Advertising

Rolls-Royce to take £1.4bn charge as Trent 1000 fix delayed

Rolls-Royce is expecting to take a £1.4 billion ($1.8 billion) exceptional charge this year in relation to the continuing Trent 1000 engine problems, after increasing its cost estimate of fixing the problems.

Its charge for 2019 will be nearly double the £790 million figure absorbed in 2018. Trent 1000s power the Boeing 787 fleet.

The manufacturer – which has just admitted a new delay to blade fixes on the TEN version of the engine – says the charge relates mainly to additional cash costs associated with disruption to airline customers as well as the expense of maintenance visits.

Rolls-Royce adds that the charges also recognise losses from a "small number" of customer contracts.

The manufacturer has outlined the increased cash cost impact from the Trent 1000 issues, following its postponement of the introduction of a redesigned TEN high-pressure turbine blade to 2021.

Rolls-Royce insists it has a "clearer view" of the costs of revolving the problems.

It expects total in-service cash costs to increase to £2.4 billion, spread across a longer timeline of 2017-23.

Rolls-Royce says this is higher than the previous £1.6 billion estimate at the half-year mark, because it includes a £400 million additional cost across all the Trent 1000 engine variants, plus £400 million of Trent 1000 TEN costs previously included in normal programme contingency.

The company expects the cash impact of the Trent 1000 issues to amount to £550 million this year – similar to the figure incurred in 2017-18 – and estimates this to stay at around £450-550 million in both 2020 and 2021, before falling "significantly" afterwards.

Rolls-Royce chief executive Warren East says the Trent 1000 costs "remain a headwind" and that restoring customer confidence in the engine is his "top priority".

"Although we regret that the [Trent 1000 TEN] blade will not be ready when we had originally planned, our understanding of the technical issues has significantly improved," he insists.

"We are now able to reset our financial and operational expectations for the engine based on a blade design with a prudent durability estimate that we are confident we can deliver."

East says that this will give the manufacturer's customers a "higher degree of certainty" regarding the fleet servicing.

Advertising
Related Content
Advertising