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Rolls-Royce shares recover after 'progress' on engine failure

Rolls-Royce on Monday said the engine problem with the Qantas A380 was an "incident is specific to the Trent 900 engine."
Rolls-Royce on Monday said the engine problem with the Qantas A380 was an "incident is specific to the Trent 900 engine."
STORY HIGHLIGHTS
  • Rolls-Royce says Qantas "incident specific to the Trent 900 engine"
  • Oil leaks found in Rolls-Royce Trent 900 engines on three Qantas Airbus A380s
  • CEO: Alan Joyce told reporters the leaks were "beyond normal tolerances"
  • Rolls-Royce share value dropped by 10 percent since Qantas initial reported problem

London, England (CNN) -- Shares in Rolls-Royce rose Monday after the company announced that it had made progress in understanding the cause of a Qantas mid-air engine blow-out.

The shares rose by 2.62 percent -- they had been 14 percent down from Thursday after the Australian carrier revealed early Monday that oil leaks had been discovered in the engines on three of its planes after being examined by Rolls-Royce engineers.

This follows last week's aborted flight by an A380, which was forced to make an emergency landing in Singapore shortly after take off when one of its engines failed.

Rolls-Royce on Monday issued a statement saying the Qantas problem was caused by an "incident specific to the Trent 900 engine."

"As a result, a series of checks and inspections has been agreed with Airbus, with operators of the Trent 900 powered A380 and with the airworthiness authorities," the Rolls-Royce statement continued.

Qantas CEO Alan Joyce told reporters the leaks were "beyond normal tolerances" and that the planes will not return to service until the airline is "100 percent sure" about their safety,

Jetliner safety concerns rise
Qantas CEO: Planes to remain grounded
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"It is disturbing that Qantas found three more engines that needed to be looked at. That's a total of four," aviation consultant Peter Goelz told CNN. "This is a relatively... young aircraft. These engines have probably less than 200,000 total hours, so it is an issue that we need to be concerned about."

New safety fears ground Qantas A380s

Singapore airlines and Lufthansa also operate the A380 equipped with Rolls-Royce Trent 900 engines, but they reported no problems after carrying out their own extensive checks. Their fleets are now flying again.

Dubai-based Emirates also operate the double-decked Airbus A380 but with GP7000 engines, designed as part of a joint venture between U.S. manufacturers General Electric and Pratt and Whitney. These engines have not been part of the current safety scare.

Before the share price recovery, more than $1.6 billion had been wiped off the value of British-based Rolls-Royce, its share value dropping by 14 percent since Thursday. Shares in EADS, which owns Airbus, were down by half a percent for the same period.

"We're looking at a period of time when investors will be pretty jittery," said Dan Thisdell of Flightglobal.com.

"But they've got to grapple with this problem in a way that maintains confidence among their prospective customers as well as existing customers.

They've got to grapple with this problem in a way that maintains confidence among their prospective customers as well as existing customers.
--Aviation expert Dan Thisdell
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"If it is some kind of underlying design flaw, though this would seem unlikely given the enormous expertise and modern computer simulation technology available to Rolls-Royce, then there could be a problem given the level of investment involved."

In August, another Rolls-Royce engine -- this time a Trent 1000 -- suffered an uncontained failure during testing in England. This particular model is designed to power Boeing's latest commercial aircraft, the 787 Dreamliner.

Rolls-Royce said on Tuesday that the Trent 1000 issue was not connected to the Qantas Trent 900 incident.

Rolls-Royce said in the statement: "This incident happened during a development program with an engine operating outside normal parameters. We understand the cause and a solution has been implemented."

With at least half of the 850 787s on order destined to be powered by Trent engines, Thisdell told CNN that this will be another profitable source of income for a very long time.

"Many airlines have placed orders for aircraft years down the line and have not yet selected their preferred engine," he said.

"But no-one has a better reputation than Rolls-Royce. Many airlines will order Rolls-Royce engines as a matter of course because they've had first rate service from them for years.

"Not every airline see it this way, but many -- particularly small and medium-sized airlines -- feel some comfort in having a single supplier of engines for all the aircraft they fly because it provides some commonality with maintenance, spares and training for mechanics."

As if to reinforce this point, Rolls-Royce on Monday announced a new $350 million engine servicing contract with Egyptair, who operate a fleet of Airbus A330s fitted with Trent 700 engines.