AIRBUS - 2019 Financial Statements

2.7 Capital Structure and Financial Instruments Notes to the IFRS Consolidated Financial Statements /

34.2 Non-Controlling Interests The non-controlling interests (“NCI”) from non-wholly owned subsidiaries increased to €15 million as of 31 December 2019 (2018: € -5 million). These NCI do not have a material interest in the Company’s activities and cash flows.

35. Capital Management

The Company seeks to maintain a strong financial profile to safeguard its going concern, financial flexibility as well as shareholders’, credit investors’ and other stakeholders’ confidence in the Company. Consequently, operating liquidity is of great importance. As part of its capital management, it is one of the Company’s objectives to maintain a strong credit rating by institutional rating agencies. This enables the Company to contain its cost of capital which positively impacts its stakeholder value (entity value). Next to other non-financial parameters, the credit rating is based on factors such as cash flow ratios, profitability and liquidity ratios. The Company monitors these ratios to keep them in a range compatible with a strong rating.

Rating Agency

Long-term rating

Outlook

Short-term rating

Standard and Poor’s

A+

Stable

A-1+

Moody’s Investors Services

A2

Stable

P-1

Fitch Rating (unsolicited)

A-

Positive

F-1

The Company’s stand-alone ratings reflect the strong backlog providing revenue visibility and the Company’s leading market position, the Company’s strong liquidity and improving credit metrics as well as management’s focus on programmes execution, profitability and cash generation improvement. The rating is constrained by the Company’s exposure to structural currency risk. In accordance with the Company’s conservative financial policy, a strong rating is key to maintain a wide array of funding sources at attractive conditions, to have broad access to long-term hedging and to strengthen the Company’s position as a solid counterparty for its customers and suppliers. Among other indicators, the Company uses a Value Based Management approach in order to guide the Company towards sustainable value creation by generating financial returns above the cost of capital. The key elements of the Value Based Management concept are: – the definition of financial returns; – the definition of the Company’s capital base; and – the measurement of value creation derived from the two above. The Company uses Return on Capital Employed (“RoCE”) to measure the value created by financial returns relative to its capital base. RoCE, as defined by the Company, uses EBIT for the numerator and Average Capital Employed for the denominator.

The Average Capital Employed for the Company is defined as the average of the annual opening and closing positions of Fixed Assets plus Net Operating Working Capital plus Operating Cash less Other Provisions. Financial value is created if profits relative to the Company’s Capital Employed exceed the Company’s cost of capital. Value can be measured by comparing RoCE to the WACC. A three year plan for a value creation ambition is constructed annually, and is composed of (i) RoCE, (ii) EBIT, and (iii) Free Cash Flow, which is defined as Cash provided by operating activities and Cash used for investing activities less Change of securities, Contribution to plan assets for pensions, realised Treasury swaps and bank activities. The Company also monitors the level of dividends paid to its shareholders. The Company generally satisfies its obligations arising from ESOPs by issuing new shares. In order to avoid any dilution of its current shareholders out of LTIPs , the Company performs share buybacks to meet its obligations to its employees, following the decisions of the Board of Directors and approval of the AGM. Apart from this purpose, the Company generally does not trade with treasury shares. The Company complies with the capital requirements under applicable law and its Articles of Association.

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Airbus / Financial Statements 2019