Rolls-Royce upbeat despite 60% drop in engine flying hours

British engineers’ cargo flights helped bolster demand in first four months of 2021

ROLLS-ROYCE said its plane engines spent 60 per cent less time in the air in the rst four months of this year than prepandemic levels seen in 2019, but the company remains cautiously optimistic about the recovery of international travel.

Cargo ights and the maintenance of key routes helped to bolster the British engineering company’s engine ying hours between January and April, with its

nancial and operational performance in line with expectations.

However, the company was more upbeat about the outlook for international travel as vaccination programmes accelerate around the world.

“While the timing of the recovery remains uncertain, the progress of Covid-19 vaccination programmes in a signi cant number of countries, particularly the US and UK, is encouraging,” the company said in its latest trading update on Thursday.

“Combined with increased testing, vaccination programmes are key enablers of further recovery in international air travel.”

Roll-Royce charges airlines for the number of hours its engines y, which means much of its income dried up during the pandemic when travel ground to a halt.

The jet maker plunged into the red last year with an underlying pre-tax loss of 4 billion ( 5.62bn), compared with a pro t of 583 million in 2019, driven by the company’s “power by the hour” business model.

The company reduced costs, took on debt and raised equity to survive, and said on Thursday it had “made good progress on the targeted 1.3bn of annualised cost savings”.

During restructuring, 7,000 permanent and contractor roles were cut by the end of last year and at least 2,000 more are set to go by the end of 2022.

Senior managers and executives were hit with a 10 per cent pay cut, with the company warning in January that its 2021 cash out ow would be worse than expected.

The company stuck to its guidance to turn free cash ow positive at some point during the second half of 2021 as vaccinations increase across the globe and travellers return to the skies.

“The cautiously optimistic message from Rolls-Royce this morning was clear – a return to normalcy is the key to a second-half recovery,” said Laura Hoy, equity analyst at Hargreaves Lansdown.

“Management con rmed that from their side, everything is ticking over as expected. Now the group just needs global vaccine rollouts to hold up their end of the deal.”

Rolls-Royce also plans to sell 2bn worth of assets to help repair its nances, and said on Thursday that there was an “encouraging range” of parties interested in buying its Spanish unit ITP Aero.

“We faced unprecedented challenges in 2020 with events that were beyond our control. We acted quickly and decisively by putting in place the measures necessary to protect our people and our business,” chief executive Warren East said.

“Looking ahead, we are con dent that the signi cant restructuring action we have taken in 2020 will deliver permanent cost reductions, positioning us well for the rebound in international air travel.”

Roll-Royce charges airlines for the number of hours its engines fly, which means much of its income dried up during the pandemic