By Paul Sandle
LONDON (Reuters) – Aerospace engineer Rolls-Royce
The British company, which makes engines for the Boeing 787 and Airbus 350, said flying hours fell 75% in April, May and June, and it had only seen a marginal improvement since.
Chief Executive Warren East said Rolls had started reviewing options for strengthening its balance sheet, and it had 8.1 billion pounds at hand even after the first-half outflow.
“The COVID-19 pandemic has created a shock across the entire civil aviation industry,” he told reporters on Thursday.
“Across the first half of this year, widebody engine flying hours, which we get paid for under our servicing contract, were half of what they were last year.”
Rolls has announced at least 9,000 job cuts, mainly in civil aviation. Its defence business had been resilient, East said, while power systems had been impacted in part.
East said sites could be cut as well as jobs.
Roll’s widebody engine flying hours were expected to recover to about 70% of 2019 levels in 2021, he said, but deliveries were likely to remain subdued.
He said the restructuring would drive a recovery in free cash inflow to at least 750 million pounds in 2022.
Its shares, which are 58% lower since the start of the year, were down 10% at 260 pence at 1500 GMT.
Analysts at JP Morgan said the trading update was “materially worse” than expected.
“If there is a second wave of COVID-19 or a slower than hoped for recovery, then it is very possible, in our view, that the UK government will need to step in to save Rolls-Royce,” they said.
East said Britain had supported Rolls with export finance guarantees, underpinning a 2 billion pound loan facility, but there was no quick fix for the industry.
“The number one thing governments all around the world can do to help this industry is to get people flying again,” he said.
Rolls said the first-half outflow included a 1.1 billion pound fall in engine flying hours receipts and deliveries and a 1.1 billion pound hit from the voluntary end of invoice factoring, which it used to align cash receipts with deliveries.
($1 = 0.7911 pounds)
(Reporting by Paul Sandle; editing by Edmund Blair/Jason Neely/Jane Merriman/Barbara Lewis)
