Rolls-Royce share price slides as group flags further engine inspections

Rolls-Royce share price slides as group flags further engine inspections

Rolls-Royce has warned that it needs to carry out more frequent inspections of its Trent 1000 aircraft engines, raising the prospect of disruption for airlines such as British Airways and Virgin Atlantic and resulting in higher costs for the company.

Read: Rolls-Royce faces turbulence over engine issues.

The US Federal Aviation Administration (FAA) plans to reduce the amount of time the affected planes can fly on a single engine after a failure of the other. Now inspections must be carried out after every 200 flight cycles. J P Morgan Chase & Co restated a neutral rating and set a GBX 890 ($11.09) target price on shares of Rolls-Royce Holding PLC in a research report on Monday, November 14th. Three analysts have rated the stock with a sell rating, five have given a hold rating, two have issued a buy rating and one has given a strong buy rating to the stock.

As of 08:36 BST, Rolls-Royce's share price had given up 1.57 percent to 867.40p, underperforming the broader United Kingdom market, with the benchmark FTSE 100 index now standing 0.09 percent lower at 7,251.80 points.

The engineering giant claimed that its cash flow for 2018 would be unaffected at around £450m, as it would cut non-essential spending on travel, IT upgrades and other costs to offset the financial impact.

"We will be working closely with Boeing and affected airlines to minimise disruption wherever possible".

The inspections affect Trent 1000s with the Package C compressor, and the engine manufacturer says 380 such engines are in service.

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The need to inspect and fix Trent 1000 engines has led to an industry-wide shortage. "Our team of technical experts and service engineers is working around the clock to ensure we return them to full service as soon as possible".

This check was already required prior to the engine reaching a flying threshold of 2000 cycles (one way journeys).

"It's disappointing and frustrating that our new aircraft don't work the way they are supposed to", spokesman Lasse Sandaker-Nilsen said, adding that it had cancelled a flight from Paris to NY next week as a result.

In December the EASA ordered airlines to replace some Trent 1000 engines.

Air New Zealand also has Trent 1000 TEN model engines in its 787 fleet and these are unaffected.

In March, Rolls said the cash hit from the problem should peak at £340mn in 2018 before falling in 2019.

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