Rolls-Royce Prepares For Production Scalebacks
LONDON—Aero-engine manufacturer Rolls-Royce says it is preparing for a dip in engine delivery volumes as the industry scales back operations in the face of the novel coronavirus pandemic.
Production of engines was “broadly stable” during the first quarter of 2020 as airframers maintained production levels, Rolls-Royce said in an April 6 trading update. But COVID-19 is now causing airframer and airline customers to face “unprecedented business challenges.” Maintenance, repair and overhaul volumes are also expected to drop.
The company had earlier announced on March 27 that it was pausing engineering and production operations at its UK facilities for a week.
Directors decided to withdraw the company’s 2020 guidance for investors after watching widebody airliner flying hours drop 25% in the first quarter compared to the same period in 2019, and fall by around 50% in March alone. The company said it expected further deterioration in April as airlines ground and store their fleets.
“We find ourselves in unprecedented times,” CEO Warren East said. “Our priority is to do everything we can to safeguard the lives and livelihoods of our people and to play our part in helping our customers, partners and communities.”
East said his management team was taking “significant measures” to strengthen the company’s operational and financial resilience. Rolls-Royce has drawn on a £2.5 billion ($3 billion) revolving credit facility and taken steps to secure another £1.5 billion from a consortium of banks.
The company is also halting all noncritical capital expenditure projects, consulting, professional fees and subcontractor costs. It has also ceased all nonessential travel and frozen recruitment.
The Rolls-Royce board is also no longer recommending the payment of dividends to shareholders because of the “uncertain macro outlook.”
But the company is continuing to work on resolving the issues associated with the troubled Trent 1000 engine powering the Boeing 787, which left dozens of aircraft grounded. The company says there were around 25 aircraft on ground (AOG) at the end of March, and it plans to reduce the number to single digits by the end of the second quarter. MRO facilities are still operational despite COVID-19 disruptions, the company notes. Work is continuing on the development of a new, high-pressure turbine blade for the Trent 1000 TEN engine, with ground testing of the new blade progressing through the second quarter. The new design is expected to be ready for retrofit by mid-2021.
The company is also supporting the British government’s VentilatorChallengeUK Consortium, organizing new supply chains to feed materials to new assembly lines for medical ventilators. The company also produced an intubation shield for use with the ventilators, prototyping, developing and producing the component within one week.