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Rolls-Royce Holdings PLC's (LSE:RR) financial liability will be manageable following a recent engine issue that led to numerous flight cancellations by Cathay Pacific. Deutsche Bank assessed the situation on Tuesday, indicating that while there are concerns regarding a suspected fuel line issue, initial evaluations suggest that the financial impact on Rolls-Royce will be limited.
The situation arose after a Rolls-Royce-powered A350-1000, operated by Cathay Pacific, had to return to Hong Kong shortly after takeoff on Monday due to an engine component issue. In response, Cathay Pacific announced the cancellation of at least 34 return flights as several of its widebody jets were grounded for inspections. This disruption affected eight of the airline’s nine flights to Singapore on Tuesday, with the remaining flight operating with a Boeing 777-300 jet.
Cathay Pacific identified issues in 15 of its A350 aircraft, with repairs already completed on three of these jets, according to Reuters. The airline’s engineering director, Keith Brown, stated that Cathay is working closely with regulators and manufacturers, including Rolls-Royce, which provides the XWB-97 engines for the A350-1000.
This incident follows a previous issue with Rolls-Royce’s Trent 1000 engine, which had led to ongoing financial commitments related to engine faults before the pandemic. AJ Bell's Russ Mould commented that Rolls-Royce's reputation had already been tarnished by the Trent 1000 crisis, which involved problems with engine blades. Mould cautioned that another issue could hinder Rolls-Royce’s recovery efforts, with the industry waiting to determine if the current problem is isolated to Cathay Pacific or affects other operators as well.
On Tuesday, other airlines operating A350 aircraft appeared to be unaffected by the issue, and Cathay Pacific aims to resume full service for its grounded jets by the weekend. Rolls-Royce shares experienced a decline in value on Monday in response to the news but showed signs of recovery on Tuesday. The company's financial outlook remains focused on managing the impact of the latest engine issue while continuing to address past challenges.
