Australia’s Qantas Airways has grounded its A380 fleet for at least another three days as it investigates oil leaks as a possible cause of the explosion which tore apart one of the super jumbo’s engines last week.
Qantas shares fell as its reputation as one of the world’s safest airlines came under the spotlight and investors started counting the financial cost of grounding aircraft and compensating passengers.
The incident has rattled the global aviation industry which is recovering from heavy losses during the global economic downturn and has been damaging for Rolls-Royce which is developing new engines for the next generation of commercial jets.
Qantas said its six Airbus A380 aircraft would be grounded for at least another 72 hours after an investigation found oil leaks on three Rolls-Royce engines which have been removed from the planes.
Oil leaks in the engines’ turbine area were now the focus of the investigation into last Thursday’s incident where an engine broke apart above Indonesia’s Batam Island, forcing the world’s latest passenger plane to make an emergency landing in Singapore.
“We are working with Rolls-Royce to ensure we have an appropriate fix to this issue. Our team, Airbus and Rolls-Royce are working around the clock to ensure that. We are not looking at any other alternatives,” Chief Executive Alan Joyce told reporters.
Singapore Airlines said on Monday it had completed engine inspections all its A380s and did not find any issues of concern. Lufthansa has also been conducting additional tests of its A380 fleet.
Analysts said if Qantas’s six A380 planes were grounded beyond a week, it could affect the company’s profit forecast for this year.
“If they’re grounded past two weeks, you’d be a bit concerned,” said Matt Crowe, an analyst at Commonwealth Bank, adding there was unlikely to be a long-term impact on passenger demand due to the incident.
SHARES FALL
Qantas shares closed 2.1 percent lower at A$2.80 [US$2.825], having fallen as low as A$2.74 [US$2.765] during the session. The stock is down just over 2 percent since last Thursday’s incident.
Engine maker Rolls-Royce has fared worse, down 3 percent on Monday, taking losses to about 13 percent since the initial engine blowout.
Most of the passengers due to fly on the A380s will be put on other Qantas planes. Qantas has chartered one aircraft from its oneworld air alliance partner British Airways and are talking to other airlines about hiring more.
Joyce said it had no plans to change its delivery schedule for new A380 planes and it was too early to talk about any legal claim against Rolls-Royce or Airbus.
About 500 Qantas passengers remained stranded in Los Angeles and Qantas said compensation talks would take place after it resolved the issue. Qantas was paying for most passengers stranded in five-star accommodation.
A second Qantas flight out of Singapore was forced to make an emergency landing after another problem on Friday, this time with the Rolls-Royce engine on a Boeing 747-400 jumbo.
Royal Bank of Scotland analysts downgraded the stock to a hold from a buy saying 2011 earnings forecasts were challenging although a stronger Australian dollar was offsetting some of the damage. Qantas was one of the only major airlines globally to turn a profit during the global economic downturn.
Deutsche Bank said if the six A380s were grounded for six months this would reduce Qantas’ international passenger numbers by 378,000 and cut its 2011 financial year earnings per share forecast by 11.5 percent.
Qantas has never had a fatal accident since it start flying jetliners. Its safe reputation was famously mentioned by Dustin Hoffman’s character in the 1988 movie “Rain Man”.
“For all businesses it is imperative that safety is front of mind when running the business. Qantas has a pretty good track record and they probably get a lot of unwarranted attention,” said Jason Teh, portfolio manager at fund manager Investors Mutual.
Thursday’s engine failure was the biggest incident to date for the A380, which went into service in 2007 and can carry more than 500 people.
Australian air safety investigators said the recovery of a broken engine disk may be crucial in understanding what caused the A380 engine failure.
The Australian Transport Safety Bureau (ATSB) issued a statement and photograph of the broken disk and called on residents of Indonesia’s Batam Island who may have found the parts of the disk among debris to return it to the police.
Joyce said a huge amount of material had already been recovered. “All of this is starting to narrow the investigation back to the oil leak,” he said.
(Additional by Michael Perry in Sydney and Sonali Paul in Melbourne; Editing by Lincoln Feast)
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