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Aircraft engine maker Rolls-Royce to cut 9k jobs

British aircraft engineer Rolls-Royce will cut roughly 9,000 jobs over the coronavirus outbreak. Meanwhile, more Airliners are packing customers to near capacity on a reduced number of flights, putting Americans at risk for exposure to COVID-19. Yahoo Finance’s On The Move panel breaks down the latest developments.

Video Transcript

ADAM SHAPIRO: But as we talk about airlines, more than 50% of the US commercial airline fleet is grounded. It is parked. That's having ramifications worldwide. Let's go to Oscar Williams-Grut in London, because one of the big engine-makers is announcing a big layoff. Oscar.

OSCAR WILLIAMS-GRUT: That's right, Adam. Rolls-Royce today announced that they are letting go 9,000 employees. That's just shy of one-fifth of their global workforce. Now, we had had suspicions that this would be happening. In the UK press, there were reports that 9,000 jobs would be set to go, and Rolls-Royce confirmed they were in talks with unions about layoffs.

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But today is the first time that they actually confirmed that number. However, they said that they haven't decided yet where the layoffs will fall globally. It's likely, however, that a lot will be in the UK, which is home to a lot of their manufacturing capacity for engines. CEO Warren East said, as you highlighted, that this is all to do with the slowdown in the airline industry. He said our airline customers and airframe partners are having to adapt, and so must we.

Now, they're not the only people over here reportedly sort of seeking layoffs due to manufacturing troubles. We've also had reports in the French press that Renault could be considering shutting down three of their factories in France as part of a 2 billion euro cost-saving program. So far, we've not had any report of that. But frankly, it wouldn't be surprising given the huge slump in demand we've seen over here in Europe for cars.

Just earlier this week, there were stats showing that almost an 80% fall in car sales in April-- so huge reduction in demand. And so manufacturers in all sort of transportation sectors are having to adjust. However, investors in Rolls-Royce, at least, seem to like the news of this pretty tough self-help measure that the company is taking. Shares were up as much as 4% earlier today in London.

ADAM SHAPIRO: Oscar, thank you. We're going to keep talking about the airlines. Because if you look at airline stocks right now, American is trading higher, United, Southwest, Delta-- all trading higher-- not by huge metrics. But the airline slowdown, to put it in perspective, Airlines for America, the trade group, put out a metric this morning that 73% of the flights which are in the air right now-- 73% are flying at less than 50% capacity. Yet, Julie, we see those photos of those rare but packed flights which might pose a health risk.

JULIE HYMAN: Yeah. And there's been a lot of sort of social media activity around those particular flights. So they get a lot of attention here. So you know, what seems to be missing from the equation is some kind of federal regulation, right-- some kind of guidelines on what exactly the airlines should be doing in terms of their safety. And so in the absence of that-- and of course, that's not just happening in the airline industry, it's happening elsewhere.

In the absence of that, the airlines are filling the gap themselves. And as you well know having covered the airlines, there is a very difficult balance that they have right now between trying to preserve people's safety but also staying in business. Because the fewer people that you put on a flight, the less money that flight makes, or even the more money that flight loses, right?

JARED BLIKRE: Yeah, I mean, you talk about regulation, Julie, we're trying to figure out this one day at a time, one week at a time. And I don't think we're in a position right now where we're going to be able to say, we have definitive guidelines, this is what we need, because we just like too much medical information. But you look at some of the charts here of the airlines-- we have a lot of the-- most of the American-based airlines are up today, although European ones are just sinking again.

We do have Norwegian down 31% today alone. And if we look on a year to date basis-- so you could just see the carnage in the industry-- look at this-- Southwest is the best off, and it's down 46% year to date, followed by a bunch of others. Norwegian Air at the bottom off 93%, Icelandic Air off 80%, Spirit Airlines off 75%. So I don't think there is any kind of fast and easy solution out of this. I'm just kind of waiting for the day when they're quasi-nationalized. Maybe some of them are going to be recapitalized, combined. Thinking ahead six months, if there is a turndown, a second wave, that's in the cards, I think.

AKIKO FUJITA: And to Julie's point there in terms of the fragmented guidelines that are in place right now, it's going to be interesting to see how the conversation that's happening in the US is going to connect to the broader travel picture, right? IATA yesterday put out some guidelines that they think should be implemented globally. One of those included immunity passports, which is something that has been discussed here in the US, as well as outside of the US-- essentially, a passport that's just whether you have been, in fact, tested, you know, whether you have tested for antibodies.

And those conversations are going to take much longer, but I think long term, those are the areas where you're going to want to see. Because the idea is to just make sure that people feel comfortable getting on planes again. We may see the packed planes right now, because capacity has been cut so significantly. But long term, they're going to have to find a balance in some way.

ADAM SHAPIRO: And the analysts will tell you that by the end of the year, we'll only be at-- at best, 50% of capacity. And it was Helene Baker over at Cowen who said, you can't employ an industry of 750,000 people flying at 50% capacity.