Rolls-Royce, Safran shares slump on report of EU probe

(LONDON) - Shares in British engine maker Rolls-Royce and French counterpart Safran sank Monday following a report of a European competition probe into the aircraft maintenance sector.

The European Commission (EC) had written to carriers and aircraft component makers to ask for information about provisions in service contracts, the Financial Times reported, citing an anonymous source at an unnamed airline.

The daily business paper added that regulators were investigating whether airlines were being forced to enter anti-competitive service contracts.

"The European Commission is closely monitoring competitive conditions as regards maintenance of engines and components for large commercial aircraft," said a Commission spokesman when asked about the report.

Rolls-Royce added separately that the company had received a request from Brussels.

"We can confirm we have received a questionnaire from the EC and are working on our response," said a Rolls-Royce spokesman who declined to give further details.

In Monday deals in London, Rolls-Royce shares sank 3.90 percent to close at 726 pence on the British capital's FTSE 100 index, which ended 0.70 percent down at 6,371.18 points.

Across in Paris, Safran's share price dived 5.07 percent to 67.40 euros on the CAC 40 index, which finished 0.27 percent lower at 4,688.70 points.

"If confirmed, the probe could have a major impact on the industry profitability pattern, with services seen as a captive market of the engine providers," said Kepler Chevreux analyst Christophe Menard.