Rolls-Royce Plane-Engine Failure Costs to Exceed $80 Million, Analyst Says
Stock Chart for Rolls-Royce Holdings PLC (RR/)
Rolls-Royce Plc faces costs and penalties of more than the 50 million pounds ($80 million) to fix its Trent 900 engine that blew up on an Airbus SAS A380 operated by Qantas Airways Ltd., according to Nick Cunningham of Agency Partners.
Compensation will extend to Qantas, which grounded all six of its A380s for 23 days and now is operating only two, and to other client airlines and the plane manufacturer Airbus, for expected delays in future deliveries, he said.
Rolls may also find it more challenging to market the engine to potential customers, Cunningham said. That would provide an advantage to General Electric Co. and United Technologies Corp.’s Pratt & Whitney, which together make a rival powerplant for the A380.
“This event and its aftermath might impact on the marketability of the Trent 900 engine,” according to Cunningham, who is a managing partner at the London-based investment advisory firm and a 25-year veteran of the industry. “This could have a cost in terms of market share and pricing.”
The costs to 2010 profit are unlikely to be the final installment, Cunningham said. Further charges against 2011 accounts will probably follow, he said.
Rolls fell 1.5 percent to 632.5 pence in London trading as of 8:04 a.m.
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