A Cathay Pacific Airbus A350 at Kingsford Smith Airport in Sydney, Australia on August 18, 2021. Cathay Pacific Airways Ltd. is the national airline of Hong Kong with its main hub at Hong Kong International Airport.
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Rolls Royce Shares opened higher on Tuesday, recouping some of the previous session’s losses after Cathay Pacific Several flights were cancelled after technical problems were discovered on aircraft equipped with the British manufacturer's Trent XWB-97 engines.
Rolls-Royce shares were up 4.4 percent at 9:15 a.m. London time on Tuesday, after falling 6.5 percent on Monday.
Cathay Pacific announced on Tuesday that an engine defect had been detected on 15 of its Airbus A350 aircraft – a long-range wide-body aircraft with Rolls-Royce engines used by numerous airlines such as Qatar Airways, British Airways, Japan Airlines and Virgin Atlantic.
Cathay Pacific itself has a total of 48 A350s in its fleet.
The problem was discovered after an engine component failed on an airline flight from its Hong Kong base on September 2 and the plane did not complete its journey to Zurich and return to Hong Kong.
The airline said three aircraft had already been successfully repaired and that the remaining aircraft were expected to return to service by September 7.
The problem led to the cancellation of nearly 40 flights on Monday, mainly on Asian routes. Long-haul flights are unlikely to be affected in the future and customers will be offered alternatives, Cathay Pacific said.
Details of cancellations through September 7 would be announced by 2 p.m. local time on Wednesday, the company added.
Rolls-Royce confirmed on Tuesday that its Trent XWB-97 was used in the aircraft. The company said Hong Kong authorities had launched an investigation on which it had no opportunity to comment, but said it was “committed to working closely with the airline, the aircraft manufacturer and the relevant authorities to support their efforts.”
The company added that it would keep other airlines using Trent XWB-97 engines “fully informed of all relevant developments as appropriate.”
Given the engine problems at Pratt & Whitney, which have led to significant delays in the delivery of some aircraft to Airbus, and the long-running series of production problems at the US company Boeing, investors are sensitive to such problems.
“Although the news raises some concerns, our preliminary analysis suggests that the financial impact could be limited. Therefore, our positive assessment of the share price development remains unchanged,” Deutsche Bank analysts said of Rolls-Royce on Tuesday.
The company's share price has had a rocky run in recent years, taking a heavy hit during the pandemic due to supply chain issues and the decline in aviation. Rolls-Royce shares rose more than 220% in 2023 as the company launched a major restructuring and efficiency program that boosted profits.
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Rolls Royce share price.
— CNBC's Ganesh Rao contributed to this story.
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