This archive report was first published on 10 July 2020.
Published on July 10, 2020, Rolls Royce, a leading UK-based aerospace company, has received a £2 billion loan from a syndicate of banks to boost its liquidity amidst the ongoing aviation crisis.
The loan, which has an 80% guarantee from the UK Export Finance Agency, will help the company stay afloat after engine hours fell significantly in the first and second quarters.
Global travel restrictions have had a devastating impact on the aviation industry, with wide-body engine flying hours plummeting by 50% in the first quarter and 75% in the second quarter. According to Rolls Royce's chief executive, Warren, the full-year decline is expected to hit 55%.
Rolls Royce Engine Hours to Stay Low ¶
The company's civil aerospace business, which accounts for over half of its income, is expected to be severely impacted by the decline in flying hours. As a result, Rolls Royce has announced plans to close out a third of its $37 billion dollar-denominated hedges, attracting cash costs of £1.45 billion over the next seven years.
The company aims to generate £750m by 2020 by closing currency hedges, expecting lower income from wide-body engines over the next seven years. This move is part of Rolls Royce's efforts to adapt to the changing market conditions and reduce its workforce.
More than 3,000 workers in Rolls Royce UK have expressed interest in voluntary redundancy, as the company resizes its dwindling civil aerospace business to adapt to lower demand in the medium term. In May, the company announced plans to cut its global workforce by 9,000.
