British jet-engine manufacturer Rolls-Royce is considering a restructuring plan that could affect around 15% of its 52,000-strong workforce – reported the Financial Times. This follows a massive reduction in air travel demand which has led to a devastating chain reaction across the whole industry, forcing companies to slow their production lines.
| A British Airways A350-1000 powered by two Rolls-Royce Trent XWB-97 engines. Photo by Karam Sodhi - AeroNewsX |
Although a definite update will be delivered by the company in late May, these figures are being discussed internally along with unions, so that the extent of the measures is softened, sources said to the newspaper. However, these job losses are set to be the most numerous in the last 30 years of the company, surpassing the 5,000 that were executed after the 9/11 incident.
As the two largest aircraft manufacturers in the world, Airbus and Boeing, also expressed intentions to slash both activity rates and workforce, suppliers have found themselves under tremendous pressure to adapt to these new circumstances. In view of this, Rolls-Royce experiences increased vulnerability: first because the company is paid by airlines depending on the hours the engines are running, and secondly, because the engines they produce serve widebody aircraft that are predominantly used in highly affected international routes. These limitations suggest a prolonged recovery of the giant engine producer even after the containment of the COVID-19 crisis.
| LATAM's Boeing 787-9 Dreamliners are powered by RR's Trent 1000J2 engines. Photo by Ernest Leung - AeroNewsX |
The news also follows recent reports of how major airlines in the United Kingdom are dealing with the collapse in demand. For instance, British Airways announced a 30% cut of the total 42,000 jobs while the Ultra-Low-Cost Ryanair said it would slash 15% of the total 19,000 jobs.
These figures suggest an overwhelming impact of the Coronavirus on the civil aerospace segment, which is equally emphasized among the engine-maker’s different divisions. In 2019, “it accounted for almost half of the group’s £15.4bn total revenue”. Likewise, it is Britain’s civil aerospace division which will suffer the most compared to the different internationally located units in Germany and Singapore, according to the FT report.
So far, the UK government intends to support the company (like many others) at least until June to maintain the workforce as best as it can. Nonetheless, it is evident that in order to secure the viability of the company these cuts are going to take place sooner or later, and this is going to affect not only managerial positions but also factory level positions.
Demand for state-of-the-art aircraft using Rolls-Royce engines is expected to take at least 2 to 3 years to get back to pre-crisis levels - explaining why the company had also considered cutting research and development investment programs as a response.
| British Airways' Airbus A350-1000 powered by RR's Trent XWB engines. Photo by Karam Sodhi - AeroNewsX |
Additionally, last month the company announced that it would be looking to put in place different measures to adapt to the new environment. It is therefore committed to increasing liquidity and reducing expenditure during this year by, among others, slashing salaries by at least a 10% across the workforce (20% to senior managers and executive teams) and by suspending its dividends (first time in 30 years).
Parallelly, the manufacturer has stressed on the fact that “during this time, they will continue to maintain their critical capability that ensures airlines can continue to operate.”
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