Airbus SE

Thank you, Maurine, and good morning, ladies and gentlemen. This is the Airbus 9 Months 2022 Results Release Conference Call.

Guillaume Faury, our CEO, here with me in Paris; and Dominik Asam, our CFO, connected from Berlin will be presenting our results and answering your questions. This call is planned to last around an hour.

This includes Q&A, which we will conduct after the initial presentation. This call is also webcast.

It can be accessed via our homepage where we have set a special banner. Playback of this call will be accessible on the website, but there is no dedicated phone replay service.

The supporting information package was published on our website earlier today. It includes the slides which we will now take you through as well as the financial statements.

Throughout this call, we will be making forward-looking statements. I invite you to refer to our Safe Harbor Statement that appeared in the presentation slides, which applies to this call as well.

Please read it carefully. And now over to Guillaume.

Thank you, Helene, and good morning, ladies and gentlemen. Thank you for joining us.

It's been only a month since we had the teams and myself a great pleasure to welcome you in Toulouse for our CMD, our Capital Market Day. We strongly appreciated the opportunity to exchange with you on our growth trajectory, our road map to decarbonize aviation, a role in defense as well as to give you an in-depth update of our division.

Today, as said by Helene, we returned to our quarterly disclosure cycle with the presentation of our 9 months 2022 results. As I said earlier several times, but it keeps being the case, we operate, we continue to operate in a complex environment.

In that context, we delivered 140 aircraft in Q3 as compared to 127 in Q3 last year. This takes our year-to-date deliveries to 437 aircraft.

Our EBIT adjusted stood at EUR 3.5 billion. This solid financial performance reflects our deliveries and efforts on competitiveness, while the resumption of some pre-COVID activities has become visible in our cost base.

Our EBIT adjusted also includes a nonrecurring positive element of EUR 0.4 billion related to retirement obligations in France recorded already in Q1. Our free cash flow before M&A and customer financing stood at EUR 2.9 billion, supported by a favorable foreign exchange environment -- dollar mainly and a healthy working capital in a backloaded year and in a phase of ramp up.

This brings me to the 2022 guidance. We keep our guidance on commercial aircraft delivery and EBIT-adjusted unchanged.

But following our solid cash performance in 9 months, we raised our 2022 free cash flow before M&A and customer financing guidance. As of today, the supply chain remains fragile, resulting from impacts of COVID, war in Ukraine, energy supply issues, constraints on labor markets and others.

We expect it will take at least up to the middle of next year to normalize. Therefore 2023 is expected to be another backloaded year.

Now let's look at our commercial environment. The commercial air traffic continues to recover with domestic and regional markets leading the way.

Air travel demand came back faster and stronger than many expected during the summer, including myself in spite of high fuel prices. All major markets continue their recovery, except where travel is restricted, which, as you know, remains the case in China.

North and Latin America are now trending close to previously achieved levels followed by Europe and the Middle East while other markets continue to progressively catch up, for instance, Asia. The outlook is positive.

I hear from airlines that bookings for the month to come are strong for both domestic and international flights. The financial performance of the airline industry as a whole is improving -- in particular, the latest results from U.S.

airlines points to a return to profitability as soon as 2022, which is earlier than expected. On aircraft demand, we continue to see a robust demand from our customers who have a strong appetite for our latest generation of fuel-efficient aircraft.

Let me remind you of our orders and backlog in the first 9 months. We booked a total of 856 gross orders, of which 414 in Q3.

This includes 292 aircraft for 4 of our Chinese airlines customers. On widebody, we booked 44 orders, including 20 for freighters and further progress on the remarketing of our aircraft, post-COVID, confirming the increasing commercial momentum on widebodies.

We saw 209 cancellations, of which only 26 in Q3, the cancellations in 9 months were already largely anticipated and embedded in our backlog valuation as of year-end 2021, I mean, end of last year. As a result, net orders were positive at 647 aircraft, and our backlog in units amounted to 7,294 aircraft at the end of September, including 6,115 A320 Family aircraft.

Our robust and diversified backlog has proven in the past to be a strong level of resilience in uncertain times or even in times of quiet is like COVID. Looking at helicopters.

In the 9 months, we booked 246 net orders compared to 185 in the 9 months 2021. Orders are well spread across programs and include 14 Super Pumas.

On the Civil market, we observed a strong recovery on the light segment and positive signals from the oil and gas segment, which we expect to improve in the midterm, given the current market environment. We also see good momentum on the military market, supported by our drill platform strategy.

Finally, in Defence and Space. In the 9 months 2022, our order intake was at EUR 8 billion, corresponding to a book-to-bill slightly above 1.

During the third quarter, orders were booked in the amount of EUR 1.5 billion, mainly related to services across the portfolio. It also includes the contract to provide 42 satellite platforms and services to Northrop Grumman for the U.S.

Space Development Agency. This will support a critical U.S.

national security program, and we are honored to be partnered. Still, the current economic and geopolitical environment continues to impact the space sector in Europe.

On the military aircraft side, we are proud to highlight that the Airbus A330 MRTT has become the world's first tanker to be certified for automatic air-to-air refueling boom operations in daylight. This means no additional equipment on the receiver aircraft is required, improving safety and allowing more efficient missions to enable air superiority.

On FCAS, we remain committed to the program and continue to work towards launching Phase 1B later this year. Now Dominik will take you through our financials.

Dominik, the floor is yours.

Yes. Thank you very much, Guillaume, and good morning, ladies and gentlemen.

Our 9 months 2022 revenues increased to EUR 38.1 billion, up 8.4% year-on-year, mainly reflecting the higher number of commercial aircraft deliveries, including a favorable mix, higher contributions from our divisions and the appreciation of the U.S. dollar.

Our 9-month EBIT adjusted slightly increased to EUR 3.5 billion, up from EUR 3.4 billion in the 9 months of 2021. This includes the nonrecurring positive element of EUR 0.4 billion related to retirement obligations recorded in Q1, partially offset by the EUR 0.1 billion negative impact resulting from the international sanctions against Russia.

The net positive impact from these 2 nonrecurring elements was partially offset by a less favorable hedge rate versus the 9 months 2021. While we continue to benefit from our effort on competitiveness, the progress on ramp-up and on preparing the future are now materializing in our cost base, especially in Q3.

Our research and development expenses in the 9 months of 2022 stood at EUR 2 billion versus EUR 1.9 billion in the 9 months 2021. Our 9-month earnings per share adjusted stood at EUR 3.17 per share, based on an average of 787 million shares.

Our 9 months free cash flow before M&A and customer financing was EUR 2.9 billion, including a stable working capital and supported by the strong appreciation of the U.S. dollar.

Let me now give you some color on the remain to do for Q4. In Q4, we target to deliver 260 commercial aircraft, moreover, the full year EBIT adjusted contribution from Airbus Helicopters and Airbus Defense & Space will be significantly back-end loaded.

On the other side, the research and development expenses should peak in Q4, and the hedge rate is expected to be less favorable than in the first 9 months of the year. In addition, we'll record in Q4 about EUR 0.2 billion of charges related to an exceptional premium awarded to our employees in the context of elevated inflation.

All in all, as Guillaume mentioned, we continue to target for the full year EUR 5.5 billion, about EUR 5.5 billion of EBIT adjusted. On the free cash flow before M&A and customer financing that remain to do on the updated guidance is about EUR 4.5 billion, reflecting the back-end loaded profile for Airbus Commercial as well as in our divisions.

It should also benefit from the stronger U.S. dollar.

This will be partially offset by the phasing of costs and a capital expenditure of roughly EUR 1 billion in the last quarter. Now on to the slide regarding our profitability.

9 months 2022 EBIT reported was EUR 3.6 billion. The level of EBIT adjustments totaled a net positive of EUR 0.1 billion, including EUR 349 million positive impact from foreign exchange mismatch and balance sheet revaluation, of which EUR 123 million in Q3, EUR 33 million related to A380 program, of which EUR 40 million in Q3; minus EUR 219 million related to A400M virtually unchanged versus H1, minus EUR 48 million related to the Aerostructures transformation in France and Germany, of which minus EUR 15 million in Q3, and minus EUR 44 million of other costs, including compliance costs, of which minus EUR 10 million in Q3.

Earnings per share reported includes minus EUR 306 million of financial results. It mainly reflects minus EUR 166 million of net interest results as well as a negative impact from the revaluation of financial instruments, partially offset by the evolution of the U.S.

dollar and the revaluation of certain equity investments. The tax rate on the core business is around 27%.

The effective tax rate on net income is 24%, including a net release of deferred tax asset impairments. The resulting net income is EUR 2.6 billion with earnings per share reported of EUR 3.26.

Now on our U.S. dollar exposure coverage -- going forward, the hedge ratio composed of forwards and the euro conversion will be presented altogether, both for the volumes and associated rates.

The mark-to-market figures are only associated with the forward instruments. There's no mark-to-market associated with the euro conversion portfolio.

In the 9 months of 2022 EUR 14.1 billion of forwards matured with associated EBIT impact and euro conversion realized at a blended rate of $1.22 versus $1.20 in the 9 months of 2021. This volume includes EUR 4.9 billion in the third quarter at a blended rate of $1.21.

In the 9 months of 2022, we also implemented $12.9 billion of new coverage at a blended rate of $1.19. As a result, our total U.S.

dollar coverage portfolio in U.S. dollar stands at $96.6 billion, with an average blended rate of $1.24 as compared to $98.3 billion at $1.25 at the end of 2021.

Now let's look at our cash evolution in the 9 months of 2022. Our gross cash from operations of EUR 3.7 billion mainly reflects our EBIT adjusted.

Despite the strong inventory build, reflecting the ramp-up and the delivery profile, including in the divisions, our working capital was broadly stable, supported by a positive impact from cash receipts and payments. The A400M continued to weigh on our free cash flow before M&A, but less so than in the 9 months of 2021.

In that period, customer financing cash flows amounted to minus EUR 290 million, and we might see additional usage of cash going forward. Overall, the aircraft financing environment remains solid with sufficient liquidity in financial markets for our products.

Our 9 months 2022 CapEx was around minus EUR 1.3 billion versus EUR 1.2 billion in the 9 months of the prior year. For 2022, we expect our CapEx to be at around EUR 2.4 billion.

Free cash flow reported of EUR 2.5 billion includes M&A activities for minus EUR 107 million. The 2021 dividend of EUR 1.50 per share or EUR 1.2 billion in total was paid in Q2.

On our pensions, we contributed EUR 0.5 billion in the 9 months of 2022. The net pension deficit stood at EUR 2.7 billion as of September 2022 and has clearly benefited from the increase in interest rates.

However, risks from inflation persist. Our net cash position stood at EUR 8 billion as of the end of September.

Our liquidity position further strengthened and stood at EUR 30.5 billion. Now back to Guillaume.

Thank you, Dominik. Going on to commercial aircraft.

In the 9 months, we delivered 437 aircraft to 66 customers, of which 2 operating leases without revenue recognition at delivery. The net year-to-date delivery number of 435 reflects a reduction of 2 aircraft previously recorded as sold in December 2021 for which a transfer was not possible due to international sanctions.

Looking at the 9 months 2022 situation by aircraft family. On the A220, we delivered 34 aircraft including the 220 -- A220 in July.

We continue to ramp up and are on track for rate 14 that we continue to envisage by the middle of the decade. On the A320, we delivered 340 aircraft, of which 169 A321.

Production is progressing towards a monthly rate of 65 aircraft in early 2024 and 75 in 2025. No change.

We continue the groundwork to secure rate 75 through all our site and adapt to the higher proportion of A321 in the backlog ensuring all A321 files become A321 capable. Preparation for the upgrade of the second A325 in Toulouse is underway.

On the XLR, all 3 test aircraft have now flown and the entry into service is expected to take place in Q2 2024. On wide bodies, we delivered 63 aircraft, of which 21 A330s and 42 A350s including our #500 A350 in September.

On A330, we are about to reach a rate of around 3. On A350, we are preparing for a rate of around 6 aircraft in early 2023 coming from rate 5 this year.

We're exploring together with our supply chain, the feasibility of further rate increases to meet growing market demand as international air travel pick up. Now let's look at Airbus commercial financials for the 9 months.

Revenues increased by 8% year-on-year, mainly reflecting higher number of deliveries, including favorable mix and the strengthening of the U.S. dollar.

The EBIT adjusted increased to EUR 2.9 billion from EUR 2.7 billion in the 9 months 2021 despite a less favorable hedge rate compared to 2021, as Dominik explained earlier. I remind you that the EBIT adjusted includes the nonrecurring positive impact from retirement obligations in France recorded in Q1 partly offset by the impact from international sanctions.

Looking at helicopters. In the 9 months, we delivered 193 helicopters stable compared to the 9 months last year.

Revenues increased 9% year-on-year, mainly reflecting growth in services and a favorable mix in our programs. EBIT adjusted also reflects nonrecurring elements including the positive impact related to the retirement obligations, I mentioned also earlier.

And let's complete the review with Defense & Space. In the 9 months, the revenues increased 10% year-on-year, mainly driven by military aircraft and the Eurodrone contract signature.

The decrease in EBIT adjusted mainly reflects the impairments related to Ariane 6 delays, the impact of rising inflation in some of our long-term contracts across the division's portfolio and the consequences of the international sanctions. All of this being partly offset by the positive impact related to the same retirement obligations booked in Q1 and the Eurodrone.

On the A400M, we delivered 7 aircraft in the 9 months. We continue with development activities towards achieving the revised capability road map.

Retrofit activities are progressing in close alignment with our customers. But risks remain on the qualification of technical capabilities and associated costs on aircraft operational reliability.

On cost reductions and on securing export orders in time as per the so-called revised baseline. Let me read our guidance.

And as the basis for its 2022 guidance, the company assumes no further disruptions to the world economy. Air traffic, the company's internal operations and its ability to deliver products and services.

The company's 2022 guidance is before M&A. On that basis, the company maintains its target to achieve around 700 commercial aircraft deliveries and around EUR 5.5 billion of EBIT adjusted in 2022.

. But the company now targets around EUR 4.5 billion of free cash flow before M&A and customer financing in 2022.

This brings me to our priorities which actually have not changed since the last quarter. First, to meet our commitments towards our customers by delivering on our ramp-up -- on the 320 Family, this means rate 65 in early 2024 and rate 75 in 2025.

Then also continue to transform the company and support the ramp-up, but also to prepare the future. We focus on our products, our industrial systems, our people, and lastly, what I call the ecosystem as the transformation we have engaged involves the whole sector, in particular, on the transformation on the energy.

The transformation is key for our long-term ambitions and to continue to progress on our road map to decarbonize aviation. On that note, there were very positive developments at the 41st international civil aviation organization, the ICAO assembly, which took place last month.

At Airbus, we welcome the adoption of the aviation sector's long-term aspiration goals for the LTAG to reach net 0 carbon emissions by 2050. This is the sectoral objective we have been striving to obtain an objective aligned with our ambition for sustainable aerospace.

This agreement will enable current strategies and action plans and will accelerate investments. The assembly also made a strong commitment to what is called CORSIA, the Carbon Offsetting and Reduction Scheme for International Civil Aviation.

This will enable progress in managing the carbon footprint of the sector towards carbon neutral growth in the short term. That's a very important level playing field system that has been adopted by the ICAO assembly.

Finally, this is also for me an opportunity to highlight that the Airbus Summit 2022 taking place on the 30th of November and the 1st of December, will bring together business leaders, partners and industry experts to take stock of the progress made on our group-wide decarbonization journey since the last year's Summit through concrete projects, concrete actions and partnerships. Make sure you tune in.

And on this positive note from my perspective at least, we are now ready to take your questions.

I'll ask 2 as you suggested. So the first one just wanted to check regarding buyback and cash to shareholders.

I guess you're at EUR 8 billion cash now. There's EUR 1.6 billion left in your free cash flow guidance.

I think historically, you talked about the EUR 10 billion level, given where likely to be slightly below that. Does it become more of also another back-end loaded item?

If you can comment on that. And then the second thing, just it sounds like your hiring levels in Q3 were maybe a little bit higher than in the first half.

Can you talk through whether that had a margin sort of headwind implication? And maybe following from that, what are your like wage growth and ramp-up cost expectations into 2023 and then how that could influence sort of how we think about the bridge then?

Dominik, I guess you take the questions? .

Yes, sure. I mean, on the share buyback topic, there's actually nothing really new to what we had communicated on the Capital Markets Day, which is that once we exceed that EUR 10 billion number, we will intensify discussions about that.

I mean, of course, the earlier, the better we like cash flow as you like cash flow, but let's be cautious also in terms of imponderabilities like U.S. dollar volatility on the cash balance and stuff like that.

So let's cross that bridge when we get there. .

And on the hiring level and the impact? Dominik?

I can also take that. Indeed, you can see that the hiring level was accelerating, so to speak, in the 3 months.

And there will be further roll-on on OpEx. You've seen it already starting in Q3.

If you look at the Q3 year-on-year on OpEx, i.e., research and development expenses and selling, general and administrative expenses, you see the increase and then that's a trend that's going to continue.

The first one is going to be pretty obvious, but I wanted to have a bit more color from you on the achievability of the 700 deliveries targets for this year, you said 260 deliveries required in Q4 November sounds like being good, but not stellar either. I mean that there will be a very heavy workload to deal with in November, December.

Can you comment on how you prepare to make sure that like all the flight testing, the readiness of the aircraft can be guaranteed on a very high number of aircraft over these 2 months? And the second question is on the similar gross margin performance in Q3.

I remember, Dominik, you said at the Capital Market Day that there will be a number of costs that will be backloaded this year in H2, R&D was not up so much year-on-year in Q3 in commercial aircraft still when you consider the fact that you have an FX tailwind by $0.02 on the hedge rate that was not expected. The margin was not necessarily impressive this quarter.

I wonder whether you could tell us whether there have been any other headwind that you could comment from, I don't know, either rework out of sequence or step up in some ramp-up costs that could explain a slightly softer margin in Q3 than what we expected.

Thank you, Tristan. I will take the first question, and I'll suggest to Dominik to take the second one.

So for the 700, yes, indeed, the delivery performance of Q3 was not so strong, but maybe part of the answer, by the way, to the second question, which leaves us with sort of close to 270 planes to be delivered as far as I remember, or slightly less, 265 planes to be delivered in Q4, which is challenging. So we believe it's doable.

And that's why, by the way, the reason why we maintain the guidance. But we know it's a challenging situation.

We and I and with the team, we reviewed the situation earlier this week, we went to Hamburg as well. And there's a lot of work that is ongoing to make sure the planes will go through the production cycle to the flight test with the appropriate skills in quantities and qualities and including the support we need from our suppliers during this phase.

So we have, again, a bit like in '18, '19, significantly backloaded end of the year. That's not what we like.

We prefer a more normalized and linear year but that's where we are. So we have maintained the guidance because we think we can get there, but we know it's not a walk in the park.

Dominik, for the second part? .

Sure. On the Q3 quarterly EBIT performance, indeed, it was not an easy quarter, as was mentioned with continuous challenges on supplier side causing also extra cost.

And as we have highlighted many times before, the ramp of some activities on research and development and also some activities that need to be resuscitated on other functions, but you now have the luxury of having a quarterly guidance actually for Q4 because you deduct the full year guidance from the full year guidance, the number we've achieved already, and you can then see it and that's the number you should keep in mind. And we feel, of course, confident about the number.

Otherwise, we wouldn't maintain that EUR 5.5 billion EBIT adjusted guidance.

So first for me is on the cash, obviously, very, very strong. When you look at what you were expecting at the beginning of the year versus now, what has been the key positive surprise for you?

And how should we think about those trends going into 2023? And then secondly, on supply chain, it sounds like things have stabilized.

Labor was the big issue, I think, and has been the big issue. When you speak to the suppliers, and I know you're tracking the suppliers very closely, do you feel like the labor constraints have started to ease, and those suppliers are making progress now?

Dominik, I suggest you take it.

Yes, sure. On the cash side, and what we observed is, I'd say, 2 major factors First of all, the U.S.

dollar appreciation is actually helping us there a lot because we are hedging P&L. So there are variances against that.

And you know that, amongst others, this is reflected in the adjustments and you see a very positive number there. So with the dollar now kind of having gone well below parity for some days I think at parity as we speak.

That was a tailwind. Obviously, we also were very positively -- a very positive development on the order intake with some deals we did large deals book-to-bill significantly above 1 in commercial and that helped a lot too.

So we could now -- we now have enough visibility to upgrade the guidance. I just want to caution you on that, and there should not be too much interpretation into this, the kind of North Star for us is a cash conversion of 1 over the 5 years starting in 2022.

We think we are on a very good trajectory. But also there, the sky don't grow in the trees and it's really often phasing topics that make that number swing a lot, and this is why it's notoriously difficult to predict.

But overall, the key anchor point is that this cash conversion of 1, I think we can demonstrate. It's really embedded, so to speak, in the business model here.

Ben, so I'll take the question on the supply chain. What we are sharing is the fact that the things -- the situation, the environment has got worse over the last 12 months.

And it seems like it has stopped to get worse, which means it's bad. And we hope the -- we see signs of things probably potentially getting better.

It needs to materialize. And given where we are, we think it's going to be long.

That's why I said it's going to take at least until mid of next year. This includes the constraints on the labor market that remains under our strong tensions.

At Airbus, we managed to find the resources we need quite adequately on the blue-collar side. It's more challenging on the white collar.

It takes more time than usual. But overall, for the sector, it remains very difficult and some midsized and smaller companies are in other regions of the world, they continue to experience a lot of difficulties to recruit in numbers and in specific skills.

So this will continue to be a headwind for the ramp-up. And again, I think it's going to take time before it gets better, especially on labor market.

Yes. Two questions, please.

The first one is on FX hedging. If I'm right, I hope I'm right, it looks like you did almost no hedging in Q3, correct me if I'm wrong, but what is your strategy here?

Because given how good the rates are, I thought you'd be doing a lot of hedging. And my second question is there's a story, I think it was on Reuters the last few days about a potential strike in Spain.

If that goes ahead, could you just say what risk that poses to your deliveries and your production ramp? And maybe just comment on labor engagement across the whole group in light of sort of pay negotiations, please?

.

Dominik, you take the first one, and I'll take the one on the workforce.

Yes. Sure.

So on the hedging, what we just read out is that we basically had $14.1 billion maturing. And that's for the 9 months and we implemented $12.9 billion, that's indeed is slightly lower than what matured.

And frankly, that's kind of pretty easily explained to some degree by the fact that we have taken the delivery guidance for this year down. So there is more rolling activities.

And as we have quite long-term-oriented quite mechanical hedging mechanisms in terms of how many months ahead of delivery be secure, we basically just implemented our long-term hedging strategy there. Now I take -- I mean, I must see that at the current exchange rates, the question is indeed, we are pushed on us and also by you, whether there is a need for tactical deviation to accelerate hedging relative to a normal path, but that's something I don't want to kind of comment on here, but I take that question with me.

But in general, what you see here is simply the impact from the very mechanical hedges. And yes, we did actually quite some euro conversions in the first half, and the euro conversions are quite heavy in hedges, so to speak, because they really secure the full revenues of the contract and not only the exposure, that means it's actually a very strong hedging with very long duration, which is also expensive.

So to cut a long story short, we just pretty mechanically implement our long-term well-proven hedging methodology and have so far not deviated tactically. And if -- or not we do, this is something we still have to discuss, but on the other hand, I must say, given that the dollar has gone always stronger so far, not deviating was not a bad thing.

Thank you, Dominik. David, on the workforce.

First, I'd like to say the level of commitment, engagement is impressive, as usual in Airbus. We are in a situation of high inflation, I really wanted with my management team to look at the situation for our employees and find a way that would be appropriate to deal with that situation and show the commitment of the company to the employees after all what we have seen the commitment from employees to the company during the last 2.5 years, the last 3 years.

We have come to the decision to pay a lump sum of EUR 1,500 or equivalent for other countries to our employees. This has been discussed and supported by our social partners.

So I think we've really done what was appropriate and something good for the workforce. Therefore, I'm really not satisfied with the news of yesterday coming from Spain, indeed, seems to come from a movement at national level that could impact Airbus, but at Airbus we have had a very good constructive and social dialogue coming to decisions and fruit for employees.

So my team is discussing this as we speak today in Spain. I hope it's going to be resolved anyway.

I don't expect material impact on the end of the year. There might be some impact.

We need to assess it. I'm not completely capable -- I'm not capable to share with you today the exact magnitude of this potential strike in Spain, but the majority of the work that's going to be important for the deliveries of this year are essentially in the final assembly line.

This might have an impact, maybe marginal for this year, maybe more for next year and that's what we're going to look at anyway. It's a strength that is limited in time.

So we need to go deeper into the analysis. But long story short, I'm not happy with this because we have found a good agreement, a good, we've gone -- come to a good decision at Airbus, and I don't see reasons why we would be impacted by this in Spain.

Two. The first one is on the free cash flow guidance, the upgrade.

Thank you for this. But my question is, is it still not too conservative, I mean in terms of the number of aircraft you have to deliver in Q4, -- it would -- I mean, if you drive it to the cash contribution per unit, it's actually below EUR 10 million.

So you may have mentioned it during the call and I may have missed it, but the question is not too conservative. Do you have a little bit of leeway on this?

Second question is actually more about supply chain going forward. I remember that in the past, there were discussions around price reduction that your Tier 2 suppliers could be awarding to you as rates are going up.

Are they still in discussion? Or are they being suspended given the, I would say, the tension on the supply chain, and I was thinking about 2025 in terms of horizon.

Should I take the free cash flow, Guillaume?

Is the cash flow guidance not too conservative?

Yes, yes. So yes, it's a EUR 4.5 billion guidance now.

The remain to do is actually EUR 1.6 billion, I realize I actually read the wrong number in the intro statement. EUR 1.6 billion is the remain to do.

And that doesn't look super ambitious given the delivery number we still have. But I always caution you about the phasing issues on this working capital, and to take a more longer-term view.

And also I want to remind you that we said there's a EUR 1 billion CapEx remain to do. So it's a very heavy CapEx back-end loading here.

So that, together with the phasing issues gets us to that EUR 4.5 billion, with always the comment that predicting free cash flow precisely is more difficult than EBIT because of all the kind of things that can happen in terms of customer flows. I think there is a lot of cash currently in the industry.

The industry is resuscitated, and we cannot exclude that the one or the other customer in the kind of budget flush logic and swamps us with cash at the end of the year, that's always a possibility.

Thank you, Dominik. On the supply chain, we keep pushing for price reductions.

We have a plan. We have an action plan that has a name that we deploy with our suppliers.

There is high inflation. So this has to be combined with the inflation situation.

And to some extent, it becomes even more important to find levers to reduce costs, and again, in a constructive manner, together with our suppliers, taking benefit of the ramp-up, but also the high rates that leads to some easier business cases for redesign and for improvements. So it's less easy to be predictable on the costs going down with this inflation environment, high inflation environment, but we remain very focused on further improving the competitiveness of our products anyway.

Yes. I have 2.

The first one would be coming back on the supply chain challenges and the delivery guide. Can you help us understand how much of the remaining to do you currently have in the fall and presales.

And if you need significant uptick in delivery from suppliers in November. The second might be technical, but on the cash flow statement, Q3 had a quite large positive impact from provisions.

So I just wanted to know if that was a matter of phasing. And if you could remind us of how you see the EBIT to free cash flow bridge for this year in terms of the A220 discounted provision headwinds.

So I'll take the first one, Dominik, you will take the second one. Well, if we speak fall and pre-fall, everything is in the work in progress at the moment.

So -- we are less depending on the supply chain deliveries now that we are coming close to November than we were 1 or 2 months ago. It gives us more visibility on what we can do, from a supply chain perspective, but it is, as Christophe highlighted earlier, it is a lot of claims to be delivered in the next 2 months.

So now it's mainly on the Airbus shoulders to a very large extent. I said also that engine makers are delivering against their previous commitments.

So we have, on the one hand, more visibility from the supply chain. On the other hand, we know the challenges that are to be overcome.

So that's where we are. Cash flow statement, Dominik?

Yes. On the cash flow statement, you specifically mentioned provisions as a positive, if I understood what you said, correctly.

And there are certain elements, you have to be a little bit careful on the balance sheet, the movement you see there because there are all kinds of things in there. There are accruals provisioning for variable comp.

There is quality issues, but also U.S. dollar impact.

So again, it's one of these items that can fluctuate quite significantly. But there is no magic.

I mean, of course, what has stopped is the cash fleet we had out of provisions. For instance, we've taken a lot of restructuring provisions for odyssey during COVID and that has stopped, and there was also not much cash out, if any, material on other legal cases.

So that overall, how many elements that drive that balance.

Thanks so much. Good morning.

Good morning, Robert.

How is it going?

Just a couple of questions from me. First for Guillaume, your competitor suggested yesterday that Airbus would not be able to satisfy the potential wide-body demand in China.

So I was wondering if you could comment on that. And then secondly, it appears there's been another delay on the Ariane 6.

Was this already anticipated in the provision that you took earlier this year?

No, I cannot comment because I didn't hear the comment. So I would rather read it and listen carefully to what was said before I sort of respond to it.

We are very much looking forward to supplying the worldwide airlines with our widebodies because we think we have an excellent product. And as I said earlier, we are currently assessing the ability of the supply chain to support us in a ramp-up.

So we are considering ramping up if we see the market increasing its demand for widebodies, which I believe is likely to come, including in China. On Ariane 6, Dominik?

Yes, sure. On Ariane 6, basically, what we talk about here is an impairment of some intangibles which were created in the context of the creation of an Ariane -- on Ariane 6.

And yes, we've taken a charge now. And given that this intangible is now written off, no further downside from that.

And I just wanted to add one thing on the provisions, and I didn't say it because at the risk of stating the obvious, we had also a strong improvement on pension provision, which is, of course, noncash. If -- I'm not sure what exactly you comment on.

But if you look at the overall provisioning, it's -- if you look at including pensions, the lion's share, of course, comes from the pension side too.

Good morning, everyone. First, on the A321XLR entry, now expected to be Q2 '24.

Previously, you had early 2024 as a target. Should that be interpreted as a slight delay?

And if so, what's causing the push out? And second, coming back to hedging.

So if the rates remain where they currently are and you do get the EBIT benefit over the medium term for more pivotal hedging. In that case, how do you think about the trade-off between having that EBIT uplift flow through your margin versus potential cost of that, you may provide or even potentially using currency as a competitive advantage on some of the ongoing campaigns?

Okay. Thank you.

I have to say, at least in Paris, the second part of the question was not easy to understand. I think I go to...

I think I got it Guillaume.

Okay. So you will answer that one.

please go on Dominik. I take the first one on the XLR.

So I think on the currency topic, what you were asking is, I mean, you have -- we have, of course, a lot of open position and the further we move out in time. And now that the dollar is so strong, how much of that kind of improvement we can gain by hedging these positions at better rates would be transferred to customers in terms of lower price or not.

And that's, of course, an extremely sensitive question competitively, which we cannot answer. But one thing is clear, the market is red hot on the single aisle widebody is also improving, but still, there's a lot of capacity on both sides.

And that's everything, and I want to leave it there because anything else is really proprietary to our commercial policy.

Thank you, Dominik. On the A321, indeed, the earlier guidance outlook for entry into service was early 2024.

A lot of things have happened in the last months, we've come to conclusions on the certification requirements and standards. We have put the 3 prototypes in flights, a lot of the ground test activities have taken place.

So we have now a rather precise and stabilized schedule for the next quarters. And therefore, we have been more specific on the entry into service date which we see in Q2.

And it's, in my view, not very likely to continue to evolve at least I hope. It's not going to evolve, but I believe it's rather stabilized now.

Can you hear me this time?

Perfect, Guillaume and Dominik and Helene, 2 from my side, if I can. And firstly, can we just talk a little bit about whether predelivery payment flows sort of were a part or a significant part in the increase in your free cash flow guidance this year or whether it was due to other factors, Dominik.

And then second question was just on Defence and Space, Clearly, this year has been challenging in terms of margin. How long do you think it will be before we get back to the previous 8% margin levels that we saw from 2015 through to about 2017?

So Dominik, I have to step here, PDPs. PDPs Indeed, it was a positive variance here on PDPs.

It's quite mechanical also. We got actually, as I said, already very good PDP inflows that whole excess PDP inflows being boosted by an extremely strong U.S.

dollar -- and as we hedge P&L and not cash flow, that's really then benefiting our cash flow. So -- and of course, we took less deliveries in the first 9 months because let's outflow, so to speak, for deliveries?

And the second one, I was not quite sure how you did the margin comparison, how you decided that. You said '17, did I get that all correct?

In the past, defense and space made a margin around a little bit over 8% in the period before moving up to 2017, really for the 3 years before that. Just wanted to have an idea of when we think margin recovery to those sort of levels could occur.

I mean this will certainly take a while. We mentioned some headwinds and Defence & Space has suffered in the current year and will continue to.

We have some negative variances there. Space continue -- will continue to be difficult also in 2023.

So it will be a very gradual recovery and the type of margin aspiration we can see is a kind of high single digit, it's not a double-digit ratio we see there in terms of return on sales. And then, of course, another topic there in the mix is the question of how the joint ventures performed.

We are involved in. We mentioned about -- we mentioned the challenges on young group.

But that might, in the long term, actually become much better when Ariane 6 is flying. And there's some scarcity in the launcher market with the Russians being out of the game for us.

So there is a path to recovery, but it's not something that will happen quickly, but it's more protracted recovery path.

This closes our conference call for today. If you have any further questions, please send an e-mail to Philippe, Goesta or myself, and we'll get back to you as soon as possible.

Thank you, and we are looking forward to taking to you again soon.

Thank you, everyone. Have a good day.