Norwegian reaches agreement over troubled Rolls-Royce engines
Rolls has been beset with problems with its engines.
Rolls-Royce shares came under pressure on Monday after budget airline Norwegian said that it had reached a settlement with the group over technical issues with its Trent 1000 engines.
In an end-of-year update, Norwegian said that it has “reached an agreement” with Rolls which will have a positive effect on the airline’s finances from the first quarter of 2019.
“Norwegian’s long-haul operation has been disrupted by challenges with the Rolls-Royce engines on the Dreamliners.
“The company has now reached an agreement with Rolls-Royce which will have a positive effect from the first quarter of 2019. The commercial terms of the agreement remain confidential,” the carrier said.
Rolls’ shares were down 1% at 802p in morning trade.
The FTSE 100 firm has been beset with problems with its engines recently.
Earlier this year, Rolls warned over costs linked to the discovery of technical issues with its Trent 1000 engines, used on Dreamliner aircraft operated by the likes of Norwegian.
Rolls has said it could see costs associated with the issues hit £440 million.
It also said in October that it will deliver fewer Trent 7000 engines to customers than originally planned, as production problems continue to dog the firm.
Separately, Norwegian said that it has launched an “extensive cost savings programme”, targeting savings of at least two billion Norwegian krone (£180 million)
“Six weeks into the programme, we have already identified significant savings,” the firm added.
Norwegian has been the subject of intense takeover speculation in recent months, with Lufthansa and British Airways owner IAG among those thought to be in the mix.
Norwegian Air has expanded rapidly over the last 12 months, ordering several aircraft to serve a raft of new routes.
The firm has shaken up the long-haul market by offering flights at knockdown prices.
Some of its most popular deals have included £99 flights from Edinburgh and Dublin to New York.
Norwegian Air carries more than 30 million passengers a year, including 5.2 million from the UK, and last year struck an agreement that allows easyJet customers to access its long-haul routes.