Rolls Royce Price Prediction: What is the Outlook for Flight Hours?

The Rolls Royce share price is trading at 100p after the stock peaked with the expectations for increased travel.

Rolls Royce Still Struggling with Flight Restrictions

Rolls Royce shares are still under pressure from government restrictions on air travel. The share price traded at 700p ahead of the coronavirus fallout and is now anchored at 100p as governments stall on the economic reopening.

UK Prime Minister Boris Johnson delayed the economic reopening by a month and faced a grilling amongst his party with Tories demanding guarantees that they will not ‘shift the goalposts’ and delay the so-called Freedom Day again.

Share Price was Plagued by Turmoil

Rolls Royce shares were hit hard last year as revenues tumbled on reduced flight hours and the company had to make tough decisions. In an attempt to address the cost base, management launched the largest restructuring in the company’s history, consolidating global manufacturing bases and delivering significant cost reductions. The company also had to boost the financial standing with a reduction in the workforce and also implemented a rights issue and bond issue.

Rolls strengthened liquidity to £9bn and protected the financial position with £7.3bn of new debt and equity
and launched a programme to raise £2.0bn from disposals. The redcution in staff was 7,000 for the year. The company is now seeking to return to positive free cash flow (FCF) during the second half of 2021 and at least £750m as
early as 2022, dependent on the pace of the recovery in engine flying hours.

Flying hours is the problem because governments have been tentative about reopening and flights are operating much lower than normal. The recent spread of virus cases is another risk for Rolls Royce.

Rolls Royce Technical Analysis

Rolls Royce bottomed in October just ahead of the breakthrough in the coronavirus vaccine. The stock was then able to shrug off deep losses in its earnings and steadily recover. The price of Rolls Royce shares saw a high above 130p at the end of 2020, but the price is drifting lower as governments slow the reopening of travel and continue with restrictions. Rolls Royce has support at the 100p and 90p levels. Below this would open up a potential move to 65p if markets weakened.

Rolls Royce Daily Chart

Recent Earnings Highlights

Underlying revenue of £11.8bn reflected lower activity for the company and included a £-1.1bn revenue hit from from Civil Aerospace contract accounting. The company reported an underlying operating loss of -£2bn, which included a -£1.3bn of one-off charges largely due to the coronavirus impact.