AIRBUS - 2019 Universal Registration Document

Management’s Discussion and Analysis of Financial Condition and Results of Operations / 2.1 Operating and Financial Review

In 2019, Airbus delivered 8 A380 aircraft. In 2019, the Company recorded an additional net charge of € 99 million in EBIT as part of its continuous assessment of assets recoverability and quarterly review of onerous contract provision assumptions. A350 XWB programme. In 2017, Airbus delivered 78 A350 XWB aircraft. In 2018, Airbus delivered 93 A350 XWB aircraft. In 2019, Airbus delivered 112 A350 XWB aircraft. New order intakes, cancellations, delivery postponements and other contractual agreements to the end of December 2019 have been reflected in the Financial Statements. Risks continue to be closely monitored in line with the schedule, aircraft performance and overall cost envelope, as per customer commitments. Despite the progress made, challenges remain with recurring cost convergence. The breakeven target for the A350 was achieved in 2019. Given overall customer demand for widebody aircraft, Airbus expects A350 deliveries to stay between a monthly rate of 9 and 10 aircraft. A400M programme. Technical progress on the A400M programme resulted in the recognition of revenues of €2.2 billion in 2017 (restated), € 2.1 billion in 2018 and € 1.5 billion in 2019. In 2017, 19 A400M aircraft were delivered. In 2017, the Company continued with development activities toward achieving the revised capability roadmap. Given the order of magnitude of the cumulative programme loss, the Board of Directors mandated the management in February 2017 to re-engage with customers to cap the remaining exposure. The Company signed a Declaration of Intent (“DOI”) with the A400M Launch Customer Nations (Germany, France, United Kingdom, Spain, Turkey, Belgium, Luxemburg) defining the framework for achieving a mutually binding contract amendment initially expected later in the year. The Company, European defence agency OCCAR (who is managing the A400M programme on behalf of the seven Launch Customer Nations) and the Customer Nations had agreed to work on a number of contractual elements including a revamped delivery plan as well as a roadmap for the development and completion of military capabilities for the A400M. The DOI, finalised on 7 February 2018, represented an important step towards reaching a contractually binding agreement also mitigating the commercial exposure while satisfying customer needs with regard to capabilities and availability of the aircraft. This DOI provided a new baseline on which to evaluate the A400M contract. A detailed review of the programme concluded in the fourth quarter of 2017 including an estimate of the financial impacts of the above mentioned adaptations on schedule, capabilities and retrofit resulted in an update of the loss-making contract provision of € 1,299 million (reported) for the year 2017 (restated equivalent loss following the implementation of IFRS 15 was € 992 million for the year 2017). In 2018, 17 A400M aircraft were delivered. In 2018, the Company worked together with OCCAR and concluded the negotiations on a contract amendment. In the fourth quarter 2018, an update of the contract estimate at completion triggered a net additional charge of € 436 million. This reflected the outcome of the negotiations, updated estimates on the export scenario during the launch contract phase of the A400M programme as well as applicable escalation and some cost increases. The contract amendment was successfully completed in June 2019, after each nation finalised their domestic approval processes.

This new contract de-risked the programme and provided the Company, OCCAR and customers greater visibility, which supported future planning and preparedness. Yet, despite the progress, the A400M programme was not entirely risk free. Risks remained on development of technical capabilities and the associated costs, on securing sufficient export orders in time, on aircraft operational reliability in particular with regards to engines, and on cost reductions as per the revised baseline. In 2019, 14 A400M aircraft were delivered. In total, the Company has delivered a total of 88 A400M aircraft as of 31 December 2019. On 13 June 2019, the Company concluded together with OCCAR and the Nations the negotiations on a global re-baselining of the programme. A contract amendment has been signed by all parties, providing a revised aircraft delivery schedule, an updated technical capability roadmap and a revised retrofit schedule. The Company continued with development activities toward achieving the revised capability roadmap. Important certification milestones have been achieved in 2019, in particular on critical Paratrooper Simultaneous Dispatch and Helicopter Air to Air refuelling capabilities. Technical modifications corresponding to the New Standard Operating Clearance (NSOC2) contractual standard have been certified and qualified. However NSOC2 Type Acceptance initially planned in 2019 is still pending due to ongoing discussions on some operational limitations. Retrofit activities are progressing in line with the customer agreed plan. In the fourth quarter 2019, an update of the contract estimate at completion has been performed and an additional charge of € 1,212 million has been recorded. This reflects mainly the updated estimates on the export scenario during the launch contract phase based on a revision of the market perspectives taking into account the current environment, including the suspension of the export licenses by the German Government and its consequences on potential prospects. It reflects as well some cost increases in particular for retrofit and an updated view on applicable escalation. Risks remain on development of technical capabilities and the associated costs, on aircraft operational reliability in particular with regard to powerplant, on cost reductions and on securing export orders in time as per the revised baseline. A320 programme . In 2017, a total of 181 A320neo Family aircraft were delivered. In 2018, A320neo Family deliveries increased to 386 aircraft and represented over 60% of overall A320 Family deliveries during 2018. The first long-range A321LR was delivered in the fourth quarter. In 2019, NEO aircraft deliveries rose by 43% year-on-year to 551 aircraft. The ramp-up continued for the Airbus Cabin Flex (“ACF”) version of the A321 with almost 100 more deliveries than in 2018. The Airbus teams are focused on securing the ongoing ACF ramp-up and improving the industrial flow. Airbus is discussing further ramp-up potential for the A320 programme beyond rate 63 per month with the supply chain, and already sees a clear path to further increase the monthly production rate by 1 or 2 for each of the 2 years after 2021. A330 programme . In 2017, 67 A330 were delivered. On the A330neo, the first flight was completed in October 2017. In 2018, 49 A330 were delivered. On the A330neo programme, the first A330-900s were delivered and the A330-800 conducted its maiden flight in the final quarter of 2018.

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Airbus / Annual Report – Registration Document 2019