Rolls-Royce to temporarily shut jet engine plants to stem losses

Rolls-Royce (RR.L) will temporarily close its jet engine factories for two weeks in the summer, in a drastic effort to save costs amid the coronavirus pandemic.

It is the first time in history the company has shut down its jet engine factories. An official date has not yet been revealed.

The move will affect all 19,000 staff in the FTSE 100 (^FTSE) firm’s international civil aerospace arm, including 12,500 in the UK, who make jet engines for airliners.

Employees were made aware of the shutdown in November last year, and were told that the loss of two weeks’ pay will be spread across the year to reduce the impact on their income.

The measures are expected to save the company tens of millions of pounds in wages, plus energy and other running costs.

It confirmed the planned closure, saying that the company has “agreed in principle” to enter talks about “delivering a 10% productivity and efficiency improvement” across its civil aerospace business in the UK, as part of a “deal reached with the union.”

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The British firm added: “We have now begun complex and constructive discussions with the union on how this can be achieved.

“As we continue to manage our cost base in response to the impact of the Covid-19 pandemic on the whole commercial aviation sector, we are proposing a two-week operational shutdown of civil aerospace over the summer.

“We understand that this will be disappointing to our colleagues and intend to reduce the impact on pay by spreading it across the year.”

COVID-19 has brought the airline industry to its knees following global lockdowns and airline groundings, which saw passenger levels retract to record lows and profit losses steepen.

The International Air Transport Association (IATA) expects a net loss of $38.7bn (£28.2bn) is also expected in 2021, more than double the projected $15.8bn loss six months ago.

It comes as the firm’s stock lowered its flight forecast for 2021, due to coronavirus restrictions and impact on the airline industry, sending its shares nosediving.

Rolls-Royce said in January that it expects flying hours of aircraft powered by its engines to decline to 55% of 2019’s levels, down from previous estimates of 70%.

The downgrade means a cash outflow of some £2bn, higher than analyst estimates between £900m Morgan Stanley (MS) forecast and £1.5bn Jeffries (JEF) estimate.

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