The archive · Business Models · Strategic decision · 1962–2012
Rolls-Royce sells engine uptime, not engines: Power-by-the-Hour, 1962
In 1962 Rolls-Royce invented Power-by-the-Hour: a fixed fee per flying hour for engine maintenance, so the maker earns only when engines perform.
Rolls-Royce
What it had to solve
Aircraft operators faced costly, unpredictable maintenance on engines like the Viper powering the de Havilland/Hawker Siddeley 125 business jet; the manufacturer carried the deep knowledge needed to run them reliably.
How it works
In 1962 Rolls-Royce invented Power-by-the-Hour to support the Viper engine on the de Havilland/Hawker Siddeley 125 business jet. Instead of selling engines and charging separately for repairs, it offered a complete engine and accessory replacement service on a fixed-cost-per-flying-hour basis.
The innovation was alignment: the operator paid only for engines that performed, and Rolls-Royce was rewarded for keeping engines reliable and on wing. The 2012 press release celebrating the model's 50th anniversary notes it 'aligned the interests of the manufacturer and operator.'
The idea never left. It became CorporateCare for business jets and TotalCare for airlines, which adds engine health monitoring and a global network of authorized maintenance centers. TotalCare is charged on a fixed dollar-per-flying-hour basis, explicitly so Rolls-Royce is 'only rewarded for engines that perform.'
Why it lands
- It changed the unit of sale from parts and labor to flying hours, making maintenance costs planned and predictable for operators.
- Risk moved to the manufacturer, which had the deepest design knowledge and the strongest incentive to maximize engine availability.
- It created a durable annuity-like revenue stream that grew into the industry's dominant long-term service agreement model.
What it did
Power-by-the-Hour became the industry's standard long-term engine service model: by 2012 more than half of Rolls-Royce's £11.3bn annual revenue came from services, and TotalCare charges a fixed fee per flying hour so both sides win when engines stay on wing.
What you can take
Price the outcome the customer actually buys: a fixed per-hour fee shifts maintenance risk to the party best able to manage it and makes product reliability the revenue engine.
Since then
Power-by-the-Hour was trademarked and became the template for aero-engine aftermarket services across the industry. Rolls-Royce's TotalCare now covers fleets of airliners, and by 2011 services supplied more than half of the company's £11.3bn revenue; the model is taught as a landmark of servitization, with competitors and engine lessors adopting variants of the same per-flying-hour contract structure.
Sources
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