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New Rolls-Royce CEO embarks on strategic review of jet-engine maker

Rolls-Royce primarily manufactures large engines for Airbus and Boeing wide-body aircraft.

Embattled British aircraft-engine maker Rolls-Royce Holdings PLC has embarked on a strategic review led by its new chief executive in a fresh effort to turn the company around.

Tufan Erginbilgic, who took over the top job at Rolls-Royce last month, said the company was drawing up a new transformation plan in which it will decide in which segments of its business it would continue to invest. The CEO said details would be announced in the second half of this year and that it was too early to outline any potential outcomes, including possible job cuts.

"It’s very clear that we have performance potential. Frankly, catching up with competition cannot be the full potential of Rolls-Royce," Mr. Erginbilgic told reporters Thursday. "No company can continue like this, therefore we need to change."

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Rolls-Royce shares surged 18% early Thursday. The company also posted pretax profit of 206 million pounds, or about $248 million for the year. That was up 470% compared with the previous year, boosted by the recovery in flying of wide-body aircraft in the second half of the year and the easing of travel restrictions in China. It said operating profit this year would rise from £319 million to between £800 million and £1 billion.

Mr. Erginbilgic, who previously spent more than 20 years at oil giant BP PLC, has promised a new push to restructure the British manufacturer after multiple, wide-ranging efforts under his predecessor, Warren East. Mr. East, also a Rolls-Royce outsider, took over the struggling manufacturer in 2015.

Under Mr. East, Rolls-Royce, which primarily manufactures large engines for Airbus SE and Boeing Co. wide-body aircraft, culled thousands of jobs, trimmed management layers and tried to lift flagging profitability while lowering costs. More broadly, he attempted to turn the traditionally slow-moving manufacturing behemoth into a more nimble organization.

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During his tenure, Mr. East often expressed frustration at the slow pace of change under his watch and his turnaround effort was later undermined by performance issues that emerged on its Trent 1000 engines. The units power Boeing’s 787 Dreamliners, and production and quality issues have taken years to address.

The company’s transformation plan was then upended by the pandemic, in which large aircraft—the bread and butter of Rolls-Royce’s commercial aerospace business—were largely grounded. Those aircraft are back in demand but have taken longer to return to the skies than smaller narrow-body jets, which are used predominantly on domestic and short-haul routes.

Mr. Erginbilgic earlier this month told his staff in a wide-ranging critique of the company’s performance that Rolls-Royce was a "burning platform." He said Thursday the message was intended to convey to employees that the company’s woes can’t all be blamed on the pandemic.

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"We need to change because Rolls-Royce’s issues are not actually created by Covid," the CEO said on the call with reporters Thursday. "Covid made it more difficult absolutely, but they were not created by Covid."

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