Rolls-Royce plans to cut 9,000 jobs to save money, as the coronavirus pandemic continues to significantly affect the aviation industry.
The jet engine manufacturer said it was making the change to help the firm achieve £1.3bn in annual cost savings. The job losses will make up about half of this savings target.
Majority of cuts to UK civil aerospace division
The Derby-based company employs 23,700 staff in the UK, within nine of its main manufacturing locations in the country, and also has a presence in more than 50 countries globally.
Currently, the company has furloughed 4,000 staff in the UK, which, Warren East, Rolls-Royce’s chief executive has said, was only a short-term measure to save money.
Rolls-Royce has estimated that 8,000 of the planned 9,000 redundancies would come from its civil aerospace division, which employs almost 16,000 people in the UK.
Speaking to BBC Radio 4, East said, “It’s fair to say that of our civil aerospace business, approximately two-thirds of the total employees are in the UK at the moment.”
There will be no job cuts within the company’s defence businesses, which manufacture fighter jets, along with ship and submarine engines.
East clarified that the company aims to carry out “more than half” of the redundancies in 2020 stating, “We need to get on with it because we know it is a harsh reality about our future.”
The future of air travel
The International Air Transport Association has predicted it will take four years for air travel to recover to pre-coronavirus levels, as seen in 2019.
This suggests demand for airline tickets, as well as plane orders and the engines that Rolls-Royce makes for those jets, will all be affected until 2023, at the earliest.
East has also estimated that new aeroplane engine production will be reduced to about a third of last year’s figures, and that it may take many years to completely recover to match the demand from aeroplane producers.
How the government could help
East has suggested that the company may use the government’s taxpayer-backed Covid corporate fund, which lends anywhere up to £1bn to large companies in need.
“We will discuss that with the government,” said East.
“In reality it would be a relatively small amount of funding.”
When asked if the government could do anything to help Rolls-Royce employees, British justice secretary, Robert Buckland said, “Clearly [the government] will have to go to work with the employer to look at the options.”
“All of us will be looking not just at Rolls-Royce but at the whole sector and the implications of this for the supply chains as well, let’s not forget them, to make sure we are doing everything we can in terms of plans and action to support what is a very high skilled part of our economy.”
Justifying the job cuts, East said, “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.
“Governments cannot replace sustainable customer demand that is simply not there.”