R-R on track to save billions in big restructure
PANDEMIC CAUSED COLLAPSE IN EARNINGS
CUTS and restructuring at Rolls-Royce has enabled it to save £1 billion in 2020 and the company is on track to save another £1.3 billion by the end of next year.
The firm’s civil aerospace division, headquartered in Sinfin, saw flying hours more than halved in 2020, though Rolls-Royce has said that the recovery is under way as more aircraft take to the skies around the world.
Nevertheless, it has reduced the pace of production for large engines and is undertaking a review into its civil aerospace factories, having spent £4.2 billion to protect the business during 2020.
Rolls-Royce’s civil aerospace division makes money when its engines are flying and invoices customers on how many hours their aircraft are working.
The coronavirus pandemic caused these earnings to collapse, prompting the company to cut thousands of jobs and reorganise its entire business.
This year the number of invoiced flying hours was only 42% of the previous year and the lack of aircraft working is a massive drain on the company.
Over 5,500 Rolls-Royce workers will have lost their jobs before the end of this year, with around 1,500 workers in Derby expected to have left by the end of 2022.
Chief executive officer Warren East said: “We have taken decisive actions to protect and reposition our business in difficult and uncertain trading conditions, including the impact from a second wave of Covid-19.
“We have made rapid progress on our restructuring programme and the consolidation and reorganisation of our Civil Aerospace footprint is well underway.
“Our £5 billion recapitalisation package in November was well supported and has increased our resilience and strengthened our balance sheet.
“The outlook remains challenging and the pace and timing of the recovery is uncertain. However, our actions have given us a strong foundation to deliver better returns as our end markets improve and we continue to drive our ambition of delivering more sustainable power to support the creation of a net zero carbon economy.”
In October and November combined, the number of invoiced flying hours was approximately 33% of the levels seen in 2019.
In the third quarter of the year invoiced flying hours were 29% of the prior year, an improvement compared to the 24% seen in the second quarter when the April lockdown emptied much of the world’s skies of aircraft.
However, Rolls-Royce has said it is confident its “difficult but necessary decisions” will help to ensure its future security and the company’s defence order book was described as resilient in the trading update.
Union Unite told Derbyshire Live: “We reserve the right to take appropriate industrial action if we feel the company is not respecting its employees or taking actions that are driven by other agendas, such as offshoring for example.
“We are encouraging the government to engage in longer-term strategies that protect Rolls Royce and its supply chain in order to protect jobs, bearing in mind this is a sector that will grow and provides both well-paid jobs and a significant input to the GDP.
“We try to encourage the government when they provide financial support to create a link to jobs and job security for the UK. All too often at the moment those links aren’t there.
“We provide training for our members in CV writing, interview techniques etc, as well as technical training for people looking to reskill.”