Airbus Se Ord

Ladies and gentlemen, thank you for standing by. Welcome to the Hair Boost Q1 2022 Results Release Conference Call. I am Clotilde, the operator for this conference. Please note that for the duration of the presentation, all participants will be on a listen-only mode, and afterwards there will be a question-and-answer session. The conference is being recorded. After the presentation, you will have the opportunity to ask a question. At this time, I would like to turn the conference over to your host,

Thank you and good evening ladies and gentlemen and thank you for joining us today for our Q1 2022 results call. I'm indeed with Dominique and Hélène here in Amsterdam to run you through our Q1 results. First, as I just said in the media call, I want to repeat that our thoughts are with all people affected by the humanitarian crisis settled by the attack on Ukraine, with massive casualties and millions fleeing from their homes. At Airbus, our top priority has been, as always, and remains, to safeguard people and operations. Besides, in line with international sanctions, we suspended deliveries and support services to Russian customers and operators, as well as the supply of spare parts to the country. for all our activities across all divisions, we are applying and will continue to apply the sanctions which are in place. The ongoing military conflict reminds our societies that peace, democracy and freedom can never be taken for granted, but need to be earned and need to be defended. We expect to face additional complexity as we progress in 2022, not only resulting from the geopolitical tensions, but also from increasing impacts on global supply and logistics, and in particular in the context of the new COVID wave in China. That being said, in Q1, we were able to deliver 142 aircraft, sorry, a plus 14% year-on-year increase. Commercial aircraft production ramp-up is progressing in these complex environments, Following an analysis of global customer demands, as well as an assessment of the industrial ecosystem's readiness, we are now working with our industry partners to increase the F320 family production rates further to 75 aircraft a month in 2025. Now, back to the first quarter, our solid financial results benefited from the effort on competitiveness, as well as the impact from cost containment implemented throughout the COVID crisis, which we will progressively phase out as we have resumed activities. Our EBIT adjusted stood at 1.3 billion euros and our free cash flow before M&A and customer financing was 4.2 billion euros. Our solid Q1 EBIT adjusted further includes a non-recurring positive element 0.4 billion euros related to retirement obligations, partly offset by 0.2 billion euros negative impacts from the international sanctions against Russia. During today's call, Dominique and I will update you on how we are impacted by the more complex and anticipated business environment. When it comes to the impact from the international sanctions, our direct exposure to Russian customers is relatively limited, across our product portfolio. And on the supply side, we see that our operations are protected over the short and medium term. This gives us the time to secure alternative solutions where needed. Nevertheless, given the increasing complexity of the environment, notably the worsening COVID situation in China, we will continue to closely monitor the risk we are exposed to, especially supply and labor, as well as the associated inflationary pressures. Based on our good Q1 results in Q1, we keep our guidance for 2022 unchanged. Also, our overall risk profile for the remainder of the year has become more challenging. Let's now look at our commercial environment. As I said, we are operating in a complex environment, in fact in global economy recovery. and we see a contrasted picture when it comes to the evolution of global air traffic. In China, domestic air travel has essentially deteriorated sharply and is currently around 20 to 30% of its pre-COVID level in flight numbers. The degradation of the COVID situation in the country is a concern. In the short term, this may start to impact the ability of some of our airline's customers to take delivery of some of the aircraft. Moreover, the geopolitical crisis is adding complexity. Even though airspace restrictions in Russia, Belarus, and Ukraine itself affect a small portion of global traffic, the rerouting of international flights, as well as increasing fuel prices, have become a headwind for a number of our airline customers. In contrast, air travel is coming back strongly. and between all countries where travel restrictions have been lifted. This confirms robust underlying air travel demands. Even though the global situation is contracted for the quarters to come, we still expect commercial air traffic to recover to pre-COVID levels between 2023 and 2025, with domestic and regional markets leading the way. So no change at that front. in spite of the complexity. Let me remind you of our orders and backlog into one. We booked 253 gross orders, of which 243 single I and 10 widebodies, confirming our strong commercial momentum. Seven out of the 10 widebodies orders were for our recently launched A350 freighter. We saw 170 cancellations, which were already largely anticipated and embedded in our backlog valuation as of end of the year 2021. As a result, net orders were positive at 83 aircraft and our backlog in units amounted to 7,023 aircraft at the end of March 2022, including 5,821 A320 family aircraft. With regard to Russia, our backlog includes 13 A350 orders Looking at helicopters, in the first quarter we booked 56 net orders compared to 40 in Q1 last year, well spread across programs. We were also awarded by OCAR an order for the Tiger M3 program for 42 helicopters for France and 18 for Spain. In addition, we continue to see positive momentum for campaigns mainly in our home countries. Finally, in defense and space, in Q1, our order intake was at 3.2 billion euros, corresponding to a book-to-read of around 1.3. It includes the Eurodrone global contract signed in February, covering the development and manufacturing of 20 systems and five years of initial in-service support for Germany, France, Italy, and Spain. This signature kicks off the development of one of the most ambitious European defence programmes, which will be entirely designed and developed from the start with our DDMS. Your role, the result of collaborative work between the industry, OCR and the nations, will strengthen Europe's strategic autonomy and sovereignty with this programme. booked in the quarter relate mainly to military aircraft. On the FCAS, the Future Combat Air System, we are fully committed to the program, the importance of which is acutely evident in times of crisis. We continue to work towards launching Phase 1D later this year, which is the next milestone for the success of this crucial European defense program. On the space business, we are closely monitoring the situation on all programs conducted in cooperation with the Russian State Space Agency, together with our partners, customers, and suppliers. Let me remind you that we no longer have access to the Soyuz launchers. In the meantime, preparation of 2022 IN-5 and Vega-C launches are progressing according to plan and schedule. While we are on the topic of space, I want to thank the teams for the historical agreement signed between Arianespace and Amazon in April for 18 Arian6 launches over a period of three years, which illustrates the great potential of this platform. In the context of rising defense spending and a strong drive for European strategic autonomy, we stand ready to support the European governments in this respect. Dominique, we take you from our financial committee.

Thank you, Guillaume, and hello, everyone, also from my side. Our Q1 2022 revenues increased to €12.0 billion, up 15% year-on-year, mainly reflecting the higher number of commercial aircraft deliveries and a favorable mix. Our Q1 EBIT adjusted increased to €1.3 billion, up from €0.7 billion in Q1 2021. The total €0.6 billion increase includes a non-recurring positive element of €0.4 billion related to the remeasurement of past service costs in our retirement obligation. On the other hand, an amount of minus €0.2 billion has been recorded in Q1, resulting from the impact of international sanctions against Russia, and it also reflects our effort on competitiveness and the impact from cost containment implemented throughout the COVID-19 crisis. Our Q1 EPS adjusted stood at 1 euro 14 cents per share, based on an average 786 million shares. Our Q1 free cash flow before M&A and customer financing was 0.2 billion euros, reflecting the level of deliveries, competitiveness, and impact of cost containment, partly offset by an increase in working capital, mainly driven by inventory increases. On to the next slide regarding our profitability in more detail. Q1 2022 EBIT reported was 1.4 billion euros. The level of EBIT adjustments totaled a net positive of 0.2 billion, including 190 million positive impact from foreign exchange mismatch and balance sheet revaluation, minus 11 million related to the A380 program, and minus 13 million of other costs, including compliance costs. Earnings per share reported includes 160 million positive financial results. It mainly reflects the positive net impact from the revaluation of certain equity investments, partially offset by the revaluation of financial instruments, as well as minus 76 million euros of net interest results. The tax rate on the core business is around 27%. The effective tax rate on an income is 25%, including the tax effect on the revaluation of certain equity investments, partially offset by deferred tax asset net income is €1.2 billion with earnings per share reported of €1.55. All in all, we were off to a very good start for the fiscal year 2022. Regarding our hedging activities, in Q1 2022, $4.4 billion of hedges matured with associated EBIT impact at a rate of 1.21 versus 1.16 in Q1 2021. During the quarter, we implemented $2.5 billion of rollovers, mainly to adjust the 2022 intra-year phasing of our hedges. We also implemented $3.5 billion of forwards at a rate of $1.18, mainly for the years 2024 and 2025. $4.3 billion of hedges were disqualified to reflect the impact of the international sanctions against Russia, resulting in a negative impact to financial results. As a result, our total hedging portfolio in US dollar stands at $87.1 billion with an average hedge rate of 125 unchanged versus December 2021. Now let's look at our cash evolution in Q1 2022. Our gross cash flow operations of 1.2 billion euros mainly reflect our evident justice as well as positive phasing of tax payments. The working capital increase of €0.7 billion mainly reflects inventory bills to support the A320 family ramp-up, partially offset by favorable timing of cash receipts and payments. Yesterday, the A400M continued to waive on our free cash flow before M&A to customer financing. Q1 2022 CapEx was around minus €0.3 billion versus €0.5 billion in Q1 2021. Recall that The prime year's quarter included the acquisition of real estate assets in the UK. We expect our capex to be around minus 2.4 billion euros in 2022. Free cash flow reported was 0.2 billion euros. M&A activities accounted for minus 6 million euros, while customer financing represented an outflow of minus 46 million euros. The aircraft financing environment remains solid, with sufficient liquidity in financial markets for our product Going forward, the further cash in, as in recent years, will not be sustainable, as we anticipate some usage of cash in this and the coming years. Our net cash position is stable at 7.7 billion euros, and of end of March, and our liquidity position remains strong and stood at 28.8 billion euros. In Q1 2022, Moody's and S&P both confirmed adverse credit ratings to respectively A2 and A-flat, and removed the negative outlook reflecting our strong financial and operational performance. Going forward, we will continue to adopt an effective approach when it comes to managing our liquidity with the objective of maintaining our robust credit ratings. Now back to you.

Thank you, Dominique. Very clear. Now on to commercial aircraft. So in Q1, we delivered 142 aircraft to 48 customers. The net year-to-date delivery number of 140 reflects a reduction of two aircraft previously recorded as sold in December 2021, for which a transfer was not possible due to the international sanctions put in place. Now, when we look at the Q1 2022 situation by aircraft family, on the A220, we delivered 11 aircrafts. We continue to ramp up and are on track for the rate 14 that we envisage for the middle of the decade. On the A320, we delivered 109 aircraft, of which 58 A321, so more than 50%. We can make a calculation. Our production is progressing towards rate 65 by summer 2023 in a complex environment. As I mentioned earlier, we are now working with our suppliers and partners to enable a monthly production rate of 75 in 2025. Airbus will meet the higher production rate by increasing capacity at our existing industrial site and growing the industrial footprint in mobile in the US with a file while investing to ensure all assembly sites are A321 capable. On the A321 XLR, We continue to work towards the first flight by the end of Q2 2022. Initially planned for the end of next year. Regrettably, the entry into service is now expected to take place in early 2024. As I said in the previous call, we work hard with our customers to try to mitigate the impact of that situation. On WhiteBody, we deliver 22 aircrafts of which 16 A350, 16 A350, As previously announced, we target to increase our A330 monthly production rate to almost three at the end of 2022. And on the A350, we continue to expect to increase the monthly production rate to around six aircraft in early 2023. In March, very happy to report that the first A380 flight powered by 100% sustainable aviation fuel to place. This is the third Airbus aircraft type to fly with at least one engine operating on 100% SAF after an Airbus A350 March 2021 and an A390neo in October of last year as well. Now let's look at Airbus commercial financials for Q1. So the financial reflects the net delivery of the 140 aircrafts. The 142 that I mentioned before, again, was reduced by the two deliveries under, let's call it, international sanctions. Revenues increased by 17% year-on-year, mainly reflecting the higher number of deliveries, as well as a favorable mix. You have in mind what I said on the wide-body deliveries. The increase in EBIT adjusted also reflects the effort on competitiveness, and our efforts on cost containment. It also includes the non-recurring positive impact from retirement obligations, as described by Dominique, partly offset by the impact from international sanctions. On helicopters, in Q1, we delivered 39 helicopters, in line with Q1 of 2021. Revenues increased year on year, mainly reflecting growth in services and favorable mixing programs. EBIT adjusted also reflects non-recurring elements, including the aforementioned positive impact relative to the retirement obligations. And to complete our review of Q1 2022 with defense and space, revenues increase year-on-year as many driven by military aircraft business and following the contract signature for Eurodrone in February. EBIT adjusted also reflects the impact relative to retirement obligations, again, partly offset by the consequences of international sanctions on the space business. From the F-400M, we deliver one aircraft each one, which is the last of ten ordered by the Turkish Air Force. We continue with development activities towards achieving the revised capability roadmap. Retrofit activities are progressing in close alignment with the customers. Risks remain on the qualification of technical capabilities and associated costs, on aircraft operational reliability, in particular with regard to power plants, on cost reductions, and on securing export orders in time as per the revised deadline. Now, moving on to the guidance, so let me remind you of our guidance, on the basis of the company assumes no further disruptions to the world economy, air traffic, the company's internal operations and its ability to deliver product and services. The company's 2022 guidance is before M&A and on that basis the company targets to achieve in 2022 around 720 commercial aircraft deliveries, 5.5 billion euros of EBIT adjusted and 3.5 billion euros of free cash flow before M&A and customer financing. This guidance reflects our expected growth trajectory and the investments we are making to prepare our future. After a good start in 2021, as we have shared with you, we see an unfavorable evolution in our risk profile for the remainder of 2022. The overall supply chain situation, the COVID situation in China, as well as the Russian invasion of Ukraine, are making the road to a global recovery more difficult. We are again in a place of heightened uncertainty, volatility, and complexity, and this brings me to our key priorities. Next page. First, delivering on our guidance will remain the top priority in 2022. We will work hard to mitigate the risks and capitalize on our opportunities across our businesses. Moreover, we will continue to build more resilience, relying on the diversity of our activities, the strong order backlog from our customers, the close collaboration with our supply chain, as well as our capability to transform and innovate. On our order backlog, we remain focused on filling the skyline for commercial business in the outside areas, Here we see a strong demand for our single-aisle program. We also see opportunities for the wide-body segment, especially in the second half of the decade, in the context of increasing fuel prices and the need to decarbonize aviation. For the military side of our business, the return of war in Europe clearly demonstrates that strong defense capabilities are vital for preserving peace and security. strategic compass as endorsed by the European Council in March, rightly underlines the importance to reinforce European defence by stimulating innovation and investment. Here, let me quote, measures should be taken by the end of 2022 to promote and facilitate access to private funding for the defence industry, also by making a best use of the possibilities offered by the European Investment Bank. End of quote. We welcome the clarity of this decision. We at Airbus, with our long history of European cooperation, stand obviously ready to support our governments and to make contributions to the strength of the armed forces of Europe and NATO. Moving to the round-up of our F-220 family, it remains of course one of our top priorities. After what we went through together in the past two years, I'm pleased to be in a situation to increase our rate to 75, which again will benefit the entire global value chain and will support employment, especially in our home countries and in the US. Now, I'd like to draw your attention to some important progress on our sustainability journey, which is at the heart of our company's purpose. We engaged with the FBTI, the Science-Based Target Initiative, and committed to setting science-based carbon reduction targets, including for our scope-free USP use of salt product emissions. We also officially launched a zero-e demonstrator program with the objective to test a variety of hydrogen technologies, both on the ground and in the air. A key part of the multi-year program, the Hydrogen Combustion Engine, will be developed by our partner CFM International. The Zero E-Demonstrator will be an important milestone to our roadmap to deliver the world's first zero-emission aircraft by 2035. Airbus' four sustainability commitments also include respecting human rights and fostering inclusion. On this topic, I'd like to highlight the release of our Human Rights Policy, which defines our approach to human rights and forms the backbone of how we progressively embed respect for human rights throughout our organization and supply chain. As I come to the end of my remarks, I highlight that Hélène should have kicked off the call, especially with a safe harbor statement. I was probably a bit too enthusiastic and started a bit too fast. Hélène, should I hand over to you to end another innovation today, to end by the State Harbor Statement?

Of course. So, the supporting information package was emailed to you earlier. It includes the slides, which we have taken you through, as well as the financial statements. During this call, we have been doing forward-looking statements. And the package you received contains the Safe Harbor Statement, which applies to this call as well, the entirety of the call. And please read it carefully.

So the ex post Safe Harbor applies as well.

Absolutely. So we now start our Q&A time. Please introduce yourself and your company when asking a question. Please limit yourself to two questions at a time. And this includes sub-questions. Also, as usual, please remember to speak clearly and slowly in order to help all participants, particularly yourselves, to understand your questions. So, Clotilde, please go ahead and explain the procedure for the participants.

Ladies and gentlemen, if you wish to ask a question, please press 01 on your telephone keyboard. If you wish to remove yourself from the queue, please press 02 on your telephone keypad. Participants are requested to use only handsets while asking questions. Anyone who wishes to ask a question, please press 01 on your telephone keypad. First question is from Mr. Ben Healan from Bank of America.

Yeah, morning, guys. Thanks for taking my question. So the first would be on the production rate increase. Can you talk a little bit about what's giving you the conviction that the supply chain can meet these higher rates? We've heard over the past couple of months about supply chain pressures all the way down different tiers of the supply chain. So what's giving you the conviction that the supply chain can manage those production rate increases beyond next year? That would be the first one. And then secondly, on the XRP, Is there any color that you can give around exactly what the challenges are that you've faced around the certification? And how should we think about extra costs and risks of penalties now that that entry into service has been delayed? Thank you.

Thank you, Ben. Hope you're well. So on the rate 75, we have the demand side and the supply side. I think on the demand side, it's very strong demand and supported by all what we see happening. Your question, I guess, is more on the supply side. What is giving us the trust with the assessment that we have run with a very large number of suppliers and the most important ones to determine if and when and at what speed this ramp-up beyond 65 was possible. We got a feedback that tells us that it's possible. Obviously, it's always possible to to ramp up beyond a certain number, but in a certain timeframe. And we see that from the rate 65 that we intend to reach mid of next year and 2025, this gives enough time to have a speed of ramp up that is consistent with what the supply chain will be able to deliver. Actually, we see on the short term a lot of challenges and we try to share them with you, but it's also linked to the fact that we are moving already out of the COVID crisis itself. So emerging from COVID created this complexity on the supply chain. And we are well on top, the consequences or the implications of what's happening in Ukraine and the sanctions. But beyond the short term and in the mid term and the long term, that's what we have assessed with the supply chain. And we feel comfortable enough to launch that project. rate increase with enough anticipation. You might remember that I said we wanted to decide around mid of the year. Actually we have accelerated because we had the indicators telling us it was the right moment and we had the conditions for launching that rate increase. XLR, well basically it takes more time and that's unfortunately not completely uncommon in the development of new versions of planes. a bit more time. We are coming close to the first flight. We are now way into the development stage. We have started certification and we are obviously working with the certification authorities to go through the certification process. And we see that it's going to be going a bit beyond the end of 2023. So that's what we are sharing today. When it comes to negotiation, it's customer by customer and each situation is different. So I don't want to comment on this one because I think I'm not capable of commenting and giving a detailed color on that one, just to be honest, on your questions. But that's part of the relationship we have with customers, and this is going to move forward. I mean, what we're announcing today is not changing the picture of the Excel art program as a whole.

Thank you, sir. Next question. Sorry. Next question is? Next question is from Mr. David Perry from GP Morgan. Go ahead.

The first question is this. I mean, I guess all of our analysts and investors were sitting in front of similar spreadsheets. And when I tap these production rates in and I tap in an FX rate of 105, it throws out some interesting numbers. I mean, I'm sort of trending towards 10 billion of EBIT in 2025 in civil alone. So I guess I'd just like to give Dominic the opportunity to tell me, you know, all the things I'm not thinking about, you know, ramp-up costs, inflation, or anything to temper my excitement, perhaps. And then the second question is a much simpler one. Could you just comment on the titanium situation? I don't think you said anything, or maybe I missed it. Thank you both.

Thank you, David. I will take the easier one, the titanium, because basically there's nothing new on that side. We are developing secondary sources moving forward. You know that we are protected on the short and medium term. So that's basically the situation moving forward, and there's no specific alert or color we can give at that stage. So that's the easy part. Dominique, are you excited to take the opportunity to answer the question? Sure, sure.

I mean, you're right on the US dollar. That is actually quite interesting for us. Not so much in the near term because, as you know, we have a kind of rolling hedging policy where we try to dampen the effect of the volatility in the US dollar-euro exchange rate by forward selling the future revenue, so to speak. There is a slide in the deck which I've commented where you can see that for the years 22 through 24, We have about a 20 billion per annum hedge portfolio against exposure. So for the years 23, 24, that's not fully hedging the exposure, but to a large degree. You mentioned 2025. We saw 13.3 billion forward sales as of March 2022. So a considerable part is hedged, and the rate is at 125. But yes, as we approach 2025, and if rates sustain at such a strong dollar, we'll be able to hedge at more attractive rates. And that is potentially a good offset to some of the downsides you're facing on the inflation side. So I think it yet remains to be seen how these two work against each other. But I think it's right to mention these two as a prime point. Otherwise, I think I don't want to give guidance for 2025. You know that we have been guiding the year as we did. And yes, what is right is that the rent bump provides opportunities to further significantly improve the margin.

Thank you, Dimitri.

Next question is for Mr. Tristan Sensen from Exact.

Yes, good afternoon, everyone. It's Tristan from BNP Paribas. And thanks for taking my question. There's going to be two follow-ups on the topics we just addressed. The first one would be on the inflationary pressure at Airbus, but also within the supply chain. Can you just tell us how you approach the topic? and especially how do you deal with the situation when your suppliers themselves are under significant pressure from raw materials and labor and asked at the same time to contribute to a continuous increase in production rates. And, well, the next question would be more on the quality costs or non-quality costs. Could you try to quantify for us or at least quantify the level of non-quality costs in H320 production compared to pre-crisis. What is doing significantly better in us putting a number on that efficiency level compared to pre-crisis. Many thanks.

Dominique, you take the first one on inflation and I'll take the second one. Okay, sure.

So on inflation, I think first I want to highlight that what we've seen in significant energy price spikes and so forth is now embarked. We've seen significant headwinds from that in the bridge from 2021 to 2022, but I think it's taken care of. I'm not expecting any wild leaps there because now the procurement, so to speak, for 2022 is quite well secured. The issue with inflation is the compounding effect over many years. So it's not so much an issue in the near term, but if this very, very high inflation persisted for several years in a row, of course it will compound, and that put pressure on us And we have, of course, prices locked into our backlog. We have certain escalation mechanisms, but they have limits. And then it's right that also our suppliers would come under pressure, and then we have to see on a case-by-case basis how we deal with that. But I think it's a little speculative because nobody knows today whether we will see really high inflation way beyond the inflation targets of the central banks for long. And the cost of quality, I think that's something.

Yeah, so the cost of loan quality, it's a good question, Tristan. Actually, compared to last year, and that's a review we've done recently, we've not seen the non-quality changing significantly. It's very consistent with last year. What is changing tremendously is the ability of our suppliers to deliver on time. And therefore, this is leading to a number of crises, disruptions, and situations we have to manage, which are time-consuming and quite expensive, and that's similar to what we call the acceleration cost, which is the ramp up and the effect of the supply chain that has difficulties to follow. And given the complex environment we're in, as we call it, this is indeed very significant. Well, I'm not able to give an answer to where does it stand compared to pre-COVID. I'm not sure the minute I look at you that we have really looked at it in this way. It's more trying to assess, first to keep it as low as we can. and making sure we have limited impact on the FAD, ideally no impact on the FAD, to not slow down the ramp-up. And also managing the prices one by one, putting a lot of resources as soon as we see the crisis emerging to make sure it can be managed before again it's reaching the FAD and potentially having an impact on the date of delivery of the plane. And that these efforts that is today higher than what it was in COVID, by far higher, I have difficulties to compare before COVID, so I'm sorry I cannot give an answer with substance, but the fact is it's significant. Again, sorry, we are in a comparable situation. I don't have figures to share.

Thank you, sir. Our next question is from Madam Olivia Shirley from Goldman Sachs. Please go ahead.

Hi, good evening. Thank you for taking my questions. I have a few, and I think a lot of questions have already been answered. But just to follow on on the kind of cost inflation piece, obviously we've recently seen the settlement of some of the U.K. strike action resulting in kind of wages increasing by 8.5%. Could you give us a bit more color on sort of how you're seeing labor inflation, particularly as we're in a kind of ramp-up period? And then a second question is, Just on PDPs, could you give us a comment on kind of the trends that you're seeing in PDPs in the first quarter and what you're expecting to see through the rest of the year, I guess, as we're seeing some normalization happening versus what we saw last year? Thanks very much.

Thank you for the questions. I tried to read the first one, and Dominique, I guess you'll take the one on the PDPs. So we are, after two years of... little increase of salaries given the COVID situation, the restructuring, what we call the Odyssey Plan, but it's something that we see as well in the rest of the industry, ramping up again, having delivered a strong 2021 in an environment where it's difficult to find the resources and there's indeed more power on the side of employees in general and also good reasons to act for salary increase when we see the inflation. So it's no surprise that the level of salary increase that we are giving and probably will continue to give is going to be significantly higher than what it was in the previous years. And the challenge for us is to try to come to an agreement that makes sense for employees and makes sense for the company. And honestly, I'm very thankful to what the teams have done in COVID-19. I think they've done a great job going through this very difficult situation and navigating, weathering the crisis we've been through. And therefore, we're trying to find that sweet spot that makes sense for employees and makes sense for employers. But the figures, the numbers are obviously higher. And we are in a situation where, for instance, the inflation in Spain is 10%. So there's a diversity between the different countries where we are located. But in some countries, it's really high. And we want also to make sure our employees remain committed to the company, that they're loyal and happy with us. And again, that's the sweet spot we try to find.

Now, PDPs, if you look into our balance sheet, The high negative variance we had on the working capital on PDPs last year, which was still the overhang from the deferral activities in the COVID crisis, is largely worked off. So we expect that kind of net PDP flow to be more neutral this year. And with the rent, there's also some increase in trade liabilities, which will help to offset the inventory increase in our working capital.

Thank you.

Thank you, madam. Next question is from Mr. Christophe Miller from Budget Bank. Go ahead.

Yes, good evening. I have two questions. The first one is on the profile to get to 75. Are you planning to be at 70 in 2024 or is it a different profile? I will follow up with the second question afterwards.

It's a bit premature to give you the number of daily reads per month in 24 and 25. We intend to reach the rate 65 mid of next year. That's an important data point. And then the 75 in 25. And we do this progressively as we move forward. So no specific figure to be shared on the precise date with the precise number. Except mid of 23, 65.

Okay, thank you very much. The second question is completely unrelated. It's more on defense and space. I was wondering, in the context of cybersecurity being so important right now, what is your strategy with regard to your cybersecurity entity, which appears probably a bit small versus other peers? Could you share with us your strategic vision around this subdivision, I would say?

So first and foremost, we want to be protecting our products, our services, and therefore our customers. So there's a lot of our cybersecurity resources, skills, talents, capabilities that are focused on protecting those assets and therefore serving customers with cybersecurity solutions. And that's a very important part of what we do. On top, we are same cyber services to third parties, to external customers, and that's also something we do, and that's what we do in our cybersecurity business, which is embedded in our Airbus defense and space division, because then those cybersecurity services are addressing mainly and first and foremost our governmental customers, but also customers with whom we work on the defense, on the space, on the military aircraft, so it's targeted to those customers. Moving forward, we want to be doing more of this, I mean, of protecting our customers and serving our customers, and this has to be seen in combination. We are not trying to be bigger than others in cyber services to third parties. We want to be excellent on what we do, on our platforms, on our other services, and again, serving these critical customers as well as we can, where it makes sense.

Thank you, sir. Next question is for Mr. Douglas. Sir, please go ahead.

Good evening. Thank you. You know, the first question is on some of the deliveries you've had where you actually haven't completed a physical delivery, yet you've transferred tidal and countered this delivery. We saw this Aeroflot issue with the two airplanes. And so what I'm interested in is, you know, I believe have some like that with China. You know, how many airplanes do you have in that state, in a sense, not physically delivered? And do you see any risk around those airplanes as we go forward, those deliveries? That would be the first question. And then the second is a follow-up on the A321XLR. You know, if you go back about three or four years ago, there were questions discussed around safety with customers. I know the safety of this new design with the with the fuel tank. Was it a surprise to you to see this come up with EASA now? Is it something that also is being done in parallel with the FAA, given that the FAA has become much deeper in the scrutiny of a lot of certifications lately?

Dominique, do you want to take the question on the ADA?

Yes, sure. So the advanced delivery agreements where basically we have a situation, for instance, when a lessor is taking delivery but the customer is unable to pick it up at that point in time is a typical example. Now we have the Aeroflot also as an example. It's a situation where really the full aircraft price is paid, where all the acceptance process is run through in terms of inspection and acceptance by the customer. So it's purely a kind of mechanical automatic transfer at a pre-agreed date which needs to happen. We don't have a lot of these aircraft in storage. The number is fluctuating depending on certain customers, but I do not consider it as a material risk. I think it was truly exceptional because of the so-called frustration of the contract to now simply physically do what they're committed to do, to simply hand that thing over to the customer. It's just frustrating because of the sanctions.

It's a very specific case into the fact that The aircraft was stayed, the transfer of title was done, but the physical move was no longer possible because of sanctions preventing that physical move, and that's really exceptional. On the XLR, indeed the EASA and the FAA are cooperating and working together, and there is a primary certification authority that for Airbus is EASA, so we are primarily working with EASA. And we're moving forward in the development and the certification process, like we do for other products. And there are some modifications that are quite conventional, others which are a bit more specific to this variant of the plane. Basically, that's the classical development and certification process that we see moving forward. And fortunately, in those situations, it's not rare and that we have to take more time to fully comply and to demonstrate on paper than with current tests and with site tests the compliance of what we design and produce with the requirements. That's basically where we stand today. Nothing that I would consider exceptional. It takes a bit more time than what we anticipated at the beginning.

Thank you, sir. Next question is from Mr. Robert Stalart from Vertica Research. Please go ahead.

Thanks so much, and good evening.

Good evening.

Hello. A couple of questions from me. First of all, Guillaume, you mentioned China as a risk. And I was wondering if you'd seen any actual delivery delays as yet from Chinese customers and just maybe an idea of how many planes you have scheduled for delivery in 2022. And then secondly, on the XLR, just to follow up, do these changes potentially add weight to the aircraft and impact the targeted range of the plane? Thank you.

I think we have sort of the same number of deliveries planned for 2022 than what we had in 2021 for the Chinese customers. So in numbers, which is a smaller proportion given that we ramped up the delivery in 2022 compared to 2021. Yes, China is a risk because of the Omicron situation. And we don't know how long the measures, the restrictions, the lockdown and the quarantines which are in place today will last. And it has an impact on the short-term ability of the alliance to come and take delivery, but also on their own financial situation if the very low air traffic that we observe today in China keeps extending to the second quarter and the third quarter. That's why we are monitoring the situation in China very carefully. The only good data point we have is the way it was managed in 2020. And you remember that we were in a rather similar situation that was recovered later in the year and finally we found our way forward. And to some extent as well last year. So that's why we see it as a risk, but it's a kind of risk which has been managed in the previous years, and therefore we need to see how it plays out this year. On the XLR, we are in the development of the product. Is this impacting the weight or the range? I don't know what you mean by this. Is the development of the plane, is the development of a variant? We have taken commitments to our customers when it comes to the flight and mission performance, and we want to stick to those commitments, and there's nothing to be reported here. That's just the time it takes to get there that is a bit more than what we were expecting before.

Thank you, sir. Next question is from Mr. Charles Armitage from CCC. Please go ahead.

Yes, good evening. Just looking at the sort of puts and takes in the quarter, at the end in your full year presentation, I think that you're Expected FX rate was 124 for Q1, and it came in at 121. So that's probably 100 million tailwind. You had 400 million writebacks. You had 200 million negative from sanctions. So that's sort of 300 million tailwind, if you will. And then you've got the other couple of things just would like some comments on is the competitiveness, the increased competitiveness, which is presumably permanent, but also the cost containment. which you mentioned would gradually decrease. Can you give any idea of the headwind going forward as that cost containment decreases, please?

Sure, Charles. So, first of all, Q1, as you rightly say, reflects 4.2 billion of the Ukraine crisis, but we have to stress that that is only kind of the immediate impact on the balance sheet. There are certain effects which concerns remain to do. They remain three quarters of the year, which are actually more significant than the 0.2 billion. So there is more to come and headwind from missing deliveries that were planned but not materializing to Russia, for instance, and also some impact on space business, as we mentioned. So that cannot be extrapolated, so to speak. So there will be more. It's not a pure one-off, but there will be more headwinds during the year from that. So we will need the outperformance, which I think you referred to in the Q1, to mitigate the negative impact from the Ukraine crisis. And on the other hand, the 0.4 billion of this remeasurement in pension liabilities is a clear one-off, which will only occur once. So from that perspective, I think, as we said, the guidance is really, has become more challenging and the risk profile has been more acute or by the Ukraine traders.

Maybe your last question?

Last question is from Mr. Harry Breach from CFO. Go ahead.

Yes, thank you. Thank you for taking my question and good evening, Guillaume and Dominic and Hélène. Just two simple ones, hopefully. Maybe, Guillaume, the last couple of months since we spoke for the full-year earnings clearly there have been one or two geopolitical events which can change how customers think about fleet planning. So can you tell us how you're seeing the current level of sales campaign activity for Airbus? And then completely separately, just thinking about the inventory of completed but undelivered aircraft, Dominic, my math is bad at the best of times, but if I think about the number you talked about in February, which I think was a little bit under 100, and the deliveries in the first quarter and your production, should we be thinking about around 100 units at the moment that are completed but undelivered? And can you give us your best idea today, given what's changed in recent months, about when that 100 units might return to a more normal level, which I think in the past you guys have said might be closer to sort of 30 or 40 aircraft.

So Dominique will answer your second question, and I will take the first one, and I will be quick on the first one. The momentum on the sales campaigns remains very strong. And yes, a number of events have taken place, still we see a very strong momentum.

So on this undelivered finished aircraft, we have deliberately been kind of not extremely vocal about that as we progress because it was really a thing that was making sense to comment when the demand side was the problem for taking the delivery. Now it's more coming to the supply side and that means that in some aircraft you have basically Maybe a part is missing. So with the supply side becoming more of an issue, the number becomes actually meaningless. I think you should really focus then on the inventories we disclosed and all that. But it has not materially changed, I would say, from the levels we had in the prior course.

This is a conference call for this time. If you have any further questions, please send an email to Philippe, Gusta, or myself, and we will get back to you as soon as possible. Thank you, and I'm looking forward to speaking to you again soon.

Thank you, everyone. Bye-bye. Have a good day or a good evening. Thank you.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.