Shares in Rolls-Royce Group (LSE:RR) have had a difficult few years. From trading at 1,273p back in 2013, the company’s share price now stands at 100p exactly. The company has had to deal with a seemingly endless parade of bad news. But I think there’s reason to believe the worst might be over.
Ukraine
The most recent source of problems for Rolls-Royce has been the Russian invasion of Ukraine. As a result of the appalling conflict, various countries have closed their airspace to planes from Russia, and vice versa.
This is a problem for Rolls-Royce, since its engines are primarily used in the wide-body aircraft that fly long-haul routes. Since Rolls-Royce makes money by servicing those engines based on their usage, restrictions on air travel means less revenue for the business.
Recently, though, fighting appears to be giving way to talking. Obviously, this is welcome for any number of reasons that have nothing to do with investing. But for an engine manufacturer, it might be an indication that air travel might pick up, increasing demand for its services.
Pandemic
Before the conflict in Ukraine, air travel had been under pressure as a result of the global pandemic. As airlines kept their fleets grounded, demand for new aircraft virtually evaporated. Consequently, sales of new engines from Rolls-Royce collapsed.
I think that there’s room for optimism here, though, too. Travel restrictions have, by and large, been gradually unwinding. And travel operators are reporting a return to the levels of demand from before the pandemic. In my view, this indicates that the worst might in the past as far as the pandemic is concerned and the Rolls-Royce share price might be about to respond accordingly.
Trent 1000
The problems for Rolls-Royce began before the pandemic, though. Problems with the durability of the turbine blades used in the Trent 1000 engine proved expensive to fix. This damaged the company’s balance sheet even before travel restrictions came into force.
In response, Rolls-Royce has put a big effort into improving the reliability of its Trent 1000. In addition, the business has opportunities for expanding its margins from its Trent XWB and Trent 7000 engines. Together, these factors might mean that the worst of the Trent 1000 issues are in the past.
Conclusion
Rolls-Royce has faced a number of operating issues. These have left the company with a heavy debt load that will take a while to work off. Its shares are down from their historic highs accordingly.
But I believe that there’s reason to think that the worst might be over in the case of each of these. As a result, the Rolls-Royce share price might be about to make a comeback. I’ll be watching with interest.
