Rolls-Royce seeks a partner for engines on small passenger jets

Rolls-Royce is looking for a partner to develop an engine that will take the UK aerospace group into the booming market for narrow-body aircraft.

John Rishton, the UK group's outgoing chief executive, told shareholders at its annual meeting in London on Friday that Rolls-Royce had the technology and capability to enter a segment that accounts for 70 per cent of the market for commercial aerospace engines by volume.

Rolls-Royce simply lacked a partner to help it take on the dominance of giants such as General Electric, which claimed 75 per cent of the narrow-body segment.

"It's important to get back into that part of market," he said. "It is a growth opportunity."

Narrow-body passenger jets - also known as single aisle aircraft - are the workhorses of many airlines' fleets, flying on short-haul routes.

Rolls-Royce felt compelled in 2013 to abandon a planned joint venture to develop narrow-body aircraft engines with Pratt & Whitney of the US amid fears of regulatory objections to their combined market share.

The two had proposed to work together in 2011, when Pratt & Whitney, part of United Technologies Corp of the US, bought out Rolls-Royce's share in International Aero Engines, a consortium which makes engines for the current generation of Airbus' A320 narrow-body aircraft family.

The new joint venture was intended to design engines to power the next generation of single aisle aircraft, likely to come into service in the middle of the next decade.

Mr Rishton said Rolls-Royce would not be averse to renewing its partnership. "UTC is the obvious partner for us," he added.

However, he said there was no immediate pressure to find a partner. Until the big aircraft manufacturers - Airbus and Boeing - decided to launch a new generation of narrow-body aircraft, there would be no opportunity to sell a new engine.

"We have time to think, plan and prepare," added Mr Rishton. "This isn't a decision we have to take today or tomorrow."

Mr Rishton received a mixed reception from shareholders at his last annual meeting before he steps down in July to be replaced by Warren East, the former boss of technology company Arm Holdings.

Chief executive since 2011, Mr Rishton presided over a string of profit warnings in 2014.

However Ian Davis, chairman, defended Mr Rishton's "extraordinary leadership".

Under his watch the group's profits had increased by 69 per cent, the order book by 24 per cent and the shares by 64 per cent, added Mr Davis.

Meanwhile, Rolls-Royce warned that its 2015 revenue could be hit by unfavourable currency movements.

Though its guidance for earnings - excluding the impact of foreign exchange - had not changed, the movement of the pound against the dollar, the euro and the Norwegian krone could depress reported revenue by £350m, said the group.

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