Jet engine makers moved to rental models to capture high maintenance margins

Evidence

The classic model of building an engine and then selling it to an airline was a relatively low margin business with high levels of competition. … But margins on the engines themselves remain small, and competition tight. By contrast, the maintenance of these engines involves much higher profit margins – seven times higher, according to estimates. … This prompted Rolls Royce to introduce the ‘goods as a service’ model, whereby airlines do not purchase the jet engine but pay a fee for every hour one is used. In turn, Rolls Royce provides maintenance and replacement parts. — Nick Srnicek, Platform Capitalism, 66

Categorization

• XREF: A concrete, quantified example (seven times higher margins) of the platform shift from selling goods to monetizing service/access — the causal mechanics behind Srnicek’s framework.
• SHARE: The ‘renting thrust instead of selling engines’ fact is a narrow, delightful detail for anyone interested in how industrial firms pivot to service models.