Rolls-Royce is running into production hurdles on the engine for Airbus' new A330neo jet, just as the European planemaker rushes to meet delivery targets this year.
Only 10 Rolls-Royce Trent 7000 engines will have been delivered by the end of October, the London-based manufacturer said in a letter to employees describing “technical and operational challenges.” The output is “far short” of the 30 engines promised so Airbus can hand over 15 of the wide-body planes to airlines by year-end, according to the memo.
In a bourse statement Friday following Bloomberg’s story, Rolls-Royce said it cut its engines delivery target -- for all types of large commercial aircraft turbines -- by 50 to a total of about 500 for this year, adding that "such issues in the early stages of a new engine program are not uncommon in our industry." The company reiterated its profit and cash-flow targets.
"As we move into 2019 we are confident that Trent 7000 production and delivery volumes will increase significantly to meet our customer commitments," Rolls-Royce said.
“We have caused Airbus a significant problem, and we are working with them to to manage the situation with airline customers and lessors,” the memo said.
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Read more:
Boeing sends executive to Rolls-Royce as 787 engine troubles continue
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The factory stumbles threaten to pile new pressure on Rolls-Royce, which is already struggling with design faults on the engine’s sister model, the Trent 1000, which powers Boeing's 787 Dreamliner. The A330neo is expected to debut in the coming weeks, about a year behind its initial schedule.
Disruption caused by design faults on the 787’s engine is “a source of anxiety to our customers and we must not exacerbate this by missing commitments to our Trent 7000 customers,” Rolls said in the letter, sent Thursday and signed by President of Civil Aerospace Chris Cholerton and Chris Young, director of large engine programs.
The production glitches add to a frustrating series of setbacks for chief executive officer Warren East, who is trying hard to turn around one of Britain’s few remaining industrial juggernauts. In his four years at the helm, Mr East has worked to rebuild the engineering firm from the bottom up, shedding management layers, peripheral units and outdated business practices. Those efforts have been held back by issues with the Trent 1000 that came to light in 2016, and now with the Trent 7000, which was designed as an upgrade.
Rolls shares fell as much as 14 per cent, the biggest intraday drop in three years. Airbus declined as much as 6.6 per cent in Paris and was trading down 2.4 per cent in Paris.
“We would extrapolate that the financial impact on Rolls will be compensation payments to Airbus and the airlines, and a build-up of inventory into the year-end,” Robert Stallard, an analyst with Vertical Research Partners, said in a note, while cutting his price target on Rolls by 11 per cent to 930 pence. “The profit-and-loss impact could ironically be positive, as the Trent 7000 original-equipment deliveries will be loss making, with the returns coming from the aftermarket.”
For Airbus, the delays with the A330neo threaten to disrupt the Toulouse, France-based company’s effort to produce a record number of aircraft in the final quarter of 2018. It has set a goal of delivering about 800 planes this year, but is already playing catchup after issues with unrelated engines and interiors for its single-aisle workhorse, the A320 family of jets.
Airbus declined to comment ahead of third-quarter results scheduled for Oct. 31.
Late deliveries on the Trent 7000 are “causing both customer impact and a financial headwind for us this year,” according to the letter. The London-based engine-maker risks penalties when it misses contractual deadlines for delivering new engines. If airlines need to lease-in aircraft, the company may be required to cover that cost as well.
Icelandic discounter WOW Air said earlier this month that it would take its two A330neos on order in February instead of November because of delays. The carrier said it would cancel several routes through April as a result.
“Our priority has always been to ensure that this engine meets customer expectations on entry into service and we have seen very good performance attributes during a rigorous testing phase,” Rolls-Royce said in a statement. “We continue to work very closely with Airbus and our customers on the details of the delivery schedule.”
Rolls-Royce has already earmarked 1.3 billion pounds ($1.7 billion) in charges through 2022 related to the Trent 1000, as the company develops fixes and airline customers are forced to pull 787s from service for repairs.
The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
Company%20profile
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COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
What is the FNC?
The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning.
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval.
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Tree of Hell
Starring: Raed Zeno, Hadi Awada, Dr Mohammad Abdalla
Director: Raed Zeno
Rating: 4/5
Company profile
Date started: Founded in May 2017 and operational since April 2018
Founders: co-founder and chief executive, Doaa Aref; Dr Rasha Rady, co-founder and chief operating officer.
Based: Cairo, Egypt
Sector: Health-tech
Size: 22 employees
Funding: Seed funding
Investors: Flat6labs, 500 Falcons, three angel investors
COMPANY%20PROFILE
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WHAT%20IS%20THE%20LICENSING%20PROCESS%20FOR%20VARA%3F
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Low turnout
Two months before the first round on April 10, the appetite of voters for the election is low.
Mathieu Gallard, account manager with Ipsos, which conducted the most recent poll, said current forecasts suggested only two-thirds were "very likely" to vote in the first round, compared with a 78 per cent turnout in the 2017 presidential elections.
"It depends on how interesting the campaign is on their main concerns," he told The National. "Just now, it's hard to say who, between Macron and the candidates of the right, would be most affected by a low turnout."
COMPANY%20PROFILE
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The National in Davos
We are bringing you the inside story from the World Economic Forum's Annual Meeting in Davos, a gathering of hundreds of world leaders, top executives and billionaires.