Rolls-Royce is a world-leading aircraft propulsion and electricity generation systems maker. In a wide-ranging interview on the sidelines of the Aviation Africa 2020 summit that took place in Addis Ababa in March, 2020, before the Covid-19 pandemic hit the world and temporarily froze the industry, the company’s UAE based, Vice President for Africa, Mr. Ryan Goodnight, spoke to Michael Wakabi of Nnyonyi Magazine about unlocking Africa’s air transport market potential and powering aviation into the future. Excerpts
Africa accounts for a small fraction of the global air transport market yet many commentators project a promising future. What prospects do you see for air transport in Africa?
The way I typically like to answer this question is to ask why don’t we take a look at what Southeast Asia looked like 40 years ago. A lot of people were saying the same thing, that you have a region of the world that is very small in the aviation market. Yes, it had a couple of big players but it was far from the aviation power house that it is today. The skies have been liberated inside of Southeast Asia and you now have major carriers not only Singapore International Airways and Cathy Pacific that have always been there but you now also have Air Asia, Tiger Air and Jet Star. You have really seen that liberalisation of those skies ended in the growth of air traffic in that region.
What makes Africa compelling for investors in the sector?
Africa is not only a big place but it has a large population and it is a continent that is full of resources. It has a lot of economic potential that can be unleashed. And if you do you are going to see a growing middle class and as the middle class grows, the demand for air travel naturally increases. So, if you fast forward 40 years, I am looking at Africa today in a very similar way in which we perhaps looked at Southeast Asia several decades ago. And really, I don’t see a reason why Africa with everything it has to offer, would not become as significant a player as any other part of the world.
What actions are required to free that potential?
There are a lot of things that have to happen in order to get us there. There has to be better cooperation between governments in terms of opening up routes and freeing up the skies. Single African Air Transport Market (SAATM) is a great move in the right direction but we need to see the implementation of that. You need to see airlines with more codeshare agreements. You need to see better access to fuel without that many high taxes. All of those different things are barriers to growth. But we can work through those and if we do the potential is huge for the economy. Not only from domestic travellers but also external people that want to come in. Africa is an exciting and dynamic place in terms of what the continent has to offer. And I think if that story gets out which it will in the digital age, you are going to see the demand increase and where there is demand, the need for supply becomes obvious.
As at the end of 2019, what percentage of the fleet in Africa was powered by Rolls-Royce?
I am going to break it down into types of aircraft because if you look at the entire fleet it is a little bit difficult to dissect because we don’t play in all segments of the aviation market.
Starting with wide body aircraft, 50% of all the wide body aircraft flying in Africa are powered by Rolls-Royce. But it is more about what the future holds than it is the current environment. We enjoy 50% market share globally, so having 50% in Africa puts us at par with where we are elsewhere.
We don’t currently have any engines to offer on narrow body aircraft, the A320s and 737s. But we do have the most popular engine in Africa on regional aircraft such as the Embraer 135, 145,140’s where Rolls-Royce produces the AE3007 Engine. And Africa is the number one destination globally for transitional aircraft in the Embraer Regional Jet market coming from a primary operator to a secondary operator. They are growing so fast that sometimes we can’t even keep up with the demand. It is a great aircraft for Africa and we power the entire fleet. You have over 30 of them in South Africa and a few in Ghana. Zimbabwe just bought a couple recently. So, we are a market share leader in that segment as well.
There was a time when Africa was married to after market aircraft, do you see that changing?
Yes and no. I think you have to look at Africa in two ways. You are always going to have airlines in Africa that are going to buy new equipment. Your Ethiopian, Egypt Air, Kenya Airways, or Royal Air Maroc. They like to buy new aircraft because they are a major player on the world stage. These are established airlines that have been around for decades and so they now have the economic power to go out and procure new aircraft.
With the access to low cost of capital and the increasing number of lessors that are in the market place, the scope of airlines that will take new aircraft in Africa has expanded. With cheap money in the marketplace, airlines are able to take leases on a lot more aircraft without putting up huge chunks of capital. Air Mauritius was for instance able to take so many aircraft over a short time because they could get them on lease.
There is also a separate community in Africa that is realizing that if you are going to start-up a new airline, or you are going to test the waters on something that is unproven, used or secondhand ‘previously loved’ aircraft as they like to call them, are still a very attractive proposition. And there are a number of conversations going on that I am involved in as well as some of my colleagues at Airbus and Boeing with regard to the A330 and 777-200 class of assets. Air Peace for example, took transitional aircraft. Air Peace is, nascent airline. They do not spend US$100m on a brand-new aircraft until they can prove that the concept works. So for a very small amount of money they can go out and try it without leveraging their entire financial future.
How do you support this kind of fleet?
Rolls Royce will treat a customer who has a second hand aircraft in the same way that we would treat a customer with a brand-new aircraft. Our range of services is broad enough to suit different products. It takes the same general concept and tailors it to where that aircraft is in its life cycle.
Once you see aircraft moving into the second hand market, it is generally at a time when there is a lot of industry knowledge around those engines. They have been in service for a long period of time so we know how they are going to behave. So, we have a different suite of services called SelectCare and TotalCare Flex. These are tailored towards aircraft in their later stages of life whereby we will agree a fixed price for an engine repair whenever it becomes necessary. So, you don’t pay us anything until the time the engine is repaired but at a pre-negotiated price. Sometimes we work out a plan where you pay us a dollar per flight-hour rate similar to TotalCare. It might, however, be better for us to just give you new engines instead of bringing your engines to the shop.
Yes, we are giving you what we call green time in exchange for that. There is always a way we can tailor it but the core idea of always being there to support our clients doesn’t change.
If Ethiopian, Kenya Airways or Uganda Airlines were to take a brand-new aircraft, we would typically go in and offer a service programme called TotalCare. TotalCare is what made Rolls-Royce the company it is today. It changed the way owners of aircraft look at the airframe and engine makers. You don’t pay for an engine if it is not working. We don’t make any money unless it is flying so it incentivises us to build an engine that lasts a long time on wing. It incentivises you to purchase an engine from us because you are only paying for what you get.
It is called power-by-the hour. TotalCare was the genesis of power-by-the hour on aircraft engines. A service like that is perfect for a new aircraft going into service because there is a lot of risk for an operator of not knowing how a new product is going to behave. A service like TotalCare transfers that risk from the airline Rolls-Royce. It is a very good business model.
SUSTAINABILITY
In recent times, Flight Shame has come to typify the long-held view that aviation is a primary contributor to global warming. How are you as an aircraft engine maker, responding to this pressure?
Aviation is essentially the life blood of the world economy. It is a necessary industry but that does not mean that we cannot do more to address the primary driving concerns of whatever the flight-shamers’ are after. What they are really looking for is to reduce the carbon footprint of all sectors of the world economy that group is specifically looking at aviation.
How we accommodate those concerns but still maintain a very robust industry, pre-occupies us. We have to constantly continue to put pressure on evolving technology to the point where we will address that concern by reducing fuel consumption. We can do that through new turbine and compressor technology. We can do it by gearing gas turbines through our Ultrafan which will reduce fuel consumption by 25%.
We are also looking at electrical engines to get away from the fossil fuels altogether. So, it is not a matter of just what you put out but what you put in as well. We are working in concert with a number of original equipment manufacturers around the world in order to unify our efforts towards promoting more sustainable fuels.
That is necessary because we need a consensus on what fuels to promoted. We are working with all of those suppliers including our competition to figure out how we can collectively push the industry towards more carbon neutral fuels. We are also improving the technology by investing in research and development to reduce fuel consumption all together.
How do you see the gas turbine fading out of the market?
When a product goes into service eventually better products will come out down the line. But there will still be a need for products that are slightly older.
We anticipate a phased approach to the products leaving service. Ethiopian Airlines will probably be the first airline in Africa to take the next generation of aircraft. Their aircraft will be going to go for a secondary home and then eventually be retired. So, you will still see the current technology in service perhaps for the next 20 to 35 years. It will be a new evolution of technology. I think the gas turbine technology will be around for quite some time but we will modify it enhance performance while reducing the carbon out of the said engine.
With the gas turbine around, when do you see electrical propulsion being introduced ?
Moving into an electrical future where instead of having gas turbines mounted to the wing you have electrical engines means we have to generate energy to then drive the electrical engines. We will still have a gas turbine on the aircraft but it will act as a powerplant as opposed to a propulsion system. So instead of having two gas turbines you have one. We will realise big reduction in carbon emissions but the gas turbine technology still stays in place.
As we progress our technology, the africa aviation market remains our focus due to the opportunities the Vast content presents.
