MTU Aero Engines AG

Good morning, ladies and gentlemen. Welcome to MTU's Q1 2025 Results Call.

As usual, we will start with a look at the past quarter with a review from Lars. Peter will give a financial overview and a deeper look into the segment results.

Following that, Lars will walk you through the pre-release guidance update for 2025. This will end the presentation and we will open the call for questions.

And with that, I'll hand over to Lars for the review.

All right. Thank you, Thomas and a warm welcome from my side.

Good to have you with us today. Let me start with some words on the market environment.

Global passenger traffic increased by 5.3% in the first 3 months of 2025. Within this, international traffic increased 7.7%, while domestic traffic increased by only 1.4%.

Global load factors remained high at around 80%. The number of scheduled flights for April and May looks very promising.

Dedicated cargo traffic has continued its growth with a slight increase in Q1 by 2.4% in CDK. This start into the year is very promising for air traffic and the outlook remains positive.

Anyway, the announced tariff environment creates uncertainties in the global markets. It remains to be seen how passenger and cargo traffic will be impacted in the coming months.

The downturn in the global economy would undoubtedly affect the aviation industry and us. Therefore, this topic is on everybody's watch list.

Really good news for the GTF program. In February 2025, the GTF Advantage received its FAA certification, marking another important milestone in the success story of the GTF engine family.

The initial deliveries of the GTF Advantage to Airbus are on track for later this year. The Advantage offers the lowest fuel consumption and CO2 emissions for single-aisle aircraft, providing more thrust and value, especially for longer-range aircraft like the A321XLR.

It delivers 4% to 8% more take-off thrust, enabling higher payload and longer range. Based on an extensive test program with over 100,000 hours of test flights and 38 million flight hours of in-service operation of the GTF-based version, the Advantage ensures increased robustness in service and on wing times, enhancing customer satisfaction.

And to expand the improvement to the actual in-service fleet, the certification of an upgrade package is in the making. This targets to incorporate significant durability improvements from the Advantage configuration into the existing fleet during MRO shop visits.

Target is to have this package available for its customers next year. Let me conclude the GTF news with some updates on the GTF fleet management plan.

The program remains on track and we see progress in shop turnaround times and material flow. Therefore, we are quite optimistic that the aircraft on ground situation will start to trend down in the second half year.

Overall, the GTF fleet management plan remains consistent with our previous comments. On the MRO side of the business, we have exciting developments.

In March, we celebrated the official opening of our second MRO shop in China, MTU Maintenance Zhuhai, Jinwan branch, a new site focusing on PW1100 engines. Initially, it will add a yearly capacity of up to 260 engine shop visits.

And combined with the main site, MTU Maintenance Zhuhai, it will become the largest MRO facility in the world with over 700 shop visits annually. This positions MTU Maintenance for continuous strong growth in the global engine MRO market and strengthens the GTF maintenance network with increased capacity and expertise.

The new facility was built in just 18 months with its engine test cell already in operation since summer '23. And the Jinwan branch will start with around 280 employees and will grow to 600 engine experts once fully ramped up.

Coming from China to the other side of the Pacific, where we are very proud to announce the expansion of our footprint in North America. This expansion allows us to introduce MRO services for the LEAP-1A and 1B engines and implement GEnx full engine MRO services under a new agreement with GE Aerospace.

These expansion represent a multibillion-dollar revenue potential for MTU over the lifetime of both engine programs. MTU Maintenance has been named 1 of 6 exclusive premier MRO service providers for LEAP engines globally, allowing us to offer full performance restoration and extensive repair capabilities for these engines.

The LEAP is one of the largest engine programs globally and demand for capacity and expert support is high. In addition to the LEAP engine, the Fort Worth facility which includes a 43,000 square meter space with an engine test facility capable of up to 100,000 pounds of thrust, enables us to also offer full overhaul capabilities for GEnx engines, enhancing our competitiveness and service range in North America even further.

By investing heavily in the ramp-up of our MTU Maintenance Fort Worth site, we are transforming it from a pure on-site service center into a comprehensive disassembly, assembly and test facility, delivering state-of-the-art engine maintenance for narrow-body and wide-body engines. These are just 2 examples of our MRO expansion, Jinwan and Fort Worth, showing that we are expanding the depth and scope of MTU's engine MRO solutions worldwide, thus underlining our trust in the long-term outlook in this business.

We are extremely well placed globally to expand our market share and benefit from the outstanding market opportunities in this field. This brings me to a less popular topic of additional U.S.

tariffs. U.S.

tariffs have caused significant confusion and uncertainty in global markets, making it difficult to predict the impact on air travel. However, we aim to share some information on how we assess the situation and provide some estimates on the direct impact on MTU.

As you know, MTU has locations in Europe, Canada and Serbia that are not directly affected by tariffs, especially since aviation products have not been subject to countermeasures by the EU or Canada to date. The main burden of tariffs, therefore, falls on our U.S.

partners and customers which could potentially increase their costs as tariffs are normally borne by the importer. Our sites in China are either located in a free trade zone or use privileged customs procedure, so we do not expect any direct burden from Chinese import duties on U.S.

engines or spare parts here either. We do not see our collaboration with our U.S.

partners at risk as we have established long-term relationships through our RRSP partnerships over the years. Additional capacity in engine maintenance are globally scarce and require significant investments, making quick alterations difficult and impossible.

All this cumulates to a possible headwind for our profitability. Before mitigation effects and based on actual delivery routes and volumes, the impact has been assessed to a mid- to high-digit million amount -- double-digit million euro amount.

Having said this, we are actively monitoring tariffs and are in direct contact with our U.S. partners to mitigate the impacts of the tariff environment.

As one example, we're already starting to implement alternative delivery routes on certain modules and achieve an effective avoidance of tariffs on these parts. Now, let me hand over to Peter for the financials.

Thank you, Lars and also a warm welcome from my side. In the first quarter of 2025, we booked group revenues of nearly €2.1 billion, marking a 25% increase from last year.

In U.S. dollar terms, revenues rose by 22%.

Adjusted EBIT increased 38% to €300 million with a margin of 14.3%. This strong margin was primarily driven by a favorable business mix in commercial OEM.

Similarly, adjusted net income improved 41% to €221 million. On free cash flow, with €150 million, we had a very strong start into the year.

So, now let's go into our 2 business segments and starting with the OEM segment. Total revenues increased 11% to €620 million.

Military had, as always, a slow start into the year with a small decrease in revenues to €113 million which is a typical pattern. Commercial business revenues in euros rose 17% to €507 million.

And within that, organic OE revenues grew 5%, driven by a rather strong spare engine sales volume. Organic spare part sales in dollars increased mid-teens, supported by mature wide-body platforms and narrow-body engines.

Adjusted EBITDA was up 35% to €176 million, resulting in a margin of 28.4%, primarily reflecting the very favorable business mix in the commercial OEM business. Turning the page and moving on to the commercial MRO segment.

Reported MRO revenues increased 33% to €1.5 billion, while U.S. dollar revenues were up 29%.

This strong growth was primarily driven by the PW1100G, the CF680, GEnx and the GE90 engines. Adjusted EBIT increased 42% to €125 million, resulting in a margin of 8.2%.

EBIT margin improved mainly due to volume effects and a better profitability on certain engine programs and contracts. At this point, I would like to hand back to Lars for some words on our guidance for 2025.

All right, Peter, thank you very much. On our guidance, we already informed you all early last week with our ad hoc news on the 25th of April.

In our business segments, we can confirm the organic growth drivers in our different segments. Based on this, the adjusted revenue outlook on a U.S.

dollar basis remains unchanged, while it has been reduced in euros in light of recent exchange rate developments. Adjusted revenue is now expected to reach between €8.3 billion and €8.5 billion in 2025.

So far, we had forecasted a range of €8.7 billion to €8.9 billion. The updated forecast is based on a U.S.

dollar-euro exchange rate of $1.10 instead of the previous assumption of US$1.05 per euro. As announced, we further confirm our guidance for 2025 for adjusted EBIT, adjusted net income.

On free cash flow, we are also confident to reach €250 million to €300 million as outlined with our full year release in February. On all this, please keep in mind that given the high volatility and uncertainty on the broader tariff environment and possible market tensions, we have not incorporated any effect thereof into these estimates.

This closes the formal presentation. Thank you for your attention and we're now ready to answer your questions.

The first one would be on tariffs because Lars, you commented on how your manufacturing footprint and the MRO activities are largely shielded from the direct impact but still at the top end of the impact that you're quoting, it's still relatively significant. So just trying to get a bit more color on what specific flows would lead you to paying those tariffs?

And if you could comment on the mitigation measures that you could put in place and whether that could help you stay within your current guide. The second is actually on the strike at our TX, Arlington facility.

So just if you could give any color on what it could mean for GTF deliveries or powdered metal parts production this year?

Right. On the first one, like I stated, it's very volatile situation.

And we have assessed that thoroughly in the past couple of weeks and we have a cross-site cross-function team available to assess every news. But what we have -- our baseline is basically the movements of OEM and MRO inside and outside of the U.S.

That has been the baseline for the calculation. And we -- it's still to be proven and seen what kind of tariffs will finally show up.

And we are working with Pratt and also internally MTU on countermeasures that could be rerouting of engine modules to prevent any kind of border crossing into the U.S. and back and forth.

We are revisiting the shipments of different parts, spare parts but also modules. The keyword is always the country of origin versus the country of experts.

So the origin is where you substantially transform the part or the engine. So we are in thought and in discussion with different partners, how do we like manage or verify the country of origin.

And then last but not least, contract management, we do have some contracts that are allowing the tariffs to be pushed to the customer and some of them are not. So that needs to be seen.

But these are in a nutshell, the activities we are investigating. But let me state, I continue to be an optimist.

The aerospace industry is an oligo pool. So these tariffs would burden everyone in our industry.

So I'm kind of optimistic that we'll find a good solution with both entities, East and West from us. And the second one on the strike, we don't yet have information.

As you know, we have warehouses where commissioned engines are available and it needs to be seen what kind of impact that has. I don't have any information for you as of this morning.

Okay. And just on the guidance, so should we be adding part of the impact that you've quoted as a headwind to the guide?

Or are you still comfortable with the level that you've maintained with the release?

No, I wouldn't add it right now. I'm comfortable.

I had a couple, please. Firstly, on the OEM business and the margin, the comment that you made that the spare engine and leasing contribution supported the margin.

Can you just help outline kind of how significant that was and how big of a margin? And by not increasing the guide, my assumption is that a lot of that is pull forward.

Can you just kind of help us understand a little bit how to think about that? Second thing is maybe one for Peter but it looks as though the equity accounted investment contribution to EBIT ramped very significantly.

I think it was roughly €59 million in the quarter versus €17 million this time last year. Can you just help us understand why?

Is that sustainable? Is that what we should be thinking about for the rest of the year?

From memory, the majority of that goes into the MRO business. So is that a big driver of MRO this year?

And then a question on cash. Obviously, you've done the kind of €150 million this year.

You've guided for €250 million to €300 million. It's not implying a lot of cash in the last 9 months of the year.

And from memory, you talked about more program participation costs in the second half of the year. And obviously, you have potential tariff impact.

So do you have any views at this point of where net debt will end this year? Do you think there will be an improvement in net debt?

Those were the 3.

So I take all of the 3, I guess, then. So starting with the last question regarding free cash flow.

I mean, the €150 million was a very strong start into the year and that compares quite favorably to the €300 million or €250 million to €300 million which we guide for the full year. But keep in mind, I mean; free cash flow is always a very linear development throughout the year, throughout the quarters.

I mean we had -- the cash flow was a small, let's say, source of disappointment in Q4 2024. You remember that the €180 million.

So we had a very strong November and December regarding revenues. And so the €150 million is, let's say, the cash flow spillover of the quite strong business we had at the end of 2024.

So that will not go on like that. And so we are rather cautious to increase the guidance after 1 quarter with a very good cash flow.

At equity results, both things are true. So the one is a strong contribution from Zhuhai, as you know.

But the other thing is also that the LeaseCo, so the entity in the U.S. which provides lease engine support for the GTF has also made a quite good result in the first quarter of 2025.

So these both companies contributed favorably to that one. OEM margin, I wouldn't split out that.

I mean, we had a higher share regarding deliveries for spare lease engine, net pricing for spare lease engines are higher compared to installed engines. And I would say that contributes maybe 1 or 2 percent points to the margin in the OEM segment.

But 28% will not be the sustainable level for the full year. I mean OE is going to ramp up throughout the year, also picking up -- GEnx will also pick up throughout the year as the GTF engines.

So that will normalize.

Okay. Peter, sorry, just one quick follow-up on the equity accounted investment because it was a €40 million swing year-on-year.

It was quite material. How should we think about that for the remainder of this year?

Are these positive results going to continue? Or will it normalize back to this kind of 20%, 25% level that it has been historically?

Yes, rather. So the next quarters will rather go down to the historic level.

The first one is just on the MRO growth. Can you give us the GTF share of revenues in the quarter?

Second question is on your U.S. expansion with GE.

Can you maybe just profile the kind of revenues and profit generation potential from that deal over the medium term? And then last one, if I may, just on OEM, a follow-up to a previous question.

So what was the commercial series OE sales growth in the quarter? Or maybe asked a different way, what was the percentage of spare engines delivered in the quarter?

What we say is that OE growth was 5% revenue-wise. That's -- which I gave in the call already.

So OE net sales grew 5% year-over-year in Q1. The GTF share was in the low 30s in the MRO.

34%.

And the opportunity with GE medium term?

These program, they span about 20 to 30 years. So it's a rather long-term investment.

We're building up capacity for that as we speak. We are saying here it's a multi-billion opportunity but let us highlight a bit more details during the Capital Market Day in June in Paris.

We are prepared for that over there.

I had 3 questions. The first one is on R&D and the steep increase you had in Q1.

It's only Q1, quite obviously. But can you comment related to this R&D increase, whether it's linked to the WET program and the fact that you had to switch a little bit gears on this?

Second question is on the MRO growth. You mentioned GTF; you mentioned the wide-body.

You haven't mentioned V2500. Is it just before -- because it is growing less?

Or are you starting to feel some pinch from lower level of induction because of GTF on the V25? And the last question is on FX.

The current situation, is it changing anything to your strategy of hedging? Are you slowing down?

Or are you -- basically, I mean, it's an open question on your FX strategy at the moment.

So Christophe, I'm going to start with FX strategy, no, we won't change. As you know, we don't speculate.

I mean, we have a bandwidth for the next, let's say, 16 quarters and we have -- we go a little bit up and down. So it's a little bit opportunistically but our -- but we keep our path.

So that there's no -- nothing that we see that we hedge now. We fully hedged for the next 3 or 4 years or so.

So as you see, I mean, we are fully hedged more or less this year, next year, roughly 60%, then 30% or so and we're going to continue to do so. So there's no principal reassessment of our FX hedging strategy so far.

On R&D, no, it's a onetime which we had in Q1. We have an 18% program share on the GTF.

And as such, we have to contribute also 18% of our R&D efforts and related to the GTF Advantage in our work share. So we didn't do a lot of, let's say, alteration of the parts and spend own R&D efforts but we have to bear the full development -- 18% of the full development cost.

So it was kind of an imbalance payment related to R&D which we capitalized. So we shared, let's say, 18% of the costs Pratt & Whitney did for their work share in easy words.

And maybe let me comment on the WET activities, Christophe, it's insignificant plus there is a funding involved in that program or it was. So you won't see a pike for these kind of R&D activities in our balance.

And then maybe last one is on the V25. We haven't mentioned it because it's stable.

This program continues to be a contributor. And I think we said last time around 800 shop visits are continuing certainly this year and that this program keeps on being strong but stable and therefore, we didn't comment it.

I'm actually greed and ask 4 questions, please. They're quite short.

One of them, just in the press release, you have this sentence that says talking about the growth in the OE business -- OEM business, sorry. It says it was primarily leasing and spare engines that drove revenue growth.

Can you just clarify what's the difference between a leasing and a spare engine there? Can I just start with that one?

No. I mean when you sell -- you can either sell an engine to Airbus, then it's an installed engine or you sell an engine to an airline as a spare engine, then it's a spare engine.

And typically, a spare engine has a better pricing or you give less discounts because it's used not so frequently and there's less aftermarket. So that's why the OE price is higher or the other side of the metal is you give less discounts and a leased engine, you sell to a third-party leasing company.

So that's the difference.

But basically, they're the same. They're both spare engines?

I just wanted to check it was spare engines. It's not a leasing business per se.

No, no, no, it's a spare engine. You sell it the airline or sell it to a leaser.

So these are the 2. But finally, that's a spare engine and a different owner.

Okay. Fine.

But it's the same activity, okay?

Exactly.

Fine. Okay.

Just to repeat Christophe's question on FX and he talked about FX strategy which I know you won't change because it's been the same for 20 years. It's worked well.

But just in a hypothetical situation, we go into a period of dollar weakness, what industrial levers do you think you have? Do you think your successor will be able to find cost reduction if needed?

Or have you left such a lean -- are you leaving such a lean business? There's not a lot of fat there.

That would be one. I'll rattle through the rest of the questions.

So I'm not sure if you answered Ben Heelan's question about the timing of the next entry payment on LEAP, if you did, sorry, I missed it. And the last one, Lars, is just with the -- I know it's only been a month since Liberation Day.

Any signs at all of stress in the supply chain? Or are you worried about kind of paperwork, litigation stuff that could jam up the supply chain?

Let me start with the first one. That's probably rather easy.

No, I'm not concerned right now. I'm on paperwork.

That is my least concern in all that tariff environment. You got to look at the worldwide ecosystem and I'm more concerned on pricing availability than on paperwork.

But as I said in the beginning, I'm an optimist and this industry is so important for every country and state that I believe we're going to see some ease up in the hopefully, days and weeks to come. And we have -- as I mentioned several times, we have a multi-source supply chain that is especially valid for MTU.

So if worse comes to worse, we have flexibility shares on different suppliers when you have double, triple or quadruple sources. So I think I'm good stressing other sources more than the ones affected for higher tariffs.

I mean regarding reaction to a strong U.S. dollar weakness, probably we would have to look into our cost base for sure.

But I mean, typically, the reaction scheme would not be, let's say, going into the U.S. with production.

So moving production from the euro to the U.S. dollar to reduce exposure as we -- I think we mentioned that before, I mean, it takes a lot of years to, let's say, relocate parts, get all the certification stuff from FAA and the ASA and so on.

And the U.S. is also a low-cost country.

So it's not, let's say, that we can produce with a very low cost base in the U.S. compared to Europe.

So that's also not the case. So -- but yes, if there is a dollar weakness, we would have to look into our costs, into our manufacturing footprint but probably not with the result that we're going to relocate parts to the U.S.

or so. I don't think that will be the final outcome.

But here again, at every company, we are continuously looking on our unit cost and our cost base. And we are giving some more details again on the Capital Market Day, how do we transform the company into the next decade and unit cost improvements are certainly on the agenda of the whole Board.

And on the LEAP, so near term, there won't be another payment. So I won't give you the payment plan which we agreed with the OEM but nothing to expect this year or next year.

I just wanted to follow up on the performance from AML because obviously, last year, it was a pretty strong performance. So just commenting on this for Q1 and whether you had an impact on your margin performance.

The other one was actually in terms of the -- within your cash flow, you had a pretty significant headwind from provisions. So I just wanted to check that I understood what was driving this in Q1 this year, please?

So you mean MLS margin -- comment on the MLS margin, our leasing entity in the Netherlands, yes?

Yes, sorry.

Yes. So the margin was a bit weaker in Q1 but that's a natural thing.

So when -- in quarters where you have, let's say, a lot of asset management transactions, you have a strong margin and in others, you have a little bit of weaker margin. I mean if you look on the MRO margin sequentially, we had Q3; Q4 had a margin level of 9%, where MLS did something like a 20% margin.

Q1 was a bit weaker, maybe 15% or so in that ballpark. So that was also the reason why we are a little bit below the 9% level which we had the last 2 quarters.

So 8.2% -- I mean, 8.2% is strong compared to the 7.7% we had last year in Q1. But sequentially, it's a little bit weaker.

So higher GTF share and a little bit reduced MLS margin but that -- so the next quarters will be different. So nothing to worry about on that side.

And your second question was provisions. Yes, provisions, that's always a difficult animal to look only on the provisions line.

I mean you have to -- especially in the context of the GTF fleet management plan, you know that a lot of airlines get in a first step credit notes. And then you technically consume the provision.

But on the other side, you instantly build up a liability. So you have to look on both lines together.

So that is not only on the provisions line. And so in our case, I mean, we paid roughly US$70 million in the first quarter of 2025 for the fleet management plan of the GTF.

But as I said, it's difficult to look only in the provisions line. So that's -- we cannot do that.

Sorry, the US$70 million is the compensation that you paid or if it's...

Money which flowed out of our accounts towards airlines through the different lines in the cash flow statement.

I just have a couple of follow-up questions. One is mitigation for the PW1100G in the event that tariffs become very difficult.

Would it be possible and would -- have you been discussing with Pratt & Whitney for you to assemble all the PW1100Gs for Airbus for Europe and China at MTU in Europe rather than splitting them between Europe and the U.S.? And then my second question is on R&D.

Your company-funded R&D went up €22 million in the first quarter but your capitalization of R&D went up €27 million. And I wonder if you could just explain what the spending is on at the moment given that you have completed the GTF Advantage certification and how you see that developing for the rest of the year?

So maybe on the first one, it's obviously a theoretical question right now but I would say it's obviously possible that MTU is doing more than we do today but we have a physical limitation in our test set. So there is a limit of what -- how many engines we can test here in Munich in our facility.

But then again, if worst come to worst, we would find slots in our MRO facilities in Hannover, for example, or in Poland. So, I'm not able to answer the question fully but there is -- there are scenarios that we weigh a little bit the engine assembly between the U.S.

and Europe.

I mean the capitalized R&D had a quite significant spike in Q1. And I answered that earlier that we had a one-off payment in the first quarter which is an imbalance payment related to the PW1100 GTFA.

And that won't happen in the next 3 quarters. So that -- that's always only once a year.

So the run rate regarding capitalization for next quarter is rather in the ballpark €20 million to €25 million per quarter.

I just had a quick question. I'm sorry if you have answered it before.

You had a very strong organic growth for your MRO, excluding the GTF in Q1. What are your expectations for the remainder of this year, excluding GTF?

I mean excluding the GTF, so it's more or less, I would say, more or less between 10% and 15%, I would say. I mean GTF grows a bit stronger as we expect to go from, let's say, 30% which we had last year to rather, let's say, a 40% share, 35% to 40% share.

So that implies already that GTF will grow a bit stronger, maybe in the ballpark of, let's say, 20% to 25% and the remaining MRO, excluding GTF rather between 10% and 15%, yes.

Obviously, your competitor, CFM has had some challenges in terms of delivery and you've obviously just won the certification of the Advantage. Can you talk a little bit about what you're seeing kind of in terms of campaigns medium term and if you're seeing customers or airlines potentially shifting more towards you or not?

I'm just interested how the market share dynamics have played out given the challenges that CFM has had. And then, just a final one.

So it sounds like there's going to be a business update at the air show. Is there going to be a medium-term guide that we can expect at that event?

You answer the first one for the CMD?

Yes. I mean it's always a challenge to give a medium-term guidance in a, let's say, environment where we are today with unsecure outlook what the tariffs will -- we will talk about the next 5 years in a little bit more or less detail, let's see.

But we will give a rough picture for the next 5 years, yes.

Yes. Let me comment on the market share.

And we stated several times that the deliveries -- the campaigns for the deliveries in the next 2 or 3 years have already been done years ago. We are now looking at campaigns more or less aiming towards the end of the decade and beyond.

So I don't necessarily believe that the current weakness of deliveries of the CFM engines have a big impact on these. What we can say the sales of the GTF last year were pretty successful.

I think we sold around 1,950, I believe, was the number of GTF engines and that was still with a base in mind but now we have the Advantage certified. So obviously, we are hoping that the Advantage can prove all the improvements that we have -- that we are promising to the market and then the market share and momentum kicks in for the like next year or in 2 years when we have the first results visible for our customers from the Advantage.

I've been kicked off the call more times than I have the patience for which I'm sure is a UBS issue. So if the question has been asked already, do please just pass me to the transcript.

On -- just thinking about cash flow, inventories reduced very materially quarter-over-quarter which seems abnormal with normal seasonality patterns that we see. How is this -- and it seems to be a major driver of cash flow.

Why did they decrease? Is this persistent?

How should we think about that? Very similar question for receivables as disclosed in your presentation also seems to be a major driver of cash flow.

Is this trade contract assets or imbalance payments? And is that linked in some way to capitalized R&D?

Maybe you could help us think through that and then obviously, a large move in payables which I assume is an offset to the receivables. So maybe you could just help us think through the working capital moves.

Yes. I mean, I think if you want to go into very details -- very deep details, then you have to talk to IR.

But I mean, the general thing is that we -- obviously, in Q4, we had a very strong Q4. So shop, all of our MRO shops were full.

So that reflects a high number of -- a high amount of POC receivables. It's not -- so unfinished engines in the MRO shops are all accounted for as a POC receivables.

And then you ship it to the customer that it's transferred from a POC receivables to a trade receivable. And finally, the customer pays, then it goes out of working capital.

So -- and I mentioned that I think before that we had a quite strong Q4 and so working capital moved up in Q4. So cash flow in Q4 was a little bit disappointing.

And now we had a lot of customers paid now and we had a strong cash flow in Q1. So that is a little bit the phasing in the receivable line.

On inventories, I mean, that's also more or less a typical pattern that MRO shops acquire spare parts at the end of the year, in some cases, for the old spare parts list price, then you have, let's say, a higher level of inventories. And once the inventories are consumed, are allocated to certain engines in the shop, then so the spare parts move from inventories to the POC receivables and goes down the road as described before.

So -- but it's in general, so going through working capital line item by line item is not really, let's say, helpful, I would say. If you want to go into every detail, I think Thomas is very happy to do that exercise with you.

I have 2 follow-ups. The first one is on the tariff.

Just to be clear, you're going to be sharing the cost with Pratt & Whitney of the tariffs of your components being shipped into the U.S. and also on the tariffs of the component of your Japanese partners shipping into the U.S.

That's the way we should be thinking about it on the OE side. So that was the first question.

Second question is on GTF Advantage. I mean, quite obviously, you will be delivering in series those engines at the end of the year.

But airlines may require some upgrades of the existing GTF to GTFA. How will it be visible in your P&L?

I mean, is it an MRO element that will be coming, I don't know, in 2026, 2027? Or is it part of the warranty cost?

So, I start -- Christophe, I'll start with the first one. This is my understanding today.

So everything that is on the OE side goes into the IAE and then it's shared to the work share and the percentage that we have on the program. That is clearly valid for the OE environment on the 1100.

On the GTF, I don't understand the question. We are doing these upgrades within the regular shop visits starting somewhere -- targeting for next year.

Can you?

Yes. My question is, if I have today a GTF, a normal GTF and I want this to be upgraded to the GTFA; do I need as an airline to wait for my next shop visit to be upgraded?

Or can I be upgraded before? And when it comes into the shop visit, the normal shop visit, will the airline pay an additional fee?

Or is it part of the standard warranty work that you're doing on the GTF?

Christophe, so far, it's called an upgrade package. I don't have the information right now whether this is paid extra or -- for me, it's certainly not warranty but this needs to prove.

I can't answer right now.

Yes. Thank you.

This ends our Q1 results call. Thank you, Lars.

Thank you, Peter for presenting and to you all for your participation. Looking forward to get in touch in the coming days and weeks and looking forward to see as many as possible of you on different meetings at the Paris Air Show.

Thank you.