Aerospace engineer Rolls-Royce burned through 3 billion pounds ($3.8 billion) in the first half as the hours flown by its engines halved due to the COVID-19 pandemic, and said it expected a further 1 billion pound outflow in the second half.
The British company, which makes engines for the Boeing 787 and Airbus 350, said flying hours fell 75% in April, May and June, and it had only seen a marginal improvement since.
Chief Executive Warren East said Rolls had started reviewing options for strengthening its balance sheet, and it had 8.1 billion pounds at hand even after the first-half outflow.
“The COVID-19 pandemic has created a shock across the entire civil aviation industry,” East told reporters on Thursday.
“Across the first half of this year, widebody engine flying hours, which we get paid for under our servicing contract, were half of what they were last year.”
Rolls has announced at least 9 000 job cuts, mainly in its civil aviation business, which has born the brunt of the coronavirus impact. Its defence business had been resilient, East said, while power systems had been impacted in part.
East said sites could be cut as well as jobs.
He said the restructuring would drive a recovery in free cash inflow to at least 750 million pounds in 2022.
Its shares, which are down 58% since the start of the year, were down eight percent at 265 pence at 08:21 GMT.
Analysts at JP Morgan, who have argued that Rolls needs to issue 6 billion pounds of equity to ensure its future, said the trading update was “materially worse” than its expectations.
“If there is a second wave of COVID-19 or a slower than hoped for recovery then it is very possible, in our view, that the UK government will need to step in to save Rolls-Royce,” they said.
The first-half outflow included a 1.1 billion pound fall in engine flying hours receipts and deliveries and a 1.1 billion pound hit from the voluntary end of invoice factoring, which it used to align cash receipts with deliveries, Rolls said.