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By Thomas Blackwood
July 30, 2026, © Leeham News: Rolls-Royce has raised its guidance for the full year after underlying profit soared by 46% to £2.5bn in the first six months of 2026, on the back of improved demand for its civil and military engines and the highly profitable aftermarket.
Tufan Erginbilgic, chief executive officer at Rolls-Royce, told investors the company had enjoyed “significantly improved operational and financial performance” over the first half of 2026.
He said the UK-headquartered engine maker had increased cooperation with OEM partners to support the ramp up of parts production, despite industry-wide “supply chain challenges”.
The impressive results, which form part of Erginbilgic’s transformation program initiated when he took on the role in 2023, include work to improve Rolls-Royce’s global maintenance, repair and overhaul (MRO) capacity.
The strategy also centers on new partnerships in both civil and defense, such as work with Airbus and Qantas to support the airline’s ultra long-haul flights with the Trent XWB-97, and continued work with the UK government on the Global Combat Air Program (GCAP).
Erginbilgic said during Thursday’s earnings call that Rolls Royce had effectively “eliminated AOGs [aircraft on ground] in civil aerospace for the first time in a decade”. This, he said, demonstrated that Rolls Royce was “meeting the needs of our airline and airframer customers and improving products and operational focus.”
Guidance raised as Rolls-Royce margins improve
Underlying operating profit rose by 46% to £2.5 billion in the first half of 2026, up from £1.7 billion in 2025, while the underlying operating margin reached 22.5%, versus 19% in the same period of 2025.
There was strong growth across Rolls-Royce’s three core business divisions during the six-month period.
Civil Aerospace remained the group’s largest contributor, generating underlying revenue of £6.19 billion, up 29% organically, while underlying operating profit rose 31% to £1.57 billion, resulting in an operating margin of 25.3%, an improvement of 0.5 percentage points. This was driven in part by improved aftermarket profitability.
Defense also saw growth, with revenue increasing 17% organically to £2.48 billion and operating profit surging 57% to £522 million, lifting its operating margin to 21.0%, up 5.4 percentage points. Erginbilgic said this was helped by a focus on autonomous propulsion.
Tufan Erginbilgic, Rolls-Royce CEO. Photo: Screengrab/Rolls-Royce
Power Systems delivered similarly strong results, with revenue climbing 28% to £2.6 billion and operating profit jumping 72% to £528 million, increasing its operating margin by 5.3 percentage points to about 20%.
Overall, the group reported underlying revenue of £11.28 billion, up 26% organically.
Reflecting that strong first-half performance, Rolls-Royce upgraded its full-year 2026 guidance, raising its forecast for underlying operating profit to between £4.7-4.9 billion, from the previous £4-4.2 billion, and increasing its free cash flow forecast to £3.8-4 billion, compared with earlier guidance of £3.6-3.8 billion.
Supporting this improved picture, Rolls-Royce said its large engine flying hours for the year would sit within the 115%-120% range compared with 2019 levels, and it expects 550-600 total original equipment deliveries with 1,480-1,550 shop visits in 2026.
Impact of fuel price on market?
While there is no doubt that instability in the Middle East and the resulting spike in fuel prices has impacted the industry in profound and myriad ways.
However, Erginbilgic said the impact on Rolls Royce’s operation was limited in scope.
Rolls Royce exited the market for single-aisle aircraft 15 years ago and the CEO said the vast majority of contract cancellations linked to fuel price increases related to the narrowbody market.
He said Rolls Royce’s most impacted customers, those in the Middle East, had largely recovered from the initial downturn but cautioned that in an “uncertain world” there was no guarantee cancellations would not spread. “If I was running narrowbody [aircraft], I would probably worry about it a lot more,” he said.
Engine enhancements gather pace
Rolls-Royce is continuing to make progress on a number of engine modification programs designed to improve time-on-wing.
For the Trent 1000 XE, which powers the Boeing 787 Dreamliner aircraft family, both phase one and two of the HP turbine blade modifications were certified last year.
Phase One will deliver a more than 100% increase in time of wing, with an additional 30% increase from phase two, depending on the operation.
The Trent XWB 97
Around half of the eligible fleet has now been upgraded with the new HPT blades, bringing them to the new Trent 1000 XE standard. The Trent 7000 also benefits from the same HPT blade improvements.
Erginbilgic said Rolls-Royce had now largely upgraded the fleet, which has accumulated almost 3 million engine flying hours with the new blades.
On the Trent XWB-84, which powers the Airbus A350-900, Rolls-Royce is rolling out the -EP variant, which entered service last year with Delta Air Lines.
The EP delivers a fuel burn improvement of 1.8% compared to the baseline XWB84, which is above the planned 1% improvement, as well as improving the engine’s time on wing.
The XWB 97, which powers the larger A350-1000, is also being enhanced with the next-gen engine in the family due for entry into service in 2028.
“We are now proving the durability of the whole engine, including a durability test representative of the harsh and sandy operations that it will face,” said Erginbilgic. “Following this ground test program, we will flight test and certify the engine next year.”
The XWB 97 is the engine powering Qantas’s Project Sunrise program, which will enable the carrier to reach New York and London nonstop from Sydney. The first Project Sunrise test flight from Australia to Europe was completed earlier in the month and Rolls-Royce’s work on the engine is supporting that mission.
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