Rolls-Royce warns of higher costs over Trent 1000 engine problems

The company makes engines for jets

The aerospace and engineering giant said it had made a decision to carry out more checks on the 380 engines now in service with airlines from the "package C" tranche of production, the majority of the 500 in operation.

Shares in Rolls-Royce Holdings (LON:RR) have fallen into the red in today's session as the group warned that it needs to increase the number of inspections of its Trent 1000 engines, with the move resulting in higher costs. Durability problems with the Trent 1000 and an engine used on the Airbus SE A380 led to a £170m cash cost past year, and that figure was already set to double in 2018.

The engineering giant claimed that its cash flow for 2018 would be unaffected at around £450m, as it would cut non-essential spending on travel, IT upgrades and other costs to offset the financial impact.

Citigroup reiterated its "buy" rating on the British engine maker this week, valuing the shares at 1,083p, while Liberum Capital continues to see the company as a "hold, ' with a price target of 875p on the stock". The Civil Aerospace segment provides commercial aero engines, such as airlines, business aviation, and helicopter engines for various sectors of the airline and corporate jet markets, as well as aftermarket services.

The warning by Rolls-Royce comes ahead of anticipated announcements by United States and European aviation regulators, who are expected to issue guidance to airlines as soon as Friday.

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Boeing said that about 25% of the Dreamliners flying were powered by the engine and it was deploying support teams to help to manage service disruptions. "We recognise that the application of these actions may cause additional disruption to our airline customers".

"We will be working closely with Boeing and affected airlines to minimise disruption wherever possible", Chief Executive Warren East said. The snag has led to unscheduled shop visits for dozens of Boeing's 787s at carriers including Virgin Atlantic and British Airways, costing Rolls-Royce more than £220m in charges previous year.

A Virgin spokeswoman said it had been aware of the increased inspections and that the cover it had in place would be sufficient.

Rolls-Royce said 380 engines globally are affected by the directive, including nine in the Air New Zealand 787 fleet.

In March, Rolls said the cash hit from the problem should hit a peak of £340 million in 2018 before falling in 2019.

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