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Storm clouds over Rolls Royce

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Miguel A. Rodriguez
Miguel A. Rodriguez
14 September 2020
Rolls Royce forced to fire 9,000 due to the pandemic.

Rolls Royce: one of the biggest global employers released a statement yesterday in which it announced that it will cut at least 9,000 out of 52,000 employees due to the pandemic and because the aviation business is on hold. According to them, it will take several years for it to recover. The new numbers are added to the 4,000 furloughs, as the company used the scheme provided by the government. Some of the cuts will be at their largest site in Derby. Moreover, some locations across the U.K. are to be closed.

This new announcement came after yesterday's 70% drop in the number of jobless people, reaching a ten year high.

The aviation industry represents 50% of Rolls Royce's total revenue, and now the company expects one-off restructuring costs of 800 million. Still, in the long-term, the return will generate 1.3 billion pounds.

But the bad news isn't unexpected, as airlines have cut the flying hours by 90%, with Airbus and Boeing cutting the production numbers for the next couple of years. The overall air traffic volume is to decrease by 45% this year.

The pandemic had an impact on the airline industry, which is now close to bankruptcy. The 2019 level is reachable once again, but it will take at least 2-3 years, according to aviation experts. 

After the statement, the stock price dropped by 3%, while UK100 remained flat. 

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Sources: investing.com, bbc.com


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Miguel A. Rodriguez
Miguel A. Rodriguez
financial_writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.