British engine maker Rolls-Royce is repairing and reusing spare parts in light of supply chain issues that are causing issues for the aerospace industry.
Rising inflation and supply chain disruption are two of the main challenges Rolls-Royce is facing, the company said in a first-half results presentation on August 4, 2022.
“We’re facing the same issues as everyone else. We’re doing a lot of blocking and tackling,” Chief Executive Warren East told analysts on a call to discuss the earnings.
A lack of spare parts is already impacting airlines. Latvia-based airBaltic revealed on August 3, 2022, that six of its Airbus A220s are unable to fly because regular maintenance can’t be carried out.
“We’re repairing and reusing spare parts where we can,” explained East, who is standing down as CEO at the end of 2022.
“The situation is very intense in the single aisle space at the moment. Everybody went very slow and now they’re being pressured to ramp up very steeply,” East commented on the situation.
Chief Financial Officer Panos Kakoullis said the group was working with its “best-performing” suppliers and added the group had hired more people, notably in procurement. “It’s about spending time with suppliers to make sure we’re in the right place in the queue,” he said.
In another example of Rolls-Royce mitigating supply risks, Kakoullis highlighted that Rolls-Royce has signed a new agreement with a titanium supplier in the United States, thus reducing its reliance on Russian supplies.
French aerospace engine supplier Safran has also spoken of supply chain issues, with chief executive Olivier Andriès telling analysts that he expects the issues to last into and possibly until the end 2023.
Rolls-Royce echoed that sentiment. “The external environment remains challenging, with the war in Ukraine, inflationary pressures, and supply chain constraints all impacting our business. We expect these issues will persist into 2023 and have been managing our business to address and minimise the impact,” it said in the first-half results statement.
Overall, Rolls-Royce reported first-half underlying operating profit of £125 million ($152 million), a drop from £307 million ($374 million) a year earlier, which the company said reflected one-off gains in the previous year. It said it expected operating profit margins to improve in the second half and maintained its full-year group targets.