Job losses would help Rolls-Royce save annual costs of $1.9 billion (€ 1.529 billion), and other cash restructuring costs of around $1000 million (€ 898 million) are added. The company has advanced that it would also reduce costs in plants, properties, and other areas.
British Attorney General Robert Buckland has advanced this Wednesday that the British Government must analyze the situation to see what it can do. Clearly, they will have to go to work with the employer to analyze the options.
The airlines have left on the ground a large number of aircraft and may not need as many new devices in the future, which hurts Rolls-Royce, which earns revenue by the number of hours flying their engines.
British aircraft engine maker Rolls-Royce announced this Wednesday that it will cut at least 9,000 jobs due to air traffic paralysis caused by the new coronavirus pandemic.
“We are proposing a major reorganization to accommodate the new level of customer demand,” CEO Warren East said in a statement.
The jobs to be cut, which represent 17% of the workforce, and will have an impact on civil aviation activities and the administrative sector, but not on the defense division, it was indicated.
It is “increasingly clear that the commercial aeronautics market will take years to recover to the level of a few months ago,” the statement added.
“Our aviation and aeronautical customers must adapt and we must do it too,” says Warren East, the CEO, quoted in the statement.
“Governments do what they can to support companies in the short term,” but “they cannot durably replace customer demand that doesn’t exist,” he added.
The airline sector is one of the most affected by the pandemic, which has caused border closings and severe containment measures.
In the United Kingdom, British Airways, Virgin Atlantic, and RyanAir, among other companies, announced in recent weeks the abolition of thousands of jobs.
British transport minister Grant Shapps said on Monday that 43,500 workers were temporarily unemployed in the aviation sector due to the COVID-19 to which 2,600 are added at airports.
In 2018 Rolls-Royce had already cut 4,600 jobs, mainly in the administrative sector.
In 2019, the firm managed to reduce its net loss thanks to better commercial results, despite the problems of the Trent 1000 engine, which has been sinking its accounts for years.
“Being told that there is no longer a job for you is very hard, especially when we all take so much pride in working for this company, but we have to make tough decisions if we want to get through all of this.”
The British manufacturer, which has more than two-thirds of its workforce working in the United Kingdom, is nourished with around $18,000 million a year that comes from the after-sales services associated with flight hours.
This, with 90% of commercial flights worldwide suspended in the last two months, has practically sunk that source of income, which is why Rolls-Royce has been especially affected. It’s a big blow to the company which decades ago separated from its automotive division.
Within this plan to overcome the crisis caused by the pandemic, the company expects to cut around $ 1800 million in expenses, with 785 million coming from the reduction in staff.
In fact, and in perspectives that are expandable to the rest of the sector, East himself has recognized that it will be many years before the aerospace world recovers the muscle it was exhibiting before the coronavirus.
So, it is not expected that those will be the measures aimed at temporality. Specifically, the International Air Transport Association has ensured that this recovery will not come, at least, until 2023.
Therefore, a significant drop in the number of flights is expected, and also in the manufacture of aircraft.
In this regard, the executive director specified that they expected that their production of aircraft engines would be a third less than last year, in addition to confirming that “more than half” of the layoffs will occur before the end of 2020.
Rolls-Royce: “We Have To Get On With It Because We Know That A Very Hard Reality Awaits Us”
This new scenario has already led Rolls-Royce to dismiss its dividends last month, something that has not happened since Margaret Thatcher privatized the company in 1987.
However, it has also had its consequences on the stock market, where its shares have fallen 3% this year. Wednesday in a fall accumulated during the last three months that already reached 60%.
For the moment, the company, which has a presence in 50 countries although half of its workforce is in the United Kingdom, has already taken advantage of the temporary dismissal plan offered by the British Government.
The plan proposed by the British Government was to cut 4,000 workers, a lifeguard that will only be valid until next September.
Even so, Rolls-Royce has assured that this crisis only affects the area of manufacturing of engines for commercial aircraft, since the rest of its divisions, oriented to defense projects such as submarines or combat aircraft, will not change.