Rolls Royce records profits supported by low costs and asset sales

By Arya M Nair, Intern Reporter
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Rolls Royce Aviation
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Rolls-Royce, the British luxury car and aircraft engine maker, recovered to profit in the first half of the year and is considered to be on track to meet its 2021 target, due to cost-cutting and asset sales that helped it withstand the disruption to long-haul travel caused by the pandemic. 

Revenues at the firm’s civil aviation unit, the company’s biggest business, fell as airlines ceased flying during the pandemic’s peak last year, leading in a perilous few months before the company raised extra funds and secured loans.

Rolls-Royce announced that it was in exclusive talks with a bidder for its subsidiary ITP Aero unit, a Spanish aero engine and gas turbine manufacturer, for an amount of $1.9 billion, in order to raise $2.8 billion from asset sales. While international flying remains at low levels due to the pandemic, it is depending on a cost-cutting drive in its civil aviation business to rescue it and that it was on target to save more than $1.9 billion this year. 

Warren East
Warren East
CEO Rolls Royce

“The benefits of our fundamental restructuring program in civil aerospace are evident in our reduced cash outflow and improved operational efficiency. This leaner cost base together with a strong liquidity position gives us confidence in our ability to withstand uncertainties around the pace of recovery in international travel and benefit from the eventual rebound.” 

In the first half of the year, large engine flying hours were 43 percent higher than pre-pandemic levels, according to the firm, whose engines power planes including the Airbus A350 and Boeing 787. It is expected that by the end of 2021, they will reach a total of 55 percent.

The company is also investing heavily in low-carbon and net-zero technology, with plans to boost its research and development (R&D) spending by 75 percent by 2025 in order to achieve carbon neutrality by 2050.

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