Rolls-Royce weighs alliance with United Technolgies for short-haul aircraft

09 May 2015


The UK's Rolls-Royce Holdings Plc is considering realigning with former US partner United Technologies Corp to make an entry into the market for engines for narrow-bodied aircraft to compete with General Electric Co.

''I continue to believe we need to have a partner, UTC is an obvious partner for us,'' CEO John Rishton said at a shareholder meeting in London. ''It's certainly a possibility but no decisions have been made.''

Since Rolls-Royce exited the short-haul segment four years ago, the type of aircraft had grown to represent about 75 per cent of the aircraft engine market by volume and half by value, which made it important for the London-based engine-maker to reassert itself, according to Rishton, who would be succeeded as CEO by Warren East on 2 July.

Rolls-Royce liquidated its 32.5-per cent stake in the International Aero Engines consortium it shared with UTC's Pratt & Whitney for $1.5 billion in 2011, as it stepped away from the market for narrow-bodies. While Rolls now had an orderbook that accounted for about 50 per cent of wide-bodies, GE dominated smaller aircraft with about 75 per cent, according to  Rishton.

''The issue that I am troubled by is the incumbency strength, particularly of GE,'' Rishton said. ''How do you break into a market that has such a dominant player in it? We need a partner to do that.''

Meanwhile, aerospace, defence and marine engineer Rolls-Royce eliminated 1,300 jobs on the same day that it shocked investors by announcing currency moves would hit its revenues this year by as much as £350 million.

According to the firm, most of the UK job losses would come at its Derby civil aerospace site, employing 12,000 staff, and its Bristol plant which has 3,500 workers in defence engineering roles. The job losses would hit both engineers and administrators.

Rolls Royce, which had been through a rough patch, in February, announced its first fall in revenues for a decade. Today it added that sales from its Rolls-Royce Power Systems business in Germany and its marine business in Scandinavia had been hit by the pound strengthening against the euro and Norwegian krona this year.

According to the FTSE 100 group, sales converted from these currencies into sterling had been adversely affected.

It added, however that its profit would not be affected due to the pound weakening against the dollar over part of this year which helped offset the problem.

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