Rolls-Royce

Not to be confused with car manufacturer Rolls-Royce Motor Cars

Rolls-Royce is the second largest aircraft engine manufacturer in the world by market share. She is not affiliated with luxury car manufacturer Rolls-Royce. The two companies were separated in 1971, now Rolls-Royce cars are produced by the eponymous division of BMW Corporation.

Performance indicators

2020

Revenue decline to £11.83 billion, loss growth tripled to £2.91 billion

Rolls-Royce's revenue at the end of 2020 amounted to £11.83 billion against £16.59 billion a year earlier. The company's net losses in comparison with these periods more than tripled - from £891 million to £2.91 billion.

In its financial statements, Rolls-Royce, commenting on the reported results, noted "the serious impact of the COVID-19 pandemic on the group's performance and short-term forecast" and warned that the company's prospects remain uncertain and largely depend on the development of the COVID-19 coronavirus situation and related measures taken by governments around the world.

Rolls-Royce ends 2020 with billions in losses

The division for the production of equipment for the aviation industry was hardest hit. Rolls-Royce receives payments from airlines for the number of hours that the company's engines fly. Since there were few air passenger flights in 2020 due to the COVID-19 coronavirus pandemic, receipts were extremely low. The company was forced to lay off staff and attract additional funding (in 2020, £5.3 billion was received). Rolls-Royce also put up £2 billion in assets for sale to cover the debt, which by the end of December 2020 amounted to £1.5 billion.

The Rolls-Royce division responsible for products for non-military aerospace systems ended 2020 with revenue of £5.09 billion (in 2019 - £8.11 billion), and losses here amounted to $2.57 billion. Deliveries of engines for air space vehicles decreased by 39%, to 448 units. The business in the field of energy systems added £2.75 billion to the company's annual revenue.

On March 11, 2021, the day the financial statements were published, Rolls-Royce shares rose 2.5%, while over the past 12 months their exchange rate has decreased by 25%.^[1]

History

2023

Emirates drops Airbus A350-1000 purchases due to defective Rolls-Royce engines

Emirates president Tim Clark at the Dubai Air Show in November 2023 dashed Airbus' hopes of a major order, saying he would not buy more A350-1000 flagship jets until engine problems were fixed.

Clarke claims the Rolls-Royce engine is "faulty" in its current state.

Dismissal of 2,000-2,500 employees

On October 17, 2023, the British company Rolls-Royce, one of the world's largest manufacturers of aircraft engines, announced a restructuring due to a lack of funds. This process will reduce global headcount by at least 2,000 employees.

The official statement said that the transformation, designed for several years, is focused on the formation of a simplified and optimized organizational structure. The changes will create a more flexible business to "better serve customers and develop and maintain world-class products." The reorganization will also provide an opportunity to eliminate duplicate roles within the company and reduce costs.

Rolls-Royce, one of the world's biggest aircraft engine manufacturers, announces restructuring as funds fall short

As of mid-October 2023, Rolls-Royce employs a total of 42 thousand people in divisions around the world (of which approximately half are in Britain). As part of the restructuring, 2,000-2,500 employees will need to be laid off. Thus, 4.8% to 6% of the company's employees will lose their jobs.

We have a lot of dedicated talent in our team and I believe these changes will improve activities in the areas that are key to our long-term success. This is another step on our multi-year transformation journey to create a competitive, sustainable and growing business, "said Rolls-Royce CEO Tufan Erginbilgik.

Reorganization involves structural transformations. In particular, engineering technology and safety departments will merge into one team. In addition, it is planned to form a new general corporate unit for procurement and supplier management.^[2]

Cutting thousands of jobs

At the end of May 2023, it became known about mass layoffs in Rolls-Royce Holdings. The company is forced to lay off employees in order to save money.

According to The Times, as part of the restructuring, Rolls-Royce unites non-production departments of three divisions - civil aviation, the defense sector and energy systems - as a result of which 10% of the 30,000 employees working in them may lose their jobs. The biggest cuts are likely to affect employees from Derby, where the company's main office is located.

Rolls-Royce Holdings forced to lay off staff to save money

Rolls-Royce said the company was "working as needed to transform a number of lines of business" and only part of that work was "about achieving operational efficiency."

Earlier in May 2023, the company's chief executive officer, Tufan Erginbilgic, announced Rolls-Royce's transformation program, which involves changes to the executive team, among other things. To optimize its operations, the company hired specialists from the consulting firm McKinsey & Co. to discuss the reorganization.

According to Bloomberg, by May 2023, the global aviation industry is in a difficult situation due to a lack of spare parts and qualified labor, as well as problems associated with sanctions against Russia, which is a major supplier of titanium for aircraft engines. In addition, Rolls-Royce, as a major supplier to both commercial and military aircraft, has been hit hard by the COVID-19 coronavirus pandemic, which has reduced air travel.

According to Erginbilgich, Rolls-Royce has become a "burning platform" that should make better money, reduce debt and invest in the future. The company is expected to decide on the future of its business in the second half of 2023.^[3]

2022: Suspension of purchase of Russian titanium

Rolls-Royce stops purchasing Russian titanium for aircraft engines amid the start of the Russian military operation in Ukraine. The CEO of the company, Warren East, announced this on February 24, 2022.

According to him, for several months Rolls-Royce diversified sources and accumulated sufficient reserves of titanium from Russian suppliers. At the same time, according to Kommersant, the British holding did not terminate the current contract with VSMPO-Avisma [the largest supplier of titanium in the world - newspaper note], and deliveries may resume in the near future. It is noted that Rolls-Royce gradually reduced dependence on Russian titanium since 2015, but by February 2022, about one fifth of all deliveries fell on this country.

Rolls-Royce stops purchasing Russian titanium for aircraft engines

In 2015, Rolls-Royce entered into several long-term agreements with VSMPO-Avisma for the period up to 2025. The total amount of contracts exceeded $250 million: the British concern purchased titanium rolled products and semi-finished products made of metal and alloys.^[4]

On February 24, 2022, British Prime Minister Boris Johnson announced the imposition of sanctions against Russia in connection with a special military operation against Ukraine. In particular, Britain it will ban the export of all dual-use goods to, Russia including a number of high-tech and critical equipment and components in sectors such as electronics, telecommunications and aerospace.

VSMPO-Avisma notes that the aviation industry remains the first and main consumer of titanium. The material is used:

• for the manufacture of articles of complex spatial shape;
• for the manufacture of critical high-load units and units;
• manufacture of engine parts.

2021

Sale of aircraft engine and turbine manufacturer ITP Aero for $2 billion

On September 27, 2021, Rolls-Royce announced the signing of a final agreement to sell 100% of ITP Aero to Bain Capital Private Equity, which heads a consortium of investors, for about $1.98 billion. The consortium includes stakes in Spanish co-investors SAPA and JB Capital. Read more here.

Sale of Bergen Engines to Transmashholding

On February 4, 2021, the largest manufacturer of railway equipment in Russia announced the purchase of an engine plant in Norway from Rolls-Royce. We are talking about the Bergen Engines enterprise, which manufactures diesel and gas piston medium-speed engines. Rolls-Royce said the net proceeds of the deal would be €150m. Read more here.

2020

Dismissal of 9 thousand people

On May 20, 2020, Rolls-Royce announced the dismissal of another 9 thousand people. This is the largest one-time reduction in the company's staff in 30 years.

The company has yet to make a final decision on where exactly the jobs will be cut, as it needs to discuss plans with unions to do so. But it is known that by the end of 2020 it is planned to fulfill the reduction plan by at least half.

On May 20, 2020, Rolls-Royce announced the dismissal of another 9 thousand people

As of May 2020, the bulk of Rolls-Royce's workforce is concentrated in the UK, where about 17 of its main production sites are located. In total, the manufacturer operates in 50 countries.

The reason for the reduction is a sharp drop in the number of air transportation around the world due to the COVID-19 pandemic. For Rolls-Royce, one of the world's largest manufacturers of aircraft engines, whose customers include Boeing and Airbus, this is the strongest blow - the passenger direction brings the company about half of all revenue.

According to forecasts of Rolls-Royce CEO Uorenna East, in 2020 the demand for aircraft engines for passenger aircraft will decrease by about 30% compared to 2019. At the same time, he is sure, it will take several years to restore the former demand for air transportation.

Therefore, now the company needs to reduce production capacity so that they do not stand idle. The staff cuts are thought to save around £1.7bn.

In addition to engines for passenger airliners, Rolls-Royce produces engines for military aircraft, naval vessels and submarines. The company said the military unit would not be affected by the layoffs.^[5]

Remote training for the repair of aircraft engines in virtual reality

In mid-May 2020, the British company Rolls-Royce Holdings announced the expansion of its virtual reality training programs. Now the company will remotely train the repair of aircraft engines.

The reason for the innovation was the COVID-19 pandemic - it is assumed that remote training will ensure the safety of workers. As a result, the latest addition to Rolls-Royce's immersive virtual reality training package was an instructor-led distance learning course that provides an overview of the design and operation of the Rolls-Royce BR725 engine used on the current flagship Gulfstream G650 aircraft. After completing the two-day training course, participants will be able to carry out standard maintenance and repair of the aircraft engine.

Rolls-Royce began remotely training the repair of aircraft engines in virtual reality

The company believes that the additional program is an excellent way to quickly train technicians anywhere in the world without the need for practical modeling. Although practical experience is impossible, VR technology can be a powerful help for students.

Digitalization plays an extremely important role in the implementation of the IntelligentEngine approach; we use it to design, test and maintain our engines, "explained Rolls-Royce senior vice president of customer service Andy Robinson. - This virtual learning tool takes us to the forefront of new technical learning techniques. Our customers only need an Internet connection and special VR equipment that will be delivered directly to the door.

The learning scenario uses VR technology to immerse students completely and gives an idea of ​ ​ the engine and its working parts. With high-quality 3D imaging, the motor and all its parts can be assembled, disassembled and modeled in any way necessary for learning.^[6]

20% staff reduction

In early May 2020, it became known about the reduction of about 15% of the staff in Rolls Royce against the background of how the aviation industry faced serious uncertainty in the context of the COVID-19 coronavirus pandemic.

As it clarifies, Bloomberg as a result of mass layoffs without work, about 8 thousand employees may be. In total, by the beginning of May 2020, Rolls Royce has about 52 thousand people, 23 thousand of whom work in. Britain

Rolls Royce cuts 15% of state due to coronavirus

We have taken prompt measures to increase our liquidity, sharply reduce our expenses in 2020 and strengthen stability in these exceptionally difficult times. But we will need to take further action, Rolls Royce said in a statement.

According to BBC sources, by eliminating working positions, the company will be able to cut costs by £750m, but Rolls Royce believes that savings plans "need to be expanded."

Jefferies analyst Sandy Morris believes large-scale cuts at Rolls Royce were inevitable given the challenges in the company's presence markets. According to the expert's forecasts, in 2020, the revenue of the entire Rolls Royce group will decrease by 12%, and revenues in the civil aviation equipment segment will decrease by 18%, largely due to a decrease in engine supplies.

According to Bloomberg observers, Rolls Royce is among the companies that are especially affected by the COVID-19 pandemic. Long-haul flights are likely to be resumed last, which means that the negative situation for the company will persist for a long time. Earlier, Rolls Royce restructured after engine problems, and now the company is forced to work in the face of a falling market caused by the fact that manufacturers of Airbus and Boeing airliners are reducing production volumes, according to the publication.

After the appearance of information about layoffs in Rolls Royce, the company's shares fell 8.3%. From the beginning of 2020 to May 4, the company lost 57% of its market value.^[7]

2019: Sale of Nuclear Systems Division to Westinghouse

On October 1, 2019, it became known that Westinghouse Electric Company signed a final agreement to acquire Rolls-Royce-owned North American business in the field of civil nuclear systems and their maintenance. The deal will allow Westinghouse to expand its global potential in digital, engineering services, nuclear power plant automation and monitoring systems, operational maintenance and manufacturing.

The main driving factor for Westinghouse has consistently been value creation and customer support. The acquisition of this division by Rolls-Royce optimizes our ability to serve nuclear reactors by expanding its presence in key segments and adding digital services. This transaction is an important step towards the implementation of our company's development strategy, commented Westinghouse President and CEO Patrick Fragman

The acquisition of the Rolls-Royce nuclear systems division will allow:

• expand Westinghouse's capabilities in servicing operating reactors;
• Increase the scale of digital innovation to optimize the planning and maintenance of client facilities, as well as to develop engineering and technical solutions that ensure maximum profitability and reduce possible risks;
• Provide support to Westinghouse and Rolls-Royce customers worldwide through an expanded presence and complementary collaboration between the two companies, broaden the range of customer offerings and improve the quality of operational service as well as reactor automation services;
• create additional growth points for Westinghouse while increasing the scale of customer support in the North American and European nuclear markets.

Rolls-Royce operates 11 facilities in Canada, France, the United Kingdom and the United States as of October 1, 2019.

The deal is subject to standard terms and regulatory approval^[8].

2017: Using Google software to build unmanned vessels

In October 2017, Rolls-Royce signed an agreement with Google to develop intelligent systems for unmanned ships. Thanks to this collaboration, Rolls-Royce is going to train its ships to deliver cargo without incident.

According to the terms of the contract, Rolls-Royce will use Google software, which uses machine learning mechanisms, to create a system for detecting and tracking objects at sea.

Rolls-Royce unmanned vehicle concept

Google technology should help Rolls-Royce create personalized machine learning models that can be accessed through a cloud service to interpret data arrays.

Although intelligent ship control systems will help future unmanned technologies, they are already able to benefit maritime businesses by increasing the safety and efficiency of cargo transportation, said Karno Tenovuo, senior vice president of Rolls-Royce's Ship Intelligence division.

Such systems can provide the crew with a deeper understanding of the situation surrounding the ship by integrating data from numerous sensors and operating ship systems, such as the automatic identification system (AIS) and radar, notes The Engineer.

Rolls-Royce was one of the first to announce its plans for remote-controlled cargo ships without a crew on board. According to the developers' plans, one operator will be able to control the movement of several ships at once with the support of electronics, virtual reality systems and a group of unmanned aerial vehicles.

In addition, in 2017, the company introduced the concept of an autonomous naval ship 60 meters long, capable of passing up to 3,500 nautical miles and performing such combat missions, patrolling, searching for mines, reconnaissance.^[9]

Notes