Among the hotly awaited deals at last week's Paris air show was Air France-KLM's contract with Rolls-Royce for the Trent XWB engines to power the airline group's future Airbus A350s. But the aviation community departed Le Bourget with little news on how the carrier will introduce the new powerplant to its mainly General Electric-powered fleet.
Air France-KLM finalised the order with Airbus for 25 firm and 25 optional A350s, after the deal was first announced in September 2011. But the airline group reached only a tentative agreement with Rolls-Royce - interestingly, given that the UK manufacturer is the sole engine supplier for the long-haul twinjet.
The crucial phrase in the subsequent press release was that the airline will "work with Rolls-Royce... in a strong relationship" to service the Trent XWB engines at its in-house MRO division, Air France Industries KLM Engineering & Maintenance. It is the technical support for the powerplants that has prevented the contract with Rolls-Royce being finalised thus far.
The manufacturer wants to sell aftermarket services as part of the engine deal, while Air France-KLM aims to maintain the powerplants in-house and offer these capabilities to third-party customers - thus becoming a competitor to Rolls-Royce's own MRO network.
Performing third-party maintenance work on Rolls-Royce engines is part of the ongoing discussions, says AFI KLM E&M: "Air France-KLM Group could, for example, be interested in being part of the maintenance network of Rolls-Royce in order to perform maintenance work requested by other airlines."
Whether the partnership proposal counts as news is debatable, however. It hardly came as a surprise, since there are no examples of airlines conducting Trent engine maintenance completely independently of Rolls-Royce. Texas Aero Engine Services (TAESL) operates as a 50:50 joint venture between American Airlines and the engine maker, overhauling Trent 800s and RB211s in Fort Worth, USA. Rolls-Royce is also a partner, with Lufthansa Technik (LHT), in N3 Engine Overhaul Services, located near Erfurt, Germany. The latter facility is focused on Trent 500, 700 and 900 engines, and is Rolls-Royce's main Trent MRO site for the European market.
It seems unlikely that Rolls-Royce would want to open a second European overhaul shop 660km to the southwest, in Paris, although such a move could be justified, in publicity terms, as a means of creating additional capacity for the later Trent XWB and, potentially, Trent 1000 models. Rolls-Royce says that no decision has yet been made whether Trent 1000s and XWBs will be maintained at N3.
LHT says that there are "currently" no plans to expand N3's capabilities to the Trent XWB. Lufthansa has not yet ordered the A350 or Boeing 787. Whatever the choice might be, it seems unlikely that the German airline group - which wants to have a strong presence in MRO - will accept exclusion from the overhaul market for the latest Trent models. More than a decade ago, Lufthansa changed its long-haul engine strategy in favour of Rolls-Royce. The carrier had previously been a loyal GE customer.
AFI KLM E&M not only wants to dis- and reassemble Trent XWB engines in its overhaul shop, but also conduct piece-part repairs, says Franck Terner, AFI's president. It is particularly the latter capabilities that require access to Rolls-Royce's engineering data and know-how, which all manufacturers are increasingly careful about sharing these days.
Given that Rolls-Royce is the lone powerplant supplier for the A350, Air France-KLM appears to have limited negotiating power against the UK manufacturer. The main leverage is arguably the airline's still undetermined engine selection for its parallel Boeing 787 order, where it has a choice between the Trent 1000 and GE's GEnx.
Terner has said in the past that AFI KLM E&M would establish support capabilities for both Trent and GEnx engines, if necessary. Such a decision would seem a smart move, not only because Air France-KLM has limited power to negotiate MRO concessions from Rolls-Royce, but also because the airline's long-standing relationship with GE is at stake too.
Air France-KLM's fleet is predominantly powered by GE engines - or the US manufacturer's CFM International and Engine Alliance joint ventures - and AFI KLM E&M has developed support capabilities for these engine models. Over the past three years, the MRO group invested into a new overhaul shop and test cell in Paris to expand its engine aftermarket business, particularly as third-party maintenance provider for the GE90.
But Air France-KLM may have more negotiating leverage than meets the eye at first glance. The flag carrier of the nation where Airbus is headquartered - one of Europe's three major network airline groups - is central to the A350's market standing. Airbus arguably cannot afford to put Air France-KLM off its main future long-haul platform, and should thus have an interest in a mutually acceptable agreement between the airline and engine supplier.
For Rolls-Royce, on the other hand, much is at stake, too. Other operators will carefully observe how much independence Air France-KLM can negotiate from the manufacturer as part of the Trent XWB contract and 787 engine selection. The deal could affect the engine maker's future relationships with customers and potentially change its existing aftermarket strategy, if more operators and aircraft owners demand greater choice for their aftermarket requirements.
Sources familiar with Rolls-Royce say the manufacturer is evaluating to review its "TotalCare" MRO programme, after there has been dissatisfaction with the scheme among customers.
Rolls-Royce responds that the "TotalCare" has been an "incredibly successful" programme with "high levels of satisfaction and a partnership approach to our business relationship with customers". But the company says that it is "continually" working to "match customer requirements as they change over time, and we are engaged with various stakeholder groups on a confidential basis in the industry to refine that thinking".
It adds that "we are not, at this point, able to share any detail on those discussions".