Rolls-Royce and EADS shares hit by A380 engine failure

Engine maker and Airbus parent company lost billions of dirhams in market capitalisation after an A380 superjumbo jet suffered engine failure over Indonesia.

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Billions of dirhams were wiped off the stock values of Rolls-Royce Group and Airbus yesterday after an Airbus A380 operated by Qantas suffered an engine failure over Indonesia.

An engine problem six minutes after take-off from Singapore's Changi airport sent shards of the Rolls-Royce Trent 900 engine casing falling to earth. The "superjumbo" returned to the airport and all 440 passengers disembarked, although the scare stirred a wave of selling on global stock markets.

Investors drove down the price of the UK engine manufacturer by 4.82 per cent, eliminating £560 million (Dh3.34bn) of the company's market capitalisation.

The stock price of EADS, the parent company of Airbus, declined by 3.68 per cent, driving down the company's market value by €550m (Dh2.87bn).

The A380 is the newest aircraft in the Airbus family and entered service three years ago. Since then it has undertaken 21,400 commercial flights.

Five airlines - Air France, Emirates Airline, Lufthansa, Singapore Airlines and Qantas - fly a total of 37 superjumbos.

Qantas has grounded all six A380s in its fleet pending an investigation.

Singapore Airlines delayed A380 flights after Rolls-Royce Group said the model's Trent 900 engines should be checked following the Qantas engine failure, Bloomberg reported.

Singapore Airlines, which has 11 A380s, has been advised by Rolls-Royce and Airbus to carry out "precautionary technical checks", the carrier's spokesman Nicholas Ionides said.

Lufthansa, the only other airline flying superjumbos powered by Rolls-Royce turbines, said its aircraft were operating as normal, Bloomberg reported.

Emirates Airline and Air France, which have A380s outfitted with turbines by Engine Alliance, a joint venture between General Electric and Pratt & Whitney, also said they would continue flights as scheduled.

Debris from the Qantas Airbus A380 engine casing fell from the aircraft over the Indonesian island of Batam.

Following the engine failure, passengers spoke of their shock at the incident. "I just heard this massive bang, like a shotgun going off," Tyler Wooster told Australia's Network Nine television. "Part of the skin had peeled off and you could see the foam underneath, pieces of broken wires sticking out."

In a statement yesterday, Rolls-Royce said since the incident "we have been working closely with our customer and the authorities.

"In situations like these, Rolls-Royce has well-established processes to collect and understand information relating to the event and to determine suitable actions," the company said.

"As always, the safe operation of our products is our number-one priority. The in-service fleet of Trent 900 engines is small and relatively new and the Group feels that it is prudent to recommend that a number of basic precautionary engine checks are performed. This process is now underway."

Emirates, which is the largest customer with 13 A380s in operation and another 77 on order, also emphasised that "the safety of our passengers and crew is always of paramount importance".

"Clearly, [the latest incident] is damaging to Rolls-Royce," said Howard Wheeldon, a senior strategist at BGC Partners in London.

It follows a Rolls-Royce engine blowout on a test bed at one of its facilities in England that was reportedly a factor in Boeing's most recent delay for its 787 aircraft programme.

Mr Wheeldon, however, cautioned against apportioning blame too soon. The problem could have been caused by a bird strike or collected debris, he said.

"Until the investigation is properly done we will not know whether it is a defined engine fault or if the explosion was caused by a malfunction of a part within the engine or outside interference, such as a bird strike or debris.

"It could also be a maintenance-related issue," he said.

The incident poses another quandary for Airbus, which has been beset by a number of issues surrounding the A380 programme. Last year, Singapore Airlines said one of its A380s suffered engine problems and in August Lufthansa had to shut down an engine in flight on one of its superjumbos.

Last year, Emirates produced a 46-page report for Airbus officials, detailing breakdowns that grounded the first four A380 aircraft in the Emirates fleet for 500 hours in the first 18 months of operation.

Yesterday Rolls-Royce pledged: "We are working very closely with our customers and the authorities to understand the issue and support the investigation."

Tim Robinson, an editor for Aerospace International, said such engine problems were rare. "Though engine failures do happen from time to time, the high profile of the A380 and the fact it is Qantas, a major flag carrier, means that [Rolls-Royce] is likely to come under extra scrutiny going forward," he added.

* With agencies