Rolls-Royce needs to adapt production to plane-makers demand

Following today’s statement by Rolls-Royce’s Chief Executive Warren East on the cut of 9,000 roles;

Nicolas Jouan, Aerospace and Defense Analyst at GlobalData, a leading data and analytics company, offers his view on the situation:

“The job cuts by Rolls-Royce is not a surprise as the company said last month that it was working on a restructuring plan that would cut up to 15% of its workforce – most of it in its civil engine segment. New figures would actually represent around 17% of the company’s staff.

“Rolls-Royce already suspended dividend earlier this year and the company has had to make some difficult decisions to weather the storm of COVID-19 – especially as its civil aerospace engines and maintenance, repair and overhaul (MRO) businesses are suffering from the collapse of air travel.

“Rolls-Royce arguably had no choice in the matter. Its business, as a pure-player of the engine and power system industry, is one of the most badly touched by the COVID-19 outbreak and is almost entirely reliant on the output of plane manufacturers Airbus and Boeing. The two companies have themselves announced staff and production cuts. The A350 and the B787 have dropped respectively to 6 and 10 units per month. Both models fly with Rolls-Royce’s Trent engine, whose market share in the wide-body segment climbed above 50% before the crisis. Rolls-Royce expects to save £1.3bn annualized through reorganisation – mostly relying on announced job cuts.

“The reality is that Rolls-Royce needs to adapt its production to the demand from plane makers, or takes the risk to stockpile engines for non-existent aircrafts.”

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