Rolls-Royce and Safran, major European engine OEMs with different fortunes.

By Bjorn Fehrm Subscription required. July 30, 2015 © Leeham Co. Rolls-Royce and Safran, the parent company of CFM partner Snecma, released their Q2 and first half 2015 earnings today. It is interesting to compare these companies as they are in different strategic situations in their dominant business segments, civil turbofan engines. Civil turbofans constitute 52% of Rolls-Royce total business whereas it makes 54% of Safran’s turn over. Rolls-Royce’s focus has been widebody engines to the point where it exited its part of International Aero Engines, which makes the single aisle V2500 engine, three years ago. Safran on the other hand is heavily invested in the single aisle market through its 50% part in CFM through its Snecma subsidiary. The present situation and the future outlook for these two companies are intimately aligned with this strategic difference. We look at why and how this will affect their immediate future. Summary:
  • Rolls-Royce is experiencing migration problems in its widebody turbofan business. Its bread and butter Trent 700 engine is on its way out and it takes until 2018 for the replacement, Trent 7000, to kick in.
  • Other programs are only growing slowly: the Trent 1000 for Boeing’s 787 or Trent XWB for the Airbus A350.
  • Safran civil turbofan business Snecma is enjoying record sales and deliveries through its CFM joint venture with GE.
  • Despite sharing its revenue 50:50 with GE, the business turnover is the size of Rolls-Royce turbofan business today and larger tomorrow. Profit margins are three times higher.
 

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