Rolls-Royce warns of engine issues as it readies job cuts
The UK manufacturer says there are "durability issues" on a type of engine after airlines were warned to fly close to airports.
Monday 11 June 2018 20:02, UK
Rolls-Royce has warned it has identified more problems with its engines that have forced airlines to ground and lease replacement planes.
Shares in the FTSE 100 company, which plans to announce another round of jobs cuts on Friday, dropped by 1%.
Rolls-Royce has been struggling to get on top of problems with its Trent 1000 engines.
It has replaced the fan blades on turbines on all Boeing 787 airplanes after cracks and corrosion were found on jets operated by Japan's ANA airline.
The Federal Aviation Administration (FAA), which is the civil aviation watchdog in the United States, warned operators of the 787 to fly within 60 minutes of an airport in case of an emergency.
In a statement, Rolls-Royce said there were "durability issues" on a "small number of high life Package B engines", just weeks after discovering problems on Package C Trent 1000 engines.
"We have therefore agreed with Boeing and the relevant regulatory authorities to carry out a one-off inspection of our Trent 1000 Package B fleet, to further inform our understanding," the company added.
"The Package B standard has been in service since 2012 and consists of 166 engines."
While Rolls-Royce expects to "incur some additional costs", it does not expect an impact on its full-year guidance for free cash flow.
"The mitigating actions we continue to take across the group, enable us to be confident that our FY18 (full-year 2018) guidance for Group FCF (free cash flow) of around £450m +/- £100m remains unchanged", the UK engineering group said.
Rolls-Royce has pencilled in a £340m hit for this year to cover the cost of carrying out repairs on existing engines.
But it has warned the figure may rise as it compensates airlines for grounding and replacing airplanes.
Meantime, the Sunday Times reported Rolls Royce could slash another 4,000 jobs on Friday as it updates investors on its ongoing restructuring.
A spokesperson for Rolls Royce said the company would not comment on the weekend press speculation.
"In January, we announced a simplification of our business and began work on a restructuring of our support and management functions," the spokesperson said in an emailed statement.
"We are proposing to move to a considerably simplified staff structure, with fewer layers and greater spans of control across the group.
"We said we had retained restructuring experts Alvarez & Marsal to support us with this programme. We added that we expected this programme to deliver a significant reduction in costs and assist us in improving performance across the Group as a whole, and that we would provide clarity of these benefits at an event for financial analysts and investors on 15 June.
"We are not commenting on current media speculation about the potential impact."