Qantas grounds entire Airbus A380 fleet for investigations as passengers say engine blew up and 'shot a hole through wing'

A mid-air explosion followed by a shower of debris led many to fear the worst yesterday for a Qantas Airbus A380 that had just taken off from Singapore. In the event, the plane made an emergency landing, trailing smoke from a blackened engine – and raising questions about the superjumbo's safety.

The Australian airline grounded its entire Airbus A380 fleet after flight QF32 developed engine trouble just minutes into a flight to Sydney. Both passengers and witnesses on the ground heard a loud explosion, and debris – including a chunk bearing Qantas's red-and-white kangaroo emblem – rained on the Indonesian city of Batam, on an island just south of Singapore.

The plane circled over Indonesian territory for nearly two hours, dumping fuel, before returning to Changi Airport. None of the 459 passengers and crew was injured, nor was anyone on the ground. But many people were badly shaken. Two passengers said they saw flames shooting out of the stricken left engine. Tyler Wooster told Australia's Channel Nine: "My whole body went to jelly, and I didn't know if we were going to be OK."

Hailed as the most exciting development in air travel since the jumbo jet, the A380 – the world's largest and newest passenger aircraft, with a capacity of 525 people – made its maiden flight on the same Singapore to Sydney route three years ago. Five airlines now fly the double-decker superjumbo, which was beset by production delays and cost over-runs following its much heralded launch in 2005.

Qantas, which is about to celebrate its 90th anniversary, has never had a fatal jet crash. The company's chief executive, Alan Joyce, said one of the plane's four Rolls-Royce Trent 900 engines had failed. He said A380 services would be suspended "until we are completely confident that Qantas safety requirements have been met".

Singapore Airlines, which also operates the A380, announced that it was delaying services using the aircraft. The other airlines that operate the plane – Emirates, Air France and Lufthansa – said they had no plans to follow suit. Airbus, which has staked its future on the A380, said the superjumbo could fly safely on three engines.

On Batam island, one witness told Agence France Presse he heard a "thunderous" sound and saw metal fall into a field. The Australian Transport Safety Bureau is leading an investigation. Mr Wooster, who was sitting over the left wing, heard a "big bang". While he could not see the engine itself, he said: "I saw it shot a big hole through the wing... and you could see how the [skin of the] wing had peeled off."

The first serious problem to befall the giant plane, said to be the quietest and greenest aircraft in the skies, it follows a string of minor incidents. In September last year, a Singapore Airlines A380 had to turn around and head back to Paris following an engine malfunction, while in March a Qantas A380 burst two tyres on landing in Sydney from Singapore.

An Air France flight was forced back to New York a year ago after problems with its navigation system, while in August a Lufthansa crew shut down an engine as a precaution before landing at Frankfurt on a flight from Japan.

Speaking in Sydney, Mr Joyce appeared to blame yesterday's events on Rolls-Royce. "The issue, an engine failure, has been one that we haven't seen before. So we are obviously taking it very seriously, because it is a significant failure." For its part, the engine-maker said it would work with Qantas to identify what went wrong.

Experts said the problem appeared to be an "uncontained engine failure", which occurs when turbine debris punctures the engine casing.

At Changi, six fire engines surrounded the plane and sprayed it when it made its forced landing. Witnesses said a left engine was charred and the rear cowling – which covers the engine – was missing. The upper part of the left wing appeared to be damaged.

Passengers were evacuated via a stepladder. Ulf Waschbusch, a technology executive based in Singapore, said: "Everyone was surprisingly calm on the plane. The crew helped tremendously." Residents in Batam helped authorities pick up more than 100 pieces of debris, some the size of doors.