US Marines, Rolls-Royce still talking on V-22 engines

By Andrea Shalal-Esa

WASHINGTON, March 26 (Reuters) - Britain's Rolls-Royce Plc (RR.L) and officials at the V-22 program office are continuing discussions about future orders for up to 900 engines for the V-22 tilt-rotor aircraft after news that the engines are wearing out faster than expected.

The two sides met again last Friday, but both sides have been tight-lipped about the discussions and whether any progress has been made, according to the V-22 program office.

"Discussions are ongoing between the government and Rolls-Royce and we continue to try to work toward a solution that's in the best interest of the V-22 program," said program spokesman James Darcy.

Maria Weber, spokeswoman for Rolls-Royce, said the two sides were revisiting a maintenance agreement signed in 1998 "to address specific issues based on what has been learned over these last 10 years."

The V-22 Osprey, a controversial hybrid that flies like an airplane but takes off and lands like a helicopter, is built by Boeing Co (BA.N) and Textron Inc's (TXT.N) Bell Helicopter.

The engine issue flared last week when Col. Matt Mulhern, program manager for the V-22s flown by the Marine Corps, told reporters that faster wear and tear on the engines meant Rolls-Royce was unable to recoup the cost of engine maintenance under a plan signed in 1998.

That meant the Marine Corps would have to develop a new strategy that could range from "status quo" to finding a new engine supplier, Mulhern said at an industry conference.

He said the Marine Corps was working with the manufacturer but also planned "to cast a wide net to see what's available."

Rolls-Royce's existing maintenance contract with the Marine Corps is ending soon. The company supplies its AE1107C engines under a separate contract from the maintenance deal.

It already has delivered over 250 engines at a price of about $2 million per engine. The program expects to order up to 900 more engines over the next years, Darcy said.

According to media reports the engines are not lasting as long as predicted because of erosion in the compressor blades, which reduces engine efficiency and forces the engine to run at higher temperatures. There also are worries that the existing engine does not have enough margin to handle expected weight growth, according to the reports.

Weber said the engine has met or exceeded all performance specifications, including a sand ingestion specification, and Rolls had a plan to boost the engine's horsepower and evaluate protective coatings to minimize sand and dust erosion.

She said the AE1107C was the only engine available that could operate vertically as in the helicopter mode of the V-22, or horizontally when it is in airplane mode.

Separately, the V-22 program office is expected to sign a multiyear purchase agreement for 167 new V-22s -- a deal valued at around $10 billion -- this week.

The multiyear deal would cover purchases in fiscal years 2008 through 2012.

In development for over 25 years, the V-22 suffered several fatal flight tests before it was found suitable in 2005 for military use. A first batch of V-22s is now operating in Iraq. (Reporting by Andrea Shalal-Esa; editing by Carol Bishopric)