Rolls-Royce under the cosh with Qantas lawsuit threat

Rolls-Royce is back in the headlines for all the wrong reasons. Over in Australia, air safety investigators said they'd identified a manufacturing fault in the faulty Rolls-Royce engine that grounded a Qantas A380 last month (perhaps they got some clues from the Rolls-Royce press release?). And Qantas has just started legal proceedings against the UK manufacturer to recover some of its losses it's incurred since, which suggests that the two companies have failed to reach an amicable compromise behind the scenes. Though since the last thing Rolls-Royce will want is an embarrassing and high-profile lawsuit, we'll be surprised if it gets as far as a trial...

Qantas has just filed a 'statement of claim' against Rolls-Royce, which isn't quite the same as a lawsuit but is a prerequisite if it wants to file one at a later date. The airline said the move 'allows Qantas to keep all options available to recover losses... if a commercial statement is not possible'. In other words, this is clearly a shot across the bows, intended to ramp up the pressure on Rolls-Royce to come up with an acceptable offer of compensation. Although talks are underway already, this has obviously not been forthcoming so far.

Rolls-Royce's cause hasn't been helped by a new report from these air safety investigators. Since the UK company has already admitted which part went wrong, and how, we're not sure this adds a great deal of expository detail (although they did specify that they thought a section of an oil tube was to blame, with 'fatigue cracks' allowing fuel to leak into the engine and explode). But it does ramp up the pressure when the Australian authorities start talking publicly in these terms.

This legal row was always likely; Qantas had to ground its superjumbos for weeks after the explosion, while they were tested and re-tested - and that's not to mention the potential reputational damage. So it will no doubt play hardball with Rolls-Royce. The question is: what's the price worth paying to make this go away quietly, as opposed to being fought over in a public court?