Rolls-Royce Share Price
The Rolls-Royce share price has struggled so far in 2021 as the outlook for the aviation industry has remained cloudy. Since the beginning of the year it has lost 6.94% in value. While over the past 12 months it is up by 22%, but is still more than 50% below its pre-pandemic high. With the company’s annual general meeting taking place yesterday, and vaccine roll-outs across the world moving further along, now is a pivotal moment for investors curious about the FTSE 100 engineering giant’s stock.
Return to Positive Cash Flow
Following its AGM yesterday, Rolls-Royce said it is expecting its cash flow to turn positive during H2 of 2021 “as engine activity recovers and cost savings are delivered”.
This announcement is especially important as Rolls-Royce ended last year with debt at £3.6bn as the group took measures to refinance. This came about partly because Rolls-Royce made 1,400 people redundant, saving the company up to £1.3bn a year.
Air Travel
However, for the Rolls-Royce share price to sustain its recovery and go further, it will need to show its ability to perform over a longer period of time. The question comes back to air travel. It is clear that there is pent-up demand.
However, whether or not that can turn into flights, and soon, is a different question. Leaders at the major UK and US airlines are frustrated and have called on their governments to do more to restart transatlantic travel.
“The airline industry needs adequate lead time to establish a plan for restarting air services, including scheduling aircraft and crews for these routes as well as for marketing and selling tickets,” said a letter to the transport chiefs of both countries.
There is also frustration over the UK’s “green list” which many consider to be underwhelming, containing only one mass-market destination in Portugal. “It is very disappointing and frankly not worth commenting on,” said IATA director general Willie Walsh in response to the list’s publication.
If the company does not see a return to flying in time to rescue is earnings for the 2021 holiday period, then it could be another year of losses, and the Rolls-Royce share price could be in trouble.
Electric Aeroplane
Rolls-Royce also confirmed that its all-electric aeroplane will fly within the next few weeks.
The ‘Spirit of Innovation’ will be the fastest electric plane on earth, aiming for a top speed in excess of 300mph. The aircraft will also be able to fly the distance between London to Paris, or 200 miles, on only one charge.
The company’s plan is to eventually apply the technology to products that can be brought to the market. “We are bringing a portfolio of motors, power electronics and batteries into the general aerospace, urban air mobility and small commuter aircraft sectors as part of our electrification strategy,” Rolls-Royce said in a statement following its AGM.