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Rolls-Royce update comes with cautious optimism, analysts say

·2-min read

Rolls-Royce said that its plane engines spent 60% less time in the air in the first four months of this year than they had before the pandemic.

Cargo flights and key travel routes helped ensure that the number of large engine flying hours did not drop even further, the airline said.

In an update to shareholders on Thursday, Rolls-Royce said that a cost-cutting programme, which saw 1,400 people lose their jobs, will save it about £1.3 billion a year from now on.

It will keep some much-needed cash in the company, which has been hit hard by the pandemic as the travel industry dried up.

“We faced unprecedented challenges in 2020 with events that were beyond our control. We acted quickly and decisively by putting in place the measures necessary to protect our people and our business,” said chief executive Warren East.

“I would like to thank our colleagues for their dedication and hard work this year and all our stakeholders for their engagement and support.”

The update on Thursday had a “cautiously optimistic” message and indicated that the worst might be over for Rolls-Royce, said Laura Hoy, an analyst at Hargreaves Lansdown.

“A return to normalcy is the key to a second half recovery. Management confirmed that from their side, everything is ticking over as expected. Now the group just needs global vaccine rollouts to hold up their end of the deal,” she said.

“It’s a sentiment we expect to hear quite frequently from just about everyone attached to the air travel industry.

“At this point there’s little anyone can do aside from taking a wait-and-see approach in hopes demand recovers and they can spring back into action.

The business said it has had an encouraging number of companies interested in buying its Spanish subsidiary, ITP Aero.

It is still waiting for a decision from the US government around the building of new engines for the B-52 bomber plane. The decision on the major project is due in the second half of this year, Rolls-Royce said.