Hello, and welcome to the Rolls-Royce conference call. Throughout the call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. Just to remind you, this conference call is being recorded. Today, I am pleased to present Warren East, Chief Executive, Stephen Daintith, Chief Financial Officer, and Isabel Green, Head of Investor Relations. I will now hand over to Isabel to begin the call.
Thank you, Keith. Good morning, everyone, and thank you for joining our call at short notice. As introduced by Keith, I've got with me this morning Warren East and Stephen Daintith. In a moment, I'm going to hand over to Warren for some introductory remarks before we open the lines for your questions. A little disclaimer here. On the call today, we may refer to the investor presentation that was published today. It's available to download on our website. I also need to remind you that we may not be able to respond to certain questions relating to rights issue or bond offering details. That's for regulatory reasons, and we will not be able to discuss specifics of the rights issue or the bond offering themselves. We will direct you now to our announcement this morning for those answers and the prospectus for those details.
Thank you, and over to Warren.
Thank you, Isabel. Good morning, everybody. Thanks for joining us. I'm pleased to be in a position now to update you on the plans we have to improve our liquidity headroom and reduce our level of balance sheet leverage to safeguard our business as we return to generating strong positive cash flows. For those of you looking at the slides, I am going to refer to some of the slides, we'll start on page five, which shows the package of solutions that we're proposing, that package coming together to increase our resilience through a combination of complementary self-help and external measures. The impact of the COVID-19 pandemic on our business and our industry has been unprecedented. We've said that before.
Despite entering this year with excellent momentum in our operating and financial performance, and despite the rapid measures we've put in place to deliver GBP 1 billion of cash savings in 2020, we still expect to experience a free cash outflow this year of approximately GBP 4 billion. We acted quickly to address the impact of the pandemic, because alongside that GBP 1 billion of one-off in-year cost savings for 2020, we launched a fundamental restructuring, predominantly of our Civil Aerospace business, in order to deliver annual pre-tax cash savings of GBP 1.3 billion by the end of 2022. We believe this restructuring program, together with an anticipated recovery in the end markets, will help us to restore financial performance. We aim to be delivering free cash flow generation of at least GBP 750 million, excluding any impact of disposals, as early as 2022.
However, the pathway to that sustainable positive cash flow remains dependent on a recovery from COVID-19, particularly with regard to long-haul air travel, and there is significant uncertainty about the precise timing and the shape of this recovery. The possibility of delay in that does remain. We consider it prudent, therefore, to prioritize resilience and flexibility, in particular, taking into account our reasonable worst-case scenario. As a result, today, we're announcing plans to increase our resilience through the uncertainty with a recapitalization package. We're commencing a GBP 2 billion rights issue, and intend to launch a bond offering of at least GBP 1 billion in the near future.
In addition, we have agreed commitments for a new GBP 1 billion two-year term loan, and we have an indication of support in principle from U.K. Export Finance bank for extension of their partial guarantee of our existing five-year term loan to support an increase in that term loan of a further GBP 1 billion. These additional potential loans are subject to various conditions, including, importantly, completion of the rights issue, so t his is an integrated package. We believe that these actions, coupled with targeted gross proceeds of more than GBP 2 billion from a number of potential disposals, which we announced at our half-year results in August, will enable us to navigate the uncertain macroeconomic environment. It's not been an easy decision to get here. We've already put in place more than GBP 4 billion of additional borrowing facilities since the start of this crisis.
There is a limit to the amount that we can reasonably expect solely from our banks and the bond markets without addressing the leverage as well. With approximately GBP 3.2 billion of debt and credit facilities due to mature over the next 13 months, and that includes the undrawn GBP 1.9 billion revolving credit facility, which will be canceled on completion of the rights issue. The GBP 3 billion cumulative proceeds from the rights issue and the intended bond offering announced today will largely cover those maturities and allow us to deliver disposals in a manner that ensures enhanced value for shareholders. Now let's move on to slide eight. We've spoken a lot about the uncertainty and the timing and the shape of recovery.
We believe that the base case shown here is the most probable outcome, and our large engine flying hours data over July and August has tracked slightly ahead of expectations. However, uncertainties remain around the timing and the shape of recovery, in particular, given infection rates are rising again, especially when you think about Europe. Our reasonable worst case scenario assumes a significant delay in recovery, with engine flying hours in 2021 at only about 45% of 2019 levels. In that event, in addition to lower large engine flying hour receipts, we would expect adverse trading conditions across the rest of our business too, probably with the exception of Defence, which we expect to remain resilient.
There's more detail on the reasonable worst case scenario, included in the working capital statement on page 31 of the presentation, and also in the full rights issue prospectus, which should be read, by the way, prior to making an investment decision. It's our responsibility to prepare for the reasonable worst case, and in consideration of the outcome alongside continued global and macroeconomic uncertainty, we've determined that it is in the best interest of shareholders to take the actions that we set out today. Slide 10 sets out the reasons why we need to rebuild our balance sheet and what our ambitions are in the medium term.
We aim to restore the company to a net cash position in the coming years through a combination of GBP 2 billion gross disposal proceeds as we announced in our half year results, an expected return to positive free cash flow during the second half of 2021, and a GBP 2 billion rights issue announced today. This is important, commercially, competitively, and financially. A strong financial position does matter to our customers in Civil Aerospace. Airline customers sign multi-year service contracts with us. They want to know that we can be relied on as a long-term partner, and we'll live up to our side of the contract. Similarly, in Civil Aerospace and Defence, we're committed to long-term investment cycles. In order to win positions on new programs, our customers need to know that we're resilient enough to be able to invest in those products through the cycle.
That's why we remain committed to our ambition to return to an investment-grade credit rating in the medium term. We think that we need to act now to prevent further deterioration and start the journey back to where we need to be. Slide 14 now. Moving on to slide 14. This shows our sort of recovery path back to free cash flow generation of GBP 750 million as early as 2022, premised on our base case recovery assumptions before adjustment for any potential disposals. We spoke about this at our interim results, so I'm not going to go through it all in detail again today, but just a little bit more color on how we expect that improvement in cash generation to unfold.
First, cash flow recovery is not dependent on any large working capital inflows, only on the non-repeat of the working capital outflows that we're experiencing in 2020. That includes the one-time impact of our decision to cease the invoice discounting. Secondly, we expect an improvement of around GBP 2 billion in cash from Civil Aerospace business, with engine flying hours expected to return in our base case to 90% of 2019 levels by the end of 2022, as well as improvements in time and materials work, importantly, significantly lower Trent 1000 in-service costs and lower losses on installed wide-body OE deliveries. Thirdly, the actions we're taking to resize our fixed cost base and reduce our capital intensity. We've reduced our headcount already by over 4,000 since we announced the cost reduction program in May.
We're confident that by 2022 we will have delivered the approximately GBP 1.3 billion of annual cost benefits that we've identified. While timing and shape of the recovery is uncertain, we think that these actions, which are more in our control, will enable us to adapt and thrive whatever the future holds. Finally, we can see continued resilience in Defence and a recovery in Power Systems, and that's expected to contribute an additional GBP 200 million to 2022 cash flows compared to 2020 cash flows. Remember, the GBP 750 million cash flow ambition still includes non-permanent costs. Non-permanent costs of approximately GBP 300 million, related to reducing the size of our FX hedge book and, it includes GBP 200 million-GBP 300 million, related to Trent 1000 disruption and in-service costs. Those non-repeat items will still be there in that GBP 750 million in 2022.
We expect our target free cash flow to grow further in the future as those temporary negative outflows diminish over time. Moving forward a little. Slide 16 and 17 are a reminder of our strong foundation in Civil Aerospace established over decades of investment in engineering and design. We've recently completed a multi-year investment cycle. We've got four wide-body engine programs that have been launched since 2010, which have taken our market share of in-service wide-body passenger planes up from 26% 10 years ago to 38% by December 2019. Our share of the order book is even stronger at 55% in December 2019. Our investment overall in our Civil Aerospace fleet means that by the end of 2019, we had more than 5,000 installed wide-body engines with an average age of less than nine years.
Most of the planes that we power are the newer, more economic, lower carbon footprint planes than our customers and their passengers want to use. As our engine programs mature, the investment needs reduce, of course. Manufacturing efficiency improves, pricing increases, and the risk of in-service issues diminishes. All of that creates a significant inflection in the financial performance. We think that we were already actually reaching that pivot point before COVID-19, but despite the current disruption, these underlying value drivers will continue to have a positive impact on our business performance. We tend to focus a lot on wide-body, o ur business aviation has been less impacted by COVID-19 than the commercial aviation. For those people that can afford it, business jets enable passengers to mix less with other travelers, and have more control over their flight plans.
We've got over 7,000 engines installed on business jets, and our strong product positions mean that that gives us more than 30% of the market by value. This is an area of Civil Aerospace that's often overlooked when we talk about our performance, but it's a key pillar of our strategy, an area where we've seen more resilience through the COVID-19 pandemic. On slide 18, we set out the ambition for the future beyond 2022. In addition to the embedded value in Civil Aerospace, we can see potential for underlying growth in both Defence and Power Systems. In Defence, we had a record order intake in 2019. That's actually the fifth of five years of very strong order intake in Defence.
In addition, we're competing for new business to drive growth in Defence into the longer term on programs that will be running for several decades into the future. In Power Systems, we're well-positioned in key growth areas such as mission-critical backup power, and we're also driving market share in high growth markets through our expansion in China and India. As a result, we think Power Systems can grow at a 5%-10% underlying revenue CAGR from 2021. Underpinning all of that growth beyond 2022, the world is shifting ever more towards a net -zero carbon economy. The breadth of our engineering expertise, and our established access to a range of end markets means that we're well positioned to play a crucial role in the transition, through increasingly efficient gas turbine engines in aerospace, through innovating with hybrid products and power systems.
That's actually paving the way for sustainable aviation, as well through hybrid technology and aviation. Also, we're working on sustainable aviation fuels. Once we achieve our aim of restoring financial returns and a more appropriate balance sheet, we'll be accelerating these aspects of our strategy, and you will see substantial growth in that starting to happen by 2025. To sum up, over the last six months, we've taken swift action to minimize our cash outflow, restructure our business, and position it for the future in response to both the short-term and medium-term impact of the pandemic. We believe that the restructuring program, alongside an anticipated recovery in our end markets, will help us to restore financial performance, but t here is significant uncertainty around the precise timing and the shape of the recovery from COVID-19.
As a result, we do consider it prudent to prioritize resilience and flexibility. We thought carefully about the capital needs that we'll have over the next few years, and raising additional capital at this time will provide us with three key things. Improved financial resilience and more liquidity headroom across 2021 in order to weather the macroeconomic risks before we return to strong cash generation, which is expected as early as 2022. An improved level of balance sheet leverage, supporting disciplined execution and investment to ensure that we can maximize value from our existing capabilities. Thirdly, flexibility to allow us to pursue disposals in a manner that delivers value for shareholders as we position the group for the long term to benefit from the new technologies that we have focused on sustainable power.
We've thought carefully about the size and the shape of this integrated package to ensure that they're sufficient to secure us against the downside risk, and also that it supports our deleveraging towards a net cash position over an acceptable time horizon. As a result, we see this as a final major step in our balance sheet repair. The focus is now on executing our turnaround and securing the disposal proceeds.