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Rolls-Royce to Cut 9000 Jobs as Pandemic Takes Toll

: May 21, 2020 - : 3:04 am

Rolls-Royce has decided to scrap 9,000 jobs. The jet-engine maker will cut 17 per cent of its workforce and boost savings goals amid a travel slump that’s wiping out vital maintenance revenue and prompting airlines to scale back years of jetliner purchases, according to a company statement.

“The impact of COVID-19 on Rolls-Royce and the whole of the aviation industry is unprecedented. We have already taken action to strengthen the financial resilience of our business and reduce our cash expenditure in 2020. It is, however, increasingly clear that activity in the commercial aerospace market will take several years to return to the levels seen just a few months ago. We must now address these medium-term structural changes, as demand from customers reduces significantly for our civil aerospace engines and aftermarket services,” read the statement.

Rolls-Royce is particularly exposed because of its focus on larger aircraft facing a reduced role in global fleets as the pandemic impacts economies and alters travel habits.

Warren East, Rolls-Royce, CEO said, “Being told that there is no longer a job for you is a terrible prospect and it is especially hard when all of us take so much pride in working for Rolls-Royce. But we must take difficult decisions to see our business through these unprecedented times.”

The reorganization will predominantly impact the civil aerospace business. and the company said it’s carrying out a “detailed review” of its facility footprint. It will also have implications for central support functions.

East, who joined from semiconductor developer ARM Holdings, has told investors that Rolls-Royce needs to save £1 billion (S$1.74 billion) this year as it faces the biggest challenge since the 1970s, when it was nationalized after entering liquidation. That figure will now be extended to £1.3 billion on an annualized basis, £700 million from job cuts.

“We are proposing a major reorganisation of our business to adapt to the new level of demand we are seeing from customers. As a result, we expect the loss of at least 9,000 roles from our global workforce of 52,000. In addition to the savings generated from this headcount reduction, we will also cut expenditure across plant and property, capital and other indirect cost areas. The proposed reorganisation is expected to generate annualised savings of more than £1.3bn, of which we expect headcount to contribute around £700m. The cash restructuring costs related to these actions are likely to be around £800m, with outflows incurred across 2020 to 2022,” further read the statement.

The company previously said it plans to produce 250 plane engines this year, down from its previous estimate of 450.

 

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