British aircraft-engine maker Rolls-Royce Holdings PLC projected free cash outflow of £4.2 billion in 2020, up by £200 million from its previous forecast, blaming the impact of the second wave of COVID-19 infections on the aviation sector in the fourth quarter.

In its trading update for the year through November, Rolls-Royce said the pace of recovery in flying hours has slowed due to the virus resurgence in some geographies.

The sluggish recovery in commercial air travel could continue in the first half of 2021, Rolls-Royce warned, and demand for civil aerospace products and services may take several years to fully recuperate.

"The outlook remains challenging and the pace and timing of the recovery is uncertain," Rolls-Royce CEO Warren East said in the trading update, which sent the company's shares tumbling 7.5% as of 2:11 p.m. in London.

Rolls-Royce continues to expect its cash flow to turn positive in the second half of 2021 due to the potential rollout of COVID-19 vaccines that would support the further reopening of travel borders. The company also affirmed its target of attaining at least £750 million in free cash flow, excluding business disposals, as early as 2022.

Rolls-Royce revised its year-end net debt forecast to between £1.5 billion and £2.0 billion, excluding lease liabilities of £2.1 billion, from £3.5 billion. In October, the company launched a £5 billion recapitalization plan that includes a rights issue, a bond offering and a new loan facility.

Liquidity is projected to be between £8.5 billion and £9.0 billion at the end of 2020, up from a previous forecast of £6 billion. Rolls-Royce, which unveiled a reorganization plan in May, said it is on track to achieve more than £1 billion of in-year savings due to cost-mitigating actions.