26 May 2020: Many aerospace organisations across the globe have made changes in the downtime during the COVID-19 phase. Some companies implemented stringent health measures and continued the work by maintaining strict hygienic conditions, some companies went ahead with the lay-off plans and furloughs to minimise losses. A general industry observation was that, bigger the company, greater was the loss.
Some companies like Rolls Royce proposed some major steps in their business reorganisation like cutting off about 9000 roles from the global workforce of 52,000, cutting expenditure across plant and property, capital and other indirect cost areas. This proposed reorganisation is bound to generate annual savings of Euro 1.3bn.
Taking hard decisions during unprecedented times is tough & responding to this tough-call Warren East, Rolls-Royce, CEO said, “This is not a crisis of our making. But it is the crisis that we face and we must deal with it. Our airline customers and airframe partners are having to adapt and so must we. Being told that there is no longer a job for you is a terrible prospect and it is especially hard when all of us take so much pride in working for Rolls-Royce. But we must take difficult decisions to see our business through these unprecedented times. Governments across the world are doing what they can to assist businesses in the short-term, but we must respond to market conditions for the medium-term until the world of aviation is flying again at scale, and governments cannot replace sustainable customer demand that is simply not there. We have to do this right, which means we will work closely with our employee and trade union representatives as appropriate, look at any viable alternatives to mitigate the impact, consult with everyone affected and treat our people with dignity and respect.”
Although this reorganisation will definitely affect the Civil Aerospace business, Rolls Royce has chalked out a damage-control plan.
– Detailed review of facility footprint.
– Negotiations underway with the Power Systems business and ITP Aero
– Due to robust defence business in UK and US during the pandemic phase, no downsizing in the defence sector.
– Work out a plan to ensure the civil aerospace business continues to support the increased demand in the defence sector to compensate for the losses.
Warren East further added, “The strategic choices that we have made over the last few years have helped us to respond rapidly to COVID-19 and the synergies between our divisions leave us well placed to capitalise on the long-term potential of our markets. The world on the other side of this pandemic will need the power that we generate to fuel economic recovery. I absolutely believe the call for that power to be more sustainable will be stronger than ever. This plays to our strengths. We must ensure that we are able to continue to innovate and play our leading role in enabling the vital sectors in which we operate achieve net zero carbon emissions. We have emerged from troubled times before, to achieve incredible things. We will do so again.”
By now, it is amply clear that the effects of COVID-19 on the commercial aerospace market till take several years to return to the pre-COVID-19 phase. Looking at this, Rolls Royce has addressed these medium-term structural changes with reduced demand from customers for the civil aerospace engines and aftermarket services. The above measures taken by Rolls Royce are to strengthen the financial resilience of the business and reduce our cash expenditure in 2020.
