14-Jan-2011 9:53 AM

A380 engine trouble to hit Qantas profit: RBS

Qantas’ A380 engine problems will reportedly reduce the airline’s pre-tax profit by 10% (The Australian, 14-Jan-2011). RBS expects the A380 engine explosion and its aftermath will in 2011 cost Qantas up to AUD80 million. The broker stated Rolls-Royce is likely to cover at least 75% of Qantas’ losses, but it doesn’t expect this to happen until FY2011/12. As a result, RBS reduced the airline’s FY2011 pre-tax profit estimate to AUD766 million and increased its FY2012 estimate by 5.1% to AUD1.25 billion. RBS also warned of “reputational damage”, which may lower load factors and yields.