Rolls-Royce hit by £56m bill for A380 failure

Engine manufacturer Rolls-Royce has been hit by costs totalling £56 million following an explosion on a Qantas operated Airbus A380 in 2010.

The incident saw the aircraft forced to make an emergency landing in November following an engine blow-out.

“Considerable scrutiny” following the incident saw Rolls-Royce encounter a raft of costs, including incremental service and support costs, un-contracted settlements to all affected customers and an impact on the group’s operational activity.

These costs are reflected in the 2010 underlying profit performance, released today, while a modest level of additional costs may be incurred in 2011, the manufacturer said. 

The one-off cost following the failure contributed to annual pre-tax profits dropping 76 per cent to £702 million in 2010 from £2.96bn.

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Foreign exchange costs and interest rate and fuel hedging contracts also contributed to the profit fall.

However, Rolls-Royce argued underlying pre-tax profits - which strip out one-off costs - were up by four per cent to £955 million in 2010 and were a better indication of its performance.

Chief executive, John Rose, himself due to step down in March, said: “Rolls-Royce has delivered a strong performance in 2010 with record underlying revenues and profits.

“This reflects our global customer base and the balanced portfolio of products and services that we offer. 

“It is a measure of progress that the Civil, Defence and Marine businesses now each generate underlying profits of more than three hundred million pounds.”

Delivery Highlights

During 2010 Rolls Royce made good progress with a number of the key development programmes which are expected to underpin future growth. 

These include the Trent 1000 for the Boeing 787, the Airbus A400M, where the TP400 engine has now accumulated more than three thousand hours of flying time, and the Gulfstream G650, on which the BR725 successfully met all project milestones during the year. 

The submarine HMS Astute was accepted into service by the Royal Navy, with a second submarine, HMS Ambush launched recently. 

The Type 45 destroyer, HMS Daring successfully completed its programme of sea trials during the year.