Rolls-Royce shares at 17-year low

The company has been particularly hard hit by the drop in long-distance travel, which has sharply curtailed demand for the wide-body planes its engines power.

Rolls-Royce shares fell to their lowest in 17 years after detailing a plan to raise as much as £2.5bn (€2.7bn) to brace against a drought in demand for aircraft engines.

Shares of the UK company slid for a fifth straight session, dropping as much as 12% after saying two days earlier it’s reviewing options including a rights issue, other forms of equity and new debt.

Rolls-Royce has lost more than three-quarters of its value this year amid a broad industry downturn triggered by the pandemic. The company has been particularly hard hit by the drop in long-distance travel, which has sharply curtailed demand for the wide-body planes its engines power. 

Many aircraft in the existing fleet have been temporarily or permanently grounded, depriving Rolls-Royce of vital maintenance revenue it collects when they fly.

The point was driven home by Lufthansa. The German carrier said it’s accelerating fleet and staff cuts amid mounting concern about the severity of the downturn. Plane maker Airbus supplier Leonardo and Air France-KLM shares were also hammered. 

In an interview in L’Opinion, CEO Ben Smith said the pandemic is forcing the company to accelerate and deepen its revamp. The airline will only operate profitable flights, he said, and reiterated a state rescue plan is only enough for less than a year. 

Bloomberg