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Rolls-Royce cuts forecast flying hours, shares fall

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Rolls-Royce shares plunged this morning after the group said that it expects flying hours to drop to 55% from 2019’s levels.

The FTSE 100 firm saw shares drop 8.4% on the announcement, where it also said it expects to burn through £2bn in cash over the next year amid the continuing travel restrictions.

In a trading update, the group said: “Continued progress on vaccination programmes is encouraging for the medium-term recovery of air traffic and economic activity.

“In the near-term, however, more contagious variants of the virus are creating additional uncertainty. Enhanced restrictions are delaying the recovery of long-haul travel over the coming months compared to our prior expectations, placing further financial pressure on our customers and the wider aviation industry, all of which are impacting our own cashflows in 2021,” said Rolls-Royce in a statement.

Cash burn at Rolls-Royce is expected to be its steepest throughout the first half of the year and cashflow to pickup in the second half of the year as restrictions ease and people start flying again.

Rolls-Royce is currently amid a restructuring programme. Over the last year, the group cut 7,000 jobs and hopes to increase this to a total of 9,000 by the end of 2022.

“We continue to expect to turn cashflow positive at some point during the second half, reflecting our forecasted profile of flying hours as they recover from today’s low base,” said the group.

“With liquidity of approximately £9bn, we are confident that despite the more challenging near-term market conditions we are well positioned for the future.”

 In October the group announced a £5bn emergency funding plan. Shares have lost 80% of its value since January 2020.

Chief executive, Warren East, said: “We are undertaking decisive and transformative action to fundamentally restructure our operations, materially reduce our cost base and improve our financial position. The capital raise announced today improves our resilience to navigate the current uncertain operating environment.”

Rolls-Royce shares are trading 6.13% at 91.99 (1012GMT).

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