UPDATE 4-Rolls-Royce to fix A380 engine fault, shares up

* Says failure confined to component in turbine

* To replace engine module to fix problem

* Sees lower profit growth due to cost of incident

* Expects to bring whole A380 fleet back into service

* Rolls-Royce shares end up 4.6 pct

(Adds no comment on Australian media reports, last para)

By Rhys Jones

LONDON, Nov 12 (BestGrowthStock) – Rolls-Royce (RR.L: ) said fixing an
engine fault that forced a Qantas (QAN.AX: ) A380 superjumbo to
make an emergency landing would lead to only slightly slower
profit growth, lifting its shares.

With one analyst saying the cost of the fix seemed to be
“relatively modest”, Rolls-Royce’s shares ended up 4.6 percent
at 611 pence on Friday, the top gainer on the blue-chip FTSE 100
index (.FTSE: ).

“The failure was confined to a specific component in the
turbine area of the engine. This caused an oil fire which led to
the release of the intermediate pressure turbine disc,” the
British enginemaker said.

“Our process of inspection will continue and will be
supplemented by the replacement of the relevant module according
to an agreed programme.”

Chief Executive John Rose said the engine upgrade would be
undertaken in collaboration with EADS-owned (EAD.PA: ) planemaker
Airbus, Trent 900 engine customers, and regulators.

“This will enable our customers progressively to bring the
whole (A380) fleet back into service,” said Rose. “We regret the
disruption we have caused.”

Rolls-Royce shares hit a record high at 661.5 pence on Nov.
1, three days before the engine failure. The fallout from that
incident saw the stock lose up to 14 percent of its value to a
563 pence low on Monday. At 1050 GMT, it stood at 605 pence.

The world’s second-largest maker of aircraft engines said
underlying profit growth for 2010 would now be slightly lower
than a previously guided 4-5 percent growth because of costs
associated with the blowout.

“Overall, it is pleasing the Trent 900 issue has been
narrowed down and can be fixed for what appears to be a
relatively modest cost. But the short-term disappointment is
lowered guidance,” said Investec analyst Andrew Gollan, who cut
Rolls-Royce’s 2010 earnings guidance by 3 percent.

Prior to Friday’s update the company had been expected to
post 968 million pounds pretax profit for 2010, according to a
Thomson Reuters I/B/E/S poll.

A380 DELIVERY IMPACT?

Separately, Airbus parent EADS said investigations into the
Rolls-Royce engine blowout could delay A380 deliveries in 2011
as it focused on maintaining the existing fleet, when posting
stronger-than-expected third-quarter profit (Read more your timing to make a profit.). [ID:nLDE6AB037]

“The customer has priority, and the priority is to keep the
39 aircraft flying or back in the air as quickly as possible,
and I would not rule out some impact on the delivery schedule,”
chief executive Tom Enders said.

Also, Boeing (BA.N: ) said recent problems with its 787
Dreamliner were not related to the Rolls-Royce-made Trent 1000
engine, allaying investor fears that there were problems with
Rolls-Royce’s wider family of Trent engines. [ID:nN11122164]

Qantas’s six Airbus A380s have been grounded since last
Thursday when a Trent 900 engine partly disintegrated
mid-flight, forcing a fully-laden A380 to make an emergency
landing, the biggest incident to date for the world’s largest
passenger jet. [ID:nSGE6A306J]

Rolls-Royce said the bulk of the costs associated with the
Trent 900 incident would be in this year’s accounts and would be
partly mitigated by a strong performance at its marine and
defence businesses during the third quarter.

It said growth at its civil aerospace business would be
underpinned longer term by the entry into service of Boeing’s
787, Airbus’s A350 and the Gulfstream G650, all of which use its
engines.

Both Rolls and Airbus declined comment on Australian
newspaper reports that Rolls had begun upgrading Trent 900
engines before the incident, but not the engine that failed.
(Editing by Paul Hoskins and Will Waterman)
($1 = 0.6232 pound)

UPDATE 4-Rolls-Royce to fix A380 engine fault, shares up