Rolls-Royce CEO Warren East has remained confident about the company’s future, despite revealing a £4 billion loss for 2020. Cash burn is expected to halve in 2021 from £4.2 billion to £2.0 billion and will likely turn positive for the latter half of the year as post-vaccination air travel begins to recover. This projection is based on airlines flying 55% of 2019 levels for the year.
“We have our cash burn under control … We have ample liquidity to get through this crisis as long as it lasts,” East said to reporters. One of the company’s major problems in 2020 was its policy of charging airlines for the number of hours its engines were flown. With such a downturn in air travel the company was forced to ask shareholders for cash and to also take on a further £5.3 billion in debt.
Rolls-Royce engines power both Airbus A350 and Boeing 787 aircraft and this usually generates over 50% of the group’s annual revenue. To cope with the effect of the COVID-19 pandemic the company shed 15% of its staff in 2020 and has earmarked £2.0 billion in assets for disposal to aid its balance sheet. While the search for a buyer for Rolls-Royce’s Spanish ITP unit is progressing well, the company has hit a major hurdle with the sale of it’s Norwegian unit Bergen Engines to a Russian-owned company, the Norwegian government has suspended the transaction citing security concerns. (£1.00 = US$1.20 at time of publication.)
