Airlines around the world have been hit with fallout from problems with some Rolls-Royce engines on Dreamliners. Air New Zealand has had to cancel some flights, switch aircraft and reschedule others. What's caused the disruption that threatens to stretch into spring?

The problem

There are in fact two engine issues. Two parts of about 380 Rolls-Royce engines on Boeing 787s that have potentially serious problems. The "Package C" variants of Rolls-Royce Trent 1000s are on some planes used by airlines including Air NZ, Norwegian, ANA, British Airways, LATAM and Virgin Atlantic. There's been concern about corrosion of turbine blades towards the back of the engines since 2016 and a replacement programme has been in place.

In December last year, turbine blades on an Air New Zealand flight to Tokyo failed, forcing an engine shutdown. Another engine abnormality the next day forced the airline to ground planes and send engines to Singapore for repairs.

A Transport Accident Investigation Commission preliminary report out today has found the failures happened before they were predicted by Rolls-Royce modelling, but found actions taken since mean extra recommendations are not needed. The latest problem relates to small blades on intermediate compressors further forward in the engines which have been found vulnerable to cracking and are now subject to extra checks.

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How serious is this?

Potentially, very serious. That's why a conservative approach has been taken following the compressor alert. Twin-engine aircraft are designed and certified to fly safely for hours on just one engine if the other fails. But with the Rolls-Royce engines under scrutiny, there are concerns that if used at full power, the good engine may also suffer damage and the Federal Aviation Administration has warned there is an increased likelihood of it failing before a diversion can be completed.

What's the impact on airlines?

Both the European Aviation Safety Authority ( EASA) and the US Federal Aviation Administration have issued safety alerts. Aircraft with the affected engines are required to be inspected every 300 cycles (takeoffs and landings) instead of 2000 cycles.

While the check takes two or three hours, engines must cool down for about the same amount of time. The checks are done "on wing", but if major work is needed, engines must be taken off the aircraft and sent to the Rolls-Royce facility in Singapore. That can stretch on for months, given the volume of work there.

The FAA has limited Dreamliners equipped with those engines to 140 minutes from the nearest airport instead of the 330 minutes they were originally certified for. ETOPS (Extended Twin-Engine Operations) flights are able to operate ultra-longhaul flights in remote areas and this is particularly disruptive for Air NZ, which flies some of the longest routes in the world. That has led to some flight cancellations and switching of Dreamliners to shorter routes as the airline's 15 Boeing 777s — which don't use the engines under scrutiny — are used more on longer trips.

Who is the charter operator being brought in?

Portuguese wet lease operator Hi Fly is returning this month with an Airbus A340 and is heading for the Auckland-Honolulu route — one which Air New Zealand poured extra capacity into over winter.

Hi Fly provided cover for Air New Zealand's initial engine issue during summer. It used an A330 and an A340 on the Auckland-Perth and Auckland-Sydney routes. Hi Fly supplied cabin crew, technical crew — pilots and engineers — and insurance. Air New Zealand "ambassadors" were on board in a customer liaison role. The Portuguese airline is expanding, with brand new A330s and will soon operate A380s.

The aircraft used out of New Zealand in summer were old, although the cabin crews' work won praise. Air New Zealand is also trying to source additional lease aircraft; an ex-Singapore Airlines 777-200 a possibility.

Herald Business Traveller aboard Air New Zealand's Portuguese charter plane. Video / Grant Bradley

Are these engines lemons?

The official Air New Zealand line is no — they're suffering teething problems and will be sorted. But these engines have been on Dreamliners flying scheduled services since 2011.

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Rolls-Royce says a long-term solution is under way. A new type of turbine blade using different alloys is being installed as part of a replacement programme while new compressor blades are being developed. These may not be certified and in service until early next year.

Engines used on some other planes around the world are also in the spotlight right now. Some CFM engines used on the popular Boeing 737s are under increased scrutiny following fan blade failures and Pratt & Whitney's new generation engine has also been plagued with problems and manufacturing delays.

Are these Dreamliners lemons then?

Far from it. The 787 was afflicted by well-known development and manufacturing delays which delayed the Dreamliner's introduction for years past its scheduled entry into service. There were problems with the lithium ion batteries soon after the planes were introduced, but a fix was found. The plane has since become very popular with airlines and passengers, with promises of extra cabin comfort largely having been met.

Airlines also love the fuel economy of the aircraft, which is about 20 per cent more efficient than those it replaces. Qantas has just signed for six more of them and Hawaiian Airlines switched from Airbus A330s to 787s for its next long-haul plane.

Around 670 Dreamliners are in service and have flown the equivalent of 17 times to the sun and back.

Are all Air NZ Dreamliners affected?

No. The airline's two most recently delivered planes have Trent 1000 TEN engines which are not affected by the current airworthiness directive. Neither are Trent 1000 Package B engines or those made by Rolls-Royce rival General Electric.

How is Rolls-Royce coping?

This has dealt the company a big blow. Engineers have been dispatched around the world and it says the Trent trouble could result in job losses at its corporate offices. Most engines are likely to have been sold under Rolls-Royce's "Total Care" plans, where airlines pay for "insurance" for the the company to cover extra maintenance costs and to pay compensation to airlines.

What's the financial impact on Air NZ?

In an announcement to the NZX last month, Air New Zealand said it did not expect the Trent 1000 engine issue to materially affect its full-year earnings and previous guidance remained unchanged.

Head of research at Forsyth Barr, Andy Bowley, expects Rolls-Royce to pay Air NZ compensation to cover three areas: the unknown contractual obligations for engines taken out of service for additional checks; the loss of the 330 ETOPS rating (requiring more refuelling stops); and any potential top-up goodwill payment. He said he expected Air NZ to absorb short term costs in the 2018 full-year result, with compensation coming at a later date. Lasting actual cost to the company would include potential brand damage and the operational challenge of managing disrupted schedules.

What about staff?

The airline says engine problems are affecting many areas of its business and it hit during the busy the April school holidays. Because the problem will continue for some time, it is boosting resources in some operations and customer facing areas to manage the volume of flight changes. Pilots and crew normally aboard 787s can move to 777s relatively easily by completing NZ Civil Aviation Authority approved training.

What else is the CAA doing?

The safety regulator is not directly involved with the technical inspections, but it does monitor which aircraft have reached the threshold requiring additional inspections, and the outcome of those inspections.

The CAA says it is satisfied that Air New Zealand has the capability and processes to ensure the continued safety of B787 operations, consistent with their approved safety management system. The CAA also liaises with the FAA and European Aviation Safety Agency "to ensure that our safety oversight is robust and well-informed".

What about insurance for passengers?

Air New Zealand has said that generally when there is disruption within the airline's control (such as issues with its own operations), it will compensate for reasonable direct costs relating to a customer's journey. As an example, if a customer must unexpectedly stay overnight en route as a result of a flight cancellation, the airline will cover accommodation, meals and airport transfers.

Any indirect costs such as hotel bookings, rental cars, tours or cruises would not be covered by the airline, which strongly recommends customers buy travel insurance at the time of booking their flights to cover these costs and other unforeseen circumstances.

Any winners here?

Travel agents. The bricks and mortar types that have people on the ground here are proving their worth. If you've booked directly with airlines, you're also getting help from them. However, if you've booked yourself through a pure online travel agent (OTA), you're now facing more time in front of a screen sorting your way through the disruption and dealing directly with suppliers.

The knock-on effect of delayed or cancelled flights can be severe — hotel bookings, car rental and cruise holidays can all be affected. Agents say they have been contacted by people who have used OTAs, and while they can give some advice, they can't do the work for them. Agents say they are working longer hours helping clients, rather than putting on extra staff.

Disruption for any reason also sharpens the focus on making sure you have comprehensive insurance, so insurance companies win. Airlines without the affected engines flying on the same routes will also benefit. And it's not necessarily all bad news for Air New Zealand passengers — seating changes mean they're not necessarily going backwards in the plane.

For updates: www.airnewzealand.co.nz/travel-alerts