Rolls-Royce rebounds after Cathay Pacific says engine issue limited

Rolls-Royce shares opened higher Tuesday, making up some of the previous session’s losses after Cathay Pacific cancelled several flights upon discovering technical issues in aircraft utilizing the British manufacturer’s Trent XWB-97 engines.

Rolls-Royce shares were 4.4% higher at 9:15 a.m. London time Tuesday, after falling 6.5% on Monday.

Cathay Pacific on Tuesday announced it had identified an engine component failure in 15 of its Airbus A350 aircraft — a long-range, wide-body that uses Rolls-Royce engines and is operated by a multitude of carriers including Qatar Airways, British Airways, Japan Airlines and Virgin Atlantic.

Cathay Pacific itself numbers a total of 48 A350s in its fleet.

The issue was found following an engine component failure on a Zurich-bound flight operated by the carrier from its base in Hong Kong on Sept. 2. The plane did not complete its journey and returned to Hong Kong.

The airline said three aircraft had already been successfully repaired, with the remaining aircraft expected to resume operations by Sept. 7.

The issue led to the cancellation of nearly 40 flights on Monday, primarily on Asian routes. Long-haul flights are not expected to be affected going forward and customers will be offered alternative options, Cathay Pacific said.

Details on cancellations up to Sept. 7 will be released by 2 p.m. local time Wednesday, the company added.

Rolls-Royce on Tuesday confirmed its Trent XWB-97 was used in the aircraft. It said that Hong Kong authorities had launched an investigation that restricted the company’s ability to comment, but noted that it was “committed to working closely with the airline, aircraft manufacturer and the relevant authorities to support their efforts.”

It added it would keep other airlines that operate Trent XWB-97 engines “fully informed of any relevant developments as appropriate.”

Investors are sensitive to such problems given the engine issues at Pratt & Whitney which have caused significant delays to Airbus deliveries of some aircraft; and the long-running series of manufacturing problems at the U.S.’s Boeing.

“While the news raises some concerns, our preliminary analysis is that the financial liability could be contained. Hence, our positive view of the equity story is unchanged,” Deutsche Bank analysts said of Rolls-Royce on Tuesday.

The company’s share price has faced a bumpy ride in recent years, taking a major hit during the pandemic amid supply chain issues and the dent in aviation demand. Rolls-Royce stock soared more than 220% in 2023, as the company embarked on a major restructuring and efficiency program that has boosted profits.

– CNBC’s Ganesh Rao contributed to…