Rolls-Royce Warns on Additional Engine Checks -- Update

(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 [e-mail] and Adria Calatayud at [e-mail]

(END) Dow Jones Newswires

April 13, 2018 04:17 ET (08:17 GMT)

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