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Rolls-Royce`s Customer Service and Aftermarket Services |
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| In the 1990s, Rolls Royce took a conscious decision to change from being a product/technology company selling engines to one delivering ‘Total Care’ that would improve its customers’ operations. Two events in the company’s customer base drove its transformation into a customer service company. First, the company’s hugely profitable aftermarket parts business was opened up to third party manufacturers which threatened its profitability. Second, the company’s customers such as American Airlines demanded ‘On the Wing Contracts’ also known as ‘power by the hour’ where they paid only for the power they used. In addition to this, competition between GE, P&W, and Rolls-Royce – the three main aero engine manufacturing firms in the world – led to a drop in Rolls-Royce’s margins. To counter this, beginning in the late 1990s, the company decided to focus on increasing revenues from after-sales service.... |
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| In addition to engine repair and overhaul, Rolls-Royce provided engines on lease and also undertook repair of accessory units . The company also provided its customers with asset management services to enable them to manage their inventory requirements better. In this regard, the company provided engine support equipment like spare engines, engine accessories, line maintenance parts, and tooling. It also offered logistics and engineering support. The logistics support included transportation of engines from the airline operator’s hangar to the engine overhaul base and back.. |
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| Rolls-Royce TotalCare benefited both the company and the airlines. According to Richard Goodhead, Rolls-Royce’s SVP Customer Strategy and Marketing, “It’s [TotalCare] like an insurance policy. If an engine goes wrong then we will replace it. With TotalCare, both Rolls-Royce and the aircraft operator have an interest in keeping the engine on wing. In addition, because the fees are known in advance, operators have a more predictable cost of ownership and disruption is minimised.” In 2014, in a survey the company conducted of its customers 92% revealed that their business had improved because of TotalCare and 87% believed that their relationship with Rolls-Royce had improved thanks to TotalCare... |
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| While Rolls-Royce recorded more than 50 percent of its revenues from its aftermarket services, the company’s engine problems were set to affect its financials. The problem started when Japanese airline, ANA, reported issues with the Trent 1000 engines in the summer of 2016. The problem was thought to be related to blades in the turbine corroding far earlier than expected, resulting in the engines shutting down. The airline stated that it had had to ground planes and cancel up to 300 flights as the aircraft had to be taken out of service for repairs... |
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| Analysts pointed out that Rolls-Royce’s Trent 1000 engines designed for the Boeing 787 Dreamliner and Trent 900 engines designed for the Airbus 380 represented 19% of the company’s engines operating in the market as of June 2018. The company had to take serious steps to rectify the problems as the planes were in service but grounded. Rolls-Royce stated that a new turbine blade would be made available in 2020 and the engine problems with Trent 1000 would be rectified by 2022... |
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Exhibit I:Various Products of Rolls-Royce*
Exhibit II: Rolls-Royce Revenue and Earnings Performance over the Years
Exhibit III: Rolls-Royce Aftermarket Portfolio for Trent Engines
Exhibit IV:Global Repair and Overhaul Network
Exhibit V:Rolls-Royce’s Civil Aerospace Revenues
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