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Wednesday, August 12, 2020

Rolls-Royce mentions job cuts while the CEO talks about difficult decisions

Derby’s aerospace giant Rolls-Royce has insinuated that job losses could be on the horizon for employees as the true impact of the coronavirus pandemic becomes clearer.

The company said it would provide staff with more details at the end of May, confirming that it was “pursuing changes” in its business, particularly in the civil aerospace business, based in Sinfin, Derby.

Boss Warren East talked about adaptation and making “difficult but necessary decisions”.

As the aerospace industry struggles with the impact of Covid-19, the FTSE 100 manufacturer has said it is “busy” working with employees and union representatives as it adapts to changing market conditions.

It has already been suggested that the company could lay off up to 8,000 employees, as reported in the Financial Times, although Rolls-Royce has not confirmed the number.

The company has already placed more than 4,000 employees in the UK on furlough, but said the move would have no impact on recovering the Trent 1000 engine.

However, the aerospace giant has warned that the pandemic will likely lead to a smaller commercial aerospace market that could take “several years” to recover.

East CEO said: “In this unprecedented period of uncertainty, we have quickly adapted our business to safeguard its future for all our stakeholders.

“We have implemented advanced security procedures to protect our people and are providing practical assistance to combat the impact of Covid-19 on the countries in which we operate.

“However, we must also make the difficult but necessary decisions to ensure that the Group emerges from this period with the appropriate cost base for what will be a smaller commercial aerospace market that could take several years to recover.

“I am proud of the dedication and commitment of my colleagues and I am grateful for the continued support of our shareholders and other stakeholders in this difficult time.”

Rolls-Royce said its shares are expected to offer up to £ 1 billion in cash savings in 2020, with the cancellation of the final shareholder payment for 2019 saving £ 137 million more.

The manufacturer secured an additional credit line of £ 1.5 billion, which was raised to £ 1.9 billion in an attempt to “strengthen” liquidity.

Flight hours of the civil aerospace widebody engine were approximately 40% lower than the company’s expectations for the first four months of the year, said Rolls-Royce.

This reflected a 90% drop in April, when airlines around the world temporarily landed large proportions of their fleets.

The company said it now plans to supply around 250 widebody engines in 2020, down from previous plans for 450.

Rolls-Royce added that his defense activity was “solid”, but said that the impact of social distancing and personal isolation on his operations and those of suppliers was a “potential risk” for the levels of activity.

Rolls-Royce said it was too early to drive the financial outcome for the whole year.

It will provide the market with a post-close update on first half trading in early July and first half results will be announced towards the end of August.

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