Covid-19 costs Rolls-Royce £3bn
3,000 APPLY FOR REDUNDANCY
ROLLS-ROYCE has seen £3 billion flood out of the business due to the impact of the coronavirus crisis on the aviation sector.
The firm, which has its civil aerospace and defence divisions in Derby, revealed the figure in a trading update released to the stock market yesterday.
Rolls-Royce said that its civil aerospace business had suffered a “significant” reduction in demand due to the effects of Covid-19, with wide-body engine flying hours falling by 50% in the first half of the year.
To save cash, in May, Rolls-Royce announced it was looking to shed 9,000 jobs from its global workforce of 52,000 due to the sudden slump in demand for its aero engines and associated services caused by Covid-19. It said the move would save the business £1.3 billion.
Just over 3,000 of these jobs will go in the UK, around half of which will be in Derby, where Rolls-Royce is the city’s largest private sector employer.
In yesterday’s trading update, RollsRoyce said that since opening voluntary severance in the UK, including an enhanced early retirement scheme, it had received over 3,000 expressions of interest, adding that around two-thirds of these will leave the company by the end of August.
Chief executive Warren East said: “These are exceptional times. The Covid-19 pandemic has created a historic shock in civil aviation, which will take several years to recover.
“We started this year with positive momentum and strong liquidity and acted swiftly to conserve cash and cut costs to protect Rolls-Royce during the pandemic.
“We are taking steps to resize our civil aerospace business to adapt to lower medium-term demand from customers and help secure our future.
“This means we have had to take the very difficult decision to lose people who have helped us become the company we are and who have been proud to work for Rolls-Royce.
“It is my first priority to treat everyone – whether they are leaving or staying – with dignity and respect.
“We will take the lessons of how we have dealt with this unprecedented challenge with us and position ourselves to emerge as an even stronger company in the future.”
Rolls-Royce said that the lowest point over the last six months came in April, when flying hours were down 80% compared to the same month last year.
However, the company said it had seen “early signs of recovery” with a marginal improvement in May and June led by an increase in flights in China, Asia Pacific and the Middle East.
Rolls-Royce also said it had completed the backlog of overhauls related to the Trent 1000 durability issues and that it was making progress to test a new high-pressure turbine blade for the Trent 1000 TEN.
Rolls-Royce’s civil aerospace business has been heavily impacted this year by the coronavirus pandemic after air travel across the world was brought to a virtual standstill.
In March, when the lockdown began, the firm halted all but essential work at its civil aerospace site in Sinfin and the following month announced a raft of cost-cutting measures to help it save £750 million.
This included reducing the salary of its global workforce by at least 10%. The salary of its senior managers and executive team was also cut by 20% for the rest of 2020.
And it announced it would be reining in discretionary costs, such as noncritical capital expenditure projects, consulting, professional fees and subcontractor costs, while also ceasing all non-essential travel and postponing external recruitment.
However, as the crisis in aviation continued to deepen, Rolls-Royce was forced to take further steps.
Despite staff returning to work, in May Rolls-Royce announced it would be shedding 9,000 jobs from its global workforce of 52,000, the majority from its civil aerospace division.
Since that announcement, Derby has been rallying to support impacted workers, with the Derby Economic Recovery Taskforce launching The Redundancy Workforce Group.
Recently, the group made an appeal to businesses recruiting people with engineering and manufacturing backgrounds to look at hiring people made redundant at Rolls-Royce.
It is also preparing to help staff being made redundant from other companies as the city struggles with the economic fallout of Covid-19.
They include Incora (formerly Pattonair), an aviation supply chain specialist, which recently announced it was to shed hundreds of jobs due to
the sudden downturn in the sector.