Who Will Profit From Rolls-Royce's WoesAustralia's national airline Qantas (QUBSF) has inspected all the Rolls-Royce (RR) engines on its Airbus A380 fleet, and found oil where it shouldn't be in three of them, Qantas CEO Alan Joyce said Monday, according to Reuters. Meanwhile, last week, one of its Boeing (BA) 747s had an engine problem -- again, thanks to Rolls-Royce. This raises questions about how deep the problems are at Rolls-Royce, and whether it can survive the bad publicity. Regardless of the answers, competitors General Electric (GE) and Pratt & Whitney -- a division of United Technologies (UTX) -- are likely to be the beneficiaries of Rolls Royce's troubles.

Qantas has grounded its fleet of six A380s, and analysts are starting to forecast a decline in traffic for the carrier. Specifically, Deutsche Bank estimated that if the A380s are grounded for six months, Qantas' international passenger numbers would fall by 378,000. In response, Deutsche Bank cut its fiscal 2011 earnings per share forecast for Qantas by 11.5%, according to Reuters.

What ails Rolls-Royce? Qantas officials suggest that the Trent 900 engine that failed may have "design issues," according to Reuters. Given that both Rolls-Royce and its customers are still in the early stages of figuring out what those design issues might be -- and how to fix them -- the risk to all concerned could be prolonged, possibly for years.

If a solution emerges quickly, the concerns of airlines -- and their passengers -- may fade. Otherwise Rolls-Royce's woes will represent longer-term opportunity for aircraft engine rivals GE and P&W. GE is No. 1 in the industry now, followed by Rolls-Royce, with P&W in third. In the first nine months of 2010, GE generated $12.82 billion in revenue and $2.48 billion in profit from its aviation unit, while the comparable figures for P&W were $9.44 billion and $1.51 billion, according to Reuters.

P&W has a shot at regaining the No. 2 slot thanks to Rolls-Royce's woes. That's because P&W is focusing on selling engines for smaller, single-aisle aircraft, while Rolls-Royce may abandon that segment to focus on repairing its business in the larger, twin-aisled aircraft segment -- planes such as the A380. With less single-aisle competition, P&W may enjoy a gain in market share.

It's too early to tell how all this will affect the stock prices of these participants, but I would expect more bad news for Rolls-Royce and a shot at things looking up for Pratt & Whitney.


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emardee

DEAR PATRIOTIC AMERICANS, SHOUT AND TELL IT LOUD TO THE RUSSIANS, CHINESE AND THEIR ANTI AMERICAN CRONIES VENEZUELA IRAN PAKISTAN ARMY CUBA WHO ARE PROMOTEDAND SUPPORTE3D BY ANTI AMERICAN DEMOCRATS AND THEIR ELITE SUCKERS WARREN BUFFETT, BILL GATES,GEORGE SOROS,MICHAEL BLOOMBERG,MEXICAN BILLIONAIRE,SAUDI ARABIA AN ANTI CHRISTIAN CRUSADER AND GREEDY GOLDMAN SACHS AND ITS GREEDY HEDGE FUND CRONIES/PARTNERS WHO HELPED TO PUSH OIL PRICE TO $4 IN 2007 WITH THE HELP OF NEW DEMOCRATS CONGRESS OF 2006..DESTROYING AMERICAS ECONOMY AND TRYING TO KEEP OIL PRICE HIGH AT $80 WHICH HELPS THEIR ECONOMY AT THE EXPENSE OF AMERICAN ECONOMY, AMERICAN JOBS..BY USING CORRUPT ENRON FORMULA TO HELP OUR ENEMIES AND TERRORISTS NATIONS LIKE LIKE IRAN,VENEZUELA AND OPEC...THE COMPANY WHO SUPPORTS THESE SCUMBAGS AND SUCKS AND DRAINS AMERICAN TAX PAYERS HARD EARNED TAXES TO BENEFIT THESE ANTI AMERICAN BIGOTS AND KILLERS WHO ARE HELPED BY THE LEFTIST MEDIA WHICH IS OWNED AND FINANCED BY THEM...TO GO TO HELL ..AND ITS TIME NEW REPUBLICAN CONGRESS STANDS UP WITH THE PATRIOTIC HARD WORKING AMERICANS AND EXPOSE THESE ANTI AMERICAN LUNATICS AND ANTI CHRISTIAN CRUSADERS WHO ARE BENT UPON DESTROYING THIS COUNTRY , ITS DOLLAR AND ITS GREATNESS BUILT IN 300 PLUS YEARS.. GOD BLESS AMERICA AND AMERICAN PEOPLE,ITS GREATEST MILITARY AND ITS FAMILIES....

November 17 2010 at 1:44 PM Report abuse rate up rate down Reply
richardmbutler

I've noticed the Americans cant wait to bad mouth RR without knowing any details-other Airlines that use this engine have no such problems.....rush to judgement?

November 08 2010 at 6:12 PM Report abuse +1 rate up rate down Reply
2 replies to richardmbutler's comment
anstefano

People are scared flying aircraft with RR engines, not critic English product.

November 08 2010 at 8:32 PM Report abuse rate up rate down Reply
tsafa

"I would like to have AOL's financial bloggers and columnists reveal if they have equity holdings in the stocks they write about, disguised as articles of general interest." AGREED!!!

November 08 2010 at 1:06 PM Report abuse rate up rate down Reply
sharpjack

I would like to have AOL's financial bloggers and columnists reveal if they have equity holdings in the stocks they write about, disguised as articles of general interest. This one is a good example.

November 08 2010 at 11:31 AM Report abuse +1 rate up rate down Reply