Investing.com -- Rolls-Royce (LONDON:RR) and American Airlines Group (NASDAQ:AAL) announced plans on Tuesday to dissolve an 18-year engine services partnership due to an increased lack of demand combined with little prospect for future growth opportunities.
The partnership, known as Texas Aero Engine Services, LLC. (TAESL), provided maintenance, repair and other services for aircraft engines used by American Airlines. TAESL was originally created in 1998 to help service Rolls-Royce engines on a litany of American Airlines planes including the Tay 620/650, RB211 and the Trent 800.
Demand for the engines, though, has fallen sharply in recent years. American Airlines has become less reliant on the RB211 engines since retiring its Boeing (NYSE:BA) 757 fleet, while it discontinued usage of the Tay engines entirely.
“TAESL has a proud history of supporting Rolls-Royce to serve American Airlines and other customers over many years. Unfortunately, after reviewing load forecasts for the TAESL programs, Rolls-Royce has concluded that declining future volumes of overhauls for Trent 800 and RB211 will no longer support a commercially viable operation,” Rolls-Royce Chief Operating Officer for Civil Large Engines Simon Burr said in a statement.
Shares in Rolls-Royce fell 9.00 or 1.36% to 651.00 on Tuesday.
American Airlines said Tuesday that about 600 of its employees work at TAESL, including approximately 500 who are members of the Transport Workers Union of America. The company said it will continue to provide employment for all 500 frontline mechanics and will also create an additional 100 union jobs in the Dallas-Fort Worth area to compensate for the closure of the engine maintenance facility.
“Our primary concern is for American Airlines team members working at TAESL. They have consistently delivered quality work and made significant contributions to American and Rolls-Royce. Their level of expertise is second to none,” American Airlines Senior Vice President for Technical Operations David Seymour said in a statement. “Unfortunately, there simply isn’t enough work to sustain the cost of operating this facility. We will work with the TWU to create some additional new maintenance opportunities in the Dallas-Fort Worth area, as well as offer continued employment throughout American at other locations for those who desire it.”
Shares in American Airlines gained 0.10 or 0.26% to 39.18 in Tuesday's session.