Rolls-Royce to cut 9,000 jobs as Covid-19 takes toll on airlines
Rolls-Royce is to cut 9,000 jobs, almost a fifth of
its workforce, as the coronavirus crisis takes its toll on the aviation
industry.
The jet engine manufacturer said it was targeting
£1.3bn in annual cost savings to weather the protracted downturn caused by the
Covid-19 pandemic that has grounded much of the world’s airlines. Head count
cuts will account for about half the savings target.
Derby-based Rolls-Royce, which employs 52,000 staff
globally, said the job losses would be felt worst in its civil aerospace
business, with about 8,000 of the 9,000 roles being made redundant coming from
that division. The company also makes fighter jet, ship and submarine engines
but it said there would be no job losses at its defence businesses.
Speaking on BBC Radio 4’s Today programme,
Rolls-Royce’s chief executive, Warren East, indicated that the UK would be
heavily affected. The group’s civil aerospace division employs almost 16,000
people in the UK.
He said: “It’s fair to say that of our civil
aerospace business, approximately two-thirds of the total employees are in the
UK at the moment and that’s probably a good first proxy.”
In total, Rolls-Royce employs 23,700 staff in the
UK, where nine of its approximately 17 main manufacturing locations are based.
The company has a presence in over 50 countries around the world. “This isn’t
only going to be a UK phenomenon,” said East, referring to the cuts programme.
The company has currently furloughed 4,000 UK staff,
which East said was only a short-term measure to save cash this year.
East said the aim was to make “more than half” the
job cuts this year. “We need to get on with it because we know it is a harsh
reality about our future,” he said. “We hope to make a very good start on this
in 2020, more than half at any rate.”
East said he expected new aeroplane engine
production to be about a third less than last year, and it would take several
years to fully recover, in line with demand from aeroplane producers.
The International Air Transport Association does not
expect air travel to recover to 2019 levels until 2023, which will affect
demand for airline tickets, plane orders and the engines that Rolls-Royce makes
for those jets.
A key proportion of Rolls-Royce’s civil aerospace
profits comes from aircraft owners paying regular engine service fees to the
company. A global grounding of airline fleets has hit those revenues
significantly.
Pre-lockdown, Rolls-Royce engines carried millions
of airline passengers around the world every week. The company makes engines
for the Airbus A330, A340, A350 and A380 jets, as well as the Boeing 777 and
787 Dreamliner.
“Governments
across the world are doing what they can to assist businesses in the short
term, but we must respond to market conditions for the medium term until the
world of aviation is flying again at scale,” said East. “Governments cannot
replace sustainable customer demand that is simply not there.”
When asked about what the government would do to
help Rolls-Royce employees, the British justice secretary, Robert Buckland,
said: “Clearly we will have to go to work with the employer to look at the
options.
“All of us will be looking not just at Rolls-Royce
but at the whole sector and the implications of this for the supply chains as
well, let’s not forget them, to make sure we are doing everything we can in
terms of plans and action to support what is a very high skilled part of our
economy,”
East indicated that the company could also turn to
the government’s taxpayer-backed Covid corporate financing facility, which lets
big companies borrow up to £1bn.
“We will discuss that with the government,” said East.
“In reality it would be a relatively small amount of funding.”
Rolls-Royce said its defence business, based in the
UK and US, had been robust during the pandemic.
“The world on the other side of this pandemic will
need the power that we generate to fuel economic recovery,” said East. “We are
one of a very small number of companies that can do what we do.”
