Fleet Financing

Rolls Royce: An airline industry in transition

An airline industry in transition

Rolls-Royce-powered widebody aircraft have remained the preferred solution in the transition market throughout the pandemic.

The COVID-19 pandemic has presented the aviation industry with unprecedented challenges as global airlines grounded their fleets for much of 2020 and 2021. However, despite the slowdown, an encouraging trend has begun to emerge in 2021 (and will continue in 2022) – an increase in aircraft transitions. An aircraft is classified as “in transition” when it has changed ownership, operator or purpose (or any combination of the three), and there has been a lot of movement in this space as airlines re-examine their fleets in response to the pandemic.

In 2021, a number of airlines went bankrupt and many others restructured their operations, forcing planes that otherwise would not have been available on the market. This created an opportunity for the hugely popular Airbus A330ceo powered by the Rolls-Royce Trent 700.

With increased aircraft availability, the cost of purchasing or leasing one of these reliable aircraft has been reduced, allowing new entrants to the widebody market to capitalize on the opportunity. The period saw the establishment of aircraft and services agreements for the A330ceo with major established airlines, as well as start-ups getting their first Rolls-Royce-powered aircraft. This trend has occurred in both the passenger and cargo markets, a recent example being Mexican carrier MasAir. The airline plans to operate a fleet of 18 freighters over the next five years, having recently taken delivery of the first of eight A330 P2F conversions.

Good performance in 2021

Last year, the number of aircraft returned to service increased by 83%, with 177 transitions completed compared to 94 in 2020. 77 of these aircraft were powered by Rolls-Royce, with the remaining 100 split between General Electric, Pratt & Whitney and CFM. In the passenger market, the Airbus A330ceo and Trent 700 combination stood out, performing 32 of the 48 re-services over the 12-month period. The 77 transitions completed marked an increase of 41 from 2020.

One of the main trends throughout the year has been the shift in focus from a largely existing global fleet of A330s powered by Trent 700 passengers, to a fleet split between passenger and freighter. Passenger-to-Freighter (P2F) conversion capacity has increased worldwide and reported slots for conversion globally see 88% selection of Rolls-Royce powered A330s at the end of 2021, with 44 slots on 50 confirmed, while 54 other planes are still to be decided.

An encouraging sign for 2021 was the reduction in the percentage of wide-bodied aircraft stored from 31% to 24%. The A330 saw a greater proportion of its fleet moving out of storage with a decline of 41% to 31% over the same 12 month period.

These signs of flight recovery over the 12-month period highlight the important role Rolls-Royce can play in the P2F market, suggesting that 2022 and beyond should be a time of optimism and growth.

Positive growth prospects

Across our wide-body fleets, our forecast shows that in 2022 we will increase the number of aircraft placed under new CareStore service agreements and extend existing fleet contracts by approximately 200% per compared to 2021.

This will be primarily driven by the Trent 700 powered A330 being the combination of choice in the passenger market as well as, given the fleet age dynamics, the P2F market.

Along with our continued success with the A330, we are starting to see more aircraft transitions powered by one of our next-generation products (Trent XWB-84 and Trent 1000). Operators, taking the opportunity to restructure their fleets during the COVID pandemic, have forced some A350s and 787s back into the market for the transition, which has provided a great opportunity for other airlines looking to benefit from newer or larger aircraft. We work closely with our lessor and financial partners to ensure that we support these asset investments.

Complementing the successes of our widebody fleet, we continue to support several AE3007-powered aircraft returns to service. With around 50 aircraft expected to complete the transition in 2022, following a similar level of activity to 2021.

Continue to strengthen support for aircraft transitions

Our dedicated Entry Into Service (EIS) support teams ensure the seamless entry into service of new aircraft as well as aircraft transitioning from one airline to another. We are also working to further improve alignment with asset owners to ensure we are best positioned to meet aircraft needs. We are also constantly looking for service innovation and pioneering new offerings in our CareStore.

Passenger-to-cargo transitions and conversions play a key role in Rolls-Royce’s growth story as we see a return to pre-pandemic business and profits, giving us room to invest going forward, to focus on our people and meet our net zero commitments.

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Rolls-Royce Holdings plc published this content on March 30, 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unmodified, on March 30, 2022 19:24:00 UTC.

Public now 2022


Analyst recommendations for ROLLS-ROYCE HOLDINGS PLC

2022 sales 11,912m
15,681 million
15,681 million
2022 net income 344M
Net debt 2022 5,017 million
6,605 million
6,605 million
PER 2022 ratio 24.8x
2022 return
Capitalization 8,624 million
11,352 million
11,352 million
EV / Sales 2022 1.15x
EV / Sales 2023 0.98x
# of employees 44,000
Floating 99.8%


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