Key points
- Electric aircraft and nuclear power could cause the Rolls-Royce share price to take off
- With borders reopening, the firm will benefit from increased flying hours
- The recent sale of AirTanker Holdings for £189m will bolster the company’s balance sheet
The Rolls-Royce share price has taken a battering during the pandemic. But with innovation in electric flights and nuclear power, are things about to change for this industry giant? What’s more, the retreating pandemic may give rise to more flying globally. I’m looking at these two factors in detail, while wondering if I should add to my current holding of Rolls-Royce shares.
Carbon ‘jet zero’ and nuclear power
The firm is at the forefront of global efforts to decarbonise. In November 2021, it tested its first electric aircraft in the UK. In the process, the plane broke two world speed records, as revealed last month. The records were broken for the average speed over 3km and 15km.
For me, this is extremely promising. If the company could harness the power of electricity for civil and defence aircraft, that would be truly revolutionary and the Rolls-Royce share price could soar. CEO Warren East used the phrase “jet zero” and its pursuit of electric flight would go some way to decarbonising the aviation industry.
Also, the firm announced the appointment of SNC-Lavalin to manage the next phase of its move into nuclear power just this month. SNC-Lavalin will manage the construction of several Small Modular Reactors (SMRs) around the UK.
The SMR project has already attracted the attention of the Qatari Sovereign Wealth Fund, which invested £85m in December 2021. This news resulted in a 10% upward move in the Rolls-Royce share price.
As part of a further effort by the company to decarbonise, the SMRs will produce energy equivalent to 150 wind turbines. Furthermore, they will occupy only 10% of the space of a traditional nuclear plant. This long-term plan should have the SMRs on the grid by 2030 and could be a major factor in a Rolls-Royce share price surge.
The Rolls-Royce share price and the pandemic recovery
With the pandemic receding, a number of countries are now considering fully reopening their borders. Just this week, Sweden announced its intention to open to EU citizens, regardless of vaccination status. We can also expect an update from the Swiss Federal Council on fully open borders. Of course, it’s always possible that a new variant may arise, causing progress in border openings to stall. This remains a major risk for the firm and its shares.
These moves could be very positive for the Rolls-Royce share price, because the firm is paid for every hour flown by aircraft using Rolls-Royce engines. British Airways has stated it will resume long-haul flights to Sydney via Singapore and Rolls is also hiring 280 new workers for its Singapore plant in order to ramp up engine production.
The very recent completion of the company’s 23.1% stake sale in AirTanker Holdings also provides £189m with which to bolster its balance sheet.
This is a company that’s innovative and looking far into the future. Its SMRs and potential electric aircraft could be nothing short of revolutionary. The reopening of borders may also cause the Rolls-Royce share price to soar. Will I be adding to my current holding of shares just now? Yes I will!