British aero-engine maker Rolls-Royce will likely have to slash its 2020 cash flow target after airline customers parked hundreds of planes due to the coronavirus pandemic, analysts said.
) will likely have to slash its 2020 cash flow target after airline customers parked hundreds of planes due to the coronavirus pandemic, analysts said.
The company is paid by airlines based on how many hours its engines fly, and since its update air travel has slumped. Vertical Research Partners analyst Robert Stallard, who rates Rolls “sell”, said airlines would likely retire many older aircraft earlier than expected, hitting revenue Rolls earns from spare parts and servicing in its aftermarket business.
“We are closely monitoring the situation and taking prudent measures to conserve cash, such as reducing or deferring discretionary spend. Our good starting position and the measures we have taken, and will continue to take, give us confidence in the ongoing financial resilience of our business,” he said.
According to analysis by travel data firm Cirium, flying hours on Rolls-Royce powered flights reduced from 20,421 hours on Jan. 3 to 4,664 on March 29.
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