Rolls-Royce puts Middle East at centre of five-year drive to quadruple profits

Engineering giant tells The National that the region's markets represent 'phenomenal growth opportunities'

Rolls-Royce sees tremendous opportunity for its aero engine-making business in the GCC's growing tourist markets. Photo: Rolls-Royce

With next-generation technology rolling out, the head of Rolls-Royce's operations in the Middle East, Turkey and Africa (Meta) has said the markets of Middle East will be crucial in the company's overall plan of quadrupling profits by 2027.

John Kelly, president of Meta at Rolls-Royce, told The National the “confluence of key market opportunities with phenomenal growth opportunities across all of our divisions” will be key to reaching its profit-swelling goal.

Last year, Rolls-Royce chief executive Tufan Erginbilgic outlined his plan to quadruple profits over five years by improving the performance of its jet engines and bearing down on costs.

In commercial aerospace, defence and sustainable power solutions, the Middle East ticks the businesses boxes that will help Rolls-Royce achieve its goals, Mr Kelly said.

John Kelly, president of Middle East, Turkey and Africa for Rolls-Royce. Photo: Rolls Royce

Rolls-Royce sees tremendous opportunity for its aero engine-making business in the GCC's growing tourist markets, especially that of Saudi Arabia.

“You've got new airlines, such as Neom Airlines and Riyadh Air, so the whole region, the right vision, the right location and its got the capital to make it happen,” Mr Kelly said.

Scuba diving in the Red Sea. Saudi Arabia's growing tourist industry represents a significant opportunity for Rolls-Royce as more airlines begin flying to the region. Photo: STA

'Challenging environment'

In terms of jet engines for its airline customers in the region, Mr Kelly said Rolls-Royce recognises that it is a “challenging environment” and that the company “doesn't back away from that”.

Emirates Airline President Tim Clark criticised Rolls-Royce over pricing and the performance of its engines at the Dubai Airshow last November.

The problem was around the performance and durability that all aero engine makers face in the sandy and hot conditions of the Gulf states.

“We've had open discussions with the likes of Sir Tim Clark about how we gear up for the challenging environment,” Mr Kelly said.

“We have invested in our technology in terms of product improvement to give key customers like Sir Tim both the reliability that he absolutely demands and the durability, that is, how long it lasts in that environment. We're looking to give him both.”

Rolls-Royce's UltraFan demonstrator engine on Testbed 80 at the firm's Derby plant. Photo: Rolls-Royce

One aim that Rolls-Royce has for its airline customers in the Middle East is to provide them with engines that will increasingly emit less and less carbon and eventually, none at all.

The company is continuing to drive down the fuel-burn requirements for engines and last year proved that its new fuel-efficient Ultrafan engine can be run at 100 per cent power.

“That engine is the next chapter in technology. We see that coming to the market in the next five to 10 years and it's a step-change in performance,” Mr Kelly said.

The UltraFan is 25 per cent better than early generations of Rolls-Royce's Trent engine, meaning a quarter less fuel and a quarter fewer carbon emissions.

The plan is to eventually run aero engines on sustainable aviation fuel (saf), which should make catching a flight a zero-carbon activity.

Rolls-Royce aims to eventually run aero engines on sustainable aviation fuel. Photo: Rolls-Royce

Nuclear option

Mr Kelly said small nuclear plants should be built into the “energy road maps” of the Middle East.

The company is developing small modular reactors (SMRs) to meet a growing demand in the GCC states to complement other renewable energy sources (mostly solar and wind) with nuclear.

The idea behind SMRs is that components can be manufactured in one place and then assembled in another, making them far cheaper than full-scale nuclear plants.

“It is mature technology,” Mr Kelly said. “This is stuff that we have proven. We've had this technology in our business for decades [in nuclear-powered submarines].

“If you look at something like Neom [in Saudi Arabia], that needs agile power off-grid, it's the perfect application, and that can apply to several different locations around the Middle East.”

A Rolls-Royce small modular reactor. Photo: Rolls-Royce

Free Trade Agreement

Of course, Rolls-Royce is not the only multinational engineering giant operating in the Middle East, and this week was joined by a new, but old, kid on the block in the shape of GE Aerospace, one of the final parts of General Electric to be spun off the conglomerate to go it alone.

“GE have always been one of our leading competitors, one of our leading challengers, and the thing that drives really strong performance of a business is having really strong competition,” Mr Kelly told The National.

“We recognise the competition and welcome it. I can see why they see the Middle East as a strategic market, because it's exactly why we do.”

However, a free-trade agreement (FTA) between the UK and the GCC would really give Rolls-Royce's business in the region a boost, he said.

Trade between the GCC and the UK is worth about £59 billion, and the sixth round of talks to reach a viable FTA concluded in early February. Most FTAs take about eight rounds of talks.

“Good progress was made and both sides remain committed to securing an ambitious, comprehensive and modern agreement fit for the 21st century,” the UK's Department for Business and Trade said.

“We see an FTA as a really strong way of building an open environment to do business, particular with the UK and the Middle East,” Mr Kelly said.

“The complementary aspects of a FTA and some of the strategic investment agreements that already exist really help to take down any remaining barriers – things like tariffs and export controls.

“If we have those things eradicated through an FTA, then it takes away lots and lots of the remaining challenges.”