Posts Tagged ‘Trent 900’

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.

EASA eases safety inspections for A380’s Trent 900 engines

December 22, 2010

From the WSJ:


Agence France-Presse/Getty Images The damaged Rolls-Royce Trent 900 engine and wing section from a Qantas Airways Airbus A380.

European aviation regulators on Tuesday substantially relaxed tight inspection rules covering Rolls-Royce Group PLC engines on Airbus A380 superjumbo jetliners, signaling that safety concerns about the planes are fading. The European Aviation Safety Agency, dropping emergency mandates to inspect Trent 900 engines after every 20 flights, moved to require repetitive inspections of most of the engines after 100 flights. The change is likely to reduce disruption of flight schedules, according to industry officials.

EASA’s move follows intensive inspections of Trent 900s on A380s operated by Qantas, Singapore Airlines Ltd. and Deutsche Lufthansa AG. In its latest directive, the agency said a review of manufacturing and inspection data convinced safety officials that many “lower risk” tubes are less prone to fracture and therefore don’t need such frequent checks.

Lifting the emergency directives so quickly, particularly after such a high-profile and dangerous event, indicates much of the fleet is unaffected by oil-system manufacturing defects.

To further assure the safety of Rolls-Royce-powered A380 jets, European regulators previously also ordered upgrades of Trent 900 electrical systems to prevent engine parts from turning dangerously fast, a condition that can lead to disintegration of spinning disks. Those enhancements already have been incorporated into the A380 fleet.

Problems caused by a manufacturing defect on an oil-supply tube have been blamed for the explosive failure of a relatively new Trent engine on the Qantas jet shortly after takeoff from Singapore. The fault has been found on the current fleet as well as at least one new plane slated for delivery to Qantas, according to industry officials. But on Tuesday, EASA for the first time specifically defined what it considers to be an acceptable minimum thickness for the walls of the tubes.

EASA’s decision also is good news for Qantas and the other carriers that fly A380s with Rolls-Royce engines because those airlines have been concerned about potential schedule disruptions and longer required layovers to accomplish the inspections.


Australian Transport Safety Bureau report: The Trent 900 engine blew out after the Qantas A380 took off from Singapore on Nov. 4.

It would seem that the initial failings of the Trent 900 have now been found and are being rectified. But it needs a few more months of operation before it can be said that all the “teething” problems of the Trent 900 have been identified and resolved. The costs for the fix – mainly to be borne by Rolls Royce – have still to be added up and will not be finally clear for a few more months.

EASA had also relaxed inspection requirements before the explosion on the Qantas A380 probably in response to representations by the engine manufacturer and /or the airlines. One hopes that their decision to relax inspections this time is not just in response to pressure.

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.

Airbus vs. Boeing: or a tale of the marketing of delays and engine problems

November 26, 2010

For large, complex, expensive, high-technology products (airplanes, turbines, power plants or ships for example) it is usually not worth indulging in too much negative marketing based on a competitor’s technical difficulties. Early technical difficulties and “teething” problems are common and when a competitor has difficulties it usually leads to some feeling of satisfaction but it is tempered by the knowledge that one could easily suffer similar difficulties. So when GE experiences some problem with its gas turbines or Areva has delays in its nuclear plants there will never be an overt, negative marketing campaign by Siemens against GE or by Westinghouse against Areva.

File:Airbus A380.jpg

A380: image wikipedia

And this is the current situation between the Airbus A380 and Boeing’s 787 Dreamliner. The A380 had its share of delays and was over 2 years late in coming into service. Right now the troubles that Rolls Royce are having with their Trent 900 engines is not helping the A380 image. (There are only two engines available for the A380 but it is noteworthy that the General Electric / Pratt & Whitney Alliance which manufacture the GP7200 engine which competes with the Trent 900 are not indulging in any overt negative marketing). The “Rolls Royce effect” for Airbus is currently negative because of the Trent 900 issues but it is indirectly mitigated by the reports of delays in developing the Trent 1000 which is one of the engines for Boeing’s 787.

File:Boeing 787first flight.jpg

B787 First flight: image Wikipedia

As Airbus fights to get airlines to accept the A380 their “best friend” strangely is the delays to the B787 Dreamliner program. The Dreamliner has been further delayed by an electrical system fault which caused a fire on a test flight in early November. For an airline the decision of choosing between Boeing and Airbus has become not one of comparing the advantages each has to offer but instead one of judging the risk exposure that a choice may bring. It becomes a comparison of potential “downsides” and risk mitigation possibilities rather than selecting between potential “upsides”.

For Airbus and Boeing, their sales processes now have to emphasise the risk mitigation available with their products rather than promoting all the advantages their products have to offer. This is unusual for a “sales process” but nothing new in the history of marketing of technologically new products. But it is not so easy for corporations, their salesmen and for sales processes to shift from promoting advantages to the much more difficult task of showing that the risks (whether of delay or of technical difficulties) they pose are less than that of the competitor. Even in terms of financing, the usual offers of financing and leasing packages for the customer must now additionally address the mitigation of financial and consequential exposures in the event that a risk materialises. When a single A380 costs around $320 million, a Boeing 747-400 about $250 million and a Dreamliner has a price tag of $150 -200 million, then downtime and delays have enormous financial consequences for the customer. Marketing strategy for new products in the face of heightened risk perceptions is quite different to the marketing of “tried and tested” products. But this is a fascinating marketing challenge!

The latest reports of delays to the Dreamliner has led to harsh words about Boeing from a potential customer. CityAM reports:

QATAR Airways has threatened to hand extra business to European aircraft giant Airbus after attacking Boeing over problems with its new 787 Dreamliner. Chief executive Akbar Al Baker said the airline was considering increasing its order for five Airbus A380 super-jumbo planes and might order a re-engined version of the A320 single-aisle jetliner. He did not say how many more A380s it might order.

Qatar has expanded its fleet from four to 94 aircraft in 13 years and has orders for 200 more from Airbus and its US rival Boeing worth $40bn, including 30 Dreamliners. Al Baker said Boeing had “failed” in developing its 787 Dreamliner, which is expected to suffer further delays following a fire on a test flight.

Boeing’s development of the carbon-composite 787 is running around three years late and brokers expect a further delay as it addresses the cause of a fire which led to the test flight being grounded two weeks ago.

But I would expect that there is a strong element of price negotiation in Qatar Airways’ statement!

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.

Rolls Royce shares, time to sell? Trent 900 hit will last at least 18 months

November 22, 2010

In the first half of 2010 Rolls Royce had revenues of £5.421 billion with a PBT of £465 million (8.6%) of revenues. Cash position was strong with net cash for the period at £915 million. But it looks less impressive considering the order backlog of £58.4 billion. How much of the net cash was due to order down-payments is not clear. Orders received during the period were £5.9 billion (and backlog was virtually unchanged) and this would have provided net cash of around £550 million. So operating cash flow (excluding financial posts) was probably only £350 million.

The Trent 900 debacle will probably eat up at least £200 million – and perhaps more – over the next 12 -18 months. The immediate effect will also be the loss of some expected orders and 22 A380s – bought by Qatar Airways, Kingfisher, Etihad and Air Austral – are yet to decide whether to use the Trent 900 or the rival GP7200 made by the GE / Pratt & Whitney Alliance. Any loss of market share will be difficult to recover. To sell the 100 additional engines that will be needed to recover the costs of this fix will take a few years. Even though all the costs will not be incurred in this quarter, some significant provision will have to be made this year (and it will be a real warning sign if such provision is not made).

The financial and technological position of Rolls Royce is strong and they should be able to make the fix and weather the storm. But profits will be hit hard for at least the next 12 months and perhaps even longer if Trent 900 sales suffer or if the Trent 1000 is further delayed.

Until the Trent 1000 is established in the Dreamliner (which depends on the Boeing 787 coming into service through next year), Rolls Royce share value is capped and with a big downside. It is perhaps time to sell and it could be time to re-enter in about 12 months if some of the major uncertainties are resolved by then.


ROLLS-ROYCE Share Graph:


What did Rolls Royce know and when?

November 20, 2010

Rolls Royce have been conspicuously silent but it is now emerging from the airlines that Rolls Royce knew something was amiss with the older versions of the Trent 900 long before the engine failure on QF32 on November 4th. The indications are that they had serious doubts about the unmodified engines by May this year – and perhaps even earlier.

I posted my assessments about this on November 14th and 15th.

Did Rolls Royce know about the risk for a Trent 900 failure before the Qantas accident?

Problem with Trent 900 was known before accident and raises ethical questions

From an AP report via Yahoo Finance

Rolls-Royce modified a problematic section on new models of its engine for the world’s largest jetliner months before one caught fire and blew apart over Indonesia, a Lufthansa spokesman said Thursday.

The chief executive of Qantas, meanwhile, said Rolls-Royce had made modifications to the Trent 900 engine without telling the airline or Airbus, which makes the A380 superjumbo.

The officials’ remarks were the strongest indication yet that Rolls-Royce had addressed a defect in new models of the engine while allowing Airbus A380 superjumbos to continue flying with unmodified older models.

Lufthansa’s first A380, delivered by Airbus on May 19, had three newer versions of the Trent 900 engine and one older version, airline spokesman Thomas Jachnow said.

“When we got our first aircraft it was curious that one was from an older one and three were totally new from the production line,” Jachnow said. “I think this is more or less the cusp where the old to new happened.”

The Daily Telegraph carries a similar story:

The two airlines said Rolls had not informed them about the changes to the Trent 900, although sources close to the industry played down the modifications as “continuous improvements” and said reports that the changes related to the part that caused the oil leak on the Qantas A380 were “plain wrong”.

Rolls shares fell 11½, or 2pc, to 592p.

Investors are wary that the incident could cost Rolls customers. It is understood there are 22 A380s – bought by Qatar Airways, Kingfisher, Etihad and Air Austral – which are yet to decide whether to use the Trent 900 or a rival made by GE and Pratt & Whitney.

According to Alan Joyce, Qantas chief executive, up to 40 engines could be replaced. Mr Joyce also claimed that Rolls had already been changing the engine. “Rolls-Royce have gone and modified certain parts of this engine,” he stated. “If this was significant and was known to be significant, we would have liked to have known about that. We and Airbus weren’t aware of it. But it depends on what the purpose of modifications were for. It doesn’t look like it’s a significant modification, but it is a modification that has an impact on how the engines are performing.”

A Lufthansa spokesman said it had noticed differences in newer versions of the Trent 900 it had been sent.

In addition to all their technical and logistic issues, Rolls Royce now need to urgently address their loss of credibility and provide detailed answers to:

What did Rolls Royce know and when did they know it?

Rolls Royce will face costs of over 300 million $ to fix the Trent 900 problems

November 19, 2010

Rolls Royce now faces direct costs for replacement of 40 Trent 900 engines, compensation claims from Airbus and from the airlines involved and lost opportunity costs as the Trent 900 inevitably loses market share to the General Electric / Pratt & Whitney Alliance GP 7200 engine. These could add up to around 300 million $ for fixing the Trent 900 problems and that is a best case scenario which assumes that they have not been negligent in knowingly supplying unfit engines. The cost of the consequent loss of market share cannot be easily quantified.

Airbus has already signalled that it is preparing its compensation claims for the additional costs incurred by diverting new engines from the Airbus production line to the replacement of faulty engines for Qantas, Singapore Airlines and Lufthansa. Any consequent delays to the aircraft under production at Airbus will no doubt lead to further penalties for Rolls Royce. The airlines are also, I am sure, preparing their compensation claims. Qantas is said to be losing one million dollars for every day without its A380’s. The fleet has been grounded for 15 days so far and it seems likely that this may last another 2 or 3 weeks and maybe for the rest of the 2010 calendar year. Qantas has already prepared its summer schedules based on no A380’s being available. Singapore Airlines has restarted its A380 flights.

In most supply contracts the consequential business losses at the airlines would not normally accrue to Rolls Royce but if it can be shown that the faulty engines delivered by Rolls Royce were “not fit for service” or – even more damagingly – that Rolls Royce were aware of the faults when the engines were delivered then Rolls Royce could be liable for massive damages and even for criminal negligence. In fact it would be comparable to issuing a cheque with no money in a bank account which could be construed as criminal negligence and fraud. Certainly it seems that Rolls Royce has known for some time that some of the engines delivered were “not fit for service” and it is highly unlikely that they could completely escape paying some compensation to the airlines. If the method of operation or maintenance by Qantas could be shown to be a contributory factor then Rolls Royce would have had some possibility of resisting the claim and of mitigating the penalties. But if the engines were “unfit for service” to begin with, then it even becomes possible for Airbus and the airlines to make claims for “loss of reputation” in addition to claims for loss of business. There is no viable defence at all if Rolls Royce knowingly supplied unfit engines.

A Trent 900 engine has a price of about 30 million $ and a complete A380 sells for about 320 million $. The direct cost for the engine rectifications for 40 engines is likely to be around 100 million dollars and this could easily increase to 300 or 400 million dollars with the compensation claims mainly from Airbus and Qantas. The Singapore Airlines and Lufthansa claims for compensation will not be small but will be significantly lower than the claims from Qantas. But if Rolls Royce has been negligent- whether criminally or not – then all bets are off and I think costs could escalate to be of the order of one billion dollars.

While the direct costs and compensation – once settled – can be quantified, the effects of loss of market share is potentially even more damaging but much more difficult to quantify. Since there are only 2 engine suppliers I would estimate that Rolls Royce will lose at least 5% market share to its rival as a consequence of this incident.

From my previous knowledge of the costs of fixing problems with land based gas turbines (more than 1 billion $ each for General Electric with their F-class Frame 7 and Frame 9 machines and for Alstom  and Siemens with their versions of F-class machines), I would be looking for Rolls Royce to provide – as a matter of prudence – for at least 200 million £ (300 million $) during this quarter. Rolls Royce will need to sell around 100 new engines just to recover this cost.

From an investor perspective I find the lack of communication from Rolls Royce inexplicable and suggestive that there has in fact been some negligence.

Rolls Royce must replace 40 of 80 Trent 900 engines deployed

November 18, 2010

I posted a few days ago that Rolls Royce would need to change out about 40 of the Trent 900 engines on the A380’s in operation with Qantas, Singapore Airlines and Lufthansa.

Now -via Qantas and The Press Association – this number has been confirmed by Rolls Royce:

Up to half of the Rolls-Royce engines of the type which disintegrated on an Airbus superjumbo this month may need to be replaced by the three carriers in Australia, Singapore and Germany, Qantas’s chief executive has said.

Australia’s Qantas, Singapore Airlines and Germany’s Lufthansa fly A380s powered by four giant Rolls-Royce Trent 900 engines, with a total of 80 engines on 20 planes.

Qantas chief Alan Joyce said that Rolls-Royce had indicated that up to 40 of them may need to be replaced.

“Rolls-Royce are still working through the criteria for which engines need to be changed,” he said on the sidelines of an event in Sydney unrelated to the A380 incident. He said that 14 of the 24 engines on Qantas planes may have to be replaced.

Whether Rolls Royce knew about the engine fault and the consequent risk prior to the accident on QF32 remains unanswered and whether the European Regulator (EASA) relaxed its inspection frequency Directive in response to Rolls Royce representations also remains unanswered.

Rolls-Royce cancels Zhuhai Air Show press conference

November 17, 2010

Rolls-Royce, beset by criticism over its public handling of the uncontained failures of its Trent 900 and 1000 engines, has canceled its planned Airshow China show briefing.

The engine-maker offered no explanation for the cancellation, leaving media attending the show only to speculate on its sudden change of plans.

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