Page 1

Investors’ Update March

2016

Headlines Page 2

2015 Full Year Results 12 February 2016

Non-executive director appointment 2 March 2016

2015 Annual Report Published 3 March 2016

Business news Page 3

Research and Technology Page 4

IR activity: H1 dates

5 May

Annual General Meeting

Events and conferences

8–9 March

John Dawson (Head of IR) at the Citi West Coast symposium 17 March

David Smith (CFO) at the Bank of America Global Industrials conference 29-31 March

John Dawson hosting analyst and investor meetings in Paris and Germany 12 April

Governance event in London 10-11 May

John Dawson at the Redburn European Conference – Toronto 12 May

John Dawson at the RBC A&D Investor Day, New York

Welcome to the second Investors’ Update from the Rolls-Royce Investor Relations (IR) team. Since our first newsletter in January we’ve published our full year results including unchanged guidance for 2016.

Significant new disclosures included enhanced revenue segmentation, gross margin analysis, more detail on linked and unlinked accounting adjustments and an enhanced civil aerospace trading cash flow.

Since then we have been meeting with sell-side analysts and fund managers to discuss performance, new disclosures and outlook.

We have selected six of the more interesting or frequent questions coming out of our meetings and provided answers to them in this issue.

We have also included some of our other more recent news flow and updated our forthcoming calendar of events and IR activities.

John Dawson

Director of

Investor Relations

John Dawson

Director of Investor Relations

020 7227 9087

Helen Harman

Assistant Director

020 7227 9339

Ross Hawley

Assistant Director

020 7227 9282

Georgina Broome

Analyst

020 7227 9141

Jacinta Francis

Programme Coordinator

020 7227 9237

Investors’ Update

March 2016

Page 2

Corporate news

2015 Full Year

Results 12 February 2016

Rolls-Royce announced its full year results on 12 February 2016 and hosted

a presentation at the London Stock Exchange. Full details are available

online and from our Investor Relations App.

The statement and presentation included new disclosures such as gross

margin and costs below gross margin breakdowns for the group and by

business, together with a historic breakdown for Civil Aerospace revenues /

trading cash flows and the 2016 outlook.

Alongside the publication of the 2015 Annual Report we have updated the

press release on the website to include four non-material corrections to the

12 February publication. These relate to finalising figures for Marine and

Nuclear order books and minor corrections to the C share programme and re-

election of directors at the AGM.

Read more

Non-executive director appointed 2 March 2016

The appointment of Bradley Singer as a Non-Executive Director was announced on 2 March. Brad is a Partner and COO of ValueAct Capital and a director of Motorola Solutions, Inc. A relationship agreement has also been agreed in respect of Brad’s appointment.

Read more re announcement of appointment

Read more re relationship agreement

2015 Annual Report published 3 March 2016

The 2015 Annual Report is now available online on the investor relations

section of the Rolls-Royce website.

The hard copy will be posted to shareholders towards the end of March,

together with the AGM notices, in advance of the AGM on Thursday 5 May.

Read more

Consensus estimates published 3 March 2016

Following the 2015 full year results on 12 February, consensus forecasts for

2016-18 have been collated and published, on the basis of figures made

available by 22 coverage analysts, of which seven have updated their

forecasts since the 12 February results. Consistent with the unchanged

outlook included in the 2015 results statement, overall consensus for 2016 for

revenue, profit and earnings is unchanged.

Read more

IR news

IR calendar updated During the next three months, members of the Rolls-Royce team will be at a

number of conferences and meeting investors in European and US cities as

part of the ongoing IR programme. In addition, Rolls-Royce is holding a

governance event in London in early April.

Details of our IR programme are set out on the front page of this newsletter

and on our website. Please get in touch with our Programme Co-ordinator if

you would like further information on any of these events.

Investors’ Update

March 2016

Page 3

Business news: Civil Aerospace

Rolls-Royce wins Norwegian order worth $2.7 billion 1 February 2016

A $2.7 billion order was received from Norwegian for Trent 1000 engines plus

TotalCare® long-term service support for 19 new Boeing 787 Dreamliner

aircraft. The order includes a comprehensive TotalCare® solution for all 30

Boeing 787s both in their current fleet and on order.

Read more

Singapore Airlines orders first Enhanced Performance Trent XWB and extends TotalCare

® for Trent 800s January/February 2016

Singapore Airlines has become the first customer for the newly-launched

Enhanced Performance Trent XWB engine which includes technologies from

the XWB-97 and Advance programmes.

Since the start of the year the airline also extended its TotalCare® service

agreement for Trent 800 engines that power its Boeing 777 aircraft fleet.

Read more re Enhanced Performance Trent XWB

Read more re extended TotalCare® for Trent 800s

Business news: Defence Aerospace

Delivery of first upgrade kits to US Air Force for C-130H Hercules fleet 25 February 2016

Rolls-Royce has delivered the first T56 Series 3.5 engine upgrade kits

providing fuel savings and enhancements to the USAF Hercules fleet such as

improved range, payload capability and high altitude performance. The

upgrade is added during regular overhauls to reduce costs. The USAF has

estimated that incorporating the upgrade across its C-130 fleet would save $2

billion and extend the life of the fleet for decades.

Read more

Business news: Power Systems

JV with China Yuchai to jointly produce MTU engines 19 February 2016

Rolls-Royce Power System’s subsidiary, MTU, signed a 50:50 joint venture

with China Yuchai’s GMMC subsidiary to produce MTU diesel engines under

licence in China. The JV will produce MTU Series 4000 diesel engines

compliant with China Tier 3 emission standards, primarily for the Chinese off-

highway market, and in particular for power generation and oil & gas

applications.

Read more

RRPS to supply MTU engines for Chinese freight locomotives in Argentina 22 February 2016

Rolls-Royce Power Systems has received orders worth over €30 million for

100 MTU Series 4000 engines from Chinese locomotive manufacturer,

CRRC, as part of a contract for locomotives from the Argentine government.

Read more

Investors’ Update

March 2016

Page 4

Business news: Marine

Factory acceptance test for Royal Navy’s Type 26 Global Combat Ship 1 February 2016

At the start of February, Rolls-Royce passed a significant milestone after the

success of a week-long set of rigorous performance factory acceptance tests

for the first MT30 gas turbine destined for the Type 26 Global Combat Ship

programme.

Read more

Research and Technology, Product Development

£30 million investment in new Washington aerospace facility 22 January 2016

A £30 million investment will be made in a new facility to manufacture a range

of aerospace discs for both Civil and Defence in-service engines at our site in

Tyne & Weir, UK. The facility upgrade is part of UK infrastructure

transformation and is the final stage of the modernisation of fan discs and

turbine disc manufacturing.

Read more

Roadshow Q&A and other information

Following on from our IR programme after the full year results announcement, we have selected six questions we have

encountered and which we believe would be of general interest to investors, together with some additional material

covering TotalCare® accounting, including a worked example.

The six questions are:

1. What is the expected annual impact of the various restructuring programmes you have announced?

2. What trends have you seen in the parking up of aircraft and the impact on liquidity / residual value of your engines?

3. Do the new Flex and SelectCare® products reflect a structural shift in your aftermarket business model?

4. Is 3D printing set to become an important manufacturing process and what are the likely challenges?

5. What is the likely IFRS 15 timetable in terms of clarity over the impact for Rolls-Royce?

6. Can you remind me of what you are indicating as expectations for timing and peak levels of TotalCare® and CARs

balances?

You can find the answers on pages 5 to 8.

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This newsletter is for informational purposes only, it is not intended to contain any new material or non-public information relating to Rolls-Royce plc but

is a summary of recent public announcements and as such may not be relied on. Nothing in this document should be construed as a profit forecast,

however it may repeat certain statements that might be deemed to be forward-looking; such statements are made under the provisions of Rolls-

Royce’s Safe Harbour Statement which can be found as part of our presentation materials on Rolls-Royce’s website

www.rolls-royce.com/investors/investor-events-and-presentations.aspx#yr-2015.

Investors’ Update

March 2016

Page 5

Q&A & Appendices

Q. What is the expected annual impact of the various restructuring programmes you have announced?

The attached table shows the incremental changes from our legacy and new restructuring / transformation

programmes. We’ve been asked a lot about the likely value of tranche 2 of the £150-200m cost saving programme

announced in November. This is still very much work in progress, particularly in respect of cost-to-achieve and phasing,

rather than quantum, but if you infer a similar benefit phasing to tranche 1 then the benefits are shown in the table

below. In all likelihood figures will change but it reflects our desire to achieve meaningful cumulative savings by the end

of 2018.

Restructuring Benefits (£m)

Legacy 2015 *2016 2017 2018

Aero 0 80 0 0

Marine (10) 35 40 0

Total incremental benefits (10) 115 40 0

New transformation programme (Nov 15)

Tranche 1** 30-50 45-50 0

Tranche 2*** 30-50 45-50

Total incremental benefits 30-50 75-100 45-50

Total incremental benefits (Legacy + New) (10) 145-165 115-140 45-50

Cumulative (10) 135-155 250-295 295-345

* Legacy benefits were netted-off in our profit headwinds figure of £650m for 2016

** Tranche 1: we expect an exceptional restructuring charge of around £75-100m in 2016

*** Tranche 2: no formal cost/benefit guidance has been provided:

- gross benefits shown here are assumed to be the same as Tranche 1

Net benefits after restructuring costs taken 'above the line'

Gross cost savings -restructuring costs taken as an exceptional charge

Investors’ Update

March 2016

Page 6

Q. What trends have you seen in the parking up of aircraft and the impact on liquidity / residual value of your engines?

Many questions have focused on the recent headwind of increased ‘parking’ of relatively young airframes. This was

flagged by us in November 2015 as a £50-80m headwind to profits in 2016. The details behind this relate largely to an

increase in parked RR powered B777s (using Trent 800 engines). In our view this reflects a specific set of customer

issues where one or two lessors and operators have stopped using the planes because of their own financial challenges.

As a result there is an overhang of these planes in the market seeking new operators.

Since the launch of the B777, particularly on the early airframes where engines were supplied by each of Pratt &

Whitney, GE and Rolls-Royce, a number of aircraft have changed hands. It has been a relatively liquid market, reflecting

the enduring quality of the airframe and the engines. Rolls-Royce powered aircraft have been equally successful in

finding new owners, reflecting the value of the T800 as a high quality, reliable, efficient power unit. We continue to

believe the engine will prove highly successful on the B777. This view is supported by comments made by various

lessors at ISTAT.

With only a limited number of engines coming off original TotalCare® packages liquidity is limited, something we need

to fix over time through the take up of new TotalCare® solutions (including TotalCare Life, Flex and SelectCare®) to help

create an active second hand market for engines and spares. See the answer and article on this particular topic below.

Over time we expect this headwind to unwind as we create a stronger range of options for operators and lessors to

manage the end-of-life value of our engines.

Q. Do the new Flex and SelectCare® products reflect a structural shift in your aftermarket business

model?

The company has been a significant innovator in services ever since the early days of ‘power by the hour’ through

TotalCare®. Our more recent announcements are a natural and planned evolution in our service offering as the Trent

fleet starts to mature, with an increasing number of engines set to reach over 10 years in service, or are moving on

from their first operator to one with potentially differing operational criteria. They do not reflect a breakdown in the

TotalCare® business model, nor a response to the EU competition enquiry, although both have been suggested!

We have therefore taken steps to develop our service platform both in terms of broader range of solutions and also

service facilities and their operating parameters. This will allow us to better provide a global service capability which

best suits the needs of an operator with more mature engines in their fleet. We are also planning better solutions for

lessors who are a larger proportion of this market when compared to the first owner of an engine.

For example, SelectCare® was launched in January 2016 and fits between the comprehensive TotalCare® solution and

MRO services, which are done on an individual time and materials basis. It is designed for customers who want to pay

an agreed price for a fixed number of engine overhauls, but can then select from a range of service options and pay for

Investors’ Update

March 2016

Page 7

these on a $/flying hour basis. This creates a more flexible model for the operator who continues to receive cost

predictability, but takes on more time-on-wing risk. This is likely to suit operators looking to manage a mixed age fleet

with the ability to utilise a blend of engines to maximise 'green time' utilisation.

Similarly, the reorganisation of the Trent Services Network and the agreement with Delta Tech Ops to join the network

as a 3rd party operator are indications of how we are looking to develop the services eco-system, structure in our drive

for cost efficiencies, and at the same time expand the capacity to cope with what is set to be a very significant increase

in Rolls-Royce wide-body engines in service.

We will continue to innovate and develop further offerings, add new MRO operators and look for other ways to assist

operators manage their fleet and associated costs. With just 4% of direct operating costs on a typical flight being

engine service related, when compared to 65% on other costs such as fuel burn, we are confident that our new

solutions focused on data analytics.

A recently published article in our customer magazine reviews the new offerings in more detail and is included at the

back of this document. This magazine is available by downloading ‘The Rolls-Royce Magazine’ App.

Q. Is 3D printing set to become an important manufacturing process and what are the likely

challenges?

The company has been at the forefront of research into this technology for some years. In 2015 we claimed a world

record for the largest aero-engine component assembly ever manufactured through additive layer manufacturing

(ALM, commonly known as 3D printing) with a 1.5m diameter front bearing housing for the Trent XWB-97 development

programme. This ring of vanes form the inlet into the engine’s core and each vane has an intricate series of heating

passages inside them that host an anti-icing system to protect the engine.

We did it to explore our capability and potential for using the ALM process – and identified two real benefits: lead time

in product development and also the degree of design freedom it offers, such as for products with complex internal

paths. However, the consequence is that you can only make the component through an ALM process and so we would

need to have enough ALM machines that are fast enough for the production process. Choice and availability of a stable

and trusted source of atomised metallic powder is also critical.

There is clearly significant potential for use of ALM processes but a lot more development work will be needed before it

can be used confidently for aero engine production.

Investors’ Update

March 2016

Page 8

Q. What is the likely IFRS 15 timetable in terms of clarity over the impact for Rolls-Royce?

There is considerable work being undertaken internally at Rolls-Royce, with a number of external technical advisers,

and also in conjunction with our sector peers in order to try and improve the clarity and likely interpretation of IFRS in

the run up to its implementation date of January 2018. None of these work streams have come to an initial view yet

and consequently it is premature to come to any conclusion or sense as to potential direction or impact, and we have

not made any comments as to what we believe is the most likely outcome, despite speculation to the contrary.

Our preference would be to have a good degree of consistency with our sector peers where possible, and therefore we

will not be providing guidance on the impact of any changes until we are clear on the outcome of the reviews and our

sector discussions.

Q. Can you remind me of your current expectations for timing and peak levels of TotalCare® and

CARs balances?

Our current expectations for these two items are as follows:

TotalCare® Net Debtor: around £2.5bn at some point in 2017, reflecting our current expected

cost improvements and linked engine deliveries

CARS balance: around £1-1.2bn early in the 2020s, based on current expected engine

deliveries from 2016-2021

TotalCare® or Long Term Contract Accounting explained

With our new disclosures we’ve been asked more questions around the different TotalCare® numbers that we include

in our full year statement. As a result, we thought it is timely to provide a few new, more detailed worked examples of

TotalCare® in action. These are set out overleaf and we hope you find these useful.

Slides 1 – 4 explain the fundamentals of linked accounting and how the TotalCare® net debtor is created

Slides 5 and 6 show the impact of a change in the TotalCare® contract margin partway through a linked contract, and what factors can drive these types of margin changes

Slide 7 shows the factors that can drive movements in the overall TotalCare® net debtor

1. Long-term contract accounting Example assumes a 10 year contract with illustrative figures

Table below illustrates a simplified TotalCare® contract; cash revenues received annually (flying hours), infrequent costs driven by engine overhauls 1. Cash accounting: Recognise revenue only in some years but both revenues and costs in others; profits in some years and losses in others

2. Contract accounting; progressive margin as the contract is delivered. For non-OE linked TotalCare® contracts, flying hours are the primary driver of contract financials so revenues and margin are recognised in proportion with flying hours

In the example below, the overall contract margin is $5m (50% margin) so on a cash accounting basis in years 1-3, for example, there would be 100% margin but in year 4 a $1.5m loss

In example below, overhaul (cash) costs are smoothed within cost of sales; constant 50% margin is achieved in each year of the contract

2. Linked accounting: at the start of the contract Example assumes a 10 year contract with illustrative figures

2. OE + TotalCare® Business forecast contract revenue and costs are linked to give a “blended” margin $4.0m/$14m = 29% margin

1. Linked accounting is applicable when OE and TotalCare® agreements are negotiated and contracted as one commercial package

3. Profit recognition on linked contracts based on % complete of the contract (which is based on revenue) So, for example, in year 0, the list price revenue of $10m is 50% of the total contract list price revenue of $20m so $2m (50% of the total contract margin of $4m) would be recognised

2. Linked accounting: at the start of the contract Example assumes a 10 year contract with illustrative figures

2

1

6. In this example the impact of link accounting would mean that 50% of the total contract margin was taken on OE delivery Here Year 0 net revenue of $7m is $14m total, and the margin is $2m of $4m total

4. “Blended” profit margin achieved by allocating the total contract concessions based on % complete of the contract (which is based on revenue) Here, because there is $(1)m of margin before linked accounting, the adjustment is +$3m to achieve the $2m 5. The revenue line is adjusted to generate the appropriate blended margin in each year In this example, the $(6)m concession against on a cash basis is reduced by $3m to achieve an adjusted concession line of $(3)m and a reported revenue figure of $7m

3. Linked accounting and TotalCare® net debtor Example assumes a 10 year contract with illustrative figures

I. TotalCare® net debtor = difference between profit recognised and net cash flow II. At the outset, net cash cost is recognised as negative, as engine cost is higher than initial revenue; but profit

recognition is positive; a debtor is created III. Over time, cumulative cashflow from aftermarket brings cash closer to, or even above, the cumulative recognised

linked profit margin IV. Timing differences between profit & cash are recognised through the TotalCare® net debtor balance each year; at the

end of the contract, profit & cash are the same and the net debtor balance will be zero V. Commercial agreements will cover a number of engines, typically delivered over several years, so the overall contract

cash/profit chart is a blend of different lines

Drivers of the TotalCare® Net Debtor post OE sale

Net debtor rises due to: Net debtor falls due to:

Cash outflow delivering repair overhauls

Flying hour receipts

7. TotalCare® net debtor balance reflects the difference between the cumulative cash flow and the cumulative profit lines. In the example, in Year 0 cumulative cash is a $1m outflow whereas profit recognised is $2m so the net debtor balance would be $3m. In subsequent years the cash inflow exceeds the profit taken on the contract so the debtor would start to fall. By the end of year 3 it would have reduced down to $0.6m (cumulative profit of $2.6m vs cumulative cash inflow of $2m) but it would increase again in year 4 when the overhaul occurs and profit and cash flow diverge.

$3m

4. Impact of change in TotalCare® contract margin

Example assumes a 10 year contract with illustrative figures

1. At the end of Year 5, total future costs are now expected to be $12m instead of the original $10m. The change in cost estimates reduces the expectation of total contract margin to 14%

4. These are added to the revised annual concession $(0.2)m and cost of sales of $(0.7)m, to make a linked margin of $(1.4)m for that year and thus achieve the new linked margin of 14% over the life of the contract

3. In year 6, there is $(1.5)m of catch-up flowed through a combination of concessions $(0.5)m and cost of Sales $(1.0)m to ensure that the cumulative profit taken is per the new margin of 14%

2. By the end of year 5, previously assuming a 29% margin, $4.5m of concessions and $7.5m of cost of sales have been recognised, giving a total margin of $3m. However, based on the new margin of 14% a cumulative margin $1.6m should have been taken

5. TotalCare® contract margin changes during contract

1. The linked margin made on TotalCare® contracts can often change through the life of the contract, due to a changing assessment of factors

2. Assessments undertaken every 6 months including detailed analysis of engine performance and utilisation specific to each contract

3. Change in expected margin of contract is reflected as: a) a catch-up adjustment to take account of prior year impacts of the revised margin; and b) current year adjustment

4. Can produce significant movements, particularly later in the life of the

contract where the catch-up covers a number of prior years

Drivers of the TotalCare® Net Debtor

Net debtor rises due to: Net debtor falls due to:

• When contract outlook & margin improves i.e. lower forecast costs and improved overall profitability, generating a profit catch-up

• When contract outlook worsens i.e. higher forecast costs (adjustment to linked margin)

Factors include… • market conditions • utilisation rates • lifetime cost

improvements i.e. engine performance servicing intervals and shop visit cost changes

6. Impact of TotalCare® net debtor

• Engine deliveries

• Improved outlook

• Improved lifecycle costs

• Positive valuation allowance

• Positive catch-up adjustment

• Worsening outlook

• Unwind of engine balances

• Reduced valuation allowance

• Negative catch-up adjustment

TotalCare® net debtor

More profit than cash

• A rise in TotalCare® net debtor reflects a growing contract book or a positive outlook, a decline implies a negative outlook or a reduction TotalCare® contracts

• In the P&L, the impact can be seen in both revenue and gross margin depending on the type of adjustment

• In aggregate, the TotalCare® net debtor moves by the net effect of a number of factors

More cash than profit

the magazine ISSUE 148 25

SERVICESthe magazine

A ServiceMeNTALiTY

Nearly 20 years ago Rolls-Royce turned the world of engine services on its head with an entirely new approach – today

it is embarking on a wide-ranging plan that promises to transform the industry once again.

26 rolls-royce.com

he game-changer in 1997 was the launch of TotalCare®. Previously, engine manufacturers had a profit incentive to provide services

around fixing engines, while engine owners or operators were keen to avoid maintenance costs. But TotalCare replaced that with a new business model – one where owners or operators paid money per hour flown, and Rolls-Royce accepted the risk of ensuring and guaranteeing reliability.

Overnight, Rolls-Royce had a new incentive – to keep their engines flying rather than repairing them as frequently as possible. A complete change in approach and one that aligned its interests with those of its customers.

And that impetus brought a whole host of engine service innovations to make that happen, most notably increasingly sophisticated engine health monitoring, where data is continually analysed to make better decisions about how and when repairs should take place, at the least inconvenience to airlines and the travelling public.

The service has become hugely popular since the first TotalCare contract, with American Airlines in 1999. Today 90% of the Rolls-Royce Trent engine fleet is supported by TotalCare and every Trent customer that has selected TotalCare has chosen it with any subsequent engine purchase.

In the widebody market, the company has

grown from a single-digit market share in the early ‘90s to 45% today.

But that success has itself created a new set of challenges – and in meeting them, Rolls-Royce again taking a lead in developing engine services for the modern era.

For example, the Rolls-Royce installed engine fleet stood at 2,160 in 1995, 4,600 today and will be 7,450 by 2025 – and the biggest growth will be in emerging regions such as South East Asia, China and the Middle East. At the same time, Rolls-Royce’s Trent engine fleet mix is changing. While the average age is still just over seven years, there are early build Trent engines now approaching the ‘mature’ phase of their lives.

In response, Rolls-Royce is transforming its services on a number of fronts and innovating to keep ahead of the game – with choice, flexibility, competition and capability core themes.

Changes cover new customer services, new ways of working with customers, and a new maintenance network.

Rolls-Royce customer services have been evolving over the past two years. Firstly it launched TotalCare® Flex®, a version of TotalCare designed specifically for the owners of ‘mature’ engines. Designed to manage those engines to final retirement, it was chosen last year by AerCap and South African Airlines, Cathay Pacific and bmi regional for Trent 500, Trent 800 and AE 3007 engines respectively.

Now Rolls-Royce has added an entirely new customer service option. SelectCare™, launched in January 2016, fits between Rolls-Royce’s fully comprehensive TotalCare service (which maximises engine time on wing in addition to giving long-term cost certainty on a dollar-per-flying-hour basis) and MRO Services, where customers contract for shop visit support on an individual time and materials basis.

T

Tom Palmer, Director, Services, in the Rolls-Royce Operations Centre.

SelectCare is designed for customers who want to pay an agreed price for a fixed number of engine overhauls. In addition, the customer can select from a range of service options and pay for these on a dollar-per-engine-flying-hour basis. This creates a new business model, where a customer continues to receive cost predictability, but takes on more time-on-wing risk.

Perhaps fittingly, the SelectCare launch customer is American Airlines, the original TotalCare pioneer. The airline has chosen SelectCare for all RB211-535 engines that power its Boeing 757 fleet and were previously supported by separate TotalCare and MRO Services agreements.

Changes have also taken place in the way engine services are delivered – with the aim of literally getting closer to customers.

SolutionsAs the nature of air travel, and the Trent fleet, becomes ever more global, Rolls-Royce has been faced with the challenge of providing better customer service around the world, requiring decisions on engine maintenance to be made more quickly. That in turn means more local decision-making, in the customer’s time zone, informed by a better and closer understanding of customer needs.

The solution has been the creation of a network of Customer Service Centres, serving distinct global regions, with the authority to make decisions while still connected to

Rolls-Royce functions such as the 24/7 Operations Service Desk in Derby, UK, which carries out engine health monitoring.

“We are absolutely committed to improving the customer experience with our services. They want faster decision-making and share the same working day. What we have achieved is a significant organisational shift, getting closer to our customers and having a much more intimate understanding of their requirements and their culture,” says Tom Palmer, Rolls-Royce Director, Services.

“They have been set up to deliver a wide range of support – from engineering capability with delegated aviation safety agency authority, to operational planning, data services, sales campaign support and customer account management.

“In addition, the Customer Service Centre acts as its own regional hub for our Airline

Support Teams that are co-located with our customers, providing them with greater support and a greater spirit of working as a regional team.”

The initial Customer Service Centre was set up in Singapore in February 2015 within the 65,000 square metre Rolls-Royce site at Seletar, one of the largest aerospace facilities in Singapore, with a remit covering an Asia Pacific region that accounts for 20% of Rolls-Royce civil large engines in service.

It has already delivered results: in its first year in service it improved customer issue resolution responsiveness by more than 50%.

Following that success, the rest of the global Customer Service Centre network – serving the Americas, Greater China, the Middle East and Europe – ‘went live’ in January this year.

The company has also set up an additional customer team, on a global basis, to renew its focus on an increasingly important part of its business, that of lessors – which now own around 30% of Rolls-Royce engines in service, a figure which is expected to grow to around 50% by 2025.

The team is focused on supporting the quick transitions of Rolls-Royce powered aircraft between operators and is already thinking how new approaches can be more effectively brought together for lessors.

“We have already innovated with lessors to support transactions but we want to take that further and we are already thinking about how ‘LessorCare’ might look. We know we don’t have

the magazine ISSUE 148 27

We are absolutely committed to improving the customer experience with our services.

Tom Palmer, Rolls-Royce Director, Services.

LEFT Trent engines being serviced.

HERE A Trent XWB powering a Vietnam Airlines A350 XWB.

28 rolls-royce.com

all the answers and we will be discussing what this service should do with individual lessors to ensure we have covered their requirements,” says Simon Goodson, Senior Vice President – Customers, Lessors Customer Team.

Another services feature in the process of significant development is in the Trent Service Network that helps provide the support services that make Rolls-Royce TotalCare, SelectCare and MRO Services work day in and day out.

The Approved Maintenance Centre (AMC)element of the Trent Services Network was, at the start of 2015, very much as it had been set up in the 1990s, with joint equity MRO (maintenance, repair and overhaul) shops and a wholly-owned facility. While that had supported Rolls-Royce well, it was clear that there was a need to change to bring greater capability, competition and flexibility into the system to respond to the future growth of the Trent fleet and changing mix of engines within it.

TransformedTwo significant changes have taken place to make this happen. Firstly, the way the MRO network worked was fundamentally transformed. Previously Rolls-Royce divided its TotalCare service load amongst the network on the basis of geographic rights between the AMCs – HAESL, a joint venture with Hong Kong Aircraft Engineering Company Limited and SIA Engineering Company Limited; SAESL, a joint venture with SIA Engineering Company Limited and Hong Kong Aero Engine Services Limited; and N3, a joint venture with Lufthansa Technik AG, as well as its own facility in Derby, UK.

This territory-based arrangement used by Rolls-Royce to direct MRO work to each AMC was to be replaced with a competitive model where each AMC will need to compete to

secure their Trent TotalCare engine overhauls and compete globally for basic ‘time and material’ business terms.

The changes, which are subject to certain closing conditions, including regulatory approvals, will increase competition within the network and also raise capability levels, but this change in approach also led to the decision to close the TAESL (Texas Aero Engine Service Ltd) facility, a joint venture with American Airlines which carried out work on Tay 620/650, RB211, and Trent 800 engines, due to both reduced demand and lack of future growth opportunities.

Secondly, the AMC network composition itself changed with the announcement in November last year of Delta TechOps as the first independent AMC. It will carry out work on Trent XWB and Trent 7000 engines for Delta Air Lines and other customers.

It is a significant addition to the Trent Service Network’s capability – Delta TechOps is the largest MRO in North America, and third largest in the world, serving more than 150 aviation and airline customers around the world, with capability and experience that covers the entire engine lifecycle. Work will start on the 100,000 sq ft new facility in 2018 and it will come on stream in 2020.

Today, Rolls-Royce engine services may seem wide ranging, global and fully digitised, with systems analysing billions of data points every flight. But in fact that services portfolio addresses just 4% of an operator’s direct operating costs on a typical flight.

Now the company can see ways it can support operators with an additional 65% of that cost by fully utilising its digital skills.

So instead of the traditional ‘break/fix’ model of engine services, Rolls-Royce would also

provide a whole new raft of services designed to help operators keep aircraft flying and meeting busy schedules, flying more efficiently, and ensuring their engine retains its value. It involves Rolls-Royce using its knowledge more widely – to understand aircraft routes and flight paths, air traffic control and the weather right through to managing an operator’s engine inventory and helping them plan that inventory right through to the point of engine disposal, either to another operator or to retirement.

These Service Solutions, Availability Services, Efficiency Services and Asset Value, are now being added to the existing Maintenance Services element of the TotalCare portfolio as options, and there has already been customer take up.

Norwegian has recently added Availability

LEFT Borescope inspection of an engine.

RIGHT A Trent 1000 on a Boeing 787-9.

Services to its TotalCare portfolio covering 30 Trent 1000-powered Boeing 787 Dreamliners where Rolls-Royce will use its technical knowledge to support the airline in ensuring their aircraft are ready and able to depart on time.

Cathay Pacific, Singapore Airlines and Air Mauritius have already signed for Efficiency Service Solutions that involve Rolls-Royce using its advanced data analytics.

maximiseFor example, under the five-year contract with Singapore Airlines, Rolls-Royce will analyse flight data against predictions to maximise fuel efficiency. The deal covers a total of 137 aircraft operated by Singapore Airlines and its subsidiaries SilkAir, Singapore Airlines Cargo

and low-cost carrier Scoot.Rolls-Royce will deliver this service by using

its fuel management tool, VisiumFUEL, which analyses data from on-board system monitoring, flight planning, operations control and engineering systems.

“Airlines currently operate to an on-time performance of about 45%, but they believe they could improve to 90% or above, and we have an important role to play in helping them get there,” says Tom Palmer.

“Most airlines can see that the digital revolution gives them enormous opportunities, improving connectivity, responsiveness and performance and they know it can also reduce infrastructure costs. But they want support – from a partner that has deep industry knowledge and is committed to

using data intelligently to really affect their day to day operations.

“And we at Rolls-Royce have all the attributes to do that – the skills, the knowledge, the understanding of data. But just as important is the human factor – our commitment to our customers, our willingness to work with them and understand their particular needs. If we get that right, our services future promises to be dimensionally different to our world now.”

AUTHOR Bill O’SullivanBill o’Sullivan is a former industrial editor of the Newcastle evening Chronicle and worked for several years on other regional newspapers. He is now a member of the civil aerospace communications team for rolls-royce.

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