Rolls-Royce confirms return to profit as aviation sector faces long Covid recovery
Image credit: REUTERS/Paul Ellis/Pool/File Photo
British engine maker Rolls-Royce has confirmed that it returned to profit in the first half of 2021, but warned that a broader recovery for the international aviation sector will likely occur “beyond the initial expected timeframe of 2022”.
Alongside much of its sector, Rolls-Royce fell into the red last year as the number of passengers willing to take flights fell dramatically due to the Covid-19 pandemic. Heathrow, the UK’s largest airport, said its passenger numbers were down 72.2 per cent in 2020 compared to the year before.
However, the firm's bottom-line profits picked up to £393m for the first six months of 2021, a significant improvement over the £5.4bn losses of one year ago.
Part of the recovery relied on stringent cost-cutting measures, including shedding over 9,000 jobs, two-thirds of which will affect the UK. It confirmed that around 8,000 jobs have already been scrapped under the proposals.
The firm also plans to raise at least £2bn from selling off some parts of the business. This came just days after it announced a deal to offload Norwegian maritime engine maker Bergen to British group Langley Holdings and the proposed sale of its Spanish arm ITP Aero for €1.6bn (£1.4bn).
Rolls-Royce said it was “confident” that when border restrictions are lifted the recovery of the international travel sector will accelerate, albeit slower than the initially expected 2022 time-frame.
A recent poll found that 40 per cent of European business travellers believe they will travel by plane less than they did, even after Covid-19 restrictions are lifted, as remote meetings become normalised.
In its earnings report, Rolls-Royce confirmed it was continuing to prioritise low-carbon initiatives such as enabling an accelerated take-up of sustainable fuels and developing electrical aerospace propulsion systems.
Warren East, Rolls-Royce chief executive, said: “The benefits of our fundamental restructuring programme in civil aerospace are evident in our reduced cash outflow and improved operational efficiency. This leaner cost base together with a strong liquidity position gives us confidence in our ability to withstand uncertainties around the pace of recovery in international travel and benefit from the eventual rebound.
“We are making disciplined investments in the new opportunities to drive future growth, particularly in net-zero power where we are leading the way with innovation and engineering excellence.
“Our net-zero pathway and targets, announced in June, set out our plan to enable the sectors in which we operate achieve net zero by 2050 by driving step-change improvements in engine efficiency, helping accelerate the take-up of sustainable fuels and developing new technologies.”
A study in June cast doubt on the ability for the aviation sector to meet Paris Agreement goals due to the difficulties in achieving zero-carbon flight.
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