Airbus Se Ord

Ladies and gentlemen, thank you for standing by. Welcome to the Airbus full-year 2024 results release conference call. I am Sandra, the operator for this conference. Please note that for the duration of the presentation, all participants will be in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to your hosts, Guillaume Fourie, Thomas Zepfer, on Alain Legorge. Please, go ahead.

Thank you, Sandra. Good morning, ladies and gentlemen. This is the AVUS full year 2024 results release conference call. Guillaume Faurie of CEO and Thomas Topfer of CFO will be presenting our results and answering your questions. This call is planned to last around one hour and 15 minutes. This includes Q&A, which we will conduct after the presentation. This call is also webcast. It can be accessed via our homepage by clicking on the dedicated banner. Playback of this call will be accessible on our 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 appears in the presentation slide, which applies to this call as well. Please read it carefully. And now, over to you, Guillaume.

Thank you, Hélène. Good morning, everyone, and thank you for joining us this morning for our full year 2024 results call. I'm happy to be here in Toulouse with Thomas and Hélène and to run you through our results. In 2024, we experienced another very strong order intake across all businesses, confirming the demand and positive outlook for our industry and also for products and services. At the same time, we adapted to our operating environment, concentrating on what matters most. We refocused our efforts to progress on our priorities and secure our trajectory. On defense and space, we took further steps to transform the business and the organization. The extensive technical reviews of our space programs have now been completed. On space systems, we progressed on our three-step approach. We have fixed what I would call our foundation. We are executing our turnaround plan. And third, finally, we are evaluating strategic options. And in that sense, We have started exploratory discussions with Thales and Leonardo, and I will comment on it later. On commercial aircraft ramp-up, we prioritized activities and allocated our resources accordingly. We are upskilling our teams, collaborating closely with our suppliers while keeping a laser focus on quality and safety. In a nutshell, we are progressing in an environment that remains complex and, as you can see yourself, fast changing. In that context, we delivered 766 commercial aircraft in 2024, including 269 in the last quarter, a year-on-year annual increase of plus 4%. This includes the very first XLR deliveries, A321XLR, deliveries, unlocking new opportunities for our customers. We delivered on our revised guidance, and I consider it a real achievement in the environment I described. I am really proud of what the teams have achieved, and let me also underline the dedication of all our partners to come to that result. Now, looking at our 2024 financial performance, our EBIT adjusted stood at 5.4 billion euros, reflecting our commercial aircraft deliveries and the solid performance at helicopters. It also reflects the 1.3 billion euros of charges in our space programs for the full year, including a 0.3 billion euro charge recorded in Q4, resulting from the completion of the technical review. And Thomas will come back to it later. Our free cash flow before customer financing was at 4.5 billion euros, reflecting the strong performance in all businesses. These financial results, with a net income of €4.2 billion and our confidence in our future financial performance, support our 2024 dividend proposal of €2 per share and a special dividend of €1 per share. With all that in mind, let's take a closer look at 2024, starting with commercial positioning. So let's now look at our commercial environment, starting with commercial aircraft. In 2024, travel demand remained robust, continuing to exceed historical records. This year was a successful one on the commercial front after the 2023 record year. We had customers reordering the same family of aircraft, while some of our product lines welcomed new customers. In 2024, we booked 878 gross orders, including 211 in Q4. On the A220, we booked 17 gross orders, gaining four new operators. Looking at the A320 family, we booked 637 gross orders, including 180 in the fourth quarter, bringing our backlog to 7,210 aircraft. Thereof, more than two-thirds are for the A321. Moving to the white bodies, we recorded 224 gross orders underpinning the continued momentum for our white body family. Net orders amounted to 826 aircraft, including 52 cancellations, and our backlog in units increased to 8,658 aircraft at the end of December, reflecting a book to build above one. At group level, Our backlog in value increased to 629 billion euros in 2024, mainly reflecting the book to build above one I mentioned before for all divisions and the strengthening of the US dollar. Looking at helicopters, I see 2024 as an exceptional year for Airbus helicopters. We booked 450 net orders compared to 393 in 2023, with a book to be above one, both in units and value, highlighting a strong demand for platforms. And we also secured a good order intake on services. This includes the remarkable performance of the so-called Super Puma family, or the H225 family, for which in the fourth quarter, we signed a contract with the Dutch Ministry of Defense for 12 H225Ms. We continue to see positive momentum in both the civil and military markets, and we remain focused on securing new business opportunities in both our home countries and on export markets. Then in defense and space, in 2024, our order intake stood at 16.7 billion euros, up 6% year on year, corresponding to a book-to-bill of around 1.4. It is the record order intake, and this is for the second year in a row, while being more selective on our biddings and more prudent on the risk profiles. I am obviously very satisfied with this. I see it as a proof that we have the right products and services in the current environment and for our customers. Key orders recorded in Q4 reflect a strong momentum across all business lines, and in particular on the so-called air power side. On Eurofighter, we are proud to highlight that the Spanish government has signed the Alcon II contract for the acquisition of 25 Eurofighter aircraft to be assembled, tested, and delivered at the Airbus Cretaceous site. In addition, Italy also placed an order for up to 24 Eurofighters. With this contract, both countries will further expand their existing fleet. Concerning the F-400M. Airbus Defence and Space signed two strategic contracts with the Organisation for Joint Armament Cooperation, the OCAR. The first is the Global Support Services, so-called GSS-3 contract, which provides a full range of tailored services, and the other being the so-called Block Upgrade Zero contract, which represents the first upgrade of the A400M's operational capabilities beyond the scope of the original launch contract. On Space, We have been awarded a contract by UTELSAT to build the extension of its one-web low Earth orbit LEO constellation in December. Here, let me recall our plan. Now we have completed the technical reviews, as I said earlier. We continue to execute our turnaround plan, and notably with the organization and the workforce adaptation. We have started what I call exploratory discussions with Thales and Leonardo. These discussions, which are preliminary and non-binding at this stage, aim at assessing different scenarios to consolidate and strengthen the European space sector and add value to the main stakeholders of this industry. And now, Thomas will take you through our financials. Thomas.

Well, thank you, Guillaume, and hello, ladies and gentlemen. Thank you for joining our call. I'm now on page six of the presentation, and I'll take you through our financial performance. So as you can see, our full year 2024 revenues increased to 69.2 billion euros, which is up 6% year-on-year, and it's mainly reflecting the number of deliveries of commercial aircraft and helicopters and also higher volume in our air power business. On R&D, as you can see on the right-hand side of the page, our expenses stood at 3.3 billion euros in 2024, stable compared to 2023. And indeed, two factors compensated for the slight increase that we had initially anticipated. First, the LEED initiative, which I repeat to say is not a cost-cutting program, but which aims at prioritizing activities and projects to focus on what matters, That also resulted in a slightly lower R&D expense for the year. And secondly, the earlier capitalization of our development costs in our commercial aircraft business, which we initiated in the third quarter in order to align with accounting standards, also resulted in lower R&D expenses with, of course, the opposite effect on our capex. And you remember that I mentioned that effect already in Q3. And now if you look forward, R&D expenses are expected to only marginally increase in 2025, consistent with the lead prioritization initiative as you have already observed it in Q4. On our EBIT adjusted, our full year 2024 EBIT adjusted decreased to 5.4 billion euros from 5.8 billion in 2023. And so let's start with a look at 2023 first. As you might remember, 2023 benefited from the progress that we made on our compliance topics, which allowed us then to release provisions for an amount of €0.1 billion in commercial aircraft. But 2023 numbers also contained updated assumptions on some long-term contracts in our space business, resulting in a charge of €0.6 billion. Now, in 2024, the positive contribution from the higher commercial aircraft deliveries was partially offset by investments to prepare for the future, notably the excess workforce, as well as a slightly less favorable hedge rate. And the underlying performance was also supported by the solid performance of our helicopters division. Now, in Q4, And as planned, we completed the in-depth technical review of our space programs, notably with a major program that remains to be fully assessed. And that resulted in a charge of 0.3 billion in the last quarter, mainly from the update of key assumptions. And that brings the total charges for the full year to 1.3 billion euros, which obviously is then the major driver of the decrease in our EBIT adjusted compared to the previous year. And this charge reflects the extensive and profound work done by the team, program by program, leading to revised assumptions and resulting in lowering our risk profile looking forward in a business that remains inherently complex and with increased competition. So let me recall here that this charge accounts for past, present, and also future profitability, and hence only a portion of the charge actually relates to the current period. and that therefore two-thirds is probably the right order of magnitude to be normalized in your models. I'll focus now about delivering on our plan in a simpler organization with end-to-end accountability and leveraging the reuse of technologies. Now, while on defensive space, we are progressing in the discussions with our social partners with regard to the division reorganization and workforce adaptation. and a restructuring provision is expected to be recognized once the necessary conditions are fulfilled, and the amount is expected to be around 0.2 billion euros. Now, coming to the EBIT adjustments, which were slightly negative in the full year 2024, they included, as you can see on the page, a positive 101 million euro impact from the dollar working capital mismatch and balance sheet devaluation of which €247 million in Q4. It included a negative €121 million related to the A400M, of which negative €118 million in Q4. It also included a positive €51 million related to the gain on Airbus OneWeb satellites linked to the acquisition of the remaining 50% of the joint venture, which we recorded already in the first quarter. Then there is a negative 40 million related to the recently announced termination of the Airbus Beluga transport business. And finally, another negative 41 million of other costs, including compliance and M&A, of which negative 31 in Q4. And so that takes our full year EBIT reported for 2024 to 5.3 billion euros. As you can also see on the page on the right-hand side, the financial result was a positive 121 million and mainly reflects the revaluation of certain equity investments and the evolution of the U.S. dollar, partially offset by the interest result and the revaluation of financial instruments. If you talk about tax, our tax rate on the core business continues to be around 27%. And now with respect to the French surtax, we confirm our previous assessment of an impact of around 300 million euros, but we now expect that it will materialize in 2025, both with respect to the P&L and also with respect to the cash flow. Our effective tax rate for 2024 is 25%, and that includes the tax effect on the revaluation of certain equity investments, as well as the review of deferred tax positions and tax risk updates. And so the resulting net income is 4.2 billion euros with earnings per share reported of 5.36 euros per share, and our full year 2024 EPS adjusted stood at €5.05 based on an average of 790 million shares. And now based on this result and our confidence in our future financial performance, we will propose for 2024 a dividend of €2 per share plus a special dividend of €1 per share, which we believe is the most appropriate tool to reinforce our commitment at this point in time. Now, on our US dollar exposure coverage, and I'm on page eight of the presentation, in 2024, 23.2 billion US dollars of forwards matured with associated EBIT impact and euro conversions realized at a blended rate of $1.21 versus $1.20 in 2023. And in the financial year 2024, we also implemented $14.3 billion of new coverage at a blended rate of $1.11. So as a result, our total US dollar coverage portfolio in US dollars stands at $82.8 billion with an average blended rate of $1.21 as compared to $91.7 billion at $1.23 at the end of 2023. And so indeed, as you can see, against the backdrop of the market conditions, we decided to decrease our US dollar coverage by roughly 9 billion US dollars in 2024. What I should also say is that our portfolio is currently being adjusted by implementing some rollovers to reflect the delivery target for 2025 and also the delivery profile, which we expect to be back and loaded. Now let's have a more detailed look at our free cash flow, and I'm on page nine of the presentation. Our free cash flow before customer financing was 4.5 billion euros in 2024, and this mainly reflects the level of deliveries as well as the commercial momentum across all our businesses, resulting in a healthy PDP inflow, while the planned inventory buildup reflects the ramp up across the programs. The A400M continued to weigh negatively on our free cash flow, and our full year 2024 CAPEX was negative 3.7 billion, and this obviously reflects the investments in enhancing and upgrading our industrial system and also the change in development cost capitalization that I talked about earlier. To support our ramp-up, we expect CAPEX to slightly increase in 2025. The free cash flow was 4.5 billion as well, with a very minor impact from customer financing. And in that context, the aircraft financing environment, in our view, remains strong and competitive. And we currently expect sufficient liquidity from diverse sources to finance the 2025 deliveries. And to round it up, our net cash position stood at 11.8 billion euros as of the end of December, also supported by the strengthening of the dollar towards the year end. And our total liquidity is now at around 35 billion euros. And with that, I would like to hand it back to Guillaume.

Thank you, Thomas. A beautiful picture of the 225M in the meantime. So let's start with commercial aircraft. Page 11. In 2024, as already said, we delivered 766 aircraft to 86 customers. Looking now at the situation by aircraft family. On so-called narrowbodies, we delivered 75 A220s and 602 A320 aircraft, of which 361 A321s, representing 60% of deliveries for the family, so 60% of A321s for the family. On A320, we continue to ramp up towards a rate of 75 A320 family aircraft per month We are very pleased that our newest aircraft, the A321XLR, entered into service. The first A321XLR was delivered to Iberia in October, followed by two more to Aer Lingus. The A321XLR brings unique capabilities in terms of range, economics, and environmental efficiency. Great product. We delivered 89 widebodies, of which 32 A330s and 57 A350s, including first deliveries to new operators. On the A330, we are now stabilizing at a monthly production rate of around four per month. Specific supply chain challenges, notably with spirit aero systems, are currently putting pressure on the ramp up of both the A350 and the A220. On the A350, we continue to target the rate 12 in 2028. So again, no change here. And we are adjusting the entry into service of the freighter variant, which is now expected in the second half of 2027. And here it's a change. And on the freighter, the first flight test aircraft will enter the final assembly line this year. On the A220, we continue towards a monthly production rate of 14 aircraft in 2026. So in a nutshell, we are progressing on our ramp-up trajectory. We are still facing some specific supply chain issues. The tensions on engines for narrow-body persist, notably with CFM, and this is already affecting us as we begin to have the so-called gliders, meaning aircraft waiting for their engines to aircraft being fully assembled but waiting for their engines. This will result in a low delivery number for Q1. This is something we saw coming already last year. And Q1 will be lower than last year. We expect this situation to continue until the summer before it normalizes in the second half of the year. As for cabin and equipment, it is structural. resulting from the air traffic recovery and the demand for customer upgrades. On aero structures, and as previously said, our activities are also affected by the supply chain challenges. On spirit aero systems, we will provide more color on the ongoing acquisition later. Now let's look at the financials for commercial aircraft business. Revenues increased 6% year-on-year, mainly reflecting a higher number of deliveries. EBIT adjusted increased to 5.1 billion euros from 4.8 in 2023, with the increase in deliveries being partially offset by investment for preparing the future, including some expert workforce. Looking at helicopters, in 2024, we delivered 361 helicopters, which is 15 more than in 2023. Revenue increased 8% to 7.9 billion euros, reflecting higher deliveries, a solid performance across programs and services growth. As a result, EBIT adjusted increase to 818 million euros and the profit margins to that 10.3% in line with our ambition for sustained profitability while maintaining our commitment to sound execution and continuous improvements. And let's complete the review with defense and space. In 2024, revenues increased 5% year on year to 12.1 billion euros, mainly driven by the air power business. EBIT adjusted reflects the 1.3 billion euros of charges in space described by Thomas. Here, I would like to recall that 2023 also included 4.6 billion euros of charges. Both impacts resulted mainly from the update of the estimates at completion assumptions, the EAC assumptions in our space programs. I'd like to recall what Thomas said earlier. With the extensive technical review now completed, the focus is now about delivering on our commitments in the space business, in a business that remains complex. On A400M, We delivered seven aircraft in 2024, including the first for Kazakhstan, an export customer, and ninth country to operate the aircraft. In 2024, an additional update of the contract estimate at completion was performed and a net charge of 121 million recorded, affecting mainly updated assumptions regarding the new contract amendment with the launch nations and OCR and risks in the production planning. In light of uncertainty surrounding the level of aircraft orders, the company continues to assess the potential impact on the program's manufacturing activities and risks on the qualification of technical capabilities and associated costs remain stable with no major variation compared to 2023. And yes, before moving to the 2025 guidance, Thomas will give you more color on Spirit Aero Systems.

Yes, happy to do so. And I'm on page 14 of the presentation. So on Spirit Aero Systems, and as we explained in our H1 call, we signed a binding term sheet agreement. And this is what I would call a defensive move in order to secure both the immediate operations and the future of major Airbus work packages. And it also provided more certainty to the employees and the supply chain contributing to Airbus activities. Since the term sheet signature, we have progressed on our due diligence while assessing the most suitable ways to integrate each production site into our operating model. And because of the number of stakeholders involved, more time is required to finalize the transaction. So as a consequence, and as we gain more in-depth knowledge of the operational situation, the financial outlook is more challenging than what we had originally anticipated. and indeed to support the A350 and the A220 ramp-up, we will need to invest in order to increase production capabilities and drive operational efficiency. So therefore, let me say a few words about the expected financial impact based on preliminary assumptions. Assuming a closing date mid of the year, the 2025 impact on EBIT adjusted should be roughly neutral. When it comes to EBIT reported, it will likely have a mid triple digit positive impact, mainly due to the deal compensation to be received from Spirit Aerosystems. Finally, the net cash impact is expected to be roughly neutral as well, as the compensation will offset the negative free cash flow impact before customer financing. Now in 2026 and 2027, we expect a low triple digit negative impact on EBIT adjusted, and up to a mid-triple-digit negative impact on free cash flow before customer financing per year. And our teams are working hard to deliver this project, which is clearly one of our key priorities for 2025. And with that, Guillaume will now take you through our guidance.

Thank you, Thomas. So page 16, as the basis for the 2025 guidance, the company assumes no additional disruptions to global trade or the world economy, air traffic, the supply chain, the company's internal operations, and its ability to deliver products and services. And let me be specific, the guidance excludes the impact of potential new tariffs on the company's business. The company's 2025 guidance includes the integration of certain Spirit Aerosystems work packages based on preliminary estimates and closing assumptions as of 1st of July, as just explained by Thomas. On that basis, the company targets to achieve in 2025 around 820 commercial aircraft deliveries, EBITDA speed of around 7 billion euros, and free cash flow before customer financing of around 4.5 billion euros. And we will conclude with Our key priorities on the slide 17, we are committed to serving our customers in 2025 while maintaining our strong commercial position across all businesses, which represents a source of strength and stability. In doing so, we'll continue to focus on the commercial aircraft ramp up and the defense and space transformation. When it comes to the ramp up, we are improving our ability to deliver on time and quality. We will continue shaping our industrial systems, notably with integration of spirit systems, and managing a deep and interdependent supply chain with a complex and ever fast changing environment. Put simply, we will have to be at the top of our game in 2025. On the transformation of defense and space, We will keep executing our turnaround plan and pursue the workforce adaptation in close cooperation with our social partners while looking at the different scenarios to create scale in the space business. These priorities are enablers for profitable growth and our ambition to lead the development of sustainable aerospace. Climate change is one critical challenge for humanity and 2024 was the warmest year on record globally. At Airbus, we aim to decarbonize aviation over the long term. We will therefore continue to improve the environmental performance of our products and operations, as well as act as a catalyst in the development of sustainable aviation fuels. On hydrogen, we have the ambition to bring a commercially viable, fully electric, hydrogen-powered commercial aircraft into service. This is not changing. We believe fuel cell technology to be the most promising to fulfill this ambition. The scaling up of the hydrogen ecosystem is challenging and is unfortunately progressing at a slower pace than we had previously anticipated. The scalability of fuel cell technologies towards a commercially viable product will also require more time. This is what we have learned through our efforts in the past years. While a commercially viable product is now expected to come later than 2035, we will use this additional time to further develop the performance of the fuel cell propulsion and the liquid hydrogen system technologies. And with all of this in mind, we are entering 2025 with focus, determination, and lots of positive energy. We are now ready to take your questions.

We will now start our Q&A session. Please introduce yourself and your company when asking a question. Please limit yourselves 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 ourselves, to understand your questions. So Sandra, please go ahead and explain the procedure for the participants.

We will now begin the question and answer session. If you want to ask a question, please press star 1 1 on your telephone keypad. We will now take the first question. The first question is from the line of Benjamin Hillen from Bank of America. Please go ahead, sir.

Yes, morning, guys. I hope everyone is well. Thank you for the question. Can you talk a little bit more about SPIRIT and the challenges in the second half of the year and just kind of outline a little bit? What actually is happening? What are the challenges? What are they struggling with? Is it labor? Is it capacity? Just a little bit more color on that. Thank you.

What are the challenges? I think there's two things. Let me start with the operations of SPIRIT. As you're well aware, There was a major strike at Boeing, which obviously also affected Spirit because Boeing is a major client, and that led to more disruptions in the work of the company, which is also not helpful for the work packages that we want to acquire. And therefore, more support was needed to make sure that Spirit is on a stable path, both operationally and also financially. Secondly, as we are of course diving deeper into the work packages, we have a better picture of what is the needed investment that we have to make to bring SPIRIT to a level that it can fully support the ramp up that we're planning for the A350 and the A220. And that updated knowledge is now reflected in our assumptions. And last but not least, as you can observe, it does take some time to get to a final signature and then also closing of the contract. I think we're in a good way. But of course, with more than two parties involved and a quite complex transaction by nature, this simply took some time. But again, I would say that we're on a good track, making good progress here, and therefore We have incorporated in our guidance the assumption, which I think is very realistic, that we will come to a closing by the middle of the year.

Okay, thank you. And another question, I guess one for Guillaume. Guillaume, you've talked about space and the discussions that you're currently in with Thales and Leonardo. What is a good outcome for you from these negotiations? What are you hoping to achieve? Is it to create... a European champion which Airbus can be part of? Is it to consolidate the other assets yourself? Can you just give us a little bit of color light? In a good scenario, what do you see as the outcome of these negotiations? Thank you.

Good morning, Ben. Very early for you. What we expect is to gain scale and speed by consolidating the business. We are in businesses where scale matters, in businesses where technologies go very fast, so you need to invest. And to invest, you need the scale to have the reasonable impact on the recurring cost. You need to have scale on the production as well. So we are in a situation where some US players are disrupting the ecosystem are going at scale on new technologies on constellation we have in europe at airbus but also looking at the telesalina space and telespacio we have technologies in some cases even better ones but we are missing the scale that we need to be competitive in this new environment so we want to create a scale we want airbus to have a stake in a large company we would be happy if the end result looks like something like the MBDA model where we have a significant share with others in a business that can prosper that can grow that can invest and that can be successful on a global scale now we are looking at different scenarios and we are not at a point where we can fully answer the questions of what it will look like but again What do we want? We want scale and speed in this business. We want to leverage the technologies, the competencies we have. And for this, we need to be up to global competition, which is indeed now with much more dollars and much more speed than ever.

And just a very, very quick one. Is there any chance that Ariane could be part of that? Is there any chance that Ariane could be part of that negotiation as well?

The ongoing effort to come to a different result is on satellites and satellite services. Thank you.

Thank you.

Thank you. The next question is from Mr. Tristan Sanson from BNP Paribas. Please go ahead.

Yes, good morning, everyone. Thank you for taking my questions. The first one is on raw materials. Can you, Guillaume, give us a quick view on how you see the raw material supply situation in 2025, and how do you think it's going to support the ramp-up plans for the years to come? And the second question is a quick one, but can you confirm that on the Spirit, the financial of the Spirit deal, The revision of the cash cost related to integration of the assets are in the range of about a billion over a period of three years. Is that the right magnitude? Thank you very much.

I will let Thomas answer the second question. I'm not sure I fully understood the question myself. On the first one, raw material, while it's been a source of worries and challenges in the past years, especially in the wake of COVID and the war in Ukraine, that has normalized in the meantime. And I don't see raw material on my list of critical bottlenecks for 2025.

So on spirit, I know that maybe the financial impact is slightly complicated to bring across. So the situation is that We will receive a compensation for taking over the work packages, but this will not be reflected in our free cash flow, but only in our net cash position. But it will compensate for the negative free cash flow in 2025, so therefore the total cash impact, if you look at our net cash position 2025, will be neutral. But as we indicated in the slide, we do expect a further cash need in 2026 and 2027 of up to a mid-triple-digit negative impact per year in each of those two years. So I think coming back to what you said, that then can add up to something which is below a billion for the timeframe that we indicated. That's very clear. Thank you, Thomas.

Thank you.

Thank you.

Thank you. The next question comes from the line of Mr. David Perry from JP Morgan. Please go ahead.

Yes, good morning, Guillaume and Thomas. I just wonder if you can help us a little bit with the delivery guidance. I know you say around 820, but let's just assume it's 820, it's 54. extra planes. Can you just help us think about the different models? I mean, A350 deliveries were actually down in 24. So are they expected to pick up again in 25? And what's it implying for the growth in the A320 in particular? Thank you.

Good morning, David. We would like to split by model because that's a fixability we use along the year to reach the guidance and we always have up and downs and challenges here and there and we count on the volume to not be too wrong when we give a guidance at the beginning of the year now the only well indication i can give you is that we're struggling with the ramp up on the a350 and the a220 against the backdrop of one stronger bottleneck, which is the spirit aerosystem, and that's why we're speaking so much about spirit aerosystems. So our trajectory, our ramp-up trajectory on those two programs is significantly impacted in 2025 by these difficulties.

Okay. And do you think deliveries will actually increase on those two models?

I don't want to answer that question today, David, but the ramp-up is under pressure.

Okay. All right. That was my only question for today. Thank you. Appreciate it.

Thanks, David.

Thank you. The next question is from the line of Ross Law from Morgan Stanley. Please go ahead.

Yeah. Morning, everyone. Thanks for taking my questions. The first one is just on engines. What exactly is driving the lower supply in H1? Is this just simply an allocation issue between OE and aftermarket? or is there anything else going on with the engine suppliers? And then just on the special dividend, it's going to cost you around 800 million euros in total, but net cash was 11.8, so about 1.8 billion above the 10 billion threshold. So why wasn't the special dividend slightly higher? Are you saving additional cash for something in particular? Thanks.

Thank you for the questions, and I will hand over the latter to Thomas. On engines, yes, as well an important one. I would say no specific comments on the wide bodies and we get from Rolls-Royce what we need for 2025 and onwards. There are challenges on engines for our narrow bodies. On the GTF of Pratt & Whitney, we are still limited by the aftermath of the metal power issues two years ago and the trajectory that was redefined in two ways of negotiation with them. I think as far as I remember in 2023, they are on trajectory, but we knew this would come with less engines for new aircraft to support as reasonably good as possible the in-service fleet, knowing that there's a large number of aircraft which are on the ground because having their engines in the recall campaign for this technical issue, this production issue. So this is low, but I would say more or less as planned or even more unplanned. But it's very different for CFM. CFM encountered in the back end of 2024 several issues, production issues, and one also linked damage to one of the plant of their supplier in Florida in the wake of the hurricane that took place. So they found themselves with a very critical situation on supply of some parts that impacted both aircraft for aircraft manufacturer and to support the fleet. That was the source of a lot of arm twisting between the stakeholders. End of last year for the allocation of engine, CFM supported us in the last month to help deliver aircraft to our customers, but we knew there would be some missing hardware this year, beginning of this year, and this is impacting us and our customers. So we are in that situation, and there is a sort of normalization that is planned around So that's what we tried to explain in the call earlier. So we have different situations for different aircraft.

On the dividends, let me just recall we said once we achieve the 10 billion net cash threshold, we would look into the potential for the shareholder returns. And that's exactly what we have done last year and that's what we're doing also this year. But we also said it would not be a mechanistic exercise in terms of cashing out exactly the overshooting amount. So we are looking into the factors, obviously, that matter. One of them is the fact that a non-insignificant part of the overshooting comes from a pure translation effect of our dollar cash reserves, which are translated into euro. And therefore, we felt the right balance would be the one euro special dividend per share also for 2024.

Understood. Thanks very much.

Thank you. The next question is from the line of Chloe Lemarguet from Jefferies. Please go ahead. Yes. Thank you for taking my question.

I have two, if I may. The first one is on the additional charge in defense and space. So it seems like it's not linked to the completion of the review in this one project that remained outstanding. So could you please confirm what really drove that revision and your level of confidence you now have fully de-risked the space business? And the second one would be on the 2024 to 2025 EBIT bridge. I was wondering in particular if you could split out what you factor in for potential ramp-up cost and inflation, please. Thank you.

Yes. On the chart, let me be very clear. We did complete the review of all our space programs. We said last time on the call that there was one major program still outstanding where we only had built a top-down assumption, but we had to go through the program in detail, bottom-up, to fully review what we have in our portfolio, and that we have done. So the review is complete. It was very detailed. and therefore I would really say that this exercise is now behind us and as Guillaume said we can now completely focus on what matters in the business which is taking orders with a good risk profile, focusing on the execution and the delivery and therefore I would say we're done with the cleaning exercise Which, however, does, of course, not mean that it's a business without any risk just by nature. I think we will always have some ups and downs, but the exercise of 2023 and 2024 is behind us. And with respect to the bridge in terms of inflation from 2024 to 2025, yes, we're still assuming a small amount of inflation. Remember in the past we said it could be up to $200 million. I would probably say that it could be slightly less than that in 2025.

And ramp-up costs? Anything that you factored in?

I mean, we're factoring in the normal ramp-up costs for getting to our weights, but I think this is not a special item in the bridge. So it's part of the inflation and it's part of the excess workforce that we have in 2024. We will continue, as you've seen, or as you might have seen, we hired 9,000 people in 2024. However, almost 50% of that is scope changes, so the real like-for-like increase is probably more like 5,000 FTEs, and we're expecting that we will continue to hire people, however, at a lower pace in 2025 relative to 2024. And if you want to call that ramp-up cost, that is probably what we have in our plan for the current year.

Very clear. Thank you. Thank you. The next question is from the line of Doug Harnett from Bernstein. Please go ahead.

Good morning. Thank you. On the A350, when you look at the slower ramp right now, can you Can you describe how much of the effect is coming from issues at Spirit versus issues with interiors, which have been continuing for some time? That's a first question. And then second, we're in an uncertain environment right now with respect to U.S. tariffs. Can you talk about how you're thinking about the potential impact on Airbus? And are there some steps that that you're taking to mitigate any potential impact of possible tariffs?

Yes, thank you for the questions. When it comes to the A350, the impact of the spirit and the interior manufacturers are of very different nature. When it comes to spirit section 15, we just can't build a plane. So that's really slowing us down on the ramp-up itself. When it comes to interiors and what we have experienced so far, we have delays in seats, in monuments, in things like this that is delaying the time at which we can deliver a plane fully completed and deliver it on time. But it's not slowing us down on the ramp-up itself. So the bottleneck that is really the big issue for the ramp-up itself at the moment on the A350 is section 15 of spirit. And that's really a pity. That's why we're putting all our efforts on that one because that's what we need to de-bottleneck and do the ramp-up, which is fully prepared when we look at the rest and plenty of partner suppliers impatient to deliver and help us in delivering on that ramp-up. So I hope that answering your question when it comes to US tariffs well we have all our sensors on trying to fully understand and try to reasonably anticipate what could happen but it's obviously very difficult we are like others facing uncertainty when it comes to the tariffs the nature of the tariffs the goods they would impact the country that would be more impacted depending on the trade balance they have with the U.S., depending on the VAT they are applying, depending on the currency and the exchange rates. So a lot of factors have been mentioned, and we believe it's very difficult to really anticipate what will come. So we have not taken major actions so far, so minor here and there to adapt or to try to reasonably anticipate, but we have not changed the production system, the sourcing, And we think we have a number of possibilities to adapt when things will come, if and when they come. We have a very strong demand for our products. We have a production system because of supply is oversized at the moment. So we have a number of reasons to believe we could adapt to what would come. We have a very strong demand from outside of the US, but we have also a production system in the US. And we've tried to do in the past years what we thought would be necessary to be seen as a major U.S. player in the U.S., to be respected for what we do for U.S. customers, sourcing from U.S. suppliers, having a U.S. workforce. And we hope that that will pay off. So that's where we are at the moment. And we are more in the wait and see mode. We decided as well to issue a guidance in this uncertain environment to share what we think we can do and then the tariffs will be what they will be, and we will have to adapt accordingly.

Very good. Thank you.

Thank you. The next question is from the line of Olivier Prochette from Redburn Atlantic. Please go ahead.

Yes. Thank you very much for taking my questions, Guillaume, Thomas, and good morning. I have two, if I may. The first one is on the cash flow for 2025 to 2027. Could you give us a sense of how the F1.M outflow evolves over that period and the space cash outflow? That's the first one. And the second one, how do you assess the risk that the issues on the S350 spirit continue into 2026?

I'll take the first one.

Let me take the first one on the cash flow. So the A400M, let me start by the A400M, was still negatively weighting on our cash flow in 2024. But consistent with what we've said in the past, we do expect that the A400M will be more or less neutral in 2025 and then starting to be slightly accretive 2026 and beyond so I think that is what we've said in the past and that is still what we are expecting to come with respect to space we are not expecting a negative cash burden through our space business in 2025 obviously the charges that we took were mostly P&L related, and only to a minor extent burdening our space business. So it has a negative impact on the profitability, as you can see also through the normalization. But we're not expecting any major cash charges in 2025 going forward, and therefore nothing specifically to be taken in your models.

And when it comes to the A350 team, As you have heard from my briefing, we continue to target Direct 12 in 2028, which means that we consider ourselves on trajectory for the ramp-up besides the bottleneck of Spirit. It's very important for us to be able to integrate the work packages A350, A220, ASAP we assume that we would be in a position of signing by mid of this year and I think integrated the spirit work packages by middle this year and we believe that having this at Airbus with Airbus with all experts and capabilities we could and we will manage to do the romper Now, there are uncertainties, but we see as well, as highlighted by Thomas, that the current situation of Spirit as a company has a lot of negative impact on their ability to deliver to us. There are a lot of what I would call distractions or challenges at Spirit which are linked to the situation of the company, and that will obviously be cleared when we will be the owner of those work packages, and we will be able to fully deploy our workforce, our power, our engineers, our production specialists at the site, we will be able to put the right investment at the right time to do the ramp-up of those work packages and support us in the ramp-up. So it's important that we can move forward on the integration of the work packages, and this being done middle of the year, I would support the further ramp-ups and reaching Direct 12 in 2028 for the A350.

appreciate the answer thank you thank you the next question is from the line of Christophe Menard from Deutsche Bank please go ahead yes good morning thank you very much for taking my question the first one would be on the free cash flow bridge from 24 to 25 could you help us understand the moving parts I understand the spirit aspect has to be excluded, I mean, the compensation. Also from the previous question, I understand that there is no space in fact, as you just said. So just to understand the bridge in terms of the free cash flow. And the other question was also related to A400M. Can you comment on the commercial outlook? I mean, you say that you were very more selective on the contract quality. So what commercial outlook are you considering for the coming years? I mean, I think the last reason is in 2029 as per the current backlog. So what do you have in mind for other contracts? Thank you.

So let me start with the cash flow and just be very clear. So on Spirit, as I said, We're assuming that the transaction will close at the middle of the year and we will receive a compensation. We indicated the $559 million that we have contractually or that we have in the term sheet. However, they will not be recognized in free cash flow. and therefore it is a burden to our free cash flow in 2025. However, the compensation that we will receive, of course, will have an impact on our net cash position. So it is cash that we will find in our accounts and therefore you will have negative effect on our free cash flow through SPIRIT and you will have a neutral effect when it comes to the net cash position of the company. And that, I think, then also explains pretty much the bridge. On the one hand, you have an increase in our operating results through the higher deliveries and obviously through the non-repeat of the space charges, which, however, were mostly not cash flow in nature. And the positive impact from the operations will be then partly compensated or compensated by the negative impact from Spirit, so that you land at the around 4.5 billion, which is very close to what we had in 2024.

And on the A400M, we have, by end of 2024, 48 non-delivered aircraft in the backlog. That's what we have ahead of us. And we are engaging in export campaigns that take more time to come to conclusions than what I'd like. That's something we need to take into account. We are indeed selective in our orders. The comment was mostly related to space, where we took a lot of risks in development contracts with a lot of new technologies between 2020 and 2021 that doesn't relate too much to air power and on the 400m what we are offering to export customers is very close to what we have already done for our home country customers so it's by far less risk loaded anyway thank you very much thank you

The next question is from the line of Robert Stallard from Vertical Research. Please go ahead.

Thanks so much. Good morning. Good morning, Rob. A couple of questions for you. First of all, Guillaume, with regard to your delivery forecast of around 820 aircraft, how confident are you that this year Airbus can meet that delivery, given the supply chain challenges? what's occurred over the last two years and then secondly a specific supply chain question does Airbus have any exposure to the precision cast parts plant that's burned down in Pennsylvania thank you okay thank you Rob so when it comes to the to the deliveries and you said what happened in the last two years suggesting it didn't go well well

I like to look back and with hindsight reflect on the fact that the guidance for the objective we had for 2023 was 720 and the objective we had for 24 was 800 when we found ourselves end of 2022 and looking forward. That makes 1520 planes and with the 735 that was 15 more than what we targeted in 23 and the 766 That must make a total that is close to the 1,500. I think we are at 1,501 if I count correctly. So we are 19 planes behind over two years compared to 1,520. So that's close to 1%. So I would consider that against the backdrop of so many challenges of all the unexpected difficulties including what you mentioned about Pennsylvania that is not impacting directly Airbus but is impacting indirectly Airbus through our supply chain and some of our major tier 1 suppliers what we have managed to pull out in terms of deliveries is probably not so bad and actually as I said earlier I'm really proud of how the team have managed to find solutions to those many problems. So if we give And because we give a guidance of 820, around 820 at this point of the year, is because we believe it's a reasonable number and we are reasonably confident we will be able to deliver around 820 planes this year. We start 2025 with a bit of a specific situation that we know Q1 will be low, will be lower than last year, against the difficulties on the CFM in particular, but not only. So that's a bit of a specific challenge for 2025. But we have also some more visibility on a lot of our suppliers. We see that the tube, I would say, that the underlying capability of the system to deliver at rate is strong, is good. So it's, again, a challenge coming from the supply chain. And we will need our suppliers to deliver roughly on their commitments, including the ones that have their difficulties, their known difficulties, to deliver on those numbers. Now we took the liberty or the freedom to give a guidance absent tariffs because we don't know what tariffs will look like. They might impact if they come and depending on what they look like, they might impact our financials, but it could also create some additional challenges for the supply chain. They are not positive in nature. They create new problems, challenges, but we have also, as I said earlier, number of levers to adapt to these situations so it's again a year with uncertainties but with hindsight 23 and 24 have been very difficult but not so bad given the context thank you very much thank you the next question is from the line of ken herbert from rbc capital markets please go ahead

Yes, hi, good morning. I have two questions, if I can. The first is, it looks like the assumptions for free cash flow at Spirit imply a significant improvement in the cash burn in 2026 and 2027, if you assume roughly, you know, mid-single-digit hundreds of millions on half a year in 25 and a similar amount in 26. Is there anything in particular that you can point to or call out that helps with confidence on the free cash flow improvement in 26 over 25 at Spirit, and how deep, as part of your due diligence, have you been able to get into the operations there, specifically on the A350? And then my second question is, on the A220, you're maintaining, you know, the production guidance implies over a 2X ramp on that program, you know, in the next two to three years. Seems like a stretch from where I'm sitting, but maybe anything you can say to help with confidence on that ramp as well would be appreciated. Thank you.

I think Tomas, you need to clarify your spirit.

Let me start maybe with spirit again and the free cash flow. So I think what we're trying to do is giving you a clear picture about SPIRIT and what the impact of SPIRIT will be in our numbers in 2025 but then also in 2026 and 2027 and so as I said in 2025 it will be clearly neutral with respect to the overall cash while in 2026 and 2027 we do expect that we have to make investments and turn around and the work packages so I said we are expecting up to a mid triple digit negative cash impact in each of those two years and that we will bake in our guidance for 26 and 27 however we will come to the guidance for those two years when we get there and therefore I think it's too early to talk about that as of today today we're issuing our guidance for 2025 and that is the around four and a half billion including as I said a negative effect from Spirit on the level of the free cash flow and then neutral in terms of the total cash situation for 2025. How good are we in terms of due diligence? I think we have a very very clear picture now because we were of course able to continue to look at what is the situation of the work packages. We have a several dozens of people at the site who are working hand-in-hand with Spirit on a joint improvement project. So therefore, I would say our visibility in terms of what is the situation, what has to be done in the future to make sure that we build the basis for the ramp-up of the A220 and the A350, I would say is pretty good.

Thank you, Thomas. I hope it helps. On the 220, we have indeed in front of us for 25, 26, a very steep ramp-up. Well, it's a success waiting to happen as we feel that we have invested a lot and we are prepared for that. Unfortunately, we have one or two challenges on the way, mainly the wings from Spirit Belfast. That's why we're so focused on this. That's why we are so eager to bring the work package at Airbus so we can fully control what's happening there. And the other one is the GTS situation that I mentioned a bit earlier that leads to some backloading in the year and in the ramp-ups. But that's part of the challenges we have to overcome this year and next year. It's a positive one. And we're looking forward to report on this moving forward. Great. Thank you.

Thank you. We'll now take the last question from the line of Ian Douglas Pennant from UBS. Please go ahead.

Thanks for squeezing me in at the end. I really appreciate it. Another question on Spirit, but I'm not going to ask you about the free cash flow split again. I'm going to ask a slightly longer term question. I assume the difference between the EBIT impact and the free cash flow impact next few years is the CapEx requirements, but please correct me if I'm wrong. Once this CapEx program then looks like it's completed in 2027, Does the cash flow profile of this business return to something like normal, or should we consider a continued weak cash flow, let's say, from 2028 plus? I'm not asking for exact guidance, but just any kind of loose commentary on what that program looks like and the outcome of it, please. And then the second question is on the supply chain. I just wonder, Would it be reasonable to see Spirit as some kind of case study for the aerostructure supplies in general? What I mean by that is if you did the same work that you've done at Spirit, if you were able to, at other aerostructure suppliers, and the work you did at Spirit led you to believe there's much more investment required to support that ramp up, How confident can you be that you wouldn't have that same experience if you looked at other infrastructure suppliers? Please, thank you.

Maybe I'll start with this one and give you a bit of time to think of spirit beyond 2028. No, it's a very important question that we addressed actually at Airbus in 2018, 2019. when Mike Shalom, that is today the CEO of Airbus Defence in Space, was our chief operating officer, really challenging ourselves on what was the model of integration and make or buy, core, non-core, for the big aerostructures. At that time, we had Stelia for the more front fuselage of our planes. We had Premium Aerotech in Germany for the rear part of the fuselage, some of the central fuselage, and there were subsidiaries that were put together sort of 15 years ago in the wake of Boeing carving out its activity into spirit. And there was really a question whether we would divest and procure by aerostructures or if we would probably more integrate closer to our chest with the view that this would be core. And we came to that conclusion. We said, well, aerostructure is core. There's a lot of the quality, there's a lot of the speed of integrated changes of the supply chain management, and probably even more than the current situation at that time was the view that moving forward through the digitalization, what we call DDMS at Airbus, of the design, the manufacturing, we really wanted to have the aerostructure companies as part of our make. to be able to run that digitalization exercise, and with also the view that the future fuselages, aerostructure, would be more like the chassis of a car with a lot of integrated functions, and therefore that was an air-framer activity more than the one of a supplier. So we decided to create Airbus Atlantic, consolidating sort of the Stelia scope of work with some of the Airbus plants in the west of France, and in Germany we created what is called Aerostructure with the consolidation of Premium Aerotech and part of what we're doing in Hamburg with the fuselage. That's now part of Airbus. We have taken it from internal buy to make. That's really core activities at Airbus. And we have seen at the beginning of last year that actually Boeing took the decision to re-internalize verticalize the activities that were carved out 20 years ago to spirit, probably for similar reasons. So I think that gives you the more strategic answer to your question. Moving forward, we see aerostructures are core and make.

Yes, maybe to the future of spirit and how we look at it. So let me start by saying, what is the current situation of spirit? I think it's characterized by two things. One is The work packages for Airbus are loss-making because the efficiency of Spirit has to be improved. There are processes in place which are not optimal, et cetera. And secondly, Spirit clearly is a bottleneck because they're not able to ramp up and increase the output. And so therefore, that is a drag on the ramp up of the A350, but also on the A220. Having said that, our focus in the next three years is to spend on CapEx to bring them in the position that they can support the trajectory that we have in our plans for the A220 and for the A350. It's about integrating the company into operations so that the processes will be improved. And finally, of course, it will take some time before we can turn around the work packages, so we have to suffer the operating loss that we have acquired. Having said that, Once we are done with the investments and the optimizations we want to make at Spirit, we are expecting that we will turn around these work packages to the same level of cost that we're currently paying externally, and therefore the impact beyond 2028 should not be a negative one coming from Spirit, once we've made the necessary improvements, both in terms of processes, but also in terms of capital investment.

Thank you. Very helpful.

Thank you. Thank you, Guillaume. Thank you, Thomas. This closes our conference call for today. If you have any further questions, please send an email to Olivier, to Victoria, whom we are very happy to welcome on board, or myself, and we will get back to you as soon as possible. Thank you, and looking forward to speaking to you very soon.

Thank you, everyone. Bye-bye.

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.