November 16, 2010 / 6:42 AM / 9 years ago

WRAPUP 2-Rolls-Royce scrambles for A380 engines; delays seen

* Airbus returns some engines from production line

* Engines to replace faulty ones; may delay A380 deliveries

* Airbus says first Chinese delivery will be on time in 2011

* Qantas says its deliveries have not been impacted

* Rolls-Royce shares 0.2 pct down, EADS down 1.3 pct

(Adds analyst comment, updates shares, details)

By Rhys Jones and Harry Suhartono

LONDON/SYDNEY, Nov 16 (Reuters) - British enginemaker Rolls-Royce (RR.L) has asked Airbus EAD.PA to return Trent 900 engines from A380 superjumbo production lines so they can be used to replace faulty ones on aircraft already in service.

The Airbus A380 — the world’s largest passenger aircraft with an average list price of about $350 million — has been hit by safety concerns after a Rolls-Royce engine partly disintegrated mid-flight, forcing a fully laden Qantas (QAN.AX) plane to make an emergency landing in Singapore on Nov 4.

Rolls-Royce’s move could be another blow to a much-delayed A380 programme as Airbus was scheduled to deliver over a dozen Rolls-Royce-powered A380s — primarily to Singapore Airlines (SIAL.SI), Qantas and Lufthansa (LHAG.DE) by the end of next year.

“Until this problem is fully resolved I think the situation with the delivery of A380 to customers ... will be in jeopardy,” Standard & Poor’s analyst Sukhor Yusof said.

But both Singapore Airlines and Qantas, with a combined 22 A380s still to be delivered, said on Tuesday they had not been informed of any delivery delays.

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

FACTBOX-No fatal Qantas jet accident [ID:nSGE6A306M]

TIMELINE-Events leading up to A380 incident [ID:nLDE6A31KZ]

Graphic of A380 models link.reuters.com/cab54q

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

CHINA DELIVERY ON TRACK

Airbus’s China chief Laurence Barron said the first delivery to China Southern Airlines Co Ltd (1055.HK) (600029.SS), China’s first A380 customer, would also go ahead as planned for next summer.

Airlines using the Rolls-Royce Trent 900 engines have been ordered by European aviation authorities to undertake major tests, which analysts said were so strenuous they would likely disrupt schedules.

“I can confirm that Rolls-Royce is arranging to supply some new engines from the production line to replace some engines removed from the serviced aircraft,” an Airbus spokesman in Singapore said, without saying which airlines would receive those engines.

Shares in Rolls-Royce, which on Friday said fixing the fault would lead to only slightly slower profit growth, have suffered during its probe and were 0.2 percent down at 596.50 pence by 1130 GMT on Tuesday, around 9 percent below their last trade before the Qantas incident.

Airbus parent EADS has lost 5 percent since the incident and hit a one-month low on Monday. Its shares were 1.3 percent down at 17.78 euros.

Qantas is down 4.9 percent since the incident.

“I suppose with an issue as complicated as this, Rolls-Royce has no choice” (to ask Airbus to return some A380 engines), said BGC Partners analyst Howard Wheeldon, who added that there would “definitely be a financial hit” for Rolls-Royce because of it.

AIRBUS PREDICTED DELAYS

Airbus said last week that the problem with the Rolls-Royce engine could have an impact on its earnings and delivery target for 2011 but did not give details, and airlines contacted on Tuesday had no knowledge of delivery timetable changes. [ID:nLDE6AB037]

Airbus can ill afford setbacks in sales for a plane which cost 12 billion euros ($16.3 billion) to develop but has struggled to attract airlines in some key markets including the United States and Japan.

Qantas — set to take five A380s by the end of next year, including three within the next few months — said it had not been notified of any delivery delays and expected deliveries to remain on schedule.

China Southern, which has already suffered a delay in receiving its A380s, has five of the aircraft on order, with most scheduled for delivery in 2011.

Airbus is in the process of arranging for engines to be taken off the A380 production line in Toulouse in France and shipped to Sydney to be fitted to the grounded Qantas aircraft, according to a report in Aviation Business, which cited Airbus Chief Operating Officer John Leahy in Sydney last week.

Qantas’ fleet of six A380 aircraft have remained grounded since the incident earlier this month.

“The cost is roughly $1 million for Qantas for each day the A380 is grounded. But the biggest issue is reputational. It’s down to the consumer and there’s a price to pay there as well,” said an Australian analyst, who declined to be identified.

However, the problem would not lead to cancellation of orders as it was the problem with the engine instead of the airframe, he added.

Singapore Airlines spokesman Nicholas Ionides said the carrier had not been informed by Airbus of any delay on its A380 delivery schedule.

The world’s second-biggest carrier by market capitalisation currently operates 11 A380s and is scheduled to receive eight more before end-March 2012. (Additional reporting by Alison Leung and Tim Hepher in ZHUHAI, China; Editing by Lincoln Feast and Jon Loades-Carter)

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