Minister defends £2.5bn bet on Rolls-Royce’s return to single-aisle jets

Blair McDougall says public money is justified despite the engine maker’s record profits, as both sides keep quiet on who will pay what.

Britain’s industry minister has defended a plan to put public money behind Rolls-Royce’s bid to re-enter the market for single-aisle aircraft engines. He argued that the country must compete with foreign governments for aerospace work even as the company forecasts annual profit of up to £4.9 billion.

Speaking by phone on Friday from Rolls-Royce’s plant at Inchinnan, near Glasgow, Blair McDougall said governments had long shared the risk of large aerospace programmes because of the sums involved. “There are countries all over the world trying to eat our lunch when it comes to aerospace jobs and the aerospace supply chain,” he said.

The agreement was announced on Wednesday, October 28, during the UK Budget. It sets out a joint 10-year, £2.5bn research and technology programme to develop gas turbine technologies for civil and defence aerospace. The central aim is commercial: to position Rolls-Royce to compete for an engine on the next generation of narrowbody, or single-aisle, airliners, the aircraft that will eventually replace the Airbus A320neo and Boeing 737 MAX families.

The terms are not yet settled. McDougall declined to say how costs would be split. “It’s a commercial conversation from Rolls-Royce’s end and a value-for-money conversation from our end,” he said. No new government grants have been awarded under the agreement, which still requires final terms to be negotiated. Further value-for-money, affordability and subsidy control approvals are still required, according to the government’s release. The company says it expects to invest significantly more than the government across the narrowbody programme.

For Rolls-Royce, the agreement opens a way back into a market it left 14 years ago. It previously competed through International Aero Engines, the consortium behind the V2500 used on the previous-generation A320 family, but sold its stake to Pratt & Whitney in 2012. Since then the group has concentrated on widebody jets: its Trent engines power the Airbus A330neo and A350 and some Boeing 787s. The single-aisle market is now dominated by CFM International and Pratt & Whitney.

The scale of that market explains the government’s interest. Officials estimate that single-aisle aircraft could account for about $164 billion of a $278 billion annual global commercial aerospace market by 2050. Rolls-Royce says securing a UK engine position could add £120 billion to the economy over the programme’s lifetime. Chief executive Tufan Erginbilgic called it a “once-in-a-generation opportunity.”

The jobs figures are more modest in the near term. Delivering the initial stages, subject to a final agreement, would support 3,300 UK jobs at Rolls-Royce and its supply chain partners by the end of 2029. McDougall said the larger prize was work on future aircraft that could support “tens of thousands of jobs”, and described the investment as “re-industrialisation in action”. If its technology is chosen, Rolls-Royce says it would select UK sites for new assembly and test facilities, and expand domestic production of high-pressure turbine blades and composite fan blades.

The engine at the centre of the effort is the UltraFan 30, a scaled-down version of the company’s UltraFan architecture. Ground tests are planned for 2028. Earlier this year the company also secured €64 million from the European Union’s Clean Aviation programme to develop technologies for the demonstrator. Rolls-Royce has said it wants to return to the market in partnership rather than alone; its chief executive has raised the possibility of reviving a joint venture with Pratt & Whitney.

Government support was not a foregone conclusion. During earlier talks over subsidies, Erginbilgic noted the company had other options beyond the UK.

The biggest uncertainty sits with the planemakers. New narrowbody aircraft are expected to enter service in the mid-to-late 2030s, with manufacturers selecting engine partners over the next few years ahead of possible launches around the turn of the decade. Neither Airbus nor Boeing has committed to a new single-aisle programme. The choice of engine technology is also open. CFM, the Safran-GE joint venture backed by Airbus, is pursuing an open fan design, while Rolls-Royce and Pratt & Whitney favour an advanced turbofan. Bjorn Fehrm, an aviation analyst, has argued that if Airbus chooses open rotor, Boeing may have little option but to follow.

That decision, rather than the Treasury’s cheque, will determine whether the £2.5 billion leads to a British engine on the next generation of short-haul jets. Before then, London and Rolls-Royce still have to agree how much each will pay.