Rolls Royce fears severe financial blow amid new COVID-19 variants

Due to travel restrictions and new COVID-19 variants, engine maker Rolls-Royce warned it will burn through £2billion this year.

According to the media reports, this will deal a blow to Rolls as it gets paid when its engines fly – so fewer flights mean less cash is coming in.

Rolls-Royce, whose engines power many of Airbus and Boeing’s larger planes, now estimates the number of flying hours will be about 55 per cent of the levels seen in the year 2019. It was previously expecting around 70 per cent.

Moreover, the company Shares in the FTSE 100 company dived by more than 10 per cent in early trading following the warning – but eventually closed down 1.7 per cent, or 1.68p, at 96.32p.

The company in its statement said that continued progress on vaccination programmes is encouraging. However, more contagious variants of the virus are creating additional uncertainty. The company added.

Enhanced restrictions are delaying the recovery of long-haul travel over the coming months compared to our prior expectations, placing further financial pressure on our customers and the wider aviation industry, all of which are impacting our own cash flows in 2021.

Rolls Royce earlier said that the company may shut some of its factories to lay off 9,000 employees in response to the financial crisis faced by the global aviation industry amid Coronavirus fears.

According to the company’s chief executive, Warren East, “We are reviewing our footprint because obviously when you wind an operation down below a certain level then it becomes uneconomic so that might be possible.

But again we have to consult with our unions and do a thorough run through with the unions on exactly where the job losses are going to be,” he told media officials.