UPDATE 5-Qantas plan to resume A380 flights eases Rolls woes

Tue Nov 23, 2010 8:00am EST

* Two of Qantas's six A380s to resume service by Saturday

* Safety agency lightens A380 engine safety checks

* Rolls welcomes move, working to assure safe operation

* Rolls-Royce shares up 2 pct, EADS down 1.0 pct

* Qantas shares closed up 0.4 percent

(Adds Airbus, CASA comment, updates shares)

By Balazs Koranyi and Rhys Jones

SYDNEY/LONDON, Nov 23 (Reuters) - Qantas Airways (QAN.AX) will resume flying some Airbus A380 superjumbos this week, giving Rolls-Royce (RR.L) a boost after the mid-flight failure of one of its engines forced an emergency landing this month.

The decision follows rigorous inspections on Rolls Trent 900 engines -- conducted by Qantas, Rolls-Royce and EADS EAD.PA unit Airbus -- which concluded the plane was safe to fly.

"This is good news for everyone concerned, and I suspect Rolls, Qantas and Airbus must be confident about the safety of the A380s concerned to allow flights to resume," said Nomura aerospace analyst Jason Adams.

"You would think a lot of work has gone in to this to make it happen and that they are all confident that there is little risk involved."

Europe's EASA aviation safety authority also provided positive news for Rolls, lightening its compulsory inspection regime for the Trent 900 after one partially disintegrated in the air on Nov. 4, leading Qantas to ground its six A380s.

Shares in Rolls-Royce have declined 10 percent since hitting a record high at the start of November, three days before the incident with the world's largest passenger plane.

Rolls shares were up 2 percent at 602.5 pence by 1225 GMT, while EADS had slipped 1 percent to 16.81 euros, along with the index of leading European shares .FTEU3.

Qantas shares, which have lost 7.6 percent since the engine blowout, closed up 0.4 percent at A$2.64 on Tuesday.

The move will come as a relief to Rolls-Royce, whose muted response to the crisis has been criticised.

"We are delighted that Qantas is resuming operation of its A380 fleet," a Rolls-Royce spokesman said on Tuesday. "We continue to work closely with Airbus, the regulators and our other airline customers to assure safe operation."

Qantas's decision is also a boost to Airbus, whose much-delayed $16 billion A380 programme has struggled to attract airlines in key markets such as the United States and Japan.

"We have been helping customers to get services back up and running, and we are delighted Qantas is doing so," an Airbus spokesman said.

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For more stories on A380 engine problems: [ID:nSGE6A706Q]

Graphic of A380 models: link.reuters.com/cab54q

Graphic of A380 engine: link.reuters.com/fab54q

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Qantas said two of its six A380s would resume operations on Saturday but that the other four would take "some time" to return, pending engine fixes.

"Out of abundance of caution we have taken 16 engines that we regard as having a bigger likelihood of having a problem on them and as a consequence those engines will be modified," Qantas chief executive Alan Joyce told reporters in Sydney.

"This is a worldwide fleet issue, so it is not just engines Qantas has, it is engines that other operators also have, and this is an issue that will have to be resolved for all of the other (A380) operators."

Qantas said it had replaced two engines on the first aircraft that will return to service, but declined to detail other engine changes, saying these had not been finalised.

The Australian airline will not fly any A380s until the Civil Aviation Safety Authority (CASA) has studied and cleared its plans, however.

"The airline agreed it would not seek to operate the A380 aircraft until CASA had carefully reviewed and accepted the return-to-service plan," said John McCormick, CASA's director of aviation safety.

"The travelling public can have confidence that everything possible is being done to comprehend what went wrong with the A380 engine and how to prevent this occurring again."

Rolls-Royce concluded the incident was caused by an oil fire but that the issue was confined to a specific component. It has since been scrambling to find a fix and replace faulty engines with new turbines.

NEW DIRECTIVE

That conclusion prompted the EU to order inspections that analysts said were so time-consuming they could take planes out of rotation every 10 days or so, costing airlines revenue.

However, citing progress in the analysis, EASA said it would no longer require airlines to conduct extensive ground idle runs and turbine blade checks inside the engines.

Qantas said it would keep the A380 off the high-margin Sydney-Los Angeles routes, which requires use of maximum certified engine thrust -- 72,000 pounds -- as a precaution.

Its first A380 will be reassigned from the Sydney-Los Angeles route to the Sydney-London service on Saturday.

The Sydney-Los Angeles routes are the longest served by an A380 and require the plane to be fully laden with fuel, which in turn requires higher thrust for take-off.

Rolls-Royce would not comment on reports it would advise Trent 900 operators not to use them at above 70,000 pounds of thrust.

Qantas declined to discuss the earnings impact of the A380 disruption, which analysts said would be modest but noticeable.

"Together with the likelihood of ongoing disruptions through mid-December, we have estimated incremental costs of around A$20 million ($19.8 million)... along with an around 1 percent decline on mainline international capacity for the first half of 2011," Macquarie said in a note.

Joyce said Qantas would discuss compensation with Rolls "when the time is appropriate". (Additional reporting by Narayanan Somasundaram in Sydney and Tim Hepher in Paris; Editing by Will Waterman and Michael Shields)