Rolls-Royce plc
Building Rolls-Royce Trent 1000 airplane engines

Boeing 787 Groundings to Worsen on Engine Checks, Rolls Says

May 30, 2018
“We fully recognize the unacceptable levels of disruption our customers are facing,” said Chris Cholerton, the company’s president of civil aerospace.

Rolls-Royce Holdings Plc is expecting a sharp increase in the number of Boeing Co. 787 Dreamliner planes that will have to be grounded because of faults with the engine maker’s Trent 1000 turbine.

The spike will occur ahead of a deadline next month for mandated inspections forced by durability problems, Rolls said in an emailed statement. The number of parked Dreamliners is expected to peak at about 50 from the current level of 35, a person familiar with the matter said, as the aircraft await repairs.

About 80% of the Package C engine variant, which debuted with Boeing’s marquee 787-9 jetliner, have undergone initial checks for cracking or signs of wear and tear on turbine blades, the person said. Just under a third of those engines have failed the initial checks required by regulators for planes that fly more than two hours and 20 minutes from the nearest diversionary airport.

“We fully recognize the unacceptable levels of disruption our customers are facing,” Chris Cholerton, the company’s president of civil aerospace, said in the statement. “While we expect the number of aircraft affected to rise in the short term as the deadline for the completion of initial inspections approaches, we are confident that we have the right building blocks in place to tackle the additional workload.”

Rolls-Royce shares fell 0.6% to 822 pence as of 8:24 a.m. in London on Wednesday.

Shorter Routes

The engine woes have prompted some carriers to place their 787s on shorter routes, giving them more operating time ahead of a June 9 inspection deadline mandated by the Federal Aviation Administration. Since the FAA’s directive in April, Rolls has put measures in place to triple the number of engines it can service at any time, including the development of a new ultrasonic testing technique that can be performed while the turbine is still attached to the aircraft.

The tripling of capacity and the number of Dreamliners likely to be grounded were reported earlier by the Financial Times.

Additional measures to boost capacity at sites in Singapore, London, and Derby, England, are underway, the company said. The problems center on potential cracking of the Trent’s intermediate pressure compressor blades.

Rolls has also reduced maintenance turnaround times and is accelerating the redesign of the blades that have caused the latest disruption. That part has already been installed on a test engine that will fly in June, and the final design will be rolled out to customers later this year -- ahead of the previous guidance of early 2019.

Restructuring Plan

The stepped-up inspections won’t cause any additional financial impact, Rolls said. The company is due to unveil a new restructuring plan authored by Alvarez & Marsal at its next capital markets day on June 15.

Chief Executive Officer Warren East has said Rolls will reduce discretionary spending to offset the additional spending needed for overhauls and to keep to a key target of reaching 1 billion pounds in free cash flow by 2020.

“The scale of the additional Trent 1000 maintenance cost remains to be seen, and we’re not sure how Rolls can miraculously offset this,” Rob Stallard, an analyst at Vertical Research Partners, said in a note earlier this month. “The company has not disclosed that much, and this leaves us concerned that the maintenance costs could further escalate.”

Boeing has meanwhile positioned Keith Leverkuhn, best known for leading the development of the upgraded 737 months ahead of schedule, between Derby and Singapore to help Rolls work through the escalating engine problems.

“We are drawing on the full resources of Rolls-Royce to address the issue and I’ve seen great teamwork and innovative thinking both across our organization and in our partnership with Boeing,” Cholerton said.

By Benjamin Katz and Julie Johnsson

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Licensed content from Bloomberg, copyright 2016.

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