Rolls-Royce sees steady growth in military engines market

June 16th, 1999

A ten-year forecast of the defence sector by Rolls-Royce plc, the global aerospace, defence and energy group, sees a stable market for military aero-engines and predicts a period of steady growth. New engine sales and support business will be worth around £70 billion over the next ten years.

Despite the defence budget cutbacks made by many countries as forces were reduced in the early 1990s, the market is entering a period of cyclical replacement as large numbers of military aircraft reach the end of their operational lives. There is also a demand on some armed forces to maintain or increase military capability in areas of growing instability and the emergence of less predictable threats.

World aero-engine demand between now and 2008 is expected to come principally from North America (31 per cent) and Europe (26 per cent), with the Far East and Indian sub-continent (21 per cent) and Middle East (12 per cent) also substantial. Collectively, the other regions - Latin America, CIS, Africa and Australasia/SE Asia -will total only around ten per cent.

In the broader area of defence, annual levels of procurement spend will rise from $166 billion globally to more than $220bn within ten years, while defence expenditure overall is seen as rising from around $700 billion to approaching $850bn.

These steady increases are in spite of tighter controls on defence expenditure worldwide, as governments look increasingly to ensure financial and economic satisfaction alongside performance and capability concerns in maintaining and adding to their military forces.

Military customers are increasingly adopting policies pursued in the civil aerospace field, where more responsibility is transferred to the manufacturer through concepts such as leasing, prime contractor support, private finance initiatives and 'smart procurement'. The reform of government processes has been a considerable influence in the UK, as integrated project teams bring industry, MoD and armed forces together to cut acquisition timescales and costs.

Closer working ties are reflected in the industrial base, too, as collaboration and consolidation is increased. There are fewer major defence contractors in the US, where the consolidation process is already well under way: Boeing's absorption of McDonnell Douglas and Lockheed Martin's merger being good examples. In other areas such as Europe and Russia this process is at an early stage, though British Aerospace's stake in Saab and its recent acquisition of GEC-Marconi's aerospace division is indicative of the trend towards consolidation.

The acquisition of Allison Engine Company by Rolls-Royce in 1995 was a significant move, although there has been little other evidence of transatlantic consolidation. Furthermore, Rolls-Royce has long experience of collaborative ventures. It now has one of the broadest military aero-engine portfolios in the world, and more than 50 per cent of these programmes are collaborative.

The changing nature of the military threat has led to more countries ensuring they have a rapid deployment capability, which means more helicopters, transport and tanker aircraft. Examples of new, existing and planned programmes in this arena are the C-130J Hercules, C-17, LMATTS C-27J Spartan, A4OOM, V-22, EH10l and NH9O.

At the same time, major programmes are under way and planned to provide increasingly effective equipment for use in the combat zone. Fighters such as Eurofighter, Rafale, F/A-i 8E/F and F-22 are entering production. The development of new helicopters such as Comanche and Tiger is well advanced.

Meanwhile, research and development effort is being devoted to projects on or over the horizon such as the US/UK JSF (Joint Strike Fighter) and Europe's FOAS (Future Offensive Air System) which are not due to enter service until well into the next millennium.

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