LONDON, July 21 (Reuters) - Rolls-Royce Plc , the world's second-largest civil jet engine maker, on Sunday said it expects to increase sales in its lucrative maintenance and spare parts business to 50 percent of total sales.
"We have 40 percent of our sales in the aftermarket, and I guess we can get to 50 percent," Chairman Ralph Robins, who will retire later this year, said ahead of the Farnborough Air Show, beginning on Monday.
Robins said a driving force of its aftermarket sales would be that Rolls Royce engines make up only 12 percent of more than 2,000 jets parked since the Sept. 11 attacks and its average engine age was much younger than its competitors.
Typically, jet engine makers discount the costs of their engines but reap the benefits of a sometimes more than 20- or 30-year period supplying spare parts and engine maintenance to airlines.
In the battle for new engine orders in the dour commercial airline industry, Robins said Rolls Royce was confident of maintaining more than 50 percent market share of its latest Trent series engine for the Airbus A380, a 555-seat super jumbo competing with Boeing Co.'s 747 series.
But Robins was cautious about a recovery in the passenger airline industry and said: "The real problem is the commercial business of this year, next year and possibly even a little bit in the year after."
Rolls-Royce slashed 5,000 jobs in October and warned investors it faced a difficult 2002 and 2003 as aircraft makers scaled back output in response to the financial crisis in the airline industry caused by a slump in demand for air travel.
In the wake of the Sept. 11 attacks, which exacerbated an economic downturn hitting airlines, Rolls-Royce said it expected 2002 profit from its civil business to be about half of 2001. Rolls-Royce earns over half its sales from civil engines.
But at the time Rolls-Royce said it would return to underlying profit growth in 2003. "We are well positioned for profit growth in 2003 relative to 2002," it said at the time.
In weathering weaker demand for new civil aircraft engines, Rolls-Royce points to its stable markets in military and marine engines as well as turbines for the oil and gas industries.
"Our defense business is in line with expectations," Chief Executive Jon Rose told Reuters.
On the military front, Rolls-Royce will make engines for Britain's new destroyer and has been chosen to jointly develop the F136 engine with engine maker General Electric Co. for the Lockheed Martin Corp. F-35 Joint Strike Fighter.
Even if the F136 engine misses out to the F135, an alternative engine being developed by Pratt & Whitney, a unit of United Technologies Corp. , Rolls-Royce will still provide the vertical lift system for the F-35.
Elsewhere in defense, the first tranche of the Eurofighter Typhoon will benefit Rolls-Royce, as it has a 33 percent stake in the EJ200 engine. Eurofigher GmbH is a consortium owned by European Aeronautic Defence & Space Co NV , BAE Systems Plc and Finmeccania SpA .
Despite the military buffer, Rolls-Royce shares have been battered in the turmoil engulfing financial markets, closing down 2.4 percent at 151-1/2 pence on Friday, though some analysts said the stock was cheap around this level.
Robins also said the financial market did not understand the amount of investment that goes into developing new engines.
"We don't have too much success in getting the financial analysts to understand that," said Robins, adding that "the only thing that has not responded is the share price."