Qantas said yesterday that it had reached a US$100 million settlement with engine maker Rolls-Royce over a mid-air blast that forced the grounding of the Australian flag carrier’s entire A380 fleet.
The deal led the airline to increase its profit forecast for the year ending this month despite being hit by natural disasters at home and abroad as well as soaring fuel bills.
“We have reached a compensation agreement with Rolls-Royce following the Rolls-Royce engine failure on flight QF32 in November last year,” said a “pleased” Qantas chief executive chief Alan Joyce.
“After extensive negotiations Rolls-Royce has committed to a settlement of around A$95 million (US$100 million),” Joyce said.
In November a Qantas A380 superjumbo that had just left Singapore was forced to return and make an emergency landing because one of its Rolls-Royce Trent 900 engines exploded mid-flight.
The incident dented the carrier;’s reputation for safety, having never experienced a crash in the jet age, and forced it to initially ground all six of its Airbus double-deckers.
Subsequent investigations pinpointed a manufacturing defect that caused fatigue cracking in an oil pipe, resulting in a fire and potentially catastrophic engine failure. Qantas, Singapore Airlines and Germany’s Lufthansa all used the Trent 900 engine on their A380 superjumbos and dozens of turbines had to be replaced.
The carrier said the settlement signaled the end of its -compensation case in the Federal Court of Australia, adding that it “looks forward to a continued strong relationship with Rolls-Royce.”
Qantas yesterday revised its full year earnings outlook, forecasting a pre-tax profit of A$500 million to A$550 million in the 12 months to this month.
It had earlier predicted profits would be “materially stronger” than the figure of A$377 million recorded last year.
Disasters including earthquakes in Japan and New Zealand, floods and cyclones in Australia and the Chile volcano had wiped out US$206 million, he said, with the full cost of the ash upheaval yet to be determined.
Historically high fuel prices were also eating into profits.
“We don’t have much leeway, we have to be excellent just to get a profit at all, let alone make the returns required to justify capital investments,” Joyce said.
He vowed “tough decisions” on Qantas’s international business, which is set to return a US$200 million loss for the 12 months ending June 30, pinning the airline’s future on Asia — the world’s fastest growing aviation market.
“As a nation we used to fly via Asia — now we fly to Asia, and the future will be all about travel to and within Asia,” he said, promising to unveil a new international strategy later this year.
There has been widespread speculation that Qantas is planning an Asian subsidiary, hoping to lower its cost base and tap the burgeoning travel market there.