Qantas Aiming to Settle with Rolls-Royce over A380 Engine Failure

By | January 20, 2011

Australia’s Qantas Airways is working towards a commercial settlement with Rolls-Royce over last year’s mid-air engine explosion, its chief executive said, as the airline rebuilds its image tarnished by the incident which temporarily grounded its fleet of A380 aircraft.

Alan Joyce said the airline’s prime objective was reaching a settlement with Rolls-Royce outside of court, but the airline has already initiated a lawsuit in an Australian court in case the settlement is not possible.

“We are talking to Rolls and our primary objective is to resolve this commercially. The dialogue will continue as long as it takes,” Joyce told Reuters in an interview on Thursday.

Dublin-born Joyce, who described the Nov. 4 safety scare as the most “intense” day of his aviation career, said Qantas was recovering both commercially and from a public relations perspective, denying suggestions the airline’s brand had been damaged permanently.

He indicated bookings from passengers wanting to fly on the reinstated A380 services were strong, while a healthier global economy pointed to a stronger year financially as yields recovered from the worst downturn in aviation history.

Qantas shares have fallen about 13 percent since the Nov. 4 A380 incident over Indonesia, although analysts attribute part of the decline to soaring fuel prices, heavy snow in Europe and severe floods in Queensland.

“I joked at the time that all we need is the locusts,” Joyce says of the string of hurdles which have hit the aviation industry since he took the top job at Qantas over two years ago.

Analyst estimates of the impact of the A380 incident, which grounded Qantas’ six A380 aircraft, vary from A$65 million [US$64.7 million] to A$80 million [US$79.65 million].

Macquarie analysts said this week they expected Qantas’ 2011 fuel bill to grow to A$3.7 billion [US$3.68 billion] before rising to A$4.4 billion [US$4.379 billion] in 2012, lowering earnings estimates by 15-20 percent.

Joyce would not give forecasts ahead of the company’s half-year results next month but indicated yields were improving, and said the industry as a whole would likely start raising fares and surcharges to help offset soaring oil prices.

“The fuel price has gone up considerably so I think it’s in every airline’s interest to recover these costs,” he said from his Sydney office.

Joyce admitted Qantas and Rolls-Royce had disagreed over the best way to handle the incident from a public relations perspective, but there were no plans to change existing orders for Airbus A380s or Rolls-Royce engines.

Qantas operates 7 Airbus A380s — the world’s biggest passenger jet with a list price of about $375 million — and has another 13 aircraft on order.

Qantas’ low-cost offshoot Jetstar plans to aggressively expand in Asia this year, while the airline hopes a return to business travel will lead to higher profits.

(Reporting by Michael Smith; editing by Balazs Koranyi)

By Michael Smith
SYDNEY, Jan 20 (Reuters

Topics USA Aviation

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