With the coronavirus-induced COVID-19 pandemic bring the global travel to a stop, British engineering company Rolls-Royce downgraded its yearly cash outflow forecast underscoring the challenges it faces in its financial outlook even as the air travel continues to be disrupted around the globe.
Rolls-Royce however has stuck to its guidance to turn positive cash flow during the second half of 2021, saying its deep cost-cutting plans are on track and would help bring down the burn rate of its cash.
The company’s engines power Boeing 787s and Airbus A350s. To survive the pandemic it has raised $2.7 billion (2 billion pounds) from shareholders this November.
During an investor call last month, CFO Stephen Daintith had said, Rolls-Royce had “ample liquidity to get us through 2021”.
According to Warren East, Roll Royce’s CEO, he was confident that the company would meet its 2021 cash flow target, however the timing would depend on the recovery of flying hours.
Over the last 11 months to November, Rolls Royce reported engine flying hours to be approximately 42% of their prior year level, thus it is likely that the company would miss the forecast it gave in October for engine flying hours to come in at 45% for 2020.
To sail through the pandemic, Rolls Royce plans on selling assets worth 2 billion pounds and taper down its debt; it is also cutting 1.3 billion pounds in costs by cutting 9,000 jobs and closing factories.