At the company’s Annual General Meeting (AGM), Rolls-Royce Chief Executive Warren East expressed his confidence that the restructuring actions taken in 2020 would deliver permanent cost reductions that would position the company well for the rebound in international air travel.
He confirmed that the company had made good progress on the targeted £1.3bn of annualised cost savings, adding: “We are progressing well on our disposal programme with an encouraging range of interested parties for ITP Aero and will provide an update when appropriate.”
In an operational and financial update, Rolls-Royce confirmed that performance to date was line with expectations across all business units.
In the first four months of 2021 large engine flying hours (EFH) were around 40% of 2019 levels supported by demand for cargo flights and the maintenance of key routes. This is broadly unchanged from the run rate at the end of 2020 and consistent with Rolls-Royce’s planning assumptions.
The company continues to expect to turn free cash flow positive “at some point” during the second half of 2021, as engine flying activity recovers and cost savings are delivered.
Guidance remains sensitive to the timing of EFH recovery and the timing of original equipment (OE) concession outflows on already delivered widebody engines.
The company’s business aviation was given a recent boost with the announcement by Dassault to use RR engines to power its new flagship Falcon 10X aircraft. And East confirmed that discussions were underway with Boeing about a new aircraft program.
“It is fairly well documented that Boeing is exploring the opportunity for a new aircraft,” said East at the AGM. “Like the other engine manufacturers, I am sure, we are in dialogue with Boeing about that.”
East also emphasised the company’s commitment to its net zero targets and said that it was “seizing the opportunity of supporting the transition in our end markets to low carbon and net zero carbon solutions. In the last few months, we have taken significant steps, including successfully testing 100% sustainable aviation fuels in current generation aircraft engines in Derby, while our Spirit of Innovation all-electric aircraft will take to the air within weeks.