Airbus Se Unsp/Adr

Ladies and gentlemen, thank you for standing by. Welcome to the Airbus Half Year 2024 Results Release Conference Call. I am Sharon, the operator for this conference. Please note that for the duration of the presentation, all participants will be in a listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. At this time, I would like to turn the conference over to your hosts, Guillaume Flory, Thomas Tupfer, Hélène Le Gorge. Please go ahead.

Thank you, Sharon. Good evening, ladies and gentlemen. This is the Airbus Health Year 2024 results release conference call. Guillaume Faury, our CEO, and Thomas Topfer, our CFO, will be presenting our results and answering your questions. This call is planned to last around an hour. This includes Q&A, which we will conduct after the 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. Hello, ladies and gentlemen, and thank you for joining us today for our H1 2024 results call. We are indeed here in Amsterdam with Thomas, to run you through our results. And it's been a month since we last talked. Indeed on this occasion, we addressed the increased financial exposure on our space activities, as well as the degraded operating environment and the specific supply chain issues and challenges in our commercial aircraft business. At that occasion, the company updated its 2024 guidance and adjusted the trajectory of the A320 family ramp up, confirming the rate 75, but now for 2027. We will detail our H1 performance and Thomas will come to the financial, but first I want to provide more color on the two topics that triggered the guidance update. Let me start with our space business and the charge we recorded in H1 2024. of which the nature, the scope, and the trigger are unchanged as compared to the guidance update a month ago. And in particular, by clarifying why this charge was not identified already in 2023. As decided last year as part of our transformation plan, our space transformation plan, we appointed a new management with relevant expertise both on the business and finance side, and I should say as well on the management side. The new head of space is a proven leader. It's Anna Foray with various experiences at Airbus. I know him well. And he knows the space business on top. The new head of finance led the cost containment exercise during COVID. And at the time, the transformation program in helicopters. So I was with Bruno Travel at that time in the turnaround of helicopters. The newly appointed management team launched as part of the plan we decided at that time, extensive technical reviews of our space programs, which consisted in full, what we call bottom-up assessment or reassessment of the main critical programs with enhanced risk sizing and timelines evaluation. And as said previously, there is one major program which remains to be fully assessed and has only been provisioned using a top-level approach. The profound work done by the teams led to the technical findings and subsequent estimates at completion, EACs, so subsequent estimate at completion updates. Main revised assumptions being, first and foremost, the project schedules, the time it will take to get there, the economical conditions, the reviewed risk assessment, as well as cost overruns, linked to both our own operations and also costs coming from the supply chain. So it's all about assessing the future of those programs. The amount booked in H1 stands at $989 million, consistent with the announcement made on the 24th of June and reflecting the closing and audit process. The charges are mainly contained to telecom and navigation, with a limited crossover to observation programs. Let me also do a step back. The space business went through major shifts. The market conditions have changed as we have seen an increased competition with some disruptive new players and in particular one disruptive new player. We've not been properly balancing risks and rewards in the contract we signed between 2018 and 2021. This included, for example, contracting major development programs with significant technological gaps to breach without the proper contractual conditions and the right organization set up in front of it. Now, on to the actions and the way forward. First and foremost, we are addressing the impacted programs and their challenges, so we are on them. We've also implemented a highly selective bid-no-bid strategy, including the need for an increased technological maturity threshold and assessment prior to any firm proceedings. This new approach has already started to be reflected in the average profitability of last year's binding offers. So it's not brand new. That's something we did last year. Also, we have redefined our internal organization, the governance and the control. In particular, we've put in place what we call end-to-end integrated program teams over the whole value chain, embedding engineering, procurement, operations, and smaller organizations. In addition, we have launched both a cost containment exercise that's rather short-term, but also a mid-term competitiveness map. In parallel, as I said earlier, we are evaluating all strategic options, even the nature of the situation, such as Restructuring, actually it's launched. Portfolio review, cooperation, and potential M&A. And there might be a combination of some of them. So that was for space. Now let's turn to commercial aircraft and how we secure our ramp-up trajectory and the new assumption under current operations. First, we are ramping up and we are supporting our suppliers since the pandemic. We're in the ramp-up. We have made our way from a situation with a large number of suppliers facing diverse issues in 2022 to a situation now where we see a small number of large suppliers facing some specific issues. And I see 2023, I mean the success of 2023, as a proof point of the progress we've made since we went out of COVID. But first, we enhance our level of visibility of the supply chain, both in granularity and in depth. We've performed comprehensive supplier capacity assessment to tackle the bottlenecks, also targeting the critical indirect suppliers. Second, our dedicated organization of supply chain experts has been growing significantly in numbers and in quantity and quality since 2021 to reinforce very strongly our onsite supplier support and what we call GIPs, which are joint improvement plans with the critical suppliers. Finally, we have cross-division task force fully in motion to leverage our supply chain intelligence and mitigate potential impacts from the degraded geopolitical context. We've been able to contain and manage several crises. It includes, for example, the semiconductors and various logistic disruptions demonstrating our significantly improved resilience. But when we hit like more recently by equipment that are reaching us that are going to help us at the end of the final assembly line or during the final assembly line, we have by far less ability to react and to compensate. That's what's happening with engines. They come very late in the manufacturing process or landing years that come also in the fall or seats, which by nature are installed at the end of the customization. So that's why we've been impacted short term with little notice and anticipation more recently. And regarding our own activities and in particular our own aerostructure business, we have now two main areas of priority, raw materials and detailed parts shortfalls. And on the other hand, integrating the remaining production units to get. Our efforts are paying off. Our recent decision to adjust the rate 75 to 2027 gives to the key suppliers the additional time they need to fulfill the requirements of our production planning. And it relaxes the tension for most of the suppliers by giving them a bit more time. So we will now look at these So as presented last month, we experienced a high level of missing parts, mainly on engines, on cabin and equipment, and on Spirit Aerosystems work packages. On engines, the 2024 and 2025 volumes are aligned with our suppliers. To assess the performance issue of engine manufacturers, we have joint improvement plans going down to the elementary parts bottleneck and encompassing both The line fit ends the airlines in service demand with a high level of transparency. It doesn't mean that we always get what we want on time, but at least we have this high level of transparency and cooperation with our engine manufacturers. On equipment, we saw the performance of some suppliers not at the level we were hoping for. And we have, again, JITS, Joint Improvement Plant with top management attention with Safran and Honeywell. On cabin, the supply is largely managed directly by the airlines, but we created last year the Cabin Readiness Organization to reinforce our support to both our customers and suppliers. To face the demand, the scope is now growing to continue facilitating the interfaces and securing the on-time integration of cabin elements in our final assembly lines. And last but not least, regarding Spirit Aerosystems, we have signed a binding term sheet to secure the future of the major Airbus work packages that was earlier this month. We target to close the deal in early 2025. We are working together with Spirit to secure the critical ramp-up investments in medium and long term. And to support the transition phase and secure the immediate operations, we have deployed an Airbus workforce of over 100 people, still the challenge remains high. And before we go back to the normal course of our presentation, after these few comments on space and commercial, let me stress that this is an ambitious and continuous work and that our teams and partners are devoted to successfully deliver on the plan. This being said, Let's now look at our commercial environment, starting with commercial aircraft. The demand remains strong. We booked 327 gross orders in the first half of the year and recorded 17 cancellations. On the A320 family, we booked 197 gross orders, bringing our backlog to 7,128 aircraft. Thereof, more than two-thirds are for the A321. more than two-thirds for the F321. Moving to the widebodies, we recorded 130 gross orders, including 33 from Korean Air and 30 from Indigo. We are also pleased with a recent announcement at the Farnborough Airshow, which confirmed in particular the good momentum for our widebody family and which underpins once again the trust in our products and our leading position in the long-haul air travel. As a result, our backlog in units amounted to 8,585 aircraft. At the end of June 2024, we have some work ahead of us. Looking at helicopters, in H-124, we booked 233 net orders compared to the 131 in H-1 last year. In this quarter, we secured a record order of 38 H-225 helicopters and six options with the German Ministry of the Interior for the Federal Police, the Bundespolizei. We also signed orders for the H145 in both its civil and military versions, notably with Belgium, UK, and Brunei, and additional H175 orders placed by our lesser customers, so overall good bookings. We continue to see positive momentum in the civil and military markets, and we remain focused on securing new business opportunities in both our home countries and the export markets. Onto the order intake recorded at defense and space. It was 6.1 billion euro in H1 2024. On air power side, this notably reflects services contracts. Let me highlight that Eurodrone has passed the PDR, the Preliminary Design Review, allowing it to proceed towards the next milestone, which is the CDR, so-called critical design area. And as announced in July, Saudi Arabia has signed a contract for four additional MRTTs to be recorded in the backlog once all administrative work or paperwork is done. In our space system business, Airbus will design and build two telecommunication satellites for YASAT, allowing in-orbit reconfiguration of coverage area capacity and communication frequencies. So we keep moving forward also in space as we recover the situation. And let me congratulate Ariane Group, the European Space Agency, and all partners for the first Ariane 6 liftoff, a resounding success which allows Europe to regain its independent and sovereign access to space. That's good news in the space business sometimes. But now, Thomas. We'll take you through our financials.