Rolls-Royce Warns on Additional Engine Checks -- Update
April 13 2018 - 4:32AM
Dow Jones News
(Updates with comments from CEO, details about the engine
checks.)
By Robert Wall and Adria Calatayud
Rolls-Royce Holdings PLC (RR.LN) on Friday warned of extra
inspections of some engines powering Boeing Co. (BA) 787
Dreamliners that would impact airline customers and consume extra
cash.
The more frequent checks of known problems with its Trent 1000
engines could cause further disruptions to airliner operators,
Rolls-Royce said. Air-safety regulators are expected to mandate the
further checks in the coming days, according to the company.
A number of airlines, including Japan's All Nippon Airways Co.,
Britain's Virgin Atlantic Airways Ltd., and Norwegian Air Shuttle
ASA (NAS.OS) have had to ground planes because of previous checks
Rolls-Royce had to carry out. That hit passenger travel and raised
costs.
Rolls-Royce Chief Executive Warren East said the company regrets
the impact on customers.
Boeing, the world's No. 1 planemaker, said it is aware of its
engine supplier's latest setback and that it is "deploying support
teams to mitigate service disruption."
About 25% of all in-service Dreamliners use Rolls-Royce engines,
the Chicago-based planemaker said. General Electric Co. (GE) builds
the rival engine used on Boeing's 787.
Some parts in the Rolls-Royce engines aren't lasting as long as
expected, requiring the extra checks and repairs. Mr. East said
costs from the additional checks could drag into next year, but
that the exact costs aren't fully known.
Shares in London-based Rolls-Royce fell 2.18% in early London
trading.
Rolls-Royce last month said cash costs from additional
inspections and fixes to the Dreamliner engines and others powering
Airbus SE (AIR.FR) A380 superjumbos would rise to around 340
million pounds ($482.9 million) this year. That sum will now be
higher, Mr. East said Friday.
Rolls-Royce said it will reprioritize discretionary expenditure
to minimize the impact. Mr. East said that this could affect some
research-and-development spending, lead to a deferral in
information-technology spending, and cause travel expenses
cutbacks.
Rolls-Royce reaffirmed its free-cash-flow guidance for the year
of approximately GBP450 million. The closely-watched Rolls-Royce
target of about GBP1 billion in free cash around 2020 hasn't
changed, Mr. East said.
Rolls-Royce, which is no longer affiliated with the luxury car
maker, said the additional checks affect around 380 of the
so-called Package C engines--one of the production standards used
on Dreamliners.
Rolls-Royce has made a big bet on powering long-range airplanes
after exiting the market to power more numerous single-aisle planes
six years ago. It expects to power about half the world's long-haul
planes by 2020. Fixing all the engines currently affected could
take until 2022, the company has said.
Write to Robert Wall at robert.wall@wsj.com and Adria Calatayud
at adria.calatayudvaello@dowjones.com
(END) Dow Jones Newswires
April 13, 2018 04:17 ET (08:17 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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