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.


S&P downgrades trio of Dubai developers as pandemic hits property and retail

Updated 42 min 48 sec ago

S&P downgrades trio of Dubai developers as pandemic hits property and retail

  • Gulf states are being hit hard by the coronavirus pandemic that has come at a time of weak oil prices

RIYADH: The credit ratings of three Dubai property companies were downgraded by S&P as the coronavirus pandemic hits confidence in the retail and real estate sectors.
S&P Global Ratings reduced the credit ratings for the real estate developer Emaar Properties as well as Emaar Malls to +BB from -BBB with a negative forward outlook, adding that it sees a “weakening across all its business segments” in 2020. S&P also cut its rating for DIFC Investments to +BB from -BBB, while keeping a stable outlook.
Gulf states are being hit hard by the coronavirus pandemic that has come at a time of weak oil prices, heaping pressure on governments, companies and employees.
The ratings agency expects the emirate’s economy to shrink by 11 percent this year
“The supply-demand imbalance in the realty sector appears to have been exacerbated by the pandemic. We now expect to see international demand for Dubai’s property to be subdued, and the fall in residential prices to be steeper than we had expected, lingering well into 2021” S&P reported.
Despite easing restrictions and the opening of the economy, S&P said that overall macroeconomic conditions remained challenging.
Global travel restrictions and social distancing constraints “significantly weigh on Dubai’s tourism and hospitality sectors” the rating agency reported.
Still, Dubai’s tourism chief was upbeat on the emirate’s prospects when international tourism resumes.
“Once we do get to the other side, as we start to talk about next year and later on, we see very much a quick uptick. Because once things normalize, people will go back to travel again,” Helal Al-Marri, director general of Dubai’s Department of Tourism and Commerce Marketing told AFP in an interview.