Safety body pinpoints Rolls aero engine defect

SYDNEY/LONDON (Reuters) - Australian safety officials stepped up pressure on aero engines maker Rolls-Royce RR.L on Thursday, pinpointing a "potential manufacturing defect" in its Trent 900 engines and demanding it make them safe.

The Australian Transport and Safety Bureau (ATSB) said it “recommends that Rolls-Royce address the safety issue and take actions necessary to ensure the safety of flight operations in transport aircraft.”

The recommendation came ahead of the ATSB’s full report due on Friday on a November incident where a Qantas Airbus A380 flight using Trent 900 engines suffered a mid-air engine explosion, forcing it to land in Singapore.

It also came as Australian airline Qantas prepared the ground for a possible legal case against Rolls.

On Thursday, airlines including Qantas QAN.AX, Singapore Airlines SIAL.SI and Lufthansa LHAG.DE were making further checks on the Trent 900 engine.

“The problem relates to the potential for misaligned oil pipe counter-boring, which could lead to fatigue cracking, oil leakage and potential engine failure from an oil fire,” the ATSB said in a statement.

The ATSB’s announcement adds detail to Rolls-Royce’s own revelations. The British engineering company has said only that the failure was confined to a “specific component.”

Rolls-Royce said the ATSB’s safety advice was consistent with its own recommendations.

“We have instituted a regime of inspection, maintenance and removal which has assured safe operation,” it said in an emailed statement.

Qantas Airways 380 passenger plane flight QF32 is sprayed by rescue services after making an emergency landing at Changi airport in Singapore in this November 4, 2010 file photo. Qantas stepped up pressure on December 2, 2010 on engine maker Rolls-Royce to settle damages related to an engine failure on one of its giant Airbus A380 aircraft, but said it would keep the door open for an out-of-court settlement. Picture taken November 4. REUTERS/David Loh/Files

“This program has been agreed in collaboration with Airbus, our airline customers and the regulators.”

Shares in Rolls-Royce were down 0.25 percent at 333 pence at 1325 GMT, after earlier falling as much as 2.2 percent. An analyst said the additional checks did not go far beyond the 20-flight cycle inspections already mandated by European authorities.

“I think the (extra) inspections (...) are not particularly significant -- they are just prudent,” said the analyst, who did not want to be named.

Qantas said it would do extra one-off checks on its Trent 900 engines as a result of the ATSB report. The news comes just days after Qantas resumed flying some of its A380s on a limited basis following a three-week grounding.

Qantas said it had filed a claim in the Federal Court of Australia over the financial and commercial impact of the incident, which forced a Sydney-bound A380 to make an emergency landing in Singapore with 466 people on board.

“Today’s action allows Qantas to keep all options available to the company to recover losses, as a result of the grounding of the A380 fleet and the operational constraints currently imposed on A380 services,” the airline said.

“The airline has today filed a statement of claim ... (to) ensure that the company can pursue legal action against Rolls-Royce ... if a commercial settlement is not possible.”

Howard Wheeldon, strategist at BGC Capital Partners, said the move was a “warning shot across the bows for Rolls-Royce.”

Another analyst said Rolls-Royce probably would settle out of court.

Qantas said the claim did not include a specific figure as it was still assessing the damage.

Brokerage UBS estimated it may cost the airline around A$60 million ($58 million) in costs and lost revenue, while Macquarie estimated incremental costs of around A$20 million relating to the grounding as well as a decline in international capacity of around one percent for the first half of 2011.

Only two of Qantas’ six A380s are back in service and the rest of the fleet will be grounded into next year as Qantas examines another 12 engines that may be faulty.

It has kept the A380s off routes to Los Angeles -- among the most lucrative destinations -- as these flights are the longest served by the A380 and require maximum engine thrust on take-off.

($1 = 1.032 Australian Dollars)

Additional reporting by Simon Jessop; Editing by David Fox and Andrew Callus