Photographer: Matthew Lloyd/Bloomberg

Emirates Signs Rolls for A380 Engines in $9.2 Billion Deal

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Emirates picked Rolls-Royce Holdings Plc to supply engines valued at $9.2 billion for its next Airbus A380s and said the U.K. company is in pole position to power a more fuel-efficient variant of the superjumbo if the plan goes ahead.

Dubai-based Emirates will buy 217 of Rolls’s Trent 900 turbines for a batch of 50 four-engine A380s ordered in 2013, ditching the rival General Electric Co.-Pratt & Whitney model that was chosen to power its first 90 double-deckers.

Emirates President Tim Clark said at a press conference in London that engines for some of the 50 jets could be converted to more efficient neo types -- for new engine option -- if Airbus Group NV opts to proceed with an upgrade of the A380. The revamped plane would most probably use an improved version of Rolls’s XWB engine designed for the new A350, he said.

“As far as the neo is concerned we’ll await the deliberations from Toulouse,” Clark said, referring to Airbus’s headquarters in France. “I don’t want to suggest that the current aeroplane is not a really good machine.”

The world’s largest international airline has said it could order at least 100 more A380s if Airbus commits to a neo equipped with engines that consume less fuel, something it has so far failed to do amid a dearth of order interest.

Airbus Uncertain

The plane would need to deliver efficiency gains of between 10 percent and 13 percent, Clark said today, adding in an interview that while Rolls is leading the way, an order for 200 planes -- which Emirates might ultimately require -- might be big enough to bring its U.S. rival’s back into the fray.

Fabrice Bregier, chief executive officer of Airbus’s plane-making unit, said today in Paris that the jury is still out on whether to offer an A380neo, with the business case “not necessarily as attractive” as for re-engining projects on the A320 narrow-body and twin-aisle A330 model.

“We have to ask ourselves, will there be a market?,” Bregier told journalists. “Is it the right response to this market? When should we launch it? Under what conditions for sharing costs? Will it be profitable over the long term?”

Today’s deal, featuring a lucrative through-life maintenance contract, is a coup for London-based Rolls-Royce, which already had the largest spread of airline operators for its A380 engine but lacked a presence with by far the most prolific buyer of the world’s largest passenger plane.

Share Gain

Emirates has around 60 A380s in its fleet, leaving about 30 more Engine Alliance GP7000-powered jets to come, followed by the 50 to be powered by the Rolls engines, which will still offer the standard 70,000 pounds thrust apiece though with “quality improvements,” according to Clark.

Final assembly of the engines will happen in Singapore, with 80 percent of the value will be generated in the U.K. The first 25 planes due for delivery between 2016 and 2018.

Rolls shares fell 0.1 percent to 979 pence at 2:57 p.m. in London, taking the decline to 6.4 percent in 12 months and valuing the engine-maker at 18 billion pounds ($27 billion).

Airbus has relied on Emirates for almost half the orders for a flagship model that has won no new airline customer since 2012. While the double-decker suits the Gulf giant’s strategy of funneling passengers from Europe and North America to Asia, Africa and the Middle East via its home hub, other airlines have employed the plane as a top-end product in smaller numbers.

Second-Hand Surge?

Clark said he remains of the view that the A380 deserves a wider takeup and predicted economic growth and overcrowding at airports will bring the air-travel market in the superjumbo’s direction. The availability of second-hand examples in coming years should also lead to a more diversified user-base, he said.

Customers for Trent 900-powered A380s include British Airways, Deutsche Lufthansa AG and Qantas Airways Ltd. Qantas suffered a mid-flight explosion of a Trent 900 in 2010, in the most serious incident yet involving an A380, though the aircraft landed safely and nobody was injured.

Rolls-Royce, the second-largest aircraft-engine maker behind Fairfield, Connecticut-based GE, announced 2,600 job cuts last year, with the civil engines division hardest hit. The move followed the end of development work on the Trent 1000 and XWB engines that power the Boeing Co. 787 and Airbus A350.

Today’s deal won’t affect job cuts already announced but will secure positions for the future, Rolls-Royce Chief Executive Officer John Rishton said in an interview.

Emirates is continuing to evaluate the Airbus A350 and Boeing 787-9 and -10 for a potential order, Clark said. The airline scrapped a contract for 70 A350s valued at $16 billion in June last year.

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