AIRBUS - 2019 Universal Registration Document

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

2019 compared to 2018. The Company’s consolidated EBIT decreased by 73.5%, from €5.0 billion for 2018 to €1.3 billion for 2019. The decrease reflects the strong operational performance at Airbus, driven by higher deliveries and favourable mix, overcompensated by the compliance penalties, the A400M charge recognised in the period and the lower performance at Airbus Defence and Space. Airbus’ EBIT decreased from €4.3 billion for 2018 to €2.2 billion for 2019, negatively impacted by the recognition of penalties for agreements with authorities of €3.6 billion and €206 million related to compliance costs. This partially offset the record deliveries and operational performance, largely driven by the A320 ramp-up and progress on the A350. It also included the gain from disposals of PFW Aerospace GmbH of €57 million and Alestis Aerospace S.L. of €45 million. Airbus Helicopters’ EBIT increased from €366 million for 2018 to €414 million for 2019, reflecting a higher contribution from services and lower research and development costs, partially reduced by less favourable delivery mix. Airbus Defence and Space’s EBIT decreased from €676 million for 2018 to €-881 million for 2019, mainly due to the recognition of the A400Mprogramme charge of €1.2 billion and the €221 million suspension of defence export licences to Saudi Arabia by the German government. EBIT deterioration also reflects the lower performance in Space and efforts to support sales campaigns. Airbus Defence and Space’s EBIT in 2018 also included the impact of disposals, mainly the gain from the Plant Holdings, Inc. of €159 million. 2018 compared to 2017. 2018 financials reflected strong operational performance and programme execution, evidenced in record deliveries at Airbus and higher revenues at Airbus Defence and Space. The Company’s consolidated EBIT increased by 89.4%, from € 2.7 billion for 2017 (restated) to €5.0 billion for 2018. Airbus’ EBIT increased from € 2.3 billion for 2017 (restated) to € 4.3 billion for 2018 reflecting the strong operational performance and record deliveries. A net charge of €463 million was recorded related to the A380 programme for the period ended at 31 December 2018. Airbus’ EBIT in 2018 also included a negative impact of €123 million related to compliance costs.

Airbus Helicopters’ EBIT increased from €247 million for 2017 (restated) to €366 million for 2018, reflecting higher Super Puma deliveries, a favourable mix and solid underlying programme execution. Airbus Defence and Space’s EBIT increased from €462 million for 2017 (restated) to €676 million for 2018, reflecting continued solid programme execution and contributions from its joint ventures MBDA and ArianeGroup. In 2018, it also included the impact of disposals, mainly the gain from the Plant Holdings, Inc. of €159 million. A net charge of €436 million was recorded related to the A400M programme for the period ended 31 December 2018 (2017 (restated): €992 million). Foreign currency impact on EBIT. More than 75% of the Company’s revenues are denominated in US dollars, whereas a substantial portion of its costs is incurred in euros and, to a lesser extent, pounds sterling. Given the long-term nature of its business cycles (evidenced by its multi-year backlog), the Company hedges a significant portion of its net foreign exchange exposure to mitigate the impact of exchange rate fluctuations on its EBIT. Please refer to the “Notes to the IFRS Consolidated Financial Statements – Note 37: Information about Financial Instruments” and see “— Risk Factors — 1. Financial Market Risks — Foreign Currency Exposure” and “— 2.1.2.4 Foreign Currency Translation”. In addition to the impact that hedging activities have on the Company’s EBIT, the latter is also affected by the impact of revaluation of certain assets and liabilities at the closing rate and the impact of natural hedging. During 2019, cash flow hedges covering approximately US$24.0 billion of the Company’s US dollar-denominated net exposure matured. In 2019, the compounded exchange rate at which hedged US dollar-denominated revenues were accounted for was €/US$1.24, as compared to €/US$1.24 in 2018. During 2018, cash flow hedges covering approximately US$25.4 billion of the Company’s US dollar-denominated net exposure matured. In 2018, the compounded exchange rate at which hedged US dollar-denominated revenues were accounted for was €/US$1.24, as compared to €/US$1.29 in 2017.

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Airbus / Annual Report – Registration Document 2019