Loss of key Gulf Air contract could cost Rolls Royce $1.5bn

ROLLS-ROYCE may lose a $1.5bn (&pound;903m) engine contract awarded only five months ago by Gulf Air as the carrier looks to cut costs.<br /><br />The Bahrain-based airline said yesterday it would renegotiate contracts with Airbus, Boeing and Rolls-Royce because it plans to shift its order book from wide-body to narrow-body planes to focus on cheaper-to-run shorter routes, its chief executive said. <br /><br />Chief executive Samer Majali, who joined three months ago to restructure the loss-making firm, said the airline will cancel 15 routes and open 20 new ones as part of a new strategy to increase traffic in the Middle East.<br /><br />He said: &ldquo;We are talking with the manufacturers of the airplanes to see how we can satisfy the plan with the requirements of the contracts we have.&rdquo;<br /><br />Gulf had announced a $1.5bn order for Rolls engines at the Paris Air Show this year to power a new fleet of 20 Airbus A330s that it ordered last year. Gulf also ordered a fleet of Boeing 787 Dreamliners in a $6bn deal.<br /><br />Gulf Air is expected to reopen talks with these airlines about changing these orders. The sudden change in direction comes as Gulf Air faces operating losses of $510m this year.<br />