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Qantas settles with Rolls-Royce

By Pamela Boykoff, CNN
A Qantas A380 lifts off in Sydney on November 27 on its first flight since a mid-air engine explosion three weeks earlier.
A Qantas A380 lifts off in Sydney on November 27 on its first flight since a mid-air engine explosion three weeks earlier.
STORY HIGHLIGHTS
  • Rolls-Royce agrees to compensate Qantas $100 million
  • The terms of the deal are confidential
  • The failure of a Rolls-Royce engine in early November resulted in an emergency landing
  • Engine failure causes Qantas to ground six A380s for more than three weeks
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(CNN) -- Qantas has reached a settlement with engine-maker Rolls Royce over a 2010 incident that grounded its entire Airbus A380 fleet.

Rolls-Royce agreed to compensate the airline in a deal worth US $100 million, Qantas CEO Alan Joyce said at a news conference. The deal was signed Wednesday morning and the terms will be kept confidential, according to Joyce.

The settlement brings to an end the legal action between the two parties, Qantas said.

The failure of a Rolls-Royce engine in early November resulted in an emergency landing of a Qantas passenger plane at Singapore's Changi Airport.

The flight, carrying 440 passengers and 26 crew, was Australia-bound from Singapore when a fire on the plane's No. 2 engine not only caused half of the engine casing to fall off in flight, but it also damaged the aircraft's electrical wiring.

Investigators blamed the fire on a potential manufacturing defect in the type of engine that caught fire -- a Trent 900 engine manufactured by Rolls-Royce.

The incident caused the airline to ground its six A380s for more than three weeks.

At Wednesday's news conference, Joyce also updated the company's financial outlook, forecasting annual profit before tax of between US $530 million to $580 million, despite a major impact from weather events and natural disasters.

The airline has lost an estimated $219 million due to the Japan earthquake and tsunami, Queensland floods, Cyclones Yasi and Carlos, and the Christchurch earthquake.

The Rolls-Royce settlement was included in the profit outlook.

Joyce addressed the struggle of Australia's flagship carrier to turnaround its international business which hasn't kept pace with competitors, alluding that major changes will be made later this year.

"The task must be to transition a great airline into a great business," he said. A major announcement on the future of the international business will be made on August 24.