Rolls-Royce Experience Production Problems Causes Its Shares To Drop

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The shares of Rolls-Royce slumped today after it was revealed that the company has experienced some challenges with the production of the Trent 7000 engines which are designed for the newest jet of Airbus.

It was reported that only 10 of the engines are set to be delivered to Airbus this October, 20 short of what was originally promised for the new A330neo jet by the end of this month.

According to a letter that was sent to the employees seen by Bloomberg, “technical and operational challenges” were cited as the cause for the delay in the production.

Airbus was promised to receive all of the 30 engines in order to have 15 of the new jets ready to hand over to airlines by the end of this year– however, it appears that it will not anymore be possible.

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

The shares in Rolls-Royce dropped by as much as 13 percent in the wake of the news, even though they were able to recover ground later to trade less than two percent lower at 855p.

The A330neo will still be able to make its debut in the coming weeks, even though there will be fewer of them available than what was originally planned.

The issues in production mean that the engineering company will deliver 500, instead of  550, Trent 7000 engines by the end of 2018, investors were informed today.

It stated: “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 added: “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.”

It continued: “As we move into 2019 we are confident that Trent 7000 production and delivery volumes will increase significantly to meet our customer commitments.”

The share price of Airbus also dropped by up to five percent to 92.8p as a response to the news, prior to recovering to 96.15p, a drop of 1.8 percent. According to Bloomberg, the disruption imperils the plans of the company to produce a record number of aircraft in the final quarter of this year.