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, 53 A330 were delivered. Given overall customer demand for widebody aircraft, Airbus expects A330 deliveries of approximately 40 aircraft per year beginning in 2020. A220 programme . As of 1 July 2018, the A220 aircraft programme was consolidated into Airbus. In 2018, the Company delivered 20 A220s. In 2019, A220 aircraft deliveries rose to 48 aircraft. Total deliveries since inception of programme are now at 105 aircraft. Our focus continues to be on cost reduction as well as growing the backlog to support the ramp-up plan in Mirabel (Canada) and Mobile (US) where we target our first delivery in 2020. Order backlog stood at 495 aircraft as of 31 December 2019. Provisions. The Company makes estimates and provides, across the programmes, for costs related to identified in service technical issues for which solutions have been defined, and for which the associated costs can be reliably estimated taking into consideration the latest facts and circumstances. The Company is contractually liable for the repair or replacement of the defective parts but not for any other damages whether direct, indirect, incidental or consequential (including loss of revenue, profit or use). However, in view of overall commercial relationships, contract adjustments may occur, and must be considered on a case by case basis. Restructuring provisions. In 2019, a provision of €103 million related to restructuring measures at Premium AEROTEC has been recorded following the announcement in December 2019 to the Works Council of the main features that will be carried out to increase future competitiveness. On 19 February 2020, Airbus Defence and Space announced that it had entered the consultation process with the Company’s European Works Council on its planned restructuring in that segment. Defence export ban . Due to the repeatedly prolonged suspension of defence export licences to Saudi Arabia by the German Government, and the consequential inability of the Company to execute a customer contract, a revised

Estimate at Completion (“EAC”) was performed. As a result a € 221 million impairment charge mainly on inventories on top of a € 112 million financial expense related to hedge ineffectiveness, have been recognised as of 30 September 2019. The Company is engaging with its customer to agree a way forward on this contract. The outcome of these negotiations is presently unclear but could result in significant further financial impacts. Brexit. In June 2018, the Company published its Brexit Risk Assessment outlining its expectations regarding the material consequences and risks for the Company arising from the UK leaving the European Union without a deal (a “No deal Brexit”). In September 2018, the Company launched a project to mitigate against the major disruptions Brexit could potentially cause to the Company’s business and production activities. To date, significant progress has been made in mitigating the identified risks through for example the modification of Airbus’ customs systems, and the stockpiling of parts associated with transportation and logistics. The UK Government’s Withdrawal Agreement was ratified and the UK left the European Union in an orderly manner on 31 January 2020, opening a transition period until 31 December 2020. During this transition period, the European Union and the UK are continuing to negotiate their future long term relationship, including around alignment of the regulatory framework for aviation. Until we know and understand the new EU/UK relationship, the risk of a No deal Brexit at the end of the transition period cannot be excluded. Despite the actions the Company is taking internally, the Company’s operations and supply chain may still suffer from disruptions, the nature, materiality and duration of which is impossible to predict with any level of certainty. Accordingly, the Company will continue to run its Brexit project and associated crisis management plan, in order to further eradicate and mitigate identified future risks. Litigation. For information, see “— 1.1.7 Legal and Arbitration Proceedings” and “Notes to the IFRS Consolidated Financial Statements – Note 24: Provisions, Contingent Assets and Contingent Liabilities”.

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2.1.2 Significant Accounting Considerations, Policies and Estimates The Company’s significant accounting considerations, policies and estimates are described in the Notes to the IFRS Consolidated Financial Statements. Please refer to the “Notes to the IFRS Consolidated Financial Statements – Note 2: Significant Accounting Policies”, “– Note 3: Key Estimates and Judgements” and “– Note 4: Change in Accounting Policies and Disclosures”. 2.1.2.1 Scope of and Changes in Consolidation For further information on the scope of and changes in consolidation as well as acquisitions and disposals of interests in business, please refer to the “Notes to the IFRS Consolidated Financial Statements – Note 6: Scope of Consolidation” and “– Note 7: Acquisitions and Disposals”.

On 1 January 2018, the Company implemented the new standards IFRS 15 “Revenue from Contracts with Customers” and IFRS 9 “Financial Instruments”. As a result, the Company changed its accounting policies for revenue recognition and for the accounting of financial instruments. On 1 January 2019, the Company implemented the new standard IFRS 16 “Leases” and the new interpretation IFRIC 23 “Uncertainty over Income tax treatment”.

2.1.2.2 Capitalised Development Costs Pursuant to the application of IAS 38 “Intangible Assets”, the Company assesses whether product-related development costs qualify for capitalisation as internally generated intangible assets. Criteria for capitalisation are strictly applied. All research and development costs not meeting the IAS 38 criteria are expensed as incurred in the consolidated income statement.

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Airbus / Annual Report – Registration Document 2019