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Rolls Royce Shares Fall 11.5% as the UK Mulls Mandatory Hotel Quarantine Measures

Simon Mugo trader
Updated 26 Jan 2021

Practice Stock Trading
Rolls Royce engine

Shares of Rolls-Royce Holding PLC (LON: RR) fell as much as 11.5% today driven by news that the UK was considering a new mandatory hotel quarantine for visitors arriving from various countries, or all countries.

The imposition of new quarantine measures in the UK is likely to discourage international arrivals. Similar moves by other countries suffering from rising coronavirus cases are taking a similar approach slowing down global airline travel recovery.

Some of the countries that could be affected by the new quarantine measures are South Africa and Brazil after the UK recorded 98,531 deaths, the fifth-highest death rate globally.

The UK government is yet to make an official statement regarding any new quarantine measures. The aerospace company’s stock was already under pressure after announcing that it expects to spend up to £2 billion if the airline industry resumes operations in H2 2021.

Rolls Royce spent over £4 billion last year even after laying off 7,000 employees driven by the lockdown measures implemented worldwide that brought global airline travel to a standstill.

The plane engine maker plans to cut another 2,000 jobs by 2022 to generate positive free cash flow of at least £750 million. The stock recouped most of its losses later in the day as investors reacted positively to the company's £9 billion worth of liquidity at the end of December 2020.

Rolls-Royce noted that: “Though significant uncertainty remains over the precise shape and timing of the recovery in air traffic and the phasing of engine concession payments, free cash outflow this year is forecast to be heavily weighted towards the first six months,”

The company expects to generate positive cash flow “at some point” in the second half of this year.

Rolls Royce share price

Tradingview chart of Rolls Royce share price 26-02-2021

Rolls-Royce shares fell as much as 11.5% to trade at 86.72p from Monday’s closing price of 98p but were off these lows at the time of writing.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading