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UPDATE 2-Meggit sees signs of recovery in aerospace industry demand

* Estimates 15% fall in H1 sales, hit to civil aerospace unit

* Points to initial signs on recovery in air travel

* Shares on top of UK’s FTSE 250 (Recasts with comments, details on air travel, shares)

July 2 (Reuters) - British aerospace supplier Meggitt said on Thursday there were initial signs of a recovery in airline industry demand after a difficult first half, which helped lift its shares 8%.

The company, which makes components such as braking systems and sensors and provides follow-on services, said revenue from its civil aerospace business was expected to drop about 30% in the first half.

Overall, its first-half organic revenue was expected to fall 15% as its defence business continued to perform well despite the hit to commercial airlines from travel restrictions to curb the spread of COVID-19.

“In recent weeks, initial signs of a recovery in commercial aerospace have emerged, with commercial airlines bringing more of the fleet back into service and business jet activity increasing in the U.S.,” it said in trading update.

Defence accounted for 36% of total sales in 2019 while civil aerospace made up 54%.

Meggit shares, which have nearly halved in value this year, were 8.3% higher at 331 pence at 0900 GMT, the biggest increase in the FTSE-250 index.

The pandemic has starved airlines of cash as jets were grounded and companies were unable to take jet deliveries, hitting planemakers such as Airbus and Boeing, two of Meggitt’s customers.

However, many countries are now opening up their skies to domestic and international fights to restart their stalled economies, while taking stringent safety measures as global infections are still on the rise.

“We are always encouraged when a business performs broadly as expected in terms of its revenue,” Jefferies analysts said.

Coventry-based Meggitt warned, however, that there risks ahead in the second half as it was not clear how long the pandemic would last or whether there would be a second wave.

The company has been on a cost-cutting drive to shore cash to weather the pandemic. It said in April it would axe about 1,800 jobs and sold a U.S. business this week for $146 million to focus on key markets.

The workforce reduction was proceeding as planned, it said.

Reporting by Pushkala Aripaka in Bengaluru; Editing by Sriraj Kalluvila and David Clarke

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