Rolls-Royce sees $2.7 billion cash outflow on travel slump

Bloomberg

Rolls-Royce Holdings Plc projected free-cash outflows of about 2 billion pounds ($2.7 billion) this year, saying new curbs on travel tied to the coronavirus will delay a recovery in long-
distance flights.
The shares slumped after the UK jet-engine maker said on Tuesday that it expects flying hours for wide-body aircraft to reach just 55% of 2019 levels. It had previously assumed a rebound to 70% this year.
The slowdown in air travel has hit long-distance flights the hardest, denting service revenue Rolls-Royce generates based on flying hours for twin-aisle jetliners equipped with
its engines. Renewed curbs to fight the latest surge in virus cases are delaying a rebound, with planemaker Airbus SE
last week slowing a ramp-up in production.
With a warning coming so early in the year, “one should
anticipate caution,” said Sandy Morris, an analyst at Jefferies. “The main issue is not so much flying activity as the continued impact on the airline industry and the supply chain.”
Governments from Europe to the US have tightened travel
restrictions to slow the spread of highly contagious coronavirus strains that emerged in recent months.