Rolls-Royce boss points to long-haul flight recovery

Warren East says China opening could power sector back to pre-pandemic levels by 2024

Rolls-Royce boss Warren East expects long-haul flight market to recover by 2024.  Reuters
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The outgoing chief executive of the engineering company Roll-Royce, Warren East, says the long-haul aviation market should recover to pre-pandemic levels by 2024.

"By maybe 2024 or 2025, we should be back at pre-pandemic levels, but that, of course, means that the rest of the economy has significantly grown in the meantime," Mr East told the BBC.

After three years of strict anti-Covid policies and closed borders, China will scrap quarantine measures for international travellers from January 8.

Travel overseas for Chinese citizens will become easier, the immigration authority said this week.

For Mr East, the lifting of restrictions in China is welcome news for Rolls-Royce.

"For us in the long-haul space, we’re still only at about 70 per cent, but there is quite a regional spread on that ― Europe and the US is north of 80 per cent, this year China has been significantly held back, and that’s because of the lockdowns in China," he said.

"A lot of our Chinese business is domestic travel, so it’s wide-body jets using our engines. But it’s for domestic travel and that just hasn’t been happening ― they’ve been at about 30 per cent for much of the year.

Now, there’s very encouraging news coming out of China at the moment in terms of restrictions easing, so I think we can see a path to recovery." he added.

The company struggled during the Covid-19 pandemic and was burning through cash at the rate of more than £1 billion ($1.2 billion) a quarter. Speaking as his seven-year tenure as head of Rolls-Royce comes to an end, Mr East said that during the initial months of the pandemic “a plausible outcome was that the business would not survive.”

Its civil aerospace business, building and maintaining jet engines for the likes of Airbus and Boeing, crashed to represent only 10 per cent of revenues as airlines around the world grounded their fleets during widespread travel restrictions.

But largely thanks to a deeply discounted rights issue, which brought in billions, Rolls-Royce survived. And with the continuing easing of pandemic travel restrictions, particularly in China, things are looking good for the company in 2023.

The Rolls-Royce logo on an engine of an Ethiopian Airlines Airbus A350-941. Reuters

Indeed, things are looking better for Rolls-Royce's clients, the global airlines whose Airbus and Boeing aircraft are powered by Rolls-Royce engines. After the slump of the pandemic years, the International Air Transport Association (Iata) is predicting a cautious return to profit for the world's airlines in 2023.

"Despite the economic uncertainties, there are plenty of reasons to be optimistic about 2023. Lower oil price inflation and continuing pent-up demand should help to keep costs in check as the strong growth trend continues. At the same time, with such thin margins, even an insignificant shift in any one of these variables has the potential to shift the balance into negative territory," Iata said.

Updated: December 28, 2022, 1:05 PM