Rolls-Royce bounces back after engine problems cause Cathay Pacific flights

Rolls-Royce Shares opened higher Tuesday, making up some of the previous session’s losses after Cathay Pacific canceled several flights when it discovered technical problems in the aircraft using the British-manufactured Trent XWB-97 engine.

Shares of Rolls-Royce were 4.6% higher at 8:46 am London time on Tuesday, after falling 6.5% on Friday.

Cathay Pacific on Tuesday announced that it had identified engine component failures on 15 Airbus A350 aircraft – long-range, wide-body aircraft that use Rolls-Royce engines. This issue was found after the failure of an engine component in a Zurich-bound plane operated by an operator from a base in Hong Kong on September 2, the plane did not complete the journey and returned to Hong Kong.

The airline said three planes have been successfully repaired, and the remaining planes are expected to be operational again on September 7.

The problem led to the cancellation of nearly 40 flights on Monday. Long-haul flights are not expected to be affected and customers will be offered alternative routes, Cathay Pacific said.

Details on the cancellations up to September 7 will be released at 2pm local time on Wednesday, the company added.

Rolls-Royce on Tuesday confirmed that the Trent XWB-97 is being used in the aircraft. Investors are sensitive to the issue given that engine problems at Pratt & Whitney have caused significant delays to Airbus deliveries of several aircraft; and a long series of manufacturing problems at Boeing USA.

Rolls-Royce said that the Hong Kong authorities have opened an investigation that limits the company’s ability to comment, but noted that it is “committed to working closely with airlines, aircraft manufacturers and relevant authorities to support their efforts”.

It added that it would keep other airlines operating Trent XWB-97 engines “with information on relevant developments.”

“While the news raises some concerns, our initial analysis is that financial responsibility is possible. Therefore, our positive view of the equity story remains unchanged,” Deutsche Bank analysts said Tuesday.