The big three aero engine makers are vying for orders for the next generation of jets. For Rolls-Royce this could be a battle about independence, says Roger Eglin.
In the aviation industry the 1980s were unquestionably the decade of the small twin-engined jet. The Airbus Industrie A320 became Europe's top selling commercial jet while Boeing's 737, which nearly went out of production for lack of orders at one point in its life, flew to fame as the industry's all-time best-selling jet and even now one is rolling off Boeing's Seattle production line every day.
But the 1990s promise a change of step with a new breed of big, long-haul jets, carrying 300 or more passengers, dominating the market. McDonnell Douglas's MD11 is in service and Airbus's two contenders, the A330 and A340, and Boeing's twin-engined 777 (a programme that is costing nearly $4 billion) have yet to fly but are winning sales.
The impact of the big jets is being felt nowhere more keenly than in the headquarters of the big three engine manufacturers - Rolls-Royce and its two American rivals, General Electric and Pratt and Whitney. Their existing top-of-the-line engines are running out of power at around the 60,000lb thrust level and the new jets will ultimately need 80,000lb, with plans for 90,000lb.
Each manufacturer has a contender. P and W has come up with a more powerful derivative of the PW4000. General Electric and Snecma, its French partner, are investing $1.5 billion in a new range, the GE90, and not to be outdone, Rolls is spending some £400 million on the Trent, a derivative of the RB211.
So far P and W is the only company to have won orders to power the 777 and though Rolls has taken some 78 orders and options for the Trent, about half of the number won by the PW4000, these are for the twin-engined A330. GE has yet to score. The competition will intensify this year. Several key airlines are expected to make their choice of engine, among them America's United Airlines, the first to order the 777, generating what should be the most valuable clutch of engine orders ever placed.
Pratt has a head start and the 777 could conceivably become a two-engine programme with Pratt and one other supplier, leaving Rolls or GE out in the cold. This would hurt the loser hard and would once again raise the issue of whether the market can support three big engine makers.
The struggle between Rolls and GE has had an intensely personal quality to it ever since Rolls broke off its engine development pact with GE in the latter part of the 1980s. This deal was the conception of the late Lord Duncan when he was chairman of Rolls. He saw it as the answer to the grinding and costly competition between the three engine makers. But the loss of independence was too much for Rolls to swallow. After Duncan's death, the management of GE's engine business, led by Brian Rowe, an Englishman, was infuriated when Rolls scrapped the deal. The two companies have scarcely exchanged a civil word since.
GE's view is that Rolls is nOt big enough to go it alone in a business where development costs are counted in hundreds of millions of pounds and the payback period can be 20 years or more. Rolls's view is that "They would say that, wouldn't they?". The company claims to have confounded its critics with its ability to keep developing the RB211 range, as it has with the Trent, rather than having to bear the cost of a new engine off the drawing board. Nor is Rolls quite so lonely as it might seem. Germany's BMW and France's Hispano-Suiza have become Trent risk and revenue sharing partners. The partnership may not match up to the combined weight of GE and Snecma but it certainly helps to stiffen Rolls's resolve.
Technology will be important in deciding who gets the big orders but at the end of the day, price will probably be decisive. All three engine makers are battling to cut costs. Rolls has already shed 6,000 workers and will need to lose more workers and plants.
Japan's ANA airline could provide the first indication to the way that the battle may go. On the eve of the Paris Air Show, Rolls was being tipped as a frontrunner to supply engines for its recently ordered 777 fleet. Victory would be greeted with jubilation.
But the decisive campaign could come later in the year when British Airways has to decide on a big new jet. A few years ago Rolls's triumph in winning the battle with GE to supply engines for BA's latest 747s was so close that, even in the final days, GE reckoned that it had won. GE is reported to be trying to clinch matters this time by making such generous financial offers that BA will be relieved of all the spares and maintenance costs normally associated with switching from an established supplier to a new one. In these sorts of battles, money talks - and GE has plenty of it.
In the City the Trent's progress is being watched carefully. A major contract to supply engines for the 777 would be warmly received. Equally, a defeat on Rolls's home ground would again raise the question of the Derby company's ability to remain independent. Anyone with a taste for gladiatorial contests?
(Roger Eglin is managing editor of the Business section of The Sunday Times.)