Melrose reveals potential £200m hit from plane engine problems

An issue with Pratt & Whitney engines could see hundreds of planes grounded

Melrose’s shares rose after the news (Yui Mok/PA) (PA Wire)

Melrose Industries has said it could take a hit of around £200 million from problems with an aeroplane engine which is likely to ground hundreds of planes over the next few years.

The business said its subsidiary GKN Aerospace has a 4% share in the Pratt & Whitney engine programme, which means it could be liable for the same share of the costs of remedying the problems.

It stressed that this assumed the compensation due to customers is “all a programme cost” – spread out across all partner companies that help build the engine.

We confirm our confidence in achieving the previous profit and balance sheet guidance and look forward to commencing our share buyback programme in October.

Simon Peckham, chief executive

An announcement by aerospace supplier RTX on Monday revealed that between 600 and 700 of the geared turbofan (GTF) engines would need to be removed to be examined over the next three years.

It said that there had been an issue with a “rare condition in powder metal used to manufacture certain engine parts”, which had necessitated the checks.

On Monday London-listed Wizz Air said its capacity is likely to be around 10% lower in the second half of the year due to the grounding and maintenance of planes caused by the issues.

“RTX indicated to us and the market yesterday that the GTF rare parts issue is within the scope they outlined previously and the cash impact is now assumed to be spread over a longer term,” said Melrose chief executive Simon Peckham on Tuesday.

But the business stuck by its profit guidance for the year.

Mr Peckham said: “We confirm our confidence in achieving the previous profit and balance sheet guidance and look forward to commencing our share buyback programme in October.”