British engine-maker Rolls-Royce has reportedly lowered its forecasts for how much its aircraft engines will fly in 2021, in light of fresh COVID-19 travel restrictions.
Rolls’ main revenue stream from airlines is heavily dependent on flying hours, as carriers will pay depending on how often the engines are used.
The British manufacturer creates engines that power a wide variety of popular passenger aircraft, including Airbus A330, A340, A350, and A380s, as well as Boeing 777 and 787 Dreamliners.
Currently, the manufacturer’s 2021 forecast of flying hours on its engines will be about 55 per cent of 2019 and pre-pandemic levels, down from a base forecast provided back in October of 70 per cent.
The downgrade in anticipated flying hours is expected to cost the company an additional US$2.7 billion in cash outflow.
“Enhanced restrictions are delaying the recovery of long-haul travel over the coming months compared to our prior expectations,” the company said.
Restrictions on movement of people in Europe have been introduced in light of a new strain of the coronavirus, originating in the UK, that is said to be more aggressive, and more easily transferable.
It comes despite recent news of a global rollout of COVID-19 vaccines, recently approved by health authorities in various countries, including the UK, US and Australia.
Despite the challenges and downgraded forecast on engine flight hours, Rolls-Royce said that liquidity of US$12.6 billion has left it well positioned for the future.
The company has said it also plans to sell assets worth US$2.7 billion, and will cut more than US$1.4 billion in costs by axing 9,000 jobs and closing factories.
Rolls stuck to its forecast to turn cash flow positive at some point during the second half of 2021, saying it expected the cash outflow mainly in the first half, and said it remained on track to meet its 2022 cash flow guidance contingent on the expected recovery in flying hours.
