Aero-engine company Rolls Royce has received a £2 billion loan from a syndicate of banks, including JP Morgan, that will boost its liquidity to 8.1 billion pounds. The loan, which the UK Export Finance Agency has an 80% guarantee, will help the company stay afloat after engine hours fell in the first and second quarters.
Global travel restrictions dropped wide-body engine flying hours by 50% in the first quarter, and 75% in the second quarter. Rolls Royce chief Executive Warren expects the full-year decline to hit 55%. Further, Financial Times reports that the company’s long haul market might take longer to recover than other makers like Boeing and Airbus.
Rolls Royce Engine Hours to Stay Low
The company expects a reduction in flying hours, which accounts for over half of its civil aerospace business income. As a result, Rolls Royce today announced that it would close out a third of its $37 billion dollar-denominated hedges, attracting cash costs of £1.45 billion over the next seven years. Rolls Royce aims to generate £750m by 2020 by closing currency hedges, expecting lower income from wide-body engines over the next seven years.
Shocks in civil aviation are forcing the company to reduce its workforce. More than 3,000 workers in Rolls Royce Uk expressed interest in voluntary redundancy. This news comes as the company resizes its dwindling civil aerospace business, to adapt to lower demand in the medium term. In May, the airplane engine maker automaker announced plans to cut its global workforce by 9,000.
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