Air Freight News

Rolls-Royce says China curbs weighing on jet-engine recovery

Rolls-Royce Holdings Plc said renewed coronavirus restrictions in China are holding back crucial service revenue from its jetliner engines even as markets begin to recover elsewhere.

Over the first four months of 2022, flying hours, which determine revenue-generating maintenance visits, were 42% higher than the prior year, London-based Rolls-Royce said in a statement.

“Passenger demand is recovering on routes where travel restrictions have been lifted, such as in Europe and the Americas, but additional Covid-19 restrictions have resulted in fewer flights in China where the situation is still evolving,” the company said.

Shop visits, together with deliveries of installed and spare engines, will accelerate during the course of the year, Rolls-Royce said ahead of its annual shareholder meeting later Thursday.

Rolls saw revenues plunge during the two years over which the pandemic roiled global travel. Demand for the wide-body engines in which it specializes has been hardest hit, with long-haul flights returning more slowly than regional and domestic trips.

The company, which was profitable last year, spurred by cost cuts and the travel restart, reiterated previous guidance for a broadly unchanged operating profit margin in 2022, combined with revenue growth of less than 10%.

Jetliner Engines

In the medium term underlying revenue from civil aerospace should grow by an average of more than 10% annually, it said, with operating margins in the high single digits and trading cash flow comfortably exceeding operating profit.

Jefferies analyst Chloe Lemarie said in an note that the trading update was uneventful, while the mid-term goals are “solid, but with no specific timing.”

She said Rolls’s observation that its defense products are delivered and maintained over decades and not immediately exposed to individual geopolitical events effectively “talks down the short-term uplift potential from Ukraine’s invasion.”

East said the company expects to complete the sale of Spanish unit ITP Aero by the end of next month, subject to regulatory approvals, allowing it to achieve a targeted 2 billion pounds ($2.4 billion) in proceeds from divestments.

Rolls-Royce traded 0.7% higher as of 8:55 a.m. in London, trimming the stock’s decline this year to 34%.

Bloomberg
Bloomberg

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© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

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