Qantas prepared to wait for commercial settlement with Rolls-Royce

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Qantas is prepared to wait to reach a commercial settlement with Rolls-Royce for recuperating costs from a November uncontained Trent 900 engine failure on a Qantas Airbus A380 aircraft, chief financial officer Gareth Evans says in Sydney.

“We want to reach the right commercial settlement for Qantas and we’ll take the time necessary to do that,” he says.

“Both parties are keen to settle commercially rather than go down the legal path,” Evans says. Qantas in December filed an injunction in Australia against Rolls-Royce.

“Negotiations are moving forward quite well,” Evans says.

Qantas says A380 disruptions had an A$55 million (US$54.9m) cost impact in the first half of its financial year. The carrier estimates a further $25m impact in the second half of the year.

Chief executive Alan Joyce says the cost to repair the damaged A380 and affected engines will exceed $100m. Insurance and contractual agreements with Rolls-Royce will cover the repair, he adds.

Earlier this month Rolls-Royce reported the uncontained failure and related costs for all affected Trent 900 operators totalled £56m (US$89.9m) in 2010. The engine manufacturer says it expects “a modest level of additional costs” in 2011.

Evans could not say why Rolls-Royce’s figures were short of Qantas’s costs from the uncontained failure.

“We’re not privy to how Rolls-Royce undertakes their accounting. It’s up to them to work out what numbers they put aside and how they account for the impacts,” Evans says.

Qantas chief executive Alan Joyce cautions the figures cannot be directly compared.

“The benefits to us from an agreement could be different than the cost to Rolls-Royce,” he says.

A commercial settlement, if and when reached, will be reflected in the carrier’s underlying earnings before tax and interest.

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