Rolls-Royce share price slides as EU looks into aircraft service contracts

The European Commission has written to Rolls-Royce Holdings (LON:RR) as part of its probe into whether airlines are being forced to enter anti-competitive contracts with equipment makers, the Financial Times has reported. The news marks a potential challenge for the company which is currently under scrutiny over bribery allegations in Brazil, China and Indonesia.

As of 09:37 BST, Rolls-Royce’s share price had fallen 4.10 percent to 724.50p, as compared with a 0.42-percent drop in the benchmark FTSE 100 index. Reuters quoted traders as attributing the drop in the group’s shares to reports of the EU probe.

The FT reported late on Friday that European regulators were looking into whether airlines are being forced to enter anti-competitive contracts to keep their aircraft flying. The European Commission has written to airlines and aircraft component manufacturers, asking for information about the provisions being written into service contracts.

“They are looking at the third parties that manufacturers license for maintenance and at the data and information they share with those third parties,” one unidentified airline told the newspaper. Rolls-Royce, which provides the only engine for Airbus’ new wide-body aircraft, the A350 XWB, has also been approached by the Commission.

“We can confirm we have received a questionnaire from the European Commission and are working on our response,” the UK engine maker told the FT. The enquiry is expected to take several months before the EU regulator decides whether launch a formal investigation, with companies having about a month to reply.

The development comes at a difficult time for Rolls-Royce, marked by a string of profit warnings and a Serious Fraud Office investigation over bribery allegations in China and Indonesia. The British engine maker is also facing more scrutiny in Brazil where a congressional commission is set to investigate the FTSE 100 group over ties with state oil company Petrobras.

As of 10:29 BST, Monday, 12 October, Rolls-Royce Holding PLC share price is 723.50p.