Rolls-Royce
Our Civil Aerospace business has experienced a significant reduction in demand due to the effects of COVID-19. Widebody engine flying hours fell by approximately 50% in the first half, compared to the prior year period with an approximate 75% decline in the second quarter.
Since the low point in April, when flying hours were down 80% compared to April 2019, we have seen early signs of recovery with a marginal improvement in May and June led by an increase in flights in China, Asia Pacific and the Middle East. Business jet and regional flight activity has been recovering more quickly due to lower exposure to cross-border routes.
MRO (Maintenance, Repair and Overhaul) activity in the first half was broadly stable compared to the prior year period but lower than the pre-COVID-19 first half schedule. We have completed the backlog of overhauls related to the Trent 1000 durability issues and have achieved our target to reduce the number of related aircraft on the ground (AOG) to single digits. We are progressing well with the type test of the replacement high pressure turbine blade for the Trent 1000 TEN, the final durability issue to be fixed, and remain on track for its incorporation into the fleet by the end of H1 2021.
The deterioration in the medium-term market outlook for the commercial aviation industry will need to be reflected in our contract accounting assumptions and we will also be assessing the carrying value of our engine programmes and deferred tax assets. We are currently undertaking a review of these matters, the impact of which may result in non-cash accounting adjustments in our first half results.
Output of new widebody engines was consistent with our revised guidance of 250 engines for the full year, with 130 engine deliveries in the first half.
The commercial aerospace activities of ITP Aero, which account for approximately 75% of its business, have experienced a similar deterioration in end market demand as our Civil Aerospace business unit. Its defence related activities remained stable.
Our Power Systems business experienced varying levels of COVID-19 related disruption and utilisation with low double-digit percentage revenue decline compared to the prior year period. Our customers in industrial markets were the most impacted by lower activity levels, particularly those with exposure to oil & gas and mining. PowerGen activity also slowed down in the second quarter, most notably in the US. We experienced a reduction in demand for smaller yacht engines with some marine yards closed for much of the second quarter. Defence related activities and the rest of our Marine business performed relatively robustly. Long-term demand growth for reliable power solutions is expected to remain intact with demand in data centre mission critical applications increasing above pre-COVID levels. We are growing market share in developing markets, particularly in China where we continue to expect growth in our revenues in 2020.
Our Defence business has remained resilient with continued demand from key government customers. We have not experienced any material operational or financial disruption as a result of COVID-19. We remain committed to the development of new products and programmes in Defence including Tempest in the UK. In the US, we are poised to submit our RFP for the new B-52 engine opportunity and the consortium of which we are a member recently went through to the next round in the competition for the US Army’s Future Long Range Assault Aircraft.
Outlook
We currently anticipate a gradual recovery of our end markets as travel restrictions ease in the coming months, while acknowledging the elevated level of uncertainty in the industry outlook. We currently forecast widebody engine flying hours to be down in the region of 55% this year, with more long-haul routes opening up in the fourth quarter. We continue to plan for about 250 widebody engine deliveries in 2020, based on announced build rates from our airframer customers.
As a result of our cash mitigation actions and supply chain management we expect our rate of cash consumption to significantly reduce in the coming months, resulting in a full year free cash outflow of approximately £4 billion. This reflects an unwind of the inventory in the second half along with a gradual improvement in engine flying hour receipts and an acceleration of cash savings. We have strengthened our liquidity position to absorb the near-term cashflow pressures and continue to review our options to strengthen our balance sheet and position ourselves for the recovery.
We remain positive about the long-term outlook for sustainable power solutions. We expect Defence to continue to experience good demand. In Power Systems, many of our impacted end markets are forecast to recover by the end of 2021. We currently expect our widebody engine flying hours to recover to approximately 70% of 2019 levels in 2021 with OE deliveries likely to remain subdued. The steps we have taken to substantially resize and restructure our Civil Aerospace business will help deliver a sustainably lower cost base for the future and ensure it is well positioned for the recovery in demand. As a result, even after the additional cost associated with de-risking our currency exposure, we are targeting at least £750 million Group free cash flow in 2022 and growth in our returns into the medium-term.
Our first half 2020 results announcement and webcast will be published on 27 August 2020.