Posts Tagged ‘Rolls-Royce Trent 900’

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.

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.

“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.

Rolls Royce scrambling to find Trent 900 replacement engines

November 17, 2010
Mechanic working on a Rolls Royce Trent 900 en...

Trent 900: image via Wikipedia

Rolls Royce is asking Airbus to return new engines destined for new aircraft so that they can be supplied to Qantas, Singapore Airlines and Lufthansa for their operations. This in turn is having a knock-on effect on future A380 deliveries.

In the meantime Qantas seems to be having a rash of minor issues which have caused aircraft to return after cockpit fires, bird hits and lightning strikes.

The European Regulator (EASA) has not commented on why they relaxed their Airworthiness Directive and whether this was done in response to representations from Rolls Royce. The engine maker is also silent on whether they knew of the Trent 900 problem and the risk for an engine fire prior to the uncontained explosion of an engine on QF32.

Reuters reports on the logistics problems faced by Rolls Royce:

British enginemaker Rolls-Royce has asked Airbus to return Trent 900 engines from A380 superjumbo production lines so they can be used to replace faulty ones on aircraft already in service.

The Airbus A380 — the world’s largest passenger aircraft with an average list price of about $350 million — has been hit by safety concerns after a Rolls-Royce engine partly disintegrated mid-flight, forcing a fully laden Qantas plane to make an emergency landing in Singapore on Nov 4.

Rolls-Royce’s move could be another blow to a much-delayed A380 program as Airbus was scheduled to deliver over a dozen Rolls-Royce-powered A380s — primarily to Singapore Airlines, Qantas and Lufthansa by the end of next year.

“Until this problem is fully resolved I think the situation with the delivery of A380 to customers … will be in jeopardy,” Standard & Poor’s analyst Sukhor Yusof said. But both Singapore Airlines and Qantas, with a combined 22 A380s still to be delivered, said on Tuesday they had not been informed of any delivery delays.

Airlines using the Rolls-Royce Trent 900 engines have been ordered by European aviation authorities to undertake major tests, which analysts said were so strenuous they would likely disrupt schedules.

“I can confirm that Rolls-Royce is arranging to supply some new engines from the production line to replace some engines removed from the serviced aircraft,” an Airbus spokesman in Singapore said, without saying which airlines would receive those engines.

Shares in Rolls-Royce, which on Friday said fixing the fault would lead to only slightly slower profit growth, have suffered during its probe and were 0.2 percent down at 596.50 pence by 1130 GMT on Tuesday, around 9 percent below their last trade before the Qantas incident. Airbus parent EADS has lost 5 percent since the incident and hit a one-month low on Monday. Its shares were 1.3 percent down at 17.78 euros. Qantas is down 4.9 percent since the incident. Airbus said last week that the problem with the Rolls-Royce engine could have an impact on its earnings and delivery target for 2011 but did not give details, and airlines contacted on Tuesday had no knowledge of delivery timetable changes.

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