Rolls-Royce falls on its own blade(s), while Southwest counts the cost of MAX

Juliette O'Neill
By Juliette O'Neill September 1, 2016 16:17

Rolls-Royce falls on its own blade(s), while Southwest counts the cost of MAX

ANA Holdings has confirmed that it will replace all 100 Rolls-Royce engines on its fleet of Boeing 787s following three engine failures caused by corrosion and cracking of turbine blades. The 50 787s will receive engines fitted with new blades, over three years. Rolls-Royce will swap out existing blades for new ones in the short term. Rolls has started production of a new blade design that will be ready by the end of the year. The new blade will be incorporated next year into engines going on to new 787s.

But with so many airlines running 787s with the same problem managing through ongoing maintenance one wonders if they too will demand new engines to “ensure safety”? One wonders if bending to ANA will cost RR dear at a time when it can ill afford a big financial hit – 100 engines is a big financial hit.

And about Southwest. After four years of labor negotiations, Southwest finally this week caved-in and agreed to boost its pilots pay by nearly 30% over seven years (back-dated to 2013). If the deal is approved by the unions (and they would be mad not to), Southwest will have a brewing problem on costs. Already hit hard by increasing airport costs, Southwest will be hoping that the labour deal will allow it to absorb and write-off the increased pilot costs through savings brought about by 737-MAX aircraft, through lower running and maintenance costs.

But in giving in to the pilots, Southwest will now face the prospect of having the mechanics and flight attendants unions knocking at the door for more cash. If that happens then Southwest will lose much of its edge and margins will fall, if prices rise to compensate then Alaska/Virgin America will move-in and take market share for sure.

This is a dangerous time for Southwest. The future looks brighter this week for Alaska/Virgin America that is for sure.

Meanwhile, keep an eye out for a possible consensus on the now six-year delay to the start of a mandatory scheme to offset international flight emissions. It looks likely that governments have reached agreement on how to start the voluntary phase from 2021 according to recent unconfirmed reports.

Juliette O'Neill
By Juliette O'Neill September 1, 2016 16:17