July 15, 2024

Qantas Settles With Rolls-Royce Over Engine Explosion

HONG KONG — Qantas said Wednesday that it had reached a $100 million settlement with the engine manufacturer Rolls-Royce over the disruption caused by a midair engine explosion that forced the Australian carrier to ground its fleet of Airbus A380 aircraft late last year.

None of the more than 450 people on board the flight were injured in the incident, which occurred on Nov. 4 and involved a Qantas A380 traveling to Sydney from Singapore. One of the aircraft’s Rolls-Royce Trent 900 engines exploded shortly after takeoff, scattering debris and forcing the flight to make an emergency return to Singapore.

Qantas, which is the largest passenger airline in Australia, subsequently grounded its fleet of six A380s for several weeks. The airline’s A380 services between Australia and Los Angeles did not resume until Jan. 16. The German carrier Lufthansa and Singapore Airlines, which both operate A380s with the Trent 900 engines, also temporarily suspended services involving those aircraft after the Nov. 4 accident.

An interim report by the Australian Transport Safety Bureau in May attributed the engine’s failure to a manufacturing defect in an oil feed pipe.

On Wednesday, Qantas said it would receive 95 million Australian dollars, or $100 million, from Rolls-Royce, and that it had agreed to call off legal action against the engine maker, which is based in London.

The settlement more than covers the estimated disruption to the airline’s operations. Qantas had previously estimated the costs from the incident at 80 million dollars, Tom Woodward, a Qantas spokesman, said by phone.

An engine can cost tens of millions of dollars, but Rolls-Royce declined to specify its list price.

The payment is a relatively small amount for Rolls-Royce, which generated about £11 billion, or $17.7 billion, in revenue last year, and analysts welcomed the apparent resolution of an issue that had threatened to undermine Rolls-Royce’s reputation.

“Qantas is our valued customer, and we are pleased that this matter has been resolved,” Rolls-Royce wrote in an e-mail. It added that the agreement was in line with the financial guidance it had given when it released its full-year results in February.

The settlement injects much-needed cash into Qantas’s finances at a time when the airline is facing a number of serious challenges.

High oil prices have led Qantas and other airlines to raise fuel surcharges and earlier this month prompted the International Air Transport Association to cut its full-year profit outlook for the industry.

In addition, a spate of natural disasters in the region, including devastating earthquakes in Japan and New Zealand and severe flooding in Australia, have dented Qantas’s business. Qantas on Wednesday put the financial costs of these disasters to its business at 206 million dollars.

That figure includes an estimated 21 million dollars in losses from flight disruptions caused by an ash cloud emanating from a volcano in Chile.

Including the Rolls-Royce settlement, the airline’s pre-tax profit for the year ending June 30 would be in the range of 500 million to 550 million dollars, Qantas forecast Wednesday. That is up from 377 million dollars during the previous year.

“Considering the challenges facing the aviation industry, this is a very good result — the Qantas Group’s best since the global financial crisis,” the Qantas chief executive, Alan Joyce, said in a statement.

The Qantas engine incident has also caused trouble for Airbus, which has been struggling to increase its rate of production for the twin-deck A380 since a 2006 industrial crisis at the plane maker delayed the plane’s entry into service by more than two years. Airbus hopes to deliver around 25 of the planes by the end of 2011, more than twice the 11 planes it expects to have delivered by the end of June.

Airbus ended up short several Trent 900 engines that had been intended for aircraft on its assembly lines after Rolls-Royce was obliged to divert them to airlines as replacements for Trent 900s already in service.

“Our 2001 schedule is already heavily backloaded,” Thomas Enders, the Airbus chief executive said in an interview at the Paris Air Show on Wednesday. “That is a very critical issue for us.”

Airbus and Rolls-Royce are in close contact about the production and delivery schedule for the Trent 900, Mr. Enders said, though he declined to specify whether Airbus expected to receive any financial compensation from Rolls-Royce

“We will settle this amicably,” Mr. Enders said.

Nicola Clark contributed reporting from Le Bourget, France.

Article source: http://feeds.nytimes.com/click.phdo?i=f402d564e0ec32e7e820596157d5ab09

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