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Rolls-Royce is in talks with the British government about taxpayer support to help fund the £3bn development of an engine to power the next generation narrow-body aircraft, primarily used for short-haul flights.
The FTSE 100 aerospace and defence group has told senior government officials that the project could be a once-in-a-generation opportunity, and has called for state subsidies to help develop a fully-certified engine ready to go into production.
The aviation group claims the project could create about 40,000 skilled jobs, both at Rolls-Royce and in the wider supply chain, and generate as much as £120bn for the UK economy over the lifetime of the programme.
Labour has prioritised advanced manufacturing among eight high-growth sectors as part of a new industrial strategy which is due to be published in June. Rolls-Royce believes that, as one of only a handful of companies in the world with the expertise to develop engines for civil aircraft, it should be in pole position for any support.
Rolls-Royce has told the government that there is a “once-in-a-generation opportunity to deliver a step change in growth for the UK economy”, according to people familiar with the conversations, with the development of aero-engines for the next generation of narrow-body aircraft. Rolls-Royce declined to comment on the government talks.
It is not clear how much of the estimated £3bn cost Rolls-Royce was seeking from government but people familiar with the matter said the company was prepared to invest significant sums itself. It has in the past received research and development funding from the state, as well as launch support for previous engines, including its Trent XWB. The company, which also has a facility in Dahlewitz, near Berlin, is also expected to seek support from the German government for the project.
Rolls-Royce currently builds engines that exclusively power widebody aircraft that fly internationally such as Airbus A350 jets and Boeing’s 787. Rolls-Royce left the narrow-body market more than a decade ago when it pulled out of a joint venture with Pratt & Whitney of the US.
Narrow-body aircraft such as Airbus’ A320 and Boeing’s 737 Max are the workhorses of many airlines’ fleets, flying on short-haul routes. They represent a much bigger share of the global market for civil aircraft by volume.
The group has spent more than £500mn on a demonstrator of its new UltraFan engine, which uses a geared system to improve performance, as well as composite fan blades, and aims to be 25 per cent more efficient than the group’s first Trent engines.
Rolls-Royce said last year it had started work on a “scaled-down” demonstrator of the UltraFan that would be specifically designed to power a next generation narrow-body aircraft.
Airbus and Boeing have been working on new materials and designs for the next generation of narrow-bodies, which are expected to be launched in the second half of the next decade.
Airbus has said it is talking to all engine makers, including Rolls-Royce. Its immediate focus, however, is on a more radical, open-rotor technology being developed by CFM International, a joint venture between GE Aerospace and Safran of France, which it believes is very fuel-efficient.
Boeing has not launched an all-new aircraft for more than two decades. Kelly Ortberg, who took over as chief executive last year, told employees last October that despite current challenges “at the right time in the future we need to develop a new aeroplane”.
Rolls-Royce, which has been the subject of a turnaround under chief executive Tufan Erginbilgiç, would have the financial strength to produce the engines on its own but could still look to partner given the much greater manufacturing volume required for narrow-body aircraft.
Airbus, for example, is targeting a monthly rate of 75 A320 aircraft by 2027. This compares with a monthly target of 12 A350 wide-body jets in 2028. Analysts have in the past said the most likely partner is P&W.
