Stock market today: S&P 500 drops for fifth day as focus shifts to Powell’s speech
Investing.com -- The former president of Rolls-Royce (OTC:RYCEY) has shed light on the company’s recent price increases on new contracts in an interview with In Practise. The decision to raise prices is a response to the significant uptick in costs and the inherent risks associated with newer engines, such as the XWB engine.
The XWB engine, which is known for its exceptional performance, efficiency, and valuable time on wing compared to competitors, has set a higher market rate for the A350 XWB. This has justified the price increase, according to the former president.
In the past, Rolls-Royce and GE have bundled services without fully recognizing their value, which often resulted in missed revenue opportunities. This was particularly true with services like transportation, electronic services, and spare engine support.
Now, the focus has shifted to valuing these services independently. The goal is to establish a core total care rate or services rate that reflects the engine’s current capabilities and higher costs. This shift in strategy is in line with Rolls-Royce’s higher margin expectations. The company is no longer trying to buy market share, having already invested in discounts to Airbus.
The former president highlighted the company’s strong position, particularly with the sole source position on the A350. This strength has allowed the company to avoid accepting near loss-making or low-margin deals.
The result of these changes has been a significant increase in prices. The former president estimates that the price increases are in the region of 20%. This reflects the company’s confidence in the performance of its engines, particularly on the A350, which has a sole source engine position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.