Rolls-Royce’s £3.2 billion deal gives respite

AERO-engines major Rolls-Royce revved down the runway yesterday as it secured a bumper £3.2 billion contract from American carrier Delta Air Lines to power 50 new Airbus aircraft.

John Rishton welcomed Delta deal. Picture: Contributed

The order is for Trent XWB engines to power 25 Airbus A350s, as well as for its recently launched Trent 7000 engines on 25 Airbus A330s.

It is also a significant commercial and public relations victory for Airbus, the European planemaker, as the Delta planes – with a value of $14bn (£8.9bn) – are to replace ones from arch-American rival Boeing.

John Rishton, Rolls-Royce chief executive, said: “We are proud to be selected to power Delta’s new generation of aircraft and look forward to deepening our relationship with a long-standing and valued customer.

“It is further evidence of the success of the Trent XWB in the market and represents a powerful vote of confidence in our newly launched Trent 7000.”

Delta’s relationship with Rolls goes back four decade when the RB211 engine powered the Lockheed L1011 Tristar. The US airline also operates eight Boeing 777s powered by Trent 800 engines and 47 Boeing 717s powered by Rolls’ BR710 engines.

City engineering analysts said the contract came at a good time for Rolls-Royce, following a recent profit warning that earnings next year may be 3 per cent lower due to reduced defence spending by the UK government.

The group recently announced plans for 2,600 job cuts as part of an efficiency drive to meet the tougher trading climate. Its share price, which has lost about a quarter of its value since the start of 2014, closed up 9.5p at 853.5p.

Sash Tusa, an analyst at Edison Investment Research, said: “Delta’s order should not move Rolls’ earnings or valuation, but is a nice confidence booster after a tough three months.

“Delta is a very respected airline, so the order is a valuable affirmation of the strengths of the two aircraft models and their engines.”

The Trent XWB is described by Rolls-Royce as the world’s most efficient large civil aero engine, with more than 1,500 sold. It will power the first A350 XWB into service later this year.

The Trent 7000 was launched this year and has been selected to power 152 aircraft. Meanwhile, Airbus hailed Delta’s order for 50 wide-body jets as a “massive endorsement” of its product line.

Boeing’s Dreamliner, by contrast, has been beset with problems, suffering several delays before its introduction in 2011, and then being grounded due to battery fires last year.

Analysts say Airbus and Rolls will hope other US airlines will follow Delta’s example as they upgrade their ageing fleets. However, one said: “It is good news for Airbus and Rolls, but I don’t think there is a herd instinct in the way airlines replace their fleets.”

SUBSCRIBE TO THE SCOTSMAN’S BUSINESS BRIEFING

• Get the latest business headlines from a variety of news sources emailed to your inbox each morning