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Rolls-Royce hit by further setback to fixing Boeing 787 engines

Stock MarketsSep 20, 2019 04:59AM ET
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© Reuters. FILE PHOTO: View of one of two Rolls Royce Trent 1000 engines of Boeing 787 Dreamliner during media tour of the aircraft ahead of the Singapore Airshow in Singapore

By Noor Zainab Hussain

(Reuters) - Rolls-Royce (L:RR) will take longer than expected to fix problems with its Trent 1000 engine, frustrating efforts to get Boeing (N:BA) 787s grounded by the glitch flying again and knocking the British company's shares.

Rolls-Royce, whose engines power large civil and military planes, said on Friday it had sped up turbine blade replacement for some models, leading to additional removals and delaying a reduction in the number of grounded aircraft to single figures until the second quarter of 2020.

The company faces 1.6 billion pounds ($2 billion) in extra costs and disruption as a result of the engine problem, which is due to the poor durability of components, and the latest delay spells further frustration for its customers and investors.

Its shares were down 3.5% at 780.8 pence at 0851 GMT, the largest percentage losers on London's blue-chip index (FTSE).

Rolls-Royce, whose customers include more than 400 airlines, 160 armed forces and 70 navies, said in August that it would spend another 100 million pounds to fix the issue.

"We perceived a risk that further action would be required, potentially leading to higher costs being incurred ... today's announcement that guidance for the Trent 1000 cash costs in 2019 and 2020 remains unchanged comes as a relief," Jefferies analysts, who rate the stock as "buy", said.

Rolls-Royce CEO Warren East said in August that a target of fewer than 10 aircraft on the ground at the end of the year might take a bit longer to achieve as a result of an additional repair load resulting from faster deterioration of a blade on the Trent 1000 TEN.

DEEP REGRET

The Trent 1000 TEN is the latest version of an engine that has had a problematic entry into service. As of late February, Rolls said 35 787s were grounded globally due to engine blades corroding or cracking prematurely.

"We deeply regret the additional disruption that this will cause our customers and we continue to work closely with them to minimize the impact on their operations," Rolls-Royce said.

Airlines have faced disruptions because of the groundings, with Norwegian Air's (OL:NWC) strategy switch to prioritize profits over growth hampered by the global grounding of Boeing's 737 MAX aircraft and long-running problems with Rolls-Royce's engines on Boeing Dreamliners.

Singapore Airlines (SI:SIAL) has also grounded two 787-10 jets fitted with the Trent 1000 TEN engines.

Rolls-Royce is keen to avoid further problems with the engine and in March dropped out of the race to power Boeing's planned mid-market aircraft.

Rolls-Royce hit by further setback to fixing Boeing 787 engines
 

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