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Rolls-Royce expanding in the US, positive for EADS, will ancillaries change future aircraft design?

20-Oct-2009

Rolls-Royce broke ground on its new North American manufacturing facility and research campus on Monday, committing USD170 million to the site, with the potential to invest up to USD500 million in the operation.

The new facility is the first ground-up manufacturing plant for Rolls-Royce in the US, and also accommodates an education and research arm, with the manufacturer linking up with educational providers including the University of Virginia and Virginia Tech.

At the same time as it started work on its new plant, Rolls-Royce North American Technologies took another step in its US Air Force funded Adaptive Versatile Engine Technology (ADVENT) demonstrator programme. The company was selected to proceed with Phase II of the programme, which includes development of a demonstrator and engine. Rolls-Royce's shares rose 1.3% on Monday.

Good news on A400M programme for EADS/Airbus Military

Meanwhile, customers of Airbus Military’s much delayed A400M transport aircraft are reportedly nearing a deal which will see them spread deliveries over an extended period, instead of cancelling or reducing their orders. Seven European states, as well as South Africa and Malaysia have ordered the aircraft, with renegotiations expected to be finished by the end of Oct-2009.

In Jul-2009, European states involved in the development and/or acquisition of the aircraft agreed to new contract negotiations for the EUR20 billion programme. Cancellations by customers have the potential to be highly damaging to EADS, which has already taken more than EUR5 billion in pre-delivery payments. The manufacturer will still face penalties related to late deliveries for the A400M, which is almost two years behind schedule and significantly over-budget.

EADS expects the A400M to fly before the end of the year, but attempts to revamp the development have not been enough to prevent the delays from damaging the profit potential of the aircraft.

The UK is already looking to acquire Lockheed-Martin aircraft as an interim measure while the A400M delivery programme gets up to full speed. South Africa is considering whether it will cancel its order for aircraft due to the cost increase.

EADS traded down 0.1% on Monday. 

Boeing: Ancillaries will influence aircraft interior design - report

The unbundling of air travel, pioneered by LCCs and increasingly adopted by full service carriers suffering from the economic downturn, has the potential to change the way that manufacturers design their aircraft interiors. Speaking to Reuters, Boeing stated that a new focus on ancillary revenue generation by airlines is placing greater emphasis on passenger comfort and the provision of upgrade options and other extras for passengers.

As the availability in incremental upgrades in passenger service and comfort becomes more prevalent (rather than the previous clear delineation between service levels and cabins), manufacturers will need to accommodate this into their future designs, according to the report.

Particularly important for the LCC sector is the replacement for the current A320/B737 narrowbody aircraft, which make up the vast majority of the global LCC fleet. Boeing and Airbus have announced post 2020 time frames for the service debut of their narrowbody replacements, but have recently discussed applying new engine technology to existing airframes.

Boeing shares finished the day 0.5% higher on Monday. Elsewhere, MTU Aero Engines rose 0.2%.

Selected Aviation suppliers’ daily share price movements (% change): 19-Oct-09


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