February 10, 2018 / 11:01 AM / 6 months ago

UPDATE 1-Airbus halts some deliveries, tests after engine snag -sources

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By Tim Hepher

Feb 10 (Reuters) - Airbus <AIR .PA> has stopped delivering A320neo jets powered by Pratt & Whitney geared-turbofan engines and halted pre-delivery test flights after the latest in a series of problems with the engines, two sources familiar with the matter said.

Airbus has briefed airlines and leasing companies and told them it cannot yet say how long it will take to resolve the problem, one source told Reuters on condition of anonymity.

Another said deliveries of the jets were not taking place, but that they had not been formally halted.

An Airbus spokesman said it is "in discussions with customers about delivery schedules" on a case-by-case basis.

The setback comes weeks after Airbus said it was overcoming a two-year sequence of problems on fuel-saving engines developed by United Technologies unit Pratt & Whitney, one of two engine suppliers for its best-selling A320neo.

The European Aviation Safety Agency on Friday imposed restrictions on the use of recently delivered A320neo-family jets with engines starting at a certain serial number.

That followed a spate of in-flight shutdowns or rejected take-offs that one source said began happening 10 days ago.

The restrictions cover jets with two engines from the same affected batch - effectively grounding those jets.

India's IndiGo has grounded three jets, but regulators said its competitor GoAir is not affected.

In total, the grounding affects 15-20 recently delivered aircraft, the sources familiar with the matter said.

EASA's safety bulletin also bans airlines from using A320neo jets on extended trips over water or isolated areas when one of the engines comes from the suspect batch.

Aircraft using alternative engines from CFM International are not affected.

Airbus says there are 113 Pratt & Whitney-powered A320neo aircraft flying with 18 customers. It is in the midst of increasing output and last week said it may speed up further.

A prolonged delay could have a financial impact for the planemaker, as it waits for payments that usually fall due on delivery, and for leasing companies, who start receiving rent on aircraft allotted to airlines as soon as they enter service.

"It is too early to determine financial implications, but the fact that it impacts a limited population of engines is a potentially mitigating factor," RBC Capital Markets analyst Matthew McConnell said before the delivery freeze emerged.

"Still, this will put GTF (geared turbofan) execution issues back in the spotlight after a smooth few months when news flow was mostly focused on solid orders and ramping production." (Additional reporting by Promit Mukherjee; Editing by Andrew Heavens)

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