Aircraft engine maker Rolls-Royce is cutting at least 9,000 jobs because of the collapse in demand for air travel caused by the coronavirus pandemic.
“We are proposing a major reorganization of our business to adapt to the new level of demand we are seeing from customers,” the company said in a statement on Wednesday. “As a result, we expect the loss of at least 9,000 roles from our global workforce of 52,000.”
Rolls-Royce (RYCEF) said its civil aerospace business, which is concentrated in the United Kingdom and makes engines for Boeing (BA) and Airbus (EADSF) planes, will bear the brunt of the restructuring. The division accounted for more than half the group’s revenue in 2019.
“We haven’t completely concluded on exactly where the job losses will be because we have to consult with our unions, but it’s fair to say that of our civil aerospace business, approximately two thirds of the total employees are in the UK at the moment,” CEO Warren East told BBC radio on Wednesday.
The company said it will take several years for the commercial aerospace market to return to the levels seen just a few months ago and it needed to adjust its capacity to meet the reduced demand.
“We’re very grateful for the help that the [UK] government has provided to help us through the immediate trough… but no government can extend things like furlough schemes for many years into the future,” East said.
Rolls-Royce currently has 3,700 UK employees on a government-funded furlough program, with staff in Spain, Germany and Norway also on reduced hours or state support, a spokesperson said. The company has already deferred spending, paused its dividend and implemented pay cuts of 20% among senior management to shore up cash.
It is now resizing its business to prepare for a smaller global aviation market. The industry is going through the worst crisis in its history, with airline passenger revenues expected to be cut in half this year. Several major airlines, including Lufthansa (DLAKY) and British Airways (ICAGY), have warned that demand for international travel won’t fully recover for several years.
This has dealt a huge blow to planemakers and other aerospace companies. Airbus and Boeing have both announced deep cuts to production and jobs, as airlines scale back orders for new planes. Boeing’s deliveries fell to an 11-year low in April.
“Governments across the world are doing what they can to assist businesses in the short-term, but we must respond to market conditions for the medium-term until the world of aviation is flying again at scale, and governments cannot replace sustainable customer demand that is simply not there,” East said in a statement.
UK labor union Unite described the job cuts at Rolls-Royce as “shameful opportunism.”
“This company has accepted public money to furlough thousands of workers. Unite and Britain’s taxpayers deserve a more responsible approach to a national emergency,” Unite official Steve Turner said in a statement. “We call upon Rolls-Royce to step back from the brink and work with us on a better way through this crisis,” he added.
Unite said that it expected 3,375 of the 9,000 job cuts will be in the United Kingdom.
The English city of Derby is home to Rolls-Royce’s civil aerospace business. The division also has operations in Germany, Singapore and the United States.
Rolls-Royce is also a major supplier of engines for military aircraft, and power systems for marine vessels.