Why is Rolls-Royce cutting 9,000 jobs?

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Rolls-Royce is cutting 9,000 jobs primarily due to the significant impact of the coronavirus pandemic on the aviation industry and a projected long-term reduction in air travel.

Rolls-Royce is undertaking a substantial workforce reduction, planning to cut at least 9,000 jobs, which represents more than a sixth of its total employees. This decision stems directly from the severe downturn in passenger air travel caused by global lockdowns and the subsequent economic fallout. The company anticipates that the market will remain significantly smaller for several years, necessitating a considerable decrease in its operational capacity and cost base.
Impact of the Coronavirus Pandemic on Air Travel

The coronavirus pandemic has drastically reduced passenger air travel, a critical factor for Rolls-Royce, which manufactures engines for major aircraft like the Boeing 787 and Airbus 350. Lockdowns implemented worldwide have led to a near standstill in commercial flights. Rolls-Royce forecasts that it will take between three to five years for air travel to recover and expects overall aviation activity to be approximately one-third less than it was in 2019.
Restructuring for a Smaller Market and Cost Savings

In response to this projected diminished market, Rolls-Royce is adjusting its operations to match expected demand. This includes not only job cuts but also the potential closure of factories. The company is targeting annual cost savings of £1.3 billion, with a significant portion, around £700 million, to be achieved through layoffs and other reductions. This restructuring aims to align the company's size and expenses with the anticipated lower volume of business.
Geographic Distribution of Job Losses and Defence Unit Stability

Approximately two-thirds of Rolls-Royce's civil aerospace jobs are located in the United Kingdom, suggesting a significant impact on its UK workforce. While job losses are also expected in office support functions, the company's defence unit will remain unaffected due to sustained robust demand for military products. Rolls-Royce operates 16 to 17 major civil aerospace manufacturing sites globally, with substantial operations in Germany and Singapore, indicating that the impact of these cuts may extend beyond the UK.
Previous Reductions and Ongoing Engine Issues

This latest round of job cuts follows a previous program initiated in 2018 that aimed to reduce the workforce by 4,600 employees, with 1,000 of those outstanding losses now included in the current 9,000 figure. In addition to the pandemic's impact, Rolls-Royce has also been contending with a persistent engine problem that has forced airlines to ground some of their aircraft, adding further pressure to its operational and financial situation.

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Why is Rolls-Royce cutting 9,000 jobs?

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