ROLLS ROYCE & EADS SHARES UNDER PRESSURE BUT NOT FOR THE SAME REASON

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By TESTCustomwebLP TESTCustomwebLP November 5, 2010 14:30

ROLLS ROYCE & EADS SHARES UNDER PRESSURE BUT NOT FOR THE SAME REASON

On a day yesterday when the USA decided to print huge amounts of cash sending global markets shooting up, shares in the British engineering group Rolls Royce were conspicuous in the extreme losing 4.3% in London trading to 629.5p from 626p at one stage, while EADS dropped 3.5% in Paris, after the Qantas A380 problem yesterday but this was because first reports suggested a crash had occurred. Qantas shares closed 0.7% down at A$2.89 after a volatile session.

Alan Joyce, the chief executive of Qantas, said the Airbus A380, which had originated in London, suffered “significant” failure of one of its four engines shortly after it had left Singapore en route for Sydney. He said the airline had opened an investigation into what went wrong but in the meantime was taking no risks.

Rolls-Royce then advised all Trent 900s need to be checked, which grounded six of the SIA A380 fleet. Those aircraft are now back in the air following the all clear from Rolls Royce but Qantas A380 aircraft remain grounded while further checks are made.

At this point we might wonder what differences there are between Qantas and SIA Trent 900s? It is this point which Alan Joyce will have to answer in the coming days.

All of this is very bad for Qantas, not only could this be a maintenance issue at a time when the airline is embroiled in a row with technicians, but it is the busiest period of the year for Qantas as the Ashes cricket tournament is about to start in Australia. Codeshare partner British Airways does not have the spare capacity to take up the slack left by the loss of the A380s from service and so if the aircraft are not put back into service very soon then a great deal of business will be lost to the two airlines, business that might well flow in part to SIA. Expect Qantas and BA shares to come under pressure if the A380s are still on the ground on Monday.

EADS on the other had saw its shares fall slightly but this was more to do with the sharp rise in the euro against the dollar on Thursday after the Federal Reserve moved to buy more US government debt. This action made Airbus aircraft more expensive for foreign buyers, which in turn usually means that Airbus will lower prices on orders during this period to compensate.

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By TESTCustomwebLP TESTCustomwebLP November 5, 2010 14:30
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