Exclusive-Emirates tells Rolls-Royce: Go back to basics, get engines right

By Tim Hepher

PARIS (Reuters) - The head of Dubai's Emirates has urged Rolls-Royce to go "back to basics" and focus on the performance of its engines, a day after the British firm laid out plans to quadruple profits.

Shares in the British engineering firm rose after CEO Tufan Erginbilgic unveiled a strategy on Tuesday to revive the engine maker's fortunes including a sharp increase in profit margins and "value-driven pricing," suggesting higher servicing bills.

But Emirates Airline President Tim Clark, who criticised Rolls over engine pricing and the performance of its largest engine at this month's Dubai Airshow, appeared unswayed by the plans which rely heavily on higher engine profit margins.

"If you have an engine...not performing as it should do, your costs are going to rise. But your ability to extract value from the client is going to fall simply because the client won't accept non-performance," he told Reuters in an interview.

"It's a very clear kindergarten understanding of cause and effect. Get your product right, design it to what the client wants, give it that high level of reliability. And yes, paradoxically, you can extract more value for your money for your buck in terms of your investment."

At this month's air show, Clark ruled out an immediate deal to buy Airbus A350-1000 jets, the larger of two models, blaming a dispute with engine maker Rolls-Royce over the engine's poorer-than-expected durability coupled with higher servicing prices.

"I said, guys, you need to go back to basics. Design engines that meet what the client base wants," Clark recalled saying to the engine maker during negotiations, which ultimately gave way to a top-up order for the smaller A350-900.

"We were ready on the -1000. You have no idea how much work I've spent on the interiors of these airplanes," Clark said, adding the engine stand-off had "opened the door" to plans to revive the Boeing 777-8 as a passenger variant as well as a freighter.

Rolls-Royce had no further comment Tuesday's investor presentation. Airbus declined to comment.

Rolls has acknowledged that the downtime on the XWB-97 engine is greater than expected but has denied suggestions by Clark that the performance level equates to being "defective".

Clark said the idea of ordering the A350-1000 was "not off the table" but added it depended on progress on downtime, noting that Rolls plans to introduce some modifications inherited from its Ultrafan engine technology research in late 2025 or 2026.

"I would say get your engines right....I promise you: you come up with a good engine, and we will talk to you seriously about a sort of maintenance cost, which gives you the kind of returns that you seek without being over-greedy."

Erginbilgic said on Tuesday the problem of durability was specific to the XWB-97 engine used on the A350-1000 and only in challenging climates. He said Rolls was working with Airbus "to improve that engine to a great level".

(Reporting by Tim Hepher; Editing by Sharon Singleton)