Friday 26 October 2018 5:39 pm

Rolls-Royce shares drop as production problems cause delay in Airbus engine delivery

Sport and Business Reporter at City AM. Email:

Sport and Business Reporter at City AM. Email:

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Rolls-Royce's shares slumped today after it emerged the company has hit production challenges with the Trent 7000 engines designed for Airbus's newest jet.

Only 10 of the engines will be delivered to Airbus this month, 20 short of what was promised for the new A330neo jet by the end of October, it was reported.

The delay in production has been caused by “technical and operational challenges”, according to a letter to employees seen by Bloomberg.

Airbus was supposed to receive all 30 engines in order to have 15 of the new jets ready to hand over to airlines by the end of 2018 – but that will now not be possible.

“We have caused Airbus a significant problem, and we are working with them to manage the situation with airline customers and lessors,” the memo said.

Shares in Rolls-Royce fell by as much as 13 per cent in the wake of the news, although they later recovered ground to trade less than two per cent lower at 855p.

The A330neo will still make its debut in the coming weeks, although there will be fewer of them available than originally planned.

Production issues mean the engineering firm will deliver 500, rather than 550, Trent 7000 engines by the end of the year, it told investors today.

"Our priority has always been to ensure that the Trent 7000 engine meets customer expectations on entry into service and we have seen very good performance attributes during a rigorous testing phase," it said.

"We continue to work very closely with Airbus and our customers on the details of the delivery schedule. While the production ramp up issues in Q4 are regrettable, such issues in the early stages of a new engine program are not uncommon in our industry.

"As we move into 2019 we are confident that Trent 7000 production and delivery volumes will increase significantly to meet our customer commitments."

Airbus's share price also fell by up to five per cent to 92.8p in response to the news, before recovering to 96.15p, a 1.8 per cent drop. The disruption threatens the company's plans to produce a record number of aircraft in its final quarter of 2018, according to Bloomberg.