126 on the previous year – and generated a one-third increase in civil aerospace profit to £520 million.

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"These issues have required urgent short-term support including both on-wing and shop visit intervention which has resulted in increased disruption for some of our customers," it admits.

Article
https://www.flightglobal.com/news/artic ... ws-446528/

The manufacturer expects its solutions to the Trent 1000 problems, including redesigned parts, to be "fully embodied" in the fleet by 2022.

I guess not all the Trent 1000 issues are urgent then.

I think that it was said at the 2017 Accounts Presentation that RR would be done with these problems by 2022. So they will take roughly a similar charge in each of the four years to then. It has proved a mighty expensive error on the T900 which started design in 2001 and the original T1000 from 2005. I think that normally, one can expect some infant mortality on mechanical things e.g. the engines for the current narrow bodies. But this RR issue after some many years of EIS is a new hazard. It will result in more testing on new designs, and thus longer times to market. Thus the UltraFan looks more likely to EIS in 2027 or later.

There was also a question on the Boeing Mom engine. The RR response was that they are in business to sell engines, but, but . . . The interesting bit was that they were going to be keeping up the rate of research spending to prepare for the UltraFan. So if the Mom gets the go ahead, and a suitably sized UltraFan is chosen, then RR would could bring forward the monetisation of this investment at an earlier date. The recording is on the RR website.

My take on this is that either the P&W will be the current technology to be used on the Mom, or the UltraFan may be the other newer tech choice. Neither Airbus or Boeing are likely to too happy with the risks to their new Mom sized new projects of using a technology from P&W which will be out dated in a just a few years by the UltraFan. I could be wrong of course.

One of the little nuggets was that the cost reductions achieved on the XWB for the A359 was working well, with the loss per engine cut to £1.5 million. But this is a lot of money when you are making c 400 engines annually. RR have adjusted their policy on capitalising development, to (or as I understand it) bring it into line with GE. RR will extend the time frame of capitalisation by a year of so to include the costs of initial production and re-work of delivered engines. It was not clear to me if the City money folk understood this?

RR are spending c £1 billion annually of technology across the group which is cost against current year profit. And another £1 billion on capex for buildings, plant and machinery, which is depreciated against profits normally. They are not being pressed by the London money folk to cut on these spends, as they are doubling the size of the firm, and securing its future as No 2 in civil engines. This is the opposite of would be happening in New York, who would want first call on cash to be paid out in dividend or share buy back. (Hence Boeing's plight.)

RR have a powerful top management, which is about halfway to dragging it from being a bloated over-centraised outfit it into the firm it ought to be. This is a very considerably success after only 4 years since the new chief took on the challenge of a basket case. Mind, he was a Board Member, so he knew what could be done.

Egerton wrote:

One of the little nuggets was that the cost reductions achieved on the XWB for the A359 was working well, with the loss per engine cut to £1.5 million. But this is a lot of money when you are making c 400 engines annually.

They're making nothing like 400 XWB's annually. Are you saying these cost reductions aren't specific to the XWB?

kurtverbose wrote:

Egerton wrote:

One of the little nuggets was that the cost reductions achieved on the XWB for the A359 was working well, with the loss per engine cut to £1.5 million. But this is a lot of money when you are making c 400 engines annually.

They're making nothing like 400 XWB's annually. Are you saying these cost reductions aren't specific to the XWB?

Thanks, I was talking about XWB engines of which RR sold 342 in 2017 (I presume meaning invoiced), and expect ~400 this year. Both including spare engines, I assume? There were 197 XWB engine deliveries in 2017. There were 278 XWB engines in service at the end of 2017 (presumably including invoices spare engines?). I have not fully got to the bottom of the sold and the deliveries but this is my current best shot. But presumably RR for accounting purposes regard sold (invoiced) as the key item. There will be accounting legal reasons for this definition, sales usually mean invoiced, but not necessarily paid for. I hope this helps.

There were in 2017 installed large engine (wide bodied) deliveries of 444, with an additional 39 spare engine deliveries. These include the XWB engines.

So we have sold, delivered, and installed as categories of definition for cut-off points affecting different accounting issues, I think.

kurtverbose wrote:

They're making nothing like 400 XWB's annually. Are you saying these cost reductions aren't specific to the XWB?

the (T1000)TEN takes from the XWB and is supposed to completely supplant the T1000 "Mk1".

kurtverbose wrote:

Egerton wrote:

One of the little nuggets was that the cost reductions achieved on the XWB for the A359 was working well, with the loss per engine cut to £1.5 million. But this is a lot of money when you are making c 400 engines annually.

They're making nothing like 400 XWB's annually. Are you saying these cost reductions aren't specific to the XWB?

To clarify my misunderstanding, the cost reductions are for all the wide body engines, on which XWB 84 engines are a growing part. RR are expecting that their supply of WB engines will be close to break-even in 5 years. Part as a result of the ending of initial low pricing, and part from manufacturing efficiencies. This is a change from the past acceptance of a razor blade sales policy. Mind you, making these large civil engines at ~400 per year is quite something for RR. They have from the start set their stool out so as not to be the limiting factor on the A35x production rate. So the Rate 13 may not be the maximum achievable?

Well this was the reason for my question as airbus only goes to rate 10 at the end of the year. Even with spare engines that's less than 300 deliveries.

kurtverbose wrote:

Well this was the reason for my question as airbus only goes to rate 10 at the end of the year. Even with spare engines that's less than 300 deliveries.

I was under the impression that they reached Rate 10 in 2017 and plan Rate 13 in 2018?

Even rate 13 is well short of 400 engines, but this from Leeham: -

Oct. 5, 2017, © Leeham Co.: Airbus is gearing up to increase the production rate of the A350 from 2018’s planned 10/mo to 13/mo, perhaps as early as the following year, LNC has learned.

Anyway, I'm not meaning to contradict. It's interesting to me what you wrote.

Yes, your are correct. I have just looked up the Airbus 2017 Accounts Presentation and clear as a bell it says they will build up to Rate 10 in 2018.
Apologies.