Qantas `Halo' Slips as Engine Issues Dent Reputation

Qantas Airways Ltd.’s safety image, highlighted in the 1988 movie “Rain Man,” may be losing its luster after two engine explosions in as many days.

The Australian airline today extended the grounding of its Airbus SAS A380 fleet to a week after conducting checks in response to an engine blowout that forced an emergency landing in Singapore on Nov. 4. A Boeing Co. 747 also returned to the city-state a day later following an engine failure, prompting Qantas shares to fall the most in almost a month. Rolls-Royce Group Plc powerplants were involved in both incidents.

“There is a halo around Qantas because they attract the best pilots and have a great record,” said Ronald Bishop, senior lecturer in aviation at Central Queensland University in Australia, who was a U.S. Air Force engineer for more than 20 years. “But, if there is a third incident, even if it’s a fluke, people will stop flying them.”

Qantas Chief Executive Officer Alan Joyce, 44, has trumpeted the airline’s safety record as he seeks to allay concerns that could persuade passengers to shun the carrier in favor of Singapore Airlines Ltd. or Emirates Airline. Joyce has also delayed services and hired aircraft from British Airways Plc to cope with the withdrawal of the six A380s that account for about 17 percent of international capacity.

Emergency Landings

The two emergency landings, which didn’t cause any injuries, were “unrelated events,” according to Sydney-based Qantas, nicknamed the “Flying Kangaroo” because of its logo. The two engines were different models and they were last serviced in different workshops, said spokeswoman Olivia Wirth. A Qantas facility in Melbourne handled the 747 engine, while Deutsche Lufthansa AG’s maintenance arm in Germany worked on the A380 powerplant.

Rolls-Royce’s Sydney-based spokesman Roger Hunt declined to comment, citing an ongoing investigation.

The Australian Transport Safety Bureau is working with Indonesian officials to search for a “crucial” part that resembles a geared disk after the A380 engine blew up over Batam Island in Indonesia last week. Engine parts recovered from the area have been sent to Singapore and Rolls-Royce in the U.K. for examination, the bureau said on its website.

Qantas fell 2.1 percent to A$2.80 at the 4:10 p.m. close of trading in Sydney. The stock has shed 6.4 percent this year, more than triple the 1.9 percent decline in the benchmark S&P/ASX 200 index. Rolls-Royce plunged 9.7 percent in the past two trading days in London.

Engine Checks

Checks undertaken on A380s since last week’s incident found “oil where oil shouldn’t be” on three Rolls-Royce Trent 900 engines on separate aircraft, Joyce said today as he extended the grounding for 72 hours. The powerplants are being removed as Qantas tries to work out the cause of the issue and the planes won’t fly until the carrier is satisfied they are safe, he said.

Singapore Air and Lufthansa, the only other carriers flying Rolls-Royce-powered A380s, have resumed flights after conducting checks recommended by Airbus and the London-based engine-maker.

Qantas, which has never had a fatal jetliner accident, was featured in the Oscar-winning movie “Rain Man,” when Dustin Hoffman’s character refused to fly with any other carrier. That safety reputation may have meant that the Singapore emergencies generated more publicity that they warranted, said portfolio manager Jason Teh. The Herald Sun, Australia’s bestselling newspaper, dubbed Qantas the “falling kangaroo” in a headline after the A380 incident.

Media Spotlight

“Any airline can have these issues,” said Teh, who helps manage the equivalent of $3 billion at Investors Mutual Ltd. in Sydney. “Qantas gets a great deal more media attention because they have the perfect safety record.”

The two scares overshadowed Qantas’ 90th anniversary celebrations, which it marked with a Nov. 5 open day at its Sydney jet base. About 15,000 staff and family members attended along with Hollywood star John Travolta, who has promoted the carrier since 2002.

The incidents may also disrupt Qantas’ plan to fly TV host Oprah Winfrey and about 300 studio audience members to Australia on an A380 next month to film episodes of her U.S. talk show. Winfrey’s Harpo Productions Inc. is in talks with Qantas about the trip, said Don Halcombe, a spokesman.

Qantas closed a heavy-maintenance facility in Sydney in 2006 as part of a A$3 billion ($3 billion) cost-cutting plan. Such moves could threaten standards and endanger Qantas’ safety record, according to the carrier’s engineers union.

‘Impressive Record’

“That impressive record relates to the past and you can’t keep that record if you cut corners,” said Steve Purvinas, federal secretary of the Australian Licensed Aircraft Engineers Association, which has more than 2,000 members at Qantas.

Cost-cutting may also lead to the use of less experienced pilots, which could also affect standards, said David Backhouse, a Qantas A380 captain and vice president of the Australian & International Pilots Association, which about 2,500 pilots at the carrier.

Joyce said on Nov. 5 that the A380 engine incident wasn’t a maintenance issue. Instead, he said it was likely a materials failure or a design flaw.

“Some of the claims that have been made are false and in some cases completely outrageous,” Joyce told reporters. The airline said it spends A$2 billion annually on maintenance and has 5,000 engineers on staff.

Joyce, who founded Qantas’s Jetstar budget unit, pledged that “safety is our number one priority” when he took over as chief executive about two years ago. The airline was then tackling government orders to improve standards after at least three incidents in a year.

Support for Qantas

One aircraft made an emergency landing in Manila in July, 2008 after an oxygen tank exploded, puncturing the plane’s fuselage at 29,000 feet (8,800 meters). On another flight, 44 passengers were injured when an Airbus A330 abruptly lost altitude because of a computer glitch. A third aircraft was forced to return to Sydney due to a fluid leak in a wing.

The Australian government is supporting Qantas, with Tourism Minister Martin Ferguson, who helped persuade Winfrey to bring her show to the country, saying it remained the “preferred carrier” for the trip.

“Let’s get on with maintaining what is, historically, a terrific safety record, from the point of view of the aviation industry in Australia, whilst also making sure we welcome Oprah,” he told reporters on Nov. 5.

To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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