Posts Tagged ‘Qantas’

Rolls Royce settles with Qantas for over $100 million

June 22, 2011

Qantas has reached a settlement with engine maker Rolls-Royce over last year’s mid-air disintegration of a the Trent 900 engine, which temporarily forced the grounding of its entire fleet of A380s. The terms of the agreement have not been revealed but will give Qantas a $100 million (A$95 million) boost in profits. For Rolls Royce the cost of the Qantas settlement is therefore likely to be somewhat greater and my guess would be in the region of $110 million.

My estimate made in November 2010 that Rolls Royce would face a hit of around $300 million for direct costs and in settlement costs seems to be not far off the mark. The cost to Rolls Royce of loss of future sales remains intangible and perhaps only temporary.

The Telegraph:

Alan Joyce, the Qantas chief executive, said the terms of the agreement are confidential, but said the settlement’s profit and loss impact would amount to a A$95m boost to the Australian airline’s bottom line.

Mr Joyce said the settlement marks an end to the legal proceedings Qantas launched against Rolls-Royce in the Federal Court of Australia in December.

In November, a Rolls-Royce Trent 900 engine on a Qantas A380 disintegrated shortly after takeoff from Singapore, forcing the plane to make an emergency landing.

The Australian Transport Safety Bureau’s interim report on the A380 incident said a manufacturing defect in an oil pipe deep within one of the engines led to an oil leak, which sparked a fire. The fire caused a disintegration of one of the engine’s giant turbine discs, sending pieces of it shooting through the plane’s wing and raining onto the ground below.

The engine explosion was the most significant safety issue an A380 had ever faced since it began passenger flights in 2007, and prompted intense scrutiny of Rolls-Royce engines. 

The settlement will help Qantas recover from the millions it lost following the incident. The airline was forced to temporarily ground its entire fleet of A380s for a series of inspections, and Joyce said the plane damaged by the explosion won’t return to service until February.

“Qantas and Rolls-Royce have had a long and successful commercial partnership spanning several decades,” the airline said in a statement. “Qantas looks forward to a continued strong relationship with Rolls-Royce on the basis of the settlement announced today.”

The compensation payment helped boost the airline’s expected underlying pretax profit for the year to June 30 to between A$500 million (£326m) and A$550 million (£359m), up from A$377 million (£246m) a year ago.

…… Qantas shares rose 0.8 per cent to AU$1.84 in afternoon trading.

This leaves Rolls Royce the task of settling with Airbus and some less costly settlements with Lufthansa and Singapore Airlines.

My estimate is that it will take another 2 to 3 quarters for most of these costs to have worked their way through Rolls Royce’s accounts. However RR will have to bear an increased and continuing service cost regime for some time to come for the Trent 900.

The Trent 1000  for the Dreamliner is still a long way off from generating real revenues for Rolls Royce.

The wrecked engine after the plane landed in Singapore.

The wrecked Trent 900 engine after the Qantas plane landed in Singapore.Photo: AFP

It could be time to buy Rolls Royce again.

Advertisements

Rolls Royce engine failure will eat up $80 million of Qantas profits

February 17, 2011

Qantas half-year profits have already been hit to the tune of $55 million by the failure of the Rolls Royce Trent 900 and the subsequent grounding of their A380 aircraft in November last year. They also stated that there would be a charge of $ 25 million for the second half-year which gives a total cost to Qantas – for this financial year – of at least $ 80 million.

BBC News:

Qantas Airways said its first half net profits had risen four-fold, but it added that last year’s explosion in one of its Rolls-Royce engines had wiped off $55m (£34.4m). The breakdown led to the grounding of its A380 aircraft last year.

The Australian airline predicted 2011 full year profits would be much higher than last year. But it warned that these would be held back by high fuel prices and the recent floods in Queensland.

Qantas said there would be another $25m charge in the second-half results from the A380 problems.

Rolls Royce has already announced  a hit on profits for direct costs of £56 million (about $89 million) for the engine explosion and related events for the year till December 2010. No doubt the losses suffered by Qantas will be part of their compensation claim against the engine maker.

With compensation claims due also from Airbus (EADS), Singapore Airlines and Lufthansa and with the additional costs spilling over into 2011, the total cost of the engine mishap will likely exceed my estimate of  $300 million.

Estimated costs for Rolls Royce:

  • Direct costs $130 million
  • Indirect (servicing) costs thru 2011 – $50 million
  • Qantas claim – $70 million
  • Airbus claims – $50 million
  • Singapore Airline claims – $25 million
  • Lufthansa claims – $10 million

What impact the loss of potential sales could have is anybody’s guess – but it would be interesting to see if Pratt & Whitney shows a better than expected order intake.

Rolls Royce profits down 76% as Trent 900 costs start to kick in

February 10, 2011

BBC reports:

Manufacturing giant Rolls-Royce has said the mid-air failure of one of its Trent 900 engines on a Qantas superjumbo had led to costs of £56m. The explosion in the engine forced an emergency landing of the A380 in November last year. The one-off cost contributed to annual pre-tax profits dropping 76% to £702m in 2010 from £2.96bn. Foreign exchange costs and interest rate and fuel hedging contracts also contributed to the profit fall.

But the Derby-based company said that underlying pre-tax profits – which strip out one-off costs – were up by 4% to £955m in 2010 and were a better indication of its performance.

Rolls Royce say that the may face further “modest costs” but this seems to be far too optimistic considering that all the engine servicing costs have yet to show up and all the various compensation claims from Qantas, Airbus, Lufthansa, and Singapore Airline will take some time to work their way through. Once all the claims are presented there is an even chance that some will need arbitration before settlement which will take some time.

Jorn Madslien also writes:

Investors will be scrutinising Rolls-Royce’s financial figures to try to find out how the recent engine failure that led to the grounding of six Qantas Airbus A380 aircraft affected the company. ……..

….. The long-term effects of the engine failure, for instance a potential fall in new orders over the months and years ahead, cannot be measured at this stage. Consequently, the final impact on the company’s bottom line is not yet known.

It does not seem as if Rolls Royce have made any provision for further costs which is a little worrying and I stay with my estimate of around $300 million as the total hit that Rolls will have to swallow for the Trent 900 for the A380 in addition to any impact on engine sales.

Judging from the delays the development cost of the Trent 1000 for the Dreamliner is also likely to be significantly more than budgeted or expected.

It will be at least 2012 before the full financial impact is known though some residual impacts will continue for many years.

The wrecked engine after QF32 landed in Singapore in Nov. 2010:Photo: AFP


Once again: Qantas + RR engine + B747 = return to base

January 26, 2011

The Rolls Royce Engine Syndrome (RES) strikes again.

This time – one very thirsty engine

Qantas

Another drama ... A Qantas 747 was forced to return to Bangkok yesterday. image: http://www.news.com.au

Flight QF2 carrying 352 passengers was about 30 minutes into its flight from Bangkok International Airport when one of its engines began “consuming fuel more quickly than normal” a Qantas spokesman said.
It was forced to return to Bangkok where it landed safely about 7pm local time (11pm AEST). Affected passengers are expected to spend a second night in temporary accommodation with Qantas scrambling to send a replacement engine from Sydney for the troubled Boeing 747 today.
“As far as possible we will try and get passengers who need to return to Sydney urgently on other flights but that will be dependent on availability on other airlines,” the spokesman said.

“It was not actually an engine failure, (the pilots) did not shut the engine down they just reduced the thrust.” However one passenger on the flight says the engine “blew”.

The spokesman said there were no other replacement Qantas aircraft available in Bangkok.

Read more: http://www.news.com.au/travel/news/another-engine-problem-for-qantas/story-e6frfq80-1225994833407#ixzz1C7bLqCgl

Dreamliner delayed again and Qantas dramatics continue – now with B747 engines

January 19, 2011

Boeing has delayed the Dreamliner again — for the seventh time!

The Telegraph reports:

Boeing told investors on Tuesday that the 787 will now be delivered to launch customer All Nippon Airways in the third quarter of the year, rather than the first, after a fire on one of the test planes in November. All test flights were suspended for six weeks after the fire.

The 787, which seats 210 to 250 passengers and has a list price of $202m, promises to be the company’s greenest and most efficient airliner yet and uses advanced composite materials to achieve these savings. However, technical problems have pushed the aircraft behind schedule and it is now into its third year of delays. Boeing is under pressure to deliver the 787, which has become the company’s fastest-selling airliner.

Shinichiro Ito, the president of All Nippon, said last week the airline is having a “hard time” dealing with the delay. Boeing has secured 847 orders for the 787, which took its maiden flight in December 2009. Boeing insisted the latest setback will not have a “material impact” on its results, something investors appeared to agree with.

Meanwhile Qantas experiences further problems with its Rolls Royce engines . AFP reports on two Boeing 747 Qantas flights with engine problems:

A Qantas passenger jet bound for New York made an unscheduled stop in Fiji after it developed a problem with one of its engines, the Australian airline said Wednesday.

Qantas said flight QF107, a Boeing 747, carrying 375 passengers from Sydney to New York via Los Angeles, touched down in Nadi on Tuesday for repairs to a fuel valve supplying one of its engines…..

…… The hitch comes just days after another Qantas Boeing 747, QF11 to Los Angeles, experienced a contained engine failure on the runway of Sydney airport due to a turbine blade defect.

Media reports on that incident said that passengers heard “a loud bang” and saw black smoke pour from the affected engine, with the captain reportedly telling those on board that the engine had “cooked itself” over the plane’s intercom.

The “contained”  engine failure is the more serious issue. The Boeing 747 long-reach aircraft flown by Qantas uses  Rolls-Royce RB211-524G-T engines. The “T” at the end signifies that it includes some of the Trent modifications. The Trent 900 engines are used on the Airbus A380s while the Trent 1000 is  planned for the Boeing Dreamliner.

A Trent 1000 experienced an uncontained failure on the test-bed last year while the Trent 900 has had an uncontained failure and a number of other difficulties on the A380.

Related:

https://ktwop.wordpress.com/2010/09/28/rolls-royce-trent-1000-fix-is-defined/

https://ktwop.wordpress.com/2010/10/25/in-flight-failure-of-rb-211-524-engine/

https://ktwop.wordpress.com/2010/11/04/qantas-a-380-suffers-in-flight-rr-trent-900-engine-failure/

https://ktwop.wordpress.com/2010/11/05/trent-900-vs-gp7200-competitive-pressures-getting-too-hot/

https://ktwop.wordpress.com/2010/11/07/further-boeing-dreamliner-delays-and-rolls-royce-shares-feeling-the-heat/

Qantas A380 flights to LA to restart on 17th January

January 5, 2011

While Qantas had restarted flying its A380 aircraft with Rolls Royce Trent 900 engines on  27th November after the engine failure on 4th November, its flights to Los Angeles remained grounded since the engines had not been cleared for operating at the higher thrust levels necessary for reaching LA.

Reuters reports that flights to LA could now resume on 17th January:

Qantas said on Wednesday it hoped to resume normal A380 operations from January 17 but it would still need the go-ahead from Australia’s aviation regulator before flying the superjumbo aircraft on the lucrative route……. Qantas said on Wednesday it expected to have eight A380 aircraft in the air by early February, up from five currently. The airline is scheduled to take delivery of a new A380 aircraft in mid-January and another new aircraft by early February. A third A380 currently grounded in Sydney was also due to be operating by mid-January……. Analysts estimate damages to Qantas could reach $60 million, although forecasts vary. The LA route is one of Qantas’ most profitable.

For Rolls Royce, getting Qantas back to full operation is critical to bringing this chapter to a close and to limiting at least one part of the inevitable claims that will come. They will also face claims from Airbus who announced a few days ago that they would only deliver 18 A380’s during 2010 and would not reach their already reduced target of 20 planes. This delay is put down to the extra inspections caused by the fault in Rolls Royce engines. No doubt Singapore Airlines and Lufthansa will also have claims on Rolls Royce. I still estimate that the total costs to Rolls Royce will reach $300 million.

Qantas prepares for legal action against Rolls Royce

December 2, 2010

The Trent 900 fix is not going to be cheap for Rolls Royce. I am still maintaining my estimate that the total cost for the engine manufacturer will be in excess of $300 M.

The Wall Street Journal:

Australia’s Qantas Airways Ltd. Thursday said it has taken measures that would allow litigation against Rolls-Royce Group PLC  if it fails to reach a commercial settlement over the recent failure of a Trent 900 engine powering one of its A380 super jumbos. Qantas confirmed in a statement it is in talks with Rolls Royce over the “financial and operational impacts” of the engine failure.

Also Thursday, the international carrier said it plans fresh inspections on the Trent 900 engines after Australian safety regulators said they have identified a possible manufacturing flaw.

Qantas was forced to ground its fleet of six A380s last month after an engine on board flight QF32 exploded above Batam Island, Indonesia shortly after the airplane took off from Singapore, en route to Australia on November 4. Two of the mega airliners have since returned to service.

The explosion has put U.K., Derby-based Rolls-Royce engines under the microscope as airlines around the world that operate the Airbus A380 run a raft of safety tests. Airbus is a division of European Aeronautic Defence & Space Co.

A statement of claim has been filed by Qantas and an injunction by the Federal Court of Australia granted, ensuring the carrier can pursue legal action if settlement does not emerge, it said in a statement.

Australian safety investigators now believe the cause of the November mid-air drama may have been a manufacturing defect with an oil tube connection on some Trent 900 engines. That problem could cause oil leakage, cracking and possible engine failure from an oil fire, the Australian Transport and Safety Bureau said Thursday.

“The safety recommendation of the ATSB is consistent with what we have said before. We have instituted a regime of inspection, maintenance and removal which has assured safe operation. This programme has been agreed in collaboration with Airbus, our airline customers and the regulators,” a Rolls-Royce spokesman said.

Singapore Airlines, Lufthansa and even Airbus (EADS) can have claims on Rolls Royce and all may well have to resort to legal action to reach settlements. Qantas and Airbus have the greatest potential claims. Whether Rolls Royce knew about defects in advance of the accident on QF32 will be a key issue to determine if the engines delivered by Rolls Royce were actually “fit for service”. If the engines were not “fit for service” it opens the door to an even greater levels of claims on Rolls Royce.

“Critical safety issue” with Trent 900 could lead to “catastrophic failure”: Qantas to make further inspections

December 2, 2010

The Australian Transport Safety Bureau has determined that there is a “critical safety issue” with the Rolls Royce Trent 900 used on the Qantas A380 aircraft which could lead to a “catastrophic failure”. Qantas has been ordered to carry out further inspections.

AFP reports:

The Australian Transport Safety Bureau said a misaligned component had thinned the wall of an oil pipe in the exploded engine, causing “fatigue cracking” that prompted leakage and a fire “central to the engine failure”. “This condition could lead to an elevated risk of fatigue crack initiation and growth, oil leakage and potential catastrophic engine failure from a resulting oil fire,” the ATSB said, noting it was “understood to be related to the manufacturing process.”

The Bureau issued a directive urging Rolls-Royce to “address the safety issue and take actions necessary to ensure the safety of flight operations in transport aircraft equipped with Rolls-Royce Trent 900 series engines.” Qantas said it would immediately conduct further engine investigations as a result of the findings, but stressed it was just a precautionary measure and “there is no immediate risk to flight safety.”

“Qantas currently has two A380 aircraft in operational service, following the grounding of the fleet on 4 November. Both A380 aircraft will be inspected at the Qantas Jet Base in Sydney,” the airline said. “Inspections will commence this afternoon.”

The flagship carrier said it would determine whether further action would need to be taken after inspections were complete and it had consulted both Rolls-Royce and regulators. “Qantas does not anticipate at this stage that the inspections will have an impact on international services. However contingency arrangements will be in place, if needed,” it said.

The findings come just five days after Qantas resumed A380 flights, though the carrier has barred the superjumbo from trans-Pacific trips to Los Angeles due to the extra engine thrust required. It had grounded all six of its Airbus superjumbos after the November 4 blast over the Indonesian island of Batam, which forced an A380 to return to Singapore airport trailing smoke.

Checks revealed problems with 16 of the total 24 Rolls-Royce Trent 900 engines powering Qantas’s A380s — four per plane — meaning the turbines would have to be replaced or modified.

Qantas chief Alan Joyce on Saturday said he was “100 percent comfortable” with the A380s’ operation.

As reported by the WSJ, Qantas has already said that they will be claiming compensation from Rolls Royce.

A380 resumes flying but Qantas has another engine failure on a B747

November 27, 2010

http://www.news.com.au/travel/news/grounded-jet-mars-return-of-airbus-a380/story-e6frfq80-1225962092705#ixzz16VrjhJ7P

As Qantas staged a major PR exercise to mark the return of its A380 fleet to service, another plane from Sydney, a 747, was grounded last night with engine failure.

The flight, QF1 from Sydney to London, was due to leave at 6.05pm – but passengers were pulled off the plane after a loud noise emanated from the engine while they were taxiing towards the runway. The flight was later cancelled.

Earlier, passengers watched as Qantas CEO Alan Joyce staged a media conference to assure the public the company was now “100 per cent confident” A380 planes were safe. But while passengers on the A380 flight to London got away on time, passengers on board flight QF1 to London via Bangkok were pulled off their flight because of an engine fault.

The passengers disembarked about 7pm and were given meal vouchers, while engineers examined the engine. But at 9pm they were told the flight was cancelled. It was expected to leave at 9am today.A passenger on the plane told The Sunday Telegraph he could hear the engine die. “We were on the tarmac and then the captain said there was a mechanical problem; he said there was an electrical fault and that every time they tried to start the engine up it cut out,” he said. “We sat for 45 minutes and then they took us off the plane.”

The captain of yesterday’s flight, David Evans, who was part of the cockpit crew onboard flight QF32, said as “a precaution” Qantas had decided to use “reduced thrust” on the engines for the initial flights.

Qantas to fly one A380 again on Saturday, Rolls Royce may limit Trent 900 thrust

November 23, 2010

Qantas will have one A380 ready to fly again on Saturday 27th, 23 days after the engine explosion on QF32. Bloomberg reports:

Chief Executive Officer Alan Joyce will be on the first flight, which will go to London from Sydney via Singapore, he said at a media briefing today. The carrier will conduct further inspections with Airbus, regulators and engine-maker Rolls-Royce Group Plc before resuming other routes, it said in a statement.

The carrier will have four 450-seat A380s in service before Dec. 25, including two new ones, Joyce said. The airline is also due to receive two superjumbos next year. Joyce said it is too early to estimate the cost of the disruption caused by grounding the A380s or to comment on whether the carrier will seek compensation.

The Financial Times reports that Rolls Royce are likely to restrict the operating regime of the Trent 900 by limiting the maximum thrust that can be used,

Reports in Australia said Rolls-Royce was about to impose new guidelines on users of its Trent 900 engines stipulating that they cannot be operated at above 70,000 pounds of thrust.

Downgrading thrust to 70,000 pounds would knock out Qantas’s A380 services from Sydney and Melbourne to Los Angeles, a worrying development for the Australian airline that dominates the Pacific route.

“72,000 pounds of thrust is needed for the Pacific route,” a Qantas spokesman said. The airline would not comment on reports that at 70,000 pounds of thrust, Qantas A380s would be forced to fly to Los Angeles less than half full. It said the voluntary suspension on the Pacific route remains “until further operational experience is gained or possible additional changes are made to engines”.

“Pilots still have access to maximum certified thrust [of 72,000 pounds] if they require it during flight. It is not a manufacturer’s directive,” the company added.


%d bloggers like this: