Volvo Aero has made a strategic decision to focus on its core operations. As a result of that, the US subsidiary Volvo Aero Services is expected to be divested during the third quarter. The sale has a negative impact on the operating income for the second quarter of SEK 613 M, of which SEK 378 M relates to write-downs made under “Group headquarter functions and other” during 2009 that have now been re-classified to Volvo Aero and an additional write-down of SEK 235 M in the second quarter of 2010. Therefore, Volvo Aero posted an operating loss of SEK 372 M in the quarter.
 
Adjusted for the negative impact of the sale of VAS, the operating income was SEK 241 M (28), with an operating margin of 11.3% (1.4%). The improvement compared to last year is due to higher sales, lower costs and higher productivity.

Air travel above pre-recession levels

International air traffic has continued to recover in 2010, in spite of the impact of the European volcanic ash clouds in April. Statistics for May showed an 11.7% increase in passenger traffic and a 34.3% jump in freight demand compared to May 2009. The cumulative rate of traffic growth through May was 7.2% and cargo was 28.9%. Passenger traffic is now 1% above pre-recession levels, while the freight market is 6% bigger

The International Air Transport Association (IATA) expects airlines to post a global profit of $2.5 billion in 2010. This is a major improvement compared with IATA’s previous forecast released in March of a $2.8 billion loss.
 
Airbus and Boeing announced 319 gross orders in the first six months of 2010, an improvement compared to the 175 orders reported in the same time period last year. The backlog for large commercial aircraft decreased from 6,863 aircraft at the end of 2009 to 6,659 at the end of June. Combined deliveries decreased 6%, to 472 units.

Trent XWB runs for the first time

On 17 June, the new Rolls-Royce engine Trent XWB ran for the first time at Rolls-Royce Headquarters in Derby, England. Volvo Aero is a risk and revenue sharing partner in the XWB engine, responsible for the Intermediate Compressor Case, the first fabricated Titanium ICC designed and manufactured completely in Volvo Aero‘s new design system.  The Trent XWB will power the first flight of Airbus A350 XWB in 2012 and entry into service in 2013. The order book already exceeds 1,000 engines.

A general agreement between Lufthansa Technik AG and Volvo Aero Corporation regarding cooperation in the field of engine parts repair has been signed. The two companies will jointly develop new repair methods for mainly structural parts of large commercial aircraft engines within the capability of Lufthansa Technik.

The first Boeing 787 Dreamliner with General Electric GEnx engines has completed its first flight, over the state of Washington, an important milestone also for Volvo Aero. Volvo Aero manufactures five major components and has the design responsibility for three of them.