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Revelation
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Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 2:23 pm

So much bad news for RR in their first half results:
  • £2.8bn negative cash flow
  • £3.3bn loss on trading
  • £1.5bn losses due to bad currency hedging
  • CFO is leaving
  • Seeking to sell ITP Aero and a number of other assets
  • Closing two factories
  • 4,000 employees already left this year
  • At least 5,000 more employees to go this year
  • Engine flight hours down by 75%, impacting power by the hour revenue
  • TXWB-84 compressor blade cracking issue discovered
  • Dividends scrapped
  • Company market valuation declined by 2/3rds in one year

Problems clearly are compounding, yet my relative in Derby is still working overtime making turbine blades to keep up with demand for T1000 rebuilds. I was hoping he'd take a package but his wife is still working and he doesn't want to sit at home alone so he is going to keep working as long as he can.

Ref: https://www.telegraph.co.uk/business/20 ... 54bn-loss/
Ref: https://www.bbc.com/news/business-53929215
Ref: https://www.theguardian.com/business/20 ... s-aviation
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Opus99
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 2:40 pm

Wow, i don't think i've ever seen so many problems at once, even for Boeing
 
ltbewr
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 2:49 pm

Will the current UK government give them a bailout ? Too many jobs are at stake for politicians to ignore and could do it easier as not part of the EU anymore so no worries of pesky anti-subsidy rules.
 
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SamYeager2016
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 2:53 pm

ltbewr wrote:
Will the current UK government give them a bailout ? Too many jobs are at stake for politicians to ignore and could do it easier as not part of the EU anymore so no worries of pesky anti-subsidy rules.

Currently in transition till end of the year so EU rules still apply. Even if they didn't I wouldn't have held my breath for a bailout.
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 3:03 pm

SamYeager2016 wrote:
Even if they didn't I wouldn't have held my breath for a bailout.

One thing the CEO keeps emphasizing is their defense (defence) business is not being impacted. The problem for him is that it is a relatively small part of their business. He also said their power business is "rebounding" but again it's not a big business relative to the commercial aviation business.

I don't observe UK politics much but I'd have a hard time seeing any government letting this business fail, it really is an important driver for the UK's technology / engineering sector.

I wonder if we could eventually see something like the 70s where RR went through bankruptcy and then was nationalized? Not saying we're close to that point (as the CEO says, they still have assets to sell) but am interested if that is still something that can happen.
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2175301
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 3:06 pm

It's actually not surprising given the substantial miss on both the 787 engine and on the "efficiency PIP for Emirates" A380 engine which combined already left the company financially in trouble. Just add reduced "Power by the hour" payments and you now have the perfect storm. Note that "Power by the Hour" is trademarked by RR as they reintroduced the concept in the 1980's and was originally developed by Bristol Siddeley for Viper engines: per Wiki). I personally always thought that "Power by the Hour" was risky based on economic cycles, unless its rates were high and a portion was put into a conservative investment fund to cover downturns. Now we know how risky.

Sounds like: 3 strikes and your out.... (and that's assuming that the TXWB-84 issues are just minor and on a few engines and not widespread like developed on the 787 engines).

I'm not sure in what form the RR Aviation/combustion turbine division will survive...

Have a great day,
 
astuteman
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 3:15 pm

Revelation wrote:
SamYeager2016 wrote:
Even if they didn't I wouldn't have held my breath for a bailout.

One thing the CEO keeps emphasizing is their defense (defence) business is not being impacted. The problem for him is that it is a relatively small part of their business. He also said their power business is "rebounding" but again it's not a big business relative to the commercial aviation business.

I don't observe UK politics much but I'd have a hard time seeing any government letting this business fail, it really is an important driver for the UK's technology / engineering sector.

I wonder if we could eventually see something like the 70s where RR went through bankruptcy and then was nationalized? Not saying we're close to that point (as the CEO says, they still have assets to sell) but am interested if that is still something that can happen.


The defence component won't be allowed to fail, for certain (and as a stand alone, is probably holding its own just now)

Rgds
 
enplaned
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 4:20 pm

2175301 wrote:
It's actually not surprising given the substantial miss on both the 787 engine and on the "efficiency PIP for Emirates" A380 engine which combined already left the company financially in trouble. Just add reduced "Power by the hour" payments and you now have the perfect storm. Note that "Power by the Hour" is trademarked by RR as they reintroduced the concept in the 1980's and was originally developed by Bristol Siddeley for Viper engines: per Wiki). I personally always thought that "Power by the Hour" was risky based on economic cycles, unless its rates were high and a portion was put into a conservative investment fund to cover downturns. Now we know how risky.


I'm not sure how much riskier PBH is relative to conventional arrangements. Outside of PBH, the engine business is all about sales of LLPs (life limited parts) and, in a downturn, sales of new LLP material drops massively because airlines will take all kinds of measures to avoid it - swapping engines, mixing and matching modules between engines, collecting used LLPs with decent life left on them to create engines that can be used for another few thousand hours, etc, anything to avoid having to pay the OEM for new material. So, whether an engine OEM has PBH programs or not, they're going to get hurt in an environment like this.

There's a decent chance RR doesn't survive in an independent form. Both GEAE and PW are part of larger combines which provides them some level of support (though in the case of GEAE, the larger GE is nowhere near as healthy as it once was). RR is alone. And this is a perfect storm - once again, its decision to sell off its stake in IAE looks pretty dubious, since now RR is all about widebody engines and that's far worse right now than narrowbody engines.

Presumably there's a price at which PW might be interested in RR. Post Brexit, I doubt whether a European solution is on the cards and I wonder whether Safran has the financial strength to provide the support that RR will need (MTU is small enough that it's pretty clear it cannot). But the new Raytheon is huge.
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 5:43 pm

Pratt & Whitney may show some interest in Rolls Royce. However, I think that P&W has some of their own issues to take care of and they also may be buy into RR when they are in more dire straits and the price is low enough to make an offer to acquire or merge with Rolls Royce. The British are going to need to watch for front companies, that may be controlled by the Chinese, trying to acquire a controlling interest in RR just so they can gain priority information for their own use. Then the British government would need to bail RR out and possibly nationalize RR again. :old:
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 6:34 pm

enplaned wrote:
RR is alone. And this is a perfect storm - once again, its decision to sell off its stake in IAE looks pretty dubious, since now RR is all about widebody engines and that's far worse right now than narrowbody engines.

Presumably there's a price at which PW might be interested in RR. Post Brexit, I doubt whether a European solution is on the cards and I wonder whether Safran has the financial strength to provide the support that RR will need (MTU is small enough that it's pretty clear it cannot). But the new Raytheon is huge.

Your post makes me wonder about RR's thoughts around targeting the UltraFan. I doubt they really want to shake up the wide body market, they're more likely to want to ride the storm out. Then the question becomes would/could they find an entry into the high end of the narrow body market? That will be fascinating to see.

PW would be interested in RR if they thought RR's upcoming tech was better than their own. I'm not sure that's the case. Or maybe PW would want to buy their way into the A350 franchise and half the 787 market when RR's market valuation is so low? Very intriguing. Yet as above, those markets are going to be very flat for several years to come and there still is the deep hole that was dug by the T1000 problems.

UltraFan seems to be one of the few "chips" that RR can put onto the table in the near future, I would think. Hopefully the demonstrator comes together without any unforseen issues.
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Noshow
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 6:44 pm

All those troubles seem to have started when the Nimrod did not materialize.
 
MIflyer12
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 6:53 pm

Revelation wrote:
SamYeager2016 wrote:
Even if they didn't I wouldn't have held my breath for a bailout.

One thing the CEO keeps emphasizing is their defense (defence) business is not being impacted. The problem for him is that it is a relatively small part of their business. He also said their power business is "rebounding" but again it's not a big business relative to the commercial aviation business.


As you note those are not big businesses. From the last annual report reflecting GBP 15.5 Billion in underlying revenue:

20% defence

22% power systems

51% civil aerospace

6% ITP aero

1% non-core
 
2175301
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 7:14 pm

The very real question is does the RR Civil Aerospace segment have any actual positive value. The T 1000 for the 787 has been a financial disaster... While the worst of that is over (we hope), that does not mean that the T 1000 will "for sure" break even in the future and generate profits. With the cracking problem on most of the A350 engines... is that indeed minor; or is that going to balloon to affect all the engines and at substantial cost (the T 1000 issues started very similarly). I'm not sure how anyone values that engine program. Need we discuss the A380 engine; and how they do not meet fuel burn guarantees... and that its not expected that these will have a high degree of future use. Will the UltraFan actually live up to its hype? Based on the performance of the previous several engine programs... Is this a real profit maker... or another pending financial disaster.

Any buyer is going to be asking questions like that.... I'm not sure that the RR Civil Aerospace division actually has any positive value for RR's future.

Is RR better trying to sell of the other divisions to save Civil Aerospace.... or are they better shutting down Civil Aerospace and focusing on the rest of the company? Of course such a shutdown would not be instant - and someone would end up maintaining the engines in service. But, various new aircraft could be transitioned to other engines likely within about 2 years or so.
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 7:29 pm

Clearly RR is the best engine in the world. However when brexit is final so is RR. U.K:s economy will fall over the cliff and COVID19 is just the trigger.
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 8:24 pm

2175301 wrote:
It's actually not surprising given the substantial miss on both the 787 engine and on the "efficiency PIP for Emirates" A380 engine which combined already left the company financially in trouble. Just add reduced "Power by the hour" payments and you now have the perfect storm. Note that "Power by the Hour" is trademarked by RR as they reintroduced the concept in the 1980's and was originally developed by Bristol Siddeley for Viper engines: per Wiki). I personally always thought that "Power by the Hour" was risky based on economic cycles, unless its rates were high and a portion was put into a conservative investment fund to cover downturns. Now we know how risky.

Sounds like: 3 strikes and your out.... (and that's assuming that the TXWB-84 issues are just minor and on a few engines and not widespread like developed on the 787 engines).

I'm not sure in what form the RR Aviation/combustion turbine division will survive...

Have a great day,

By normal downturns, Power by the hour would never lose money. Absolutely no one, before this year, would have predicted a 75% drop in revenue. In prior recessions 1990s, 2001, 2008) Power by the Hour was brilliant!

This is much worse than a normal recession. We have a debt bubble due to extended quantitative easing, huge trade imbalances, and then the Covid19 shutdown.

It isn't just RR undergoing a reset.
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 8:41 pm

2175301 wrote:
...The T 1000 for the 787 has been a financial disaster... While the worst of that is over (we hope), that does not mean that the T 1000 will "for sure" break even in the future and generate profits.


Very interesting thought. Especially with the production rate of widebodies being slashed, it could be a very very long time for this program to get out of the hole that it’s in. They also need to hope more existing customers don’t go by the way of AirNZ and switch power plants on new orders.
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 8:52 pm

Badly run company that probably regrets almost every decision made over the past 10-15 years.

Quitting the NB market was a huge mistake as RR were never financially secure enough to build a WB engine. The international outsourcing was another disaster for them. Result was the 787 T1000 fiasco.
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 9:05 pm

If I remember correctly, engines on the 787 can be swapped with relative ease (compared to other aircraft), right? If RR folds then how quickly could GE move to transition the worldwide RR 787 fleet to GE engines?
 
Noshow
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 9:15 pm

On a positive note they were UK government rescued in the early days of the Trent back then and recovered back to old glory again.

This current situation might end up tricky for Airbus it seems to me. RR is to Airbus what GE is to Boeing. Airbus might need some plan B engine option for the A350 from GE.
 
JohanTally
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 10:37 pm

TTailedTiger wrote:
If I remember correctly, engines on the 787 can be swapped with relative ease (compared to other aircraft), right? If RR folds then how quickly could GE move to transition the worldwide RR 787 fleet to GE engines?


It can be done but is extremely cost prohibitive and will likely never happen.
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 11:04 pm

JohanTally wrote:
TTailedTiger wrote:
If I remember correctly, engines on the 787 can be swapped with relative ease (compared to other aircraft), right? If RR folds then how quickly could GE move to transition the worldwide RR 787 fleet to GE engines?


It can be done but is extremely cost prohibitive and will likely never happen.

To build on JohanTally's comment:
Many here remember the promise that the engines and nacelles would be all that was changed. That didn't happen. Cockpit software and the pylon also must be changed. It can be done, but I estimate the cost of new engines, nacelles, pylons, and flight testing at $45 to $50 million and two months of downtime, but the benefit of having the used engines and nacelles.

No delivered aircraft would do this.

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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 11:07 pm

JohanTally wrote:
TTailedTiger wrote:
If I remember correctly, engines on the 787 can be swapped with relative ease (compared to other aircraft), right? If RR folds then how quickly could GE move to transition the worldwide RR 787 fleet to GE engines?


It can be done but is extremely cost prohibitive and will likely never happen.


One thing I'm kinda curious about is whats the lifetime of engines versus the plane? I know this depends on lots of variables, etc, but a ballpark figure would be helpful.

So for example one of the US3 buys/leases 10 narrow body planes and 21 engines. (20 on wing and 1 spare.) Do those 21 engines retire at the same time as the airplanes? Or at 10 years in do you have to buy another 21 engines?

Likewise how would that vary for widebody planes?

I guess this relates into the 787's engine swapping being, if you're going to have to buy new engines, when you're swapping them might be a time to switch providers..
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 11:14 pm

Another big question is how this would affect the Trent 7000 and the already struggling A330neo program :?:
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 11:21 pm

JohanTally wrote:
TTailedTiger wrote:
If I remember correctly, engines on the 787 can be swapped with relative ease (compared to other aircraft), right? If RR folds then how quickly could GE move to transition the worldwide RR 787 fleet to GE engines?


It can be done but is extremely cost prohibitive and will likely never happen.


Right. I was just wondering what happenea if RR goes out of business. You can't maintain a RR engine when there are no parts being produced. And I was under the impression that an airframe long outlasts the turbofans and usually going through multiple engines on each wing.
 
Bricktop
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Thu Aug 27, 2020 11:36 pm

No way does UKG let Rolls go bust. They will bail them out now they are out of the EU. It will be a big blathering point for Boris. Brussels would not have let us do it but now we can kinda stuff.
 
JayinKitsap
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Fri Aug 28, 2020 1:13 am

Revelation wrote:
So much bad news for RR in their first half results:
  • £2.8bn negative cash flow
  • £3.3bn loss on trading
  • £1.5bn losses due to bad currency hedging
  • Engine flight hours down by 75%, impacting power by the hour revenue
  • TXWB-84 compressor blade cracking issue discovered


To put in perspective, 2019 revenue was 15.45 B Pounds. So the total quarterly loss of 5.4B is 35% of last years revenue. RR has lost money in 3 of the last 5 years, two with massive losses (now this!)

Ultra fan probably doesn't have the development money. RR will have a difficult time bidding tight to win orders, they can't afford to low bid, making it up on service.

I can't see PW buying into RR, but they may buy RR plants. PW's GTF can slowly migrate up into WBs, what do they gain by buying into RR as they will be stuck with RR's products. The only reason to buy would be that it gets them in the door at Airbus, but that would be at the cost of servicing all of the existing RR engines and owning any of these problems.
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Fri Aug 28, 2020 2:06 am

JayinKitsap wrote:
Revelation wrote:
So much bad news for RR in their first half results:
  • £2.8bn negative cash flow
  • £3.3bn loss on trading
  • £1.5bn losses due to bad currency hedging
  • Engine flight hours down by 75%, impacting power by the hour revenue
  • TXWB-84 compressor blade cracking issue discovered


To put in perspective, 2019 revenue was 15.45 B Pounds. So the total quarterly loss of 5.4B is 35% of last years revenue. RR has lost money in 3 of the last 5 years, two with massive losses (now this!)

Ultra fan probably doesn't have the development money. RR will have a difficult time bidding tight to win orders, they can't afford to low bid, making it up on service.

I can't see PW buying into RR, but they may buy RR plants. PW's GTF can slowly migrate up into WBs, what do they gain by buying into RR as they will be stuck with RR's products. The only reason to buy would be that it gets them in the door at Airbus, but that would be at the cost of servicing all of the existing RR engines and owning any of these problems.

If Raytheon Technologies bid, it would be with a business case. It would be with the goal of making a future profit, after any debt absorbed, off the RR product line.

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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Fri Aug 28, 2020 2:34 am

I think it's important to note in all the speculation that RR is much more than a civil aircraft engines business, even though that delivers a large portion of their revenue. They see their core business as high-tech engineering, which is applied to civil aircraft, nuclear power, nuclear submarines and their various other business units. The civil engines business could be hived off and sold to one of the other companies that play in that space, but there is no way in hell that the UK government would allow the Trident business to fall into non-UK hands, even if it were a US defence contractor.
 
2175301
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Fri Aug 28, 2020 6:52 am

TTailedTiger wrote:
Right. I was just wondering what happenea if RR goes out of business. You can't maintain a RR engine when there are no parts being produced. And I was under the impression that an airframe long outlasts the turbofans and usually going through multiple engines on each wing.


If RR "Civil Aviation" goes out of business. Someone will pick up the parts and support business. Parts and support will be available, although it may be more expensive. I would expect the "Power By The Hour" contracts to likely expire with RR Civil Aviation.
 
Noshow
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Fri Aug 28, 2020 7:07 am

Looking back this power by the hour concept really backfired for the manufacturer. Especially with those technical blade-glitches.
RR is the last crown jewel of british engineering. They need to keep it.
 
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Francoflier
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Fri Aug 28, 2020 7:22 am

Noshow wrote:
On a positive note they were UK government rescued in the early days of the Trent back then and recovered back to old glory again.

This current situation might end up tricky for Airbus it seems to me. RR is to Airbus what GE is to Boeing. Airbus might need some plan B engine option for the A350 from GE.


It will very likely not get to this worst case scenario.

Restructuring is often about splitting companies between their branches, selling money-losing assets to other parties, recapitalizing, restructuring debt etc.
RR aero engines might not be profitable due a variety of factors they were not all in control of, but it still remains a technologically advanced company with very sensitive and valuable trade patents and solutions that very few other companies and nations in the World possess. That RR can't afford to keep it is one thing, but there is little chance that others would not see its true value, starting with the UK government which might want to retain as many technologically advanced companies in the country as a strategic measure and also to save face in the increasingly muddy background of Brexit.

Even if that didn't materialize, many European nations and consortiums would be very interested in snapping up what is essentially the sole large engine European manufacturer, especially at a bargain. As you say, the Airbus group is quite codependent on RR for its civil aircraft branch and is also quite keen to deleverage itself from the consequences of Brexit. I could see them very interested, among others on the continent.

Either way, the RR aircraft engines business will very likely survive, the question is whose hands it will end up in, how will it be recapitalized and how many poor employees will lose their livelihoods during the transition.
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Noshow
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 11:33 am

Could the RR BR700 engine-family (or it's technologies) made to grow into -say- A321neo terrain or similar? However that needs a lot of money and time in any case.
 
mxaxai
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 12:38 pm

Francoflier wrote:
Even if that didn't materialize, many European nations and consortiums would be very interested in snapping up what is essentially the sole large engine European manufacturer, especially at a bargain. As you say, the Airbus group is quite codependent on RR for its civil aircraft branch and is also quite keen to deleverage itself from the consequences of Brexit. I could see them very interested, among others on the continent.

I don't think Airbus wants to get involved in engine development but I could see other suppliers like MTU, Leonardo or Safran pick up parts of RR. Large tech corporations like Siemens or Tata could also be an option, especially for the non-aviation parts.
 
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armagnac2010
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 1:34 pm

Rolls-Royce will likely survive. Like Boeing will. Too big, too important to fail.

It is interesting to note the civil engine type certificates have been quietly transferred to Germany, the type certificate holder in Rolls-Royce Deutschland. Derby is now only a subcontracting site. This is probably driven by Brexit rather than anything else - the design authority will remain EASA, as it will take years and £££ to rebuilt CAA-Uk from scratch, if this is even feasible.
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 2:00 pm

Noshow wrote:
On a positive note they were UK government rescued in the early days of the Trent back then and recovered back to old glory again.

This current situation might end up tricky for Airbus it seems to me. RR is to Airbus what GE is to Boeing. Airbus might need some plan B engine option for the A350 from GE.


UK govt not in financial position to save Rolls again.

They have left the others in economy to struggles.

Rr may fail. They have been run very badly with bad products like Trent 1000
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 2:26 pm

FrenchPotatoEye wrote:
Noshow wrote:
On a positive note they were UK government rescued in the early days of the Trent back then and recovered back to old glory again.

This current situation might end up tricky for Airbus it seems to me. RR is to Airbus what GE is to Boeing. Airbus might need some plan B engine option for the A350 from GE.

UK govt not in financial position to save Rolls again.

They have left the others in economy to struggles.

Rr may fail. They have been run very badly with bad products like Trent 1000

UK will not let RR fail.

RR is downsizing itself by closing factories, laying off workers and selling assets.

If that's not enough a trip through bankruptcy will let them restructure and be purchased or re-nationalized.
Wake up to find out that you are the eyes of the world
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FrenchPotatoEye
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 2:38 pm

UK got will not renationalise

They don't have the money. Also, other businesses would be up in arms over such move.

The govt didn't help virgin either. They won't saving rr either too.
 
AngMoh
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 2:46 pm

FrenchPotatoEye wrote:
Noshow wrote:
On a positive note they were UK government rescued in the early days of the Trent back then and recovered back to old glory again.

This current situation might end up tricky for Airbus it seems to me. RR is to Airbus what GE is to Boeing. Airbus might need some plan B engine option for the A350 from GE.


UK govt not in financial position to save Rolls again.

They have left the others in economy to struggles.

Rr may fail. They have been run very badly with bad products like Trent 1000


If RR fails, the impact on Airbus is catastrophic. They will survive. Personally I think Temasek Holdings will invest and more jobs will move to Singapore.
727 732 733 734 735 73G 738 739/ER 742 743 744/M 752 753 762 772 77E 773 77W 788 A300 A310 A319 A320 A321 A332 A333 A343 A345 A346 A359 A35K A388 DC-9 DC-10 MD11 MD81 MD82 MD87 F70 ERJ145 E170 E175 E190 E195 ATR72 Q400 CRJ200 CRJ700 CRJ900 BAE146 RJ85
 
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FrenchPotatoEye
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 2:54 pm

Rr capex is ower value than the total sums of their debts.

Rr is in the big trouble I. Thinks.
 
MIflyer12
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 3:05 pm

FrenchPotatoEye wrote:
UK got will not renationalise

They don't have the money.


Sure they do. Every country with its own currency and Central Bank can create money. The U.S. Federal Reserve 'made' $2.3 Trillion in less than four months. GBP 10 Billion to nationalize Rolls would have no meaningful impact on UK debt to GDP.

https://www.brookings.edu/blog/up-front ... us-crisis/
 
2175301
Posts: 1907
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 3:25 pm

armagnac2010 wrote:
Rolls-Royce will likely survive. Like Boeing will. Too big, too important to fail.

It is interesting to note the civil engine type certificates have been quietly transferred to Germany, the type certificate holder in Rolls-Royce Deutschland. Derby is now only a subcontracting site. This is probably driven by Brexit rather than anything else - the design authority will remain EASA, as it will take years and £££ to rebuilt CAA-Uk from scratch, if this is even feasible.



You are correct in the overall assessment of RR. However, that is because RR is a very important engineering technology company with very important market segments that are not related to commercial aircraft engines.

RR will survive. However, it may well be that they do that without the commercial aircraft engine division. It appears that all the major losses in the last decade at RR has been from the commercial aircraft engine Division. Is it worth saving, and at what cost?
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 3:59 pm

MIflyer12 wrote:
FrenchPotatoEye wrote:
UK got will not renationalise

They don't have the money.

Sure they do. Every country with its own currency and Central Bank can create money. The U.S. Federal Reserve 'made' $2.3 Trillion in less than four months. GBP 10 Billion to nationalize Rolls would have no meaningful impact on UK debt to GDP.

https://www.brookings.edu/blog/up-front ... us-crisis/

:checkmark:

2175301 wrote:
You are correct in the overall assessment of RR. However, that is because RR is a very important engineering technology company with very important market segments that are not related to commercial aircraft engines.

RR will survive. However, it may well be that they do that without the commercial aircraft engine division. It appears that all the major losses in the last decade at RR has been from the commercial aircraft engine Division. Is it worth saving, and at what cost?

It seems to me to be a case tailor-made for a reorganization.

RR Aero has some valuable assets with temporary impairment. T1000 was a disaster and cost lots of money but they are through much of that pain and in the end they are still on a sizable percentage of the 787s out there. They are also on 100% of the A350s which is also a large business. They have the makings of an excellent next generation engine after many years of development efforts. A reorganization to shed debt and right-size the business to post-covid norms would stiff the current share holders but would produce a core business worth having, IMO. How exactly to pull that off is a great question I'll leave for someone else, but it seems it's been done before.
Wake up to find out that you are the eyes of the world
The heart has its beaches, its homeland and thoughts of its own
Wake now, discover that you are the song that the morning brings
The heart has its seasons, its evenings and songs of its own
 
frmrCapCadet
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 4:59 pm

Generally in a bankruptcy creditors in one way or another end up owning the company and they in turn sell it to whomever gives them the best price. EU, UK, Airbus, even Boeing will ensure that someone picks up the pieces. Perhaps someone might like to speculate in more details how this could play out.
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smartplane
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 8:37 pm

Ignoring all other elements of RR, commercial aero engines have four revenue streams - PBTH, non-PBTH support, design / consultancy and manufacturing / new sales. The first three are intrinsically profitable, but will wither without the fourth.

The financial result is RR writing off every skeleton in the cupboard. Others will do the same.

The air frame OEM's have been greedy with the engine OEM's - onerous supply agreements, high levels of retrospective credits (including on parts, PBTH, and even direct sales of engines to customers), free hack engines, and large withholding payments, making PiP's and new developments not viable even pre-COVID.

There must be a paradigm shift. Either customers must pay more to maintain the status quo. Or air frame OEM's become engine OEM's. Or sales are made on a more equitable basis. If not, there will be a decade long (or longer) hiatus, where there are no new engine developments in terms of performance, efficiency, noise or pollution.

Air frame OEM's, especially Boeing, make an early new year's resolution to suppliers.
 
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 11:02 pm

smartplane wrote:
Ignoring all other elements of RR, commercial aero engines have four revenue streams - PBTH, non-PBTH support, design / consultancy and manufacturing / new sales. The first three are intrinsically profitable, but will wither without the fourth.

The financial result is RR writing off every skeleton in the cupboard. Others will do the same.

The air frame OEM's have been greedy with the engine OEM's - onerous supply agreements, high levels of retrospective credits (including on parts, PBTH, and even direct sales of engines to customers), free hack engines, and large withholding payments, making PiP's and new developments not viable even pre-COVID.

There must be a paradigm shift. Either customers must pay more to maintain the status quo. Or air frame OEM's become engine OEM's. Or sales are made on a more equitable basis. If not, there will be a decade long (or longer) hiatus, where there are no new engine developments in terms of performance, efficiency, noise or pollution.

Air frame OEM's, especially Boeing, make an early new year's resolution to suppliers.

Both Boeing and Airbus need lower engine prices. The contract terms you list are why we see NEO/MAX instead of new airframes with the new engines. As long as there are 3 engine vendors and two airframers, this will continue.

When/If there are two engine vendors, the cost of new engines will be prohibitive, so the airframers will switch to demanding more PiPs. On the 787/A320 easy, to sell on models with some minor airframe PiPs, you must PiP the engine(s). On sole source, that will be tougher.

Right now, Airbus and Boeing are fighting for their own survival, so there is nothing they will do for vendors except buy critical failing vendors.

There is only a need for a new 7 or 8- across widebody, a scope compliant 76 seat RJ, and arguably a Boeing NSA. Because there will be so little to bid on, the engine vendors will have it tough.

There is a need to replace the PW300 and HTF75000.

I expect the Pearl family to do well, but not as well as the BMR7xx family as now the PW816 and PW812 have competing wins.

RR will have it tough.

Lightsaber
Winter is coming.
 
smartplane
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sat Aug 29, 2020 11:26 pm

lightsaber wrote:
smartplane wrote:
Ignoring all other elements of RR, commercial aero engines have four revenue streams - PBTH, non-PBTH support, design / consultancy and manufacturing / new sales. The first three are intrinsically profitable, but will wither without the fourth.

The financial result is RR writing off every skeleton in the cupboard. Others will do the same.

The air frame OEM's have been greedy with the engine OEM's - onerous supply agreements, high levels of retrospective credits (including on parts, PBTH, and even direct sales of engines to customers), free hack engines, and large withholding payments, making PiP's and new developments not viable even pre-COVID.

There must be a paradigm shift. Either customers must pay more to maintain the status quo. Or air frame OEM's become engine OEM's. Or sales are made on a more equitable basis. If not, there will be a decade long (or longer) hiatus, where there are no new engine developments in terms of performance, efficiency, noise or pollution.

Air frame OEM's, especially Boeing, make an early new year's resolution to suppliers.

Both Boeing and Airbus need lower engine prices. The contract terms you list are why we see NEO/MAX instead of new airframes with the new engines. As long as there are 3 engine vendors and two airframers, this will continue.

If Boeing and Airbus reduced their demands for below the line payments from the engine OEM's, or quarantined those payments / credits and channeled them into air frame enhancements and / or sponsored PiP's instead of going on their bottom line (Boeing especially and being distributed to shareholders), we would see more step changes, innovation and better testing.
 
frmrCapCadet
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sun Aug 30, 2020 1:13 am

I remain convinced that less expensive engines also more reliable, a little less efficient, and not so bleeding edge would be healthy both for the economy and the environment. They can pay some carbon tax on fuel. Modestly discouraging some marginally useful flying is another possibility. It is horrible to have all of the air-frame makers, engine manufacturers, and the airline industry at the edge of bankruptcy. They all are important sectors of our economy.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
2175301
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sun Aug 30, 2020 1:46 am

smartplane wrote:
Ignoring all other elements of RR, commercial aero engines have four revenue streams - PBTH, non-PBTH support, design / consultancy and manufacturing / new sales. The first three are intrinsically profitable, but will wither without the fourth.


I disagree. I believe that only non-PBTH support is intrinsically profitable.

PBTH is profitable only if the rates were set high enough to cover the actual cost of maintaining the engine and doing normal PIPS. I believe that the evidence is that for the B787 engines that it has fallen way short based on errors made in the design and manufacturing process. In the B787 engines case, clearly the design and manufacturing process was not profitable due to the rework needed beyond normal PBTH expectations.

We don't yet know enough about the A350 engines to know if the PBTH rates are adequately profitable long term, and we will have to see how the cracking issue develops long term before any comments can be made about design and manufacturing profitability.

We know that the design/manufacturing on the latest A380 engine order fell short - and that RR is paying substantial penalties for missing the fuel burn on those engines.

Have a great day,
 
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lightsaber
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sun Aug 30, 2020 2:40 am

2175301 wrote:
smartplane wrote:
Ignoring all other elements of RR, commercial aero engines have four revenue streams - PBTH, non-PBTH support, design / consultancy and manufacturing / new sales. The first three are intrinsically profitable, but will wither without the fourth.


I disagree. I believe that only non-PBTH support is intrinsically profitable.

PBTH is profitable only if the rates were set high enough to cover the actual cost of maintaining the engine and doing normal PIPS. I believe that the evidence is that for the B787 engines that it has fallen way short based on errors made in the design and manufacturing process. In the B787 engines case, clearly the design and manufacturing process was not profitable due to the rework needed beyond normal PBTH expectations.

We don't yet know enough about the A350 engines to know if the PBTH rates are adequately profitable long term, and we will have to see how the cracking issue develops long term before any comments can be made about design and manufacturing profitability.

We know that the design/manufacturing on the latest A380 engine order fell short - and that RR is paying substantial penalties for missing the fuel burn on those engines.

Have a great day,

RR on the 787 didn't meet warrantee. So every buyer received compensation from RR. In particular for aircraft groundings.

PBTH is normally incredibly profitable. The issue is the 75% drop in revenue due to so many grounded widebodies.

Part of this is airlines are in extreame cash conservation mode. Any thing that saves today's cash is being done. If that means parking PBTH and running out if green time on other engines (and then parking them), so be it. RR has a big problem in that many (most?) customers cannot afford overhauls.

Look at all the RR customers in bankruptcy: GoL, LATAM, Virgin, Avianca, and Norwegian.

This was lock down for 2 weeks... Many airlines are in trouble. US domestic travel has recovered to 30% of prior. What is international traffic at? I can only guess worse. Link on how bad airlines are doing with US domestic data:

https://wolfstreet.com/2020/08/26/clamo ... -massacre/

PBTH is what makes RR worth investing in. But first RR needs international travel back up.

PBTH is what is needed on leased aircraft. Until those stop being returned and instead return to service, revenue will be down.

Lightsaber
Winter is coming.
 
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FrenchPotatoEye
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Re: Rolls Royce loses £5.4bn, closing two factories, looking to sell assets

Sun Aug 30, 2020 3:47 am

MIflyer12 wrote:
FrenchPotatoEye wrote:
UK got will not renationalise

They don't have the money.


Sure they do. Every country with its own currency and Central Bank can create money. The U.S. Federal Reserve 'made' $2.3 Trillion in less than four months. GBP 10 Billion to nationalize Rolls would have no meaningful impact on UK debt to GDP.

https://www.brookings.edu/blog/up-front ... us-crisis/


USA economy and population much bigger than the uk and can recoup costs better.

Rr liabilities are much much the grater than its net worth/cap-ex.

It also has the rubbish credit ratings. Can they borrororow more cheaply? Answer is no.

RR is in major trouble

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