Rolls-Royce, Qantas settle dispute

 

Rolls-Royce and Australian airline Qantas reach settlement over Airbus A380 engine explosion that forced an emergency landing

BALAZS KORANYI and MICHAEL SMITH

Published: 2011/06/23 08:29:18 AM

ENGINE maker Rolls-Royce and Australian airline Qantas have reached a settlement over an Airbus A380 engine explosion last year that forced a jet with 469 people on board to make an emergency landing and grounded much of the airline’s fleet.


Qantas said yesterday the out-of-court settlement would add A$95m ($100,6m) to its 2011 pretax profit and called off legal action against Rolls-Royce.


However, Rolls-Royce provided a lower figure and said the final deal did not change its guidance on the cost of the incident, which forced several airlines to ground their A380s, the world’s biggest passenger aircraft, and replace some Trent 900 engines.


Sources close to the deal said the main difference between the figures is that Rolls-Royce likely accounted for some parts and services at cost, while Qantas accounted them at market or list prices.


Analysts had previously estimated the airline’s loss from the incident would reach about A$60m.


However, Qantas CE Alan Joyce said repairing the damaged aircraft, named after aviation pioneer Nancy Bird-Walton, would take until next February, keeping it out of action for nearly a year-and-a-half and resulting in further loss of revenue.


The Australian Transport Safety Bureau blamed a disc failure caused by a manufacturing defect in an oil feed pipe for the incident over Batam Island, Indonesia, shortly after take-off from Singapore last November. Qantas immediately grounded its A380 fleet, forcing it to pull its biggest aircraft from some of its most lucrative routes for more than three weeks during the southern hemisphere summer travel season.


The airline scrambled to replace potentially faulty engines and even pulled some new engines from Airbus production lines, causing delivery delays of future A380s.


Qantas shares initially rose as much as 3% but eased back to end 0,3% higher as investors digested the airline’s warning that its international operations have to be restructured to save profitability.


Qantas said it expected its full-year earnings to come in close to market expectations but it faced heavy losses on international routes and it continued to grapple with rising fuel prices and flight disruptions. Reuters




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