Rolls-Royce set to reveal deal with Norwegian that eases pressure on chief Warren East and shows company is not single manufacturer supplier
The troubled FTSE 100 group is expected to announce on Monday that it has sealed a $2.7bn (Â£1.9bn) agreement to provide Trent 1000 engines for19 new Boeing 787 Dreamliner jets the airline is buying.
The deal is also understood to include so-called â€œTotalCareâ€ long-term maintenance contracts for the aircraftsâ€™ engines, as well as taking on servicing the Rolls-Royce engines on about a dozen 787s the fast-growing Scandinavian carrier already has in service.
Rolls is in a fierce competition with giant US rival General Electric to win engine contracts for the 787, one of the most modern airliners in service and the flagship of American manufacturer Boeing.
The order is Rollsâ€™ biggest since its record-breaking Â£6.1bn deal in April last year to power 50 Airbus A380 superjumbos for airline Emirates, one of the largest-ever UK export contracts.
The Emirates agreement was an important win for Derby-based Rolls, as it stole the business from Engine Alliance, a joint venture between US groups General Electric and Pratt & Whitney.
Securing the Norwegian deal is a coup for Rolls chief executive Mr East, as it is Rollsâ€™ biggest order since he took over at the company in July last year.
Rolls has been in a downward spiral for the past two years, issuing five profit warnings and downgrades that saw its share price more than halve as it struggled against tough markets, defence cuts, poor operational controls and rising costs.
Overhauls of the business as it tried to tackle its troubles included a restructuring in 2015 that involved cost cuts and more than 3,600 redundancies, and the departure of chief executive John Rishton and other veteran bosses.
Since taking over Mr East has begun an operational review intended streamline the business and reduce costs by up to Â£200m a year by 2017, half of which will come from stripping back the companyâ€™s bloated management.
The cull has already seen one level of top executives go and shaken up the structure, removing the two division system by splitting the business into five units â€“ civil aerospace engines, defence, marine, nuclear and power systems â€“ all reporting straight to Mr East.
The company has also faced pressure from shareholders, with long-term investors dumping the company and ValueAct, a secretive US-based activist investor taking a 10pc stake, making it the biggest shareholder. ValueAct has refused to engage with the media but wants a seat on Rollsâ€™ board and is thought to be pressing for further cost cuts.
Some analysts have said Rollsâ€™ diversified structure is failing, and have called for the business to be broken up, a strategy which some think ValueAct could support.
The Norwegian order could also ease analystsâ€™ concerns that Rolls was becoming dependent on supplying engines to Airbus, and its small size compared with GE meant it could not compete on price with the US rival.
Rolls makes the only engine for the pan-European aircraft manufacturerâ€™s A350XWB aircraft â€“ which competes directly with Boeingâ€™s 787 â€“ and deals to provide engines for this Airbus plane represents about 40pc of Rollsâ€™s Â£76.5bn order book. Rolls also has an exclusive contract to provide engines for Airbusâ€™ A330neo jet which is due in service next year.