Posts Tagged ‘Singapore Airline’

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.


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