Airbus infographic showing revenues and markets

Business focus: Aerospace groups still cautious

Rolls-Royce is lifted by Airbus deal but warns of job cuts, while Babcock prepares to take over MOD unit.

Rolls-Royce’s recent announcement that it intends to cut 2,600 jobs over the coming 18 months will be a worry to its 24,000-strong workforce in the UK. Most of the jobs will go in the aerospace division, the company said, but it did not disclose where the axe would fall among its global operations, which employ 55,000 people worldwide.The company’s chief executive, John Rishton, also signalled that more cuts could be required in the future in order to make the company stronger. Rolls-Royce has had to announce a series of profit warnings in the past year, largely due to the slowdown in global defence spending. It is also feeling the effects of the conclusion to its project to develop its latest engines, the Trent 1000 and the Trent XWB.

However, at the end of November, Rolls-Royce’s aerospace business received a literal lift on the back of plane maker Airbus. One major American airline, Delta, announced plans to replace its old Boeing planes with 50 Airbus wide-body jets, all of which will be powered by Rolls-Royce Trent engines. The deal was said to be worth $5bn to Rolls-Royce.

The huge order for Airbus came soon after the pan-​European company warned that it could take a financial hit from the long-running development of its new A400M military transport plane. The project has a chequered history of delay and government bailout. Eight countries, including the UK, have backed the programme to the tune of €20bn, but it needed an extra €3.5bn cash injection back in 2010.

Unveiling healthy financial figures for the first nine months of its financial year, Airbus cautioned that its full-year results that are due in early 2015 may have to include an “incremental charge” arising from production problems with the A400M, which are currently tested by the plane’s customers.

However, this appears as a mere blip on Airbus’s financial radar. The company’s latest figures show that its order book at the end of September had reached just over €765bn, compared with €680bn at the end of 2013. Revenues in the first nine months of 2014 were up 4 per cent to €40.5bn compared with the same period in 2013. Underlying earnings in the nine months rose 12 per cent to €2.59bn.

Airbus is also engaged in high-profile cutting-edge projects. It has signed a €390m deal with the European Space Agency to build part of the US Orion spaceship, whose test flight is expected to take place three years from now. Airbus is to design the back section of the craft, which will carry the astronauts. The company has also unveiled the Zephyr 8, the latest iteration of its solar-powered drone aircraft, which it says will have half the weight of version 7.

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