Demand for travel to Asia to benefit Rolls-Royce

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Aero engine maker Rolls-Royce expects profits to rise again in 2012 as it continues to benefit from airlines’ need for more fuel-efficient planes and the relentless demand for travel to and from Asia’s burgeoning megacities.

Rolls-Royce, the world’s second-largest maker of aircraft engines behind US group General Electric, said yesterday it had made a good start to the year and that its key civil aerospace unit, which accounts for half of group sales, would lead strong profit growth at the group this year.

Rolls-Royce plans to open a factory in Rotherham to produce components for the first new nuclear plant at Hinkley Point, in Somerset. It also wants to build two other factories on the Advanced Manufacturing Park. It plans to make jet engine turbine blades capable of withstanding temperatures of more than 1,900C.

In a statement yesterday, Rolls-Royce, which makes engines for plane makers Airbus and Boeing, said: “For the full year, the group continues to expect good growth in underlying revenue and underlying profit with cash flow around breakeven as we continue to invest in future growth.”

Global airlines will buy $3.5 trillion of aircraft over the next 20 years to meet demand for travel to and from emerging markets – especially in Asia – and renew ageing fleets in the West, according to the world’s big two plane makers.

The predictions underscore soaring demand for narrow body or single-aisle jets such as the Boeing 737 and Airbus A320, the backbone of many airlines. Analysts forecast that 20,000 narrow body planes will be produced in the next 20 years.

Rolls-Royce, which reported a 21 per cent rise in 2011 profit, has more than 5,000 engines – worth some £52bn – on order. As well as airlines’ switch towards more fuel-efficient aircraft, growth last year was boosted by the acquisition of German engine maker Tognum and the sale of its stake in International Aero Engines.

A new joint venture between Rolls-Royce and US rival Pratt & Whitney to develop the next generation of engines for the mid-sized aircraft market is expected to be officially formed this year. Rolls-Royce is expected to post an average pre-tax profit of £638m for the first six months of 2012, and £1.44bn for the full year.