Aircraft engine giant Rolls-Royce said Tuesday it plans to axe up to 2,500 jobs worldwide, or about six percent of its staff. Its shares rose as much as 5.5pc, the highest since March 2023, after the UK company cited “plans for a simpler, more streamlined organization.”

The jobs will likely be cut mainly among non-engineering procurement, supply chain management, and project support employees. The company said the plan is expected to save more than PS300 million a year. The cuts are the hardest to hit the business under new chief executive Tufan Erginbilgic, who has already slashed costs and overhauled the company after replacing CEO Warren East in 2020.

He branded the business a “burning platform” needing transformation as he took over and quickly launched several cost-cutting measures. That has helped the firm to better navigate a COVID-19 slump in air travel, which pushed up maintenance costs for carriers that use its engines. It also earned revenue based on how many hours its products are used and through lucrative service contracts.

The company’s restructuring will improve the workflow in the civil aerospace, defense, and power systems divisions. It will also remove some duplication of roles and boost cost efficiencies. The company, which does not specify where the jobs will be cut, employs around 42,000 people globally.

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Erginbilgic, who joined the company from BP Plc in 2020, says he is building a Rolls-Royce that is fit for the future. His plans have been backed by improved profit in the first half of 2023 and strong cash flow from operations. Shares have trebled in the past year on the back of a recovery in aviation demand and the results from the latest overhaul efforts.

The company expects the plan to be implemented in the second half of 2023, resulting in a one-off charge of up to PS175 million, it said. This will include the cost of redundancies and other expenses.

In the UK, the job cuts will affect around 5,000 of the company’s 11,000 employees based in Derby. It needs to be clarified whether that will be the case in the US, where it has a smaller workforce.

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Sky News understands that the company has told the DWP it will need to make compulsory redundancies and will seek the government’s approval under the Employment Rights Act. Whitehall officials were briefed on the plan, by statutory requirements, on Monday evening.

FTSE 100-listed Rolls-Royce Holdings PLC, the FTSE 250 engineering group, owns the aircraft engine manufacturer. It is best known for its luxury cars, defense systems, and submarines. It is the world’s biggest maker of military helicopters and commercial aircraft engines. Its customers include airlines, shipbuilders, and power generation companies. Its main business is producing sizeable commercial jet engines for big passenger aircraft, earning revenue based on how many hours they are used. It also designs systems for defense aircraft and power systems.