UK engine-maker Rolls-Royce said on Thursday (11 March) that it lost a worse than expected US$5.58 billion in 2020 due to the shutdown in international aviation caused by the COVID-19 pandemic.
The company’s model of charging airlines for the number of hours its engines fly meant much of its income dried up last year when travel stopped. In 2020, it secured a total of 7.3 billion pounds in debt and equity to help it survive. Last year’s cash burn of 4.2 billion pounds was in line with analysts’ expectations, and Rolls guided that would reduce this year to 2 billion pounds, turning positive in the second half when travel is expected to pick up. Rolls’ civil aerospace arm accounts for just over half of group revenue in a normal year.
CEO Warren East said, “2020 was an unprecedented year and I would like to thank everyone at Rolls-Royce for their hard work, dedication and sacrifice to help secure the group’s future. The impact of the COVID-19 pandemic on the group was felt most acutely by our civil aerospace business. In response, we took immediate actions to address our cost base, launching the largest restructuring in our recent history, consolidating our global manufacturing footprint and delivering significant cost reduction measures. We have taken
decisive actions to enhance our financial resilience and permanently improve our operational efficiency, resulting in a regrettable, but unfortunately very necessary, reduction in the size of our workforce. With the support of our stakeholders we successfully secured additional liquidity with a rights issue, bond issuance and further credit facilities put in place during the year. We have made a good start on our programme of disposals and will continue with this in 2021. We continue to invest in developing market-leading technology and low carbon opportunities in all our end markets, to create value for our stakeholders and ensure we are well positioned to take advantage of the transition to a lower carbon economy and growing demand for more sustainable power solutions.”
The company said it still expected to turn cash positive during the second half of 2021 and to generate at least 750 million pounds as early as 2022. Both forecasts, however, are dependent on the pace of the recovery in engine flying hours and are underpinned by the restructuring programme. Rolls-Royce said it expected large engine flying hours in 2021 to increase to about 55 per cent of 2019 levels, up from the 43 percent level seen in 2020, supported by an acceleration in global COVID-19 vaccination programmes.