Tufan Erginbilgiç took the helm of Rolls-Royce as a relative unknown, viewed by many as an unexpected appointment to one of the most prominent jobs in British industry.
Two years on, investors in the engineering champion, whose engines power many of the world’s biggest airliners as well as submarines and military jets, know exactly who Erginbilgiç is. Rolls-Royce’s share price has risen eightfold since he started as chief executive in January 2023 and dividend payments have resumed. Full-year figures published last month showed the company was on track to hit its underlying operating profit and free cash flow guidance two years ahead of plan.
The speed of the turnaround has stunned long-term followers of the 119-year-old company, whose recent history before Erginbilgiç’s arrival was marked by profit warnings, a series of unsuccessful restructurings and a monumental blow from Covid-19. The pandemic stopped airlines flying and crippled Rolls-Royce’s revenues.
The company, says Erginbilgiç in an interview at the group’s London headquarters, was “absolutely a turnaround candidate”. The former BP executive took the job not to embark on another restructuring but to engineer a full-scale transformation: “Some people think it was about Covid. I actually went 10 years back. It wasn’t about Covid. This company had struggled for a while,” he says.
“Our vision is to create a company that is high performing, competitive, resilient and growing. I would argue Rolls-Royce was hardly any of that, at any time.”
A recovery was perhaps always on the cards once flying resumed after the pandemic. But Erginbilgiç dismisses the idea he has been a lucky general. That argument is “not credible any more”. Engine flying hours last year — a key metric for Rolls-Royce as it makes most of its money when its engines are in the air — were 103 per cent of 2019 levels. Operating margins, a measure of profitability, in its civil aerospace business have done much better — 16.6 per cent, up from 2.5 per cent in 2022.
Similarly, he points out, in Rolls-Royce’s power systems division, where “flying hours don’t matter” as it builds diesel and gas engines used in ships and power generation, profitability has doubled.
What is clear is that Erginbilgiç did his homework before starting the job. From September 2022, he spoke to shareholders, visited sites and even paid an external consultant for a benchmarking exercise against competitors so he could hit the ground running. Investors, he says, were impatient to see results after years of frustration. By the time he started, he knew what needed to be done.
The chief executive identified seven areas of improvement, including reducing working capital, increasing efficiency and optimising commercial terms. Erginbilgic had already begun to renegotiate lossmaking sales and supply contracts with airline customers.
Management changes followed, as did 2,500 job losses among ranks of middle managers. Erginbilgiç has appointed new heads to lead Rolls-Royce’s commercial aerospace division, its defence unit and the power systems business. He also brought in a new chief financial officer from BP.
This is the third transformation for Erginbilgiç, a British and Turkish national with a background in engineering. At BP, where he spent more than 20 years, including five years in its executive team, former colleagues credit him for being a good operator with a record for delivery, notably in turning round the oil company’s refining and marketing business. He left the oil major in 2020 for a role in private equity after losing out on the top job to Bernard Looney.
“I actually learnt by doing . . . you know what works, what doesn’t work that well and then you sort of build that,” says Erginbilgiç.
Rolls-Royce’s transformation is underpinned by a carefully worked out framework of four “pillars” — an approach he has used before. The first of these, Erginbilgiç describes as “holding up a mirror” to make clear to staff the reality of the company’s position. Shortly after arriving he told staff Rolls-Royce was a “burning platform” and this was “our last chance”.
The bleak assessment shocked many but Erginbilgiç insists the purpose was not to depress his employees but to show them the reality of the situation, backed up by data he had gathered. He says he had gone on to talk about his vision for the group.
“Everything has a purpose here. Transformations don’t happen by being a cowboy.”
Given the size of Rolls-Royce’s workforce — it employs around 42,000 people — “you need to reorient people . . . and you need to be very clear”.
His second pillar is to set a clear, granular strategy that engages employees. “If you don’t have a strategy that can cascade down to 42,000 people it won’t get delivered,” he says.
Rather than developing its strategy in a “dark room with consultants,” Rolls-Royce held workshops with around 500 employees to brainstorm options and decide on the best path. Strategy, he says, can “often become too tidy . . . you need to make it chaotic” to allow different options to emerge.
He describes his third pillar as “performance management” — which flows from the strategy and is about how you manage the business, with very clear targets. The fourth is to do all three with “pace and intensity” to show you are delivering.
“If you don’t put scores on the board quickly, you will lose people,” he says. “When you continue to deliver, suddenly more and more people believe.”
Erginbilgiç acknowledges the process is “intense” but in a “very positive way”. “People are very energised.” Rolls-Royce, he adds, did not lose anyone he wanted to keep during the transformation.
Today, the company tracks 17 strategic initiatives. “Everybody knows what to do,” he says. One of the initiatives is to improve “time on wing” of its large engines — the longer they are in the air, rather than on the ground getting serviced, the more money Rolls-Royce earns.
Erginbilgiç’s time in charge has not all been plain sailing. There has been criticism from some of its big airline customers — notably British Airways — about the performance and reliability of some engines. Some industry insiders have also pointed out the potential risks of being too ruthless in renegotiating contracts.
Erginbilgiç says he would “never” describe himself as ruthless. “I am a good operator and I am a strategic thinker,” he counters.
It is not easy to see where this personal drive comes from: Erginbilgiç is reluctant to talk about himself. His father was in the Turkish military and his mother still lives in Istanbul. He is more comfortable talking about his interest in playing competitive tennis. “I go out there to win. But if I played brilliantly that day and I still lost, I am happy. I need a purpose.”
Last month, he set even more ambitious financial targets, and is keenly aware of a big challenge facing the company. Boeing and Airbus have begun work on new versions of their best-selling single-aisle aircraft, the 737 and A320 respectively. Rolls-Royce does not power either of the current aircraft — its engines exclusively power larger wide-body jets — and the company would love to provide engines for the next generation of single aisle jets.
It is an enormous commercial opportunity, and Rolls-Royce thinks it has the right technology — UltraFan, a new, fuel-efficient engine. It has started work on a scaled-down demonstrator of the engine it wants to offer for the next generation of single-aisle jets.
The scale of the challenge is such, however, that the company is unlikely to go it alone, and will seek a commercial partnership. “Everybody is talking to us and we are talking to everybody,” Erginbilgiç says.
Harsh Jhaveri, investment analyst at Orbis Investments, which bought into Rolls-Royce nearly 10 years ago and owns 0.9 per cent of the company, says the company has made “outstanding progress on its transformation”.
Orbis, Jhaveri adds, had been “encouraged by the push to institutionalise a performance-driven culture,” adding that it would like to see the team capture growth in existing business and new areas including its small modular reactor business and narrow-body engines.
Erginbilgiç is adamant the revived Rolls-Royce will grow with or without a return to the narrow-body market. In defence, the company is involved in the trilateral Aukus submarine programme between the UK, the US and Australia. Military spending is also on the rise.
One uncertainty on the horizon is the impact from Donald Trump’s trade war. Rolls-Royce is assessing whether it could increase production for US customers at some of its sites in America as a way of limiting the damage done by any levies. The Department of Defense, Boeing and Lockheed Martin are among its key US customers. Rolls-Royce also builds diesel generators used to generate power for data centres in the US.
Asked how he would like to see the company positioned whenever he decides to leave — he is 65 — Erginbilgiç says he wants it to be “really sustainably distinctive”. Analysts have speculated he may look to retire after 2028 — he has lucrative share awards that vest in 2027 and 2028.
After years of the company not delivering, Erginbilgiç says he and his team are “unlocking the potential” of the venerable Rolls-Royce name. “We are now catching up with our brand.”
A day in the life of Tufan Erginbilgiç
6am If I’m in London, I go to the gym before work. At the weekend it’s a tennis court for some competitive exercise.
Morning Meetings cover a range of important stakeholders: internal teams, investors, governments, customers, suppliers. They are about making real progress on an issue; updates can just be on email. I also make room to think about upcoming events and strategic questions.
Afternoon After lunch at my desk, it’s further meetings. Safety is our number one priority. We often start internal meetings with a “safety moment” in which a team member tells a personal story about an incident, what they learnt and how that relates to our programme.
Evening I try to make time to walk. It provides valuable thinking time.
