“If you want to become a millionaire, start with a billion dollars and launch a new airline”. Richard Branson, Founder Virgin Group 
The airline industry is renowned for its low margins and fierce competition. As one of the largest jet engine manufactures, Rolls-Royce is investing aggressively in Internet of Things (IoT) technology (technology connecting physical objects to the internet) to deliver its cost sensitive customers industry leading services.
Learning to fly
Beginning as a London based car manufacturer in the early 1900’s, Rolls-Royce quickly gained notoriety after launching Silver Ghost, a motor vehicle hailed as the “best in the world” . World War 1 saw demand for both cars and planes prompting the company to leverage its engineering capabilities to design its first aero engine – The Eagle .
Fast forward to 2016, Rolls-Royce now operates as two separate entities:
- Rolls-Royce Motor Cars; and
- Rolls-Royce Holdings – containing aviation, land and sea propulsion solutions.
Consistent with the company’s original value proposition, the Rolls-Royce aviation division has a strong track record of manufacturing the highest quality engines and being on the forefront of technology innovation and digitization.
Fasten your seat-belts
The aviation industry has traditionally been one of low margins . This is largely due to airlines facing:
- Large upfront investment;
- High ongoing operating and maintenance costs;
- Strong inter-airline competition; and
- Price sensitive customers.
As a result of these factors, airlines are continually looking for ways to lower their costs…….Enter Rolls-Royce.
Rolls-Royce has helped reduce its customers cost base by engineering increasingly efficient engines. However, designers are constantly challenged by the limitations of physics and realized efficiencies are becoming increasingly marginal. Additionally, design modifications are often quickly replicated by competitors rendering any competitive advantage enjoyed by Rolls-Royce, short-lived . This has prompted Rolls-Royce to reconsider how it serves customers and how it delivers this service.
We have take-off
In April 2016, Rolls-Royce announced a partnership with Microsoft Corp. Tom Palmer, Senior Vice President Rolls-Royce, confirmed the company’s intent when stating “our customers (airlines) are looking for ways to leverage the digital landscape to increase efficiency and improve their operations. By working with Microsoft we can really transform our digital services, supporting customers right across engine-related aircraft operations to make a real difference to performance.”  This is to be achieved through industry leading aerospace engineering, cloud computing, advanced analytics and IoT .
Rolls-Royce has begun to employ Microsofts’ Azure IoT Suite (cloud computing platform) and Cortana Intelligence Suite (data analytics package) to incite improvements in two ways.
Predictive / Preventative Maintenance
With IoT technology allowing Rolls-Royce engineers to track and analyze engine performance mid-flight, the company is better placed to identify underperforming components. This allows the team to implement proactive maintenance strategies (replacing underperforming components), not only reducing the frequency of unexpected / severe faults but also improving engine efficiency and lowering fuel consumption . It is estimated a 1% reduction in fuel usage translates to US$250,000/plane/year . Applying this to Delta’s current fleet of 830 planes sees a potential saving of ~US$210M per year . Predicative maintenance also has the added benefit of allowing Rolls-Royce to carry lower inventory.
Understanding best practice flying
The way pilots fly has a direct bearing on fuel consumption. IoT technology allows Rolls-Royce to identify best practice and share this information with airlines. By comparing new data against old, the company will help airlines isolate which factors (e.g. flight path, weather, discretionary fuel usage) have the biggest influence on performance and cost .
Because IoT technology is changing the way Rolls-Royce serves its customers, the company’s earning potential is also changing. The abovementioned services have been packed into what is being termed the Rolls-Royce “TotalCare” program which sees the company earn revenue when aircraft fly as opposed to only when engines are serviced .
The Sky’s the Limit
Although Rolls-Royce has taken some great strides towards securing its place as one of the world’s leading aero engine manufacturers, competition is hot! Rival manufacturers (e.g. General Electric and Pratt Whitney) are also investing heavily in IoT. For Rolls-Royce to stay relevant the company should focus on the following:
- Data analytics of engine performance could also be shared with plane body manufacturers (e.g. Boeing, Airbus) to improve plane design / aerodynamics.
- Develop best in-class IoT capabilities – IoT capability is still new, partnerships with leading tech-companies need to be collaborative and progressive.
- Investigate the potential of mid-air feedback to pilots who are aren’t optimizing engine performance.
Not only has Rolls Royce been an early adopter of IoT technology but strategic partnerships with tech-firms such as Microsoft have placed the company in a good position to stay on the forefront of IoT advancement and continue to deliver real value for its customers.
Word Count 784 (excluding references)
 Brainy Quotes, (2001). Richard Branson Quotes. [online] Available at: http://www.brainyquote.com/quotes/quotes/r/richardbra452106.html [Accessed 11/09/16]
 Rolls-Royce history timeline, (2016). Rolls-Royce.[online] Available at: http://www.rolls-royce.com/about/our-story/rolls-royce-history-timeline.aspx [Accessed 11/14/16]
 Why airlines make such meagre profits, (2014). [online] Available at: http://www.economist.com/blogs/economist-explains/2014/02/economist-explains-5 [Accessed 11/13/16]
 How Rolls-Royce maintains jet engines with IoT, (2016). [online] Available at: https://www.rtinsights.com/rolls-royce-jet-engine-maintenance-iot/ [Accessed 11/14/16]
 Floyd, S (2016). Rolls-Royce intelligent jet engine steals the show at Hannover Messe. [online] Available at: https://enterprise.microsoft.com/en-us/industries/hospitality-and-transportation/rolls-royce-intelligent-jet-engine-steals-the-show-at-hannover-messe-2016/ [Accessed 11/14/16]
 Rolls-Royce takes TotalCare digital with Microsoft and Singapore Airlines, (2016). [online] Available at: http://www.rolls-royce.com/media/press-releases/yr-2016/11-07-2016-rr-takes-totalcare-digital-with-microsoft-and-singapore-airlines.aspx [Accessed 11/14/16]
 Microsoft and Rolls-Royce collaborate to offer advanced operational intelligence to airlines, (2016). [online] Available at: https://news.microsoft.com/2016/04/24/microsoft-and-rolls-royce-collaborate-to-offer-advanced-operational-intelligence-to-airlines/#sm.0000cfu636fkbdsuv821t8y1uscx7 [Accessed 11/14/16]
 Robinson, D (2016). Rolls-Royce to use Microsoft IoT and analytics tools for jet engine predictive maintenance. [online] Available at: http://www.v3.co.uk/v3-uk/news/2464481/rolls-royce-to-use-microsoft-iot-and-analytics-tools-for-jet-engine-predictive-maintenance [Accessed 11/14/16]
 Aircraft Fleet, (2016). [online] Available at: http://www.delta.com/content/www/en_US/about-delta/corporate-information/aircraft-fleet.html [Accessed 11/18/16]