Rolls-Royce hit by delay to engine for new Airbus jet

The A320 production line at Airbus in Hamburg, Germany. (Reuters)
Updated 26 October 2018

Rolls-Royce hit by delay to engine for new Airbus jet

  • Rolls-Royce said in a statement that it now expected to deliver about 500 large engines this year, down from about 550 previously
  • Rolls-Royce has also been grappling with problems affecting blades on its Trent 1000 engines for more than two years

LONDON: British aero-engine maker Rolls-Royce said on Friday that it would deliver fewer Trent 7000 engines this year than initially expected due to production problems, hitting both its shares and those of major customer Airbus.
Rolls-Royce shares plunged as much as 13 percent after Bloomberg reported the delays.
Rolls-Royce said in a statement that it now expected to deliver about 500 large engines this year, down from about 550 previously, and that it was working closely with customers such as Airbus, which is using the Trent 7000 on its new A330neo jet.
The problems come as the European planemaker is itself rushing to meet delivery targets this year.
The widebody A330 has historically been a second key source of cash for Airbus behind its best-selling A320, but the latest model has been hit by weak sales and engine reliability problems in testing.
“While the production ramp up issues in Q4 (the fourth quarter) are regrettable, such issues in the early stages of a new engine program are not uncommon in our industry,” Rolls-Royce said, reiterating its financial guidance for 2018.
“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 has also been grappling with problems affecting blades on its Trent 1000 engines for more than two years, and last month said it was still managing durability issues within its fleet and was replacing affected parts.
The 7000 is derived from the 1000, but Rolls-Royce’s chief executive Warren East said in June the new engine was not affected by the Trent 1000 problems.
East said in August the company faced challenges in producing significant quantities of its new engines — 7000s and 97Ks — in the second half, but was well positioned to overcome them.
Vertical Research Partners analyst Robert Stallard said in a note that Rolls-Royce could have to compensate Airbus and airlines.
Market sources say the A330neo, a refresh of the A330 launched with fuel-saving engines in 2014 at a time when oil was above $100 a barrel, has struggled to make its mark because of lower oil prices and the popularity of the underlying model.
Additionally, Boeing has been targeting potential customers with its newer Boeing 787, many powered by alternative engines from Rolls-Royce rival General Electric.
Airbus and Rolls-Royce say that the A330neo could benefit from a trend toward low-cost, long-haul operations, the economics of which are looking more attractive as oil prices return to $80.


Saudi Aramco shares soar at maximum 10% on market debut

Updated 11 December 2019

Saudi Aramco shares soar at maximum 10% on market debut

  • Company is now world’s largest publicly traded company, bigger than Apple

RIYADH: Saudi Aramco shares opened at 35.2 riyals ($9.39) on Wednesday at the Kingdom’s stock exchange, 10 percent above their IPO price of 32 riyals, in their first day of trading following a record $26.5 billion initial public offering.
Aramco has earlier priced its IPO at 32 riyals ($8.53) per share, the high end of the target range, surpassing the $25 billion raised by Chinese retail giant Alibaba in its 2014 Wall Street debut.
Aramco’s earlier indicative debut price was seen at 35.2 riyals, 10 per cent above IPO price, raising the company’s valuation to $1.88 trillion, Refintiv data showed.
At that price, Aramco is world’s most valuable listed company. That’s more than the top five oil companies – Exxon Mobil, Total, Royal Dutch Shell, Chevron and BP – combined.
“Today Aramco will become the largest listed company in the world and (Tadawul) among the top ten global financial markets,” Sarah Al-Suhaimi, chairwoman of the Saudi Arabian stock exchange, said during a ceremony marking the oil giant’s first day of trading.
“Aramco today is the largest integrated oil and gas company in the world. Before Saudi Arabia was the only shareholder of the company, now there are 5 million shareholders including citizens, residents and investors,” said Yasir Al-Rumayyan, the managing director and chief executive of the Saudi Public Investment Fund.
“Aramco’s IPO will enhance the company’s governance and strengthen its standards.”
Amin Nasser, the president and CEO of Saudi Aramco, meanwhile thanked the new shareholders for their confidence and trust of the oil company.
The sale of 1.5 percent of the firm, or three billion shares, is the bedrock of Crown Prince Mohammed bin Salman’s ambitious strategy to overhaul the oil-reliant economy.
Riyadh’s Tadawul stock exchange earlier said it will hold an opening auction for Aramco shares for an hour from 9:30 a.m. followed by continuous trading, with price changes limited to plus or minus 10 percent.

The company said Friday it could exercise a “greenshoe” option, selling additional shares to bring the total raised up to $29.4 billion.
The market launch puts the oil behemoth’s value at $1.7 trillion, far ahead of other firms in the trillion-dollar club, including Apple and Microsoft.
Two-thirds of the shares were offered to institutional investors. Saudi government bodies accounted for 13.2 percent of the institutional tranche, investing around $2.3 billion, according to lead IPO manager Samba Capital.
The IPO is a crucial part of Prince Mohammed’s plan to wean the economy away from oil by pumping funds into megaprojects and non-energy industries such as tourism and entertainment.
Watch the video marking Aramco’s opening trading: