LONDON (Reuters) – Rolls-Royce aerospace engineer RR.L burned 3 billion pounds ($3.8 billion) in the first half as its engine flight hours were cut in half due to the COVID-19 pandemic, and said it expected to a further £1 billion outflow in the second half.
The British company, which makes engines for the Boeing 787 and Airbus 350, said flying hours fell 75% in April, May and June, and saw only marginal improvement from.
Chief executive Warren East said Rolls had started looking at options to strengthen its balance sheet and it had £8.1billion on hand even after the first-half exit.
“The COVID-19 pandemic has created a shock across the entire civil aviation industry,” he told reporters on Thursday.
“During the first half of this year, the widebody engine flight hours, which we are paid for under our maintenance contract, were half of what they were last year.”
Rolls has announced at least 9,000 job cuts, mostly in civil aviation. Its defense business had been resilient, East said, while electrical systems had been partially affected.
East said sites could be cut along with jobs.
Roll’s widebody engine flight hours are expected to return to around 70% of 2019 levels in 2021, he said, but deliveries are expected to remain subdued.
He said the restructuring would see free cash inflows recover to at least £750 million in 2022.
Its shares, down 58% since the start of the year, were down 10% at 260 pence at 1500 GMT.
JP Morgan analysts said the trade update was “materially worse” than expected.
“If there is a second wave of COVID-19 or a slower than expected recovery, it is very possible, in our view, that the UK government will have to intervene to save Rolls-Royce,” they said.
East said Britain had backed Rolls with export finance guarantees, backing a £2bn loan facility, but there was no quick fix for the industry.
“The number one thing governments around the world can do to help this industry is get people flying again,” he said.
Rolls said first-half cash outflows included a £1.1 billion drop in engine flight hour receipts and deliveries and a £1.1 billion drop in the voluntary end of the invoice factoring, which it used to align receipts with deliveries.
($1 = 0.7911 pounds)
Reporting by Paul Sandle; edited by Edmund Blair/Jason Neely/Jane Merriman/Barbara Lewis