AIRBUS - 2020 Universal Registration Document

2. Management’s Discussion and Analysis of Financial Condition and Results of Operations /

2.1 Operating and Financial Review

In June 2020, Airbus announced plans to adapt its global workforce, principally in France, Germany, Spain and the UK, and resize its commercial aircraft activity in response to the COVID-19 crisis. This adaptation was expected to result in a reduction of around 15,000 positions no later than summer 2021. Working time adaptation and mitigation measures supported by the governments have reduced the number of positions subject to the restructuring plan. Taking into consideration the actual departures since the initial announcement, the remaining number of positions subject to the restructuring plan amounts to approximately 6,100 as of 31 December 2020, including pre-retirement headcount under German Altersteilzeit (“ATZ”). In addition, Airbus Defence and Space completed the consultation process with the Company’s European works council on the Division’s planned restructuring. The plan presented to the employee representatives initially foresaw the reduction of around 1,900 positions including pre-retirement headcount under German Altersteilzeit (“ATZ”) until the end of 2021. However this number was also subsequently reduced to approximately 1,400 positions re ecting departures which occurred after the initial announcement. In November 2020, a reconciliation of Interest Agreement involving approximately 100 positions was signed in Germany within Airbus Helicopters and hence, a provision has been recorded accordingly. As of 30 September 2020, a restructuring provision was recognised for an amount of € 1.2 billion including mainly the cost of voluntary and compulsory measures taking into account management’s best estimate of the impact of the working time adaptation and government support measures. Total payments to employees affected by the plan would amount to approximately € 1.5 billion, including the settlement of other accrued employee benefits. As of 31 December 2020, the provision amounts to € 1.0 billion, reduced mainly by the costs incurred in the fourth quarter. Operational assets. The Company has per formed a comprehensive review of its operational assets and liabilities taking into account the amended production rates and expected future del iver ies. This review has resulted in charges being recorded in 2020 for an amount of € 1.3 billion, including an impairment of inventories considered at risk of €355 million, additional provisions relating to A380 programme of € 279 million, a write-off of capitalised development costs of € 101 mi l l ion, provisions for suppl ier commitments of € 157 million and provisions covering various commercial risks of approximately € 401 million. Brexit. On 29 March 2017, the UK triggered Article 50 of the Lisbon Treaty, the mechanism to leave the European Union (“Brexit”). In June 2018, the Company publ ished i ts Brexi t 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. In September 2018, the Company launched a project to mitigate the risks and anticipate possible consequences associated with Brexit and its impact on the Company’s business and production activities. Significant progress was made in mitigating the identified risks through for example the modification of the Company’s customs

A220 programme . As of 1 July 2018, the A220 aircraf t programme was consol idated into Airbus. In 2018, the Company delivered 20 A220s. In 2019, A220 aircraft deliveries rose to 48 aircraft. Our focus continued 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 targeted our first delivery in 2020. Order backlog stood at 495 aircraft as of 31 December 2019. In 2020, 38 A220 aircraft were delivered. Since inception of the programme a total of 143 aircraft have been delivered. Rates are expected to increase from four to five aircraft per month from the end of the first quarter 2021. Defence export ban . Due to the suspension of defence export licences to Saudi Arabia by the German Government until 31 March 2020, and the consequential inability of the Company to execute a customer contract, a revised Estimate at Completion (“EAC”) was performed as of 31 December 2019. As a result, a € 221 million impairment charge mainly on inventories on top of a € 112 million financial expense related to hedge ineffectiveness was recognised in 2019. In the fourth quarter 2020 the Company updated its contract estimate at completion which confirms the 2019 assessment. The Company continues to engage with its customer to agree a way forward on this contract. The outcome of these negotiations is presently unclear but could result in further significant financial impacts. Going concern and associated l iquidity measures. On 23 March 2020, the Company has announced measures to bolster its liquidity and balance sheet in response to the COVID-19 pandemic, including a new € 15 bi l l ion credit facility partially termed out by bond and USPP issuances, the withdrawal of 2019 dividend proposal with cash value of € 1.4 billion, the suspension of voluntary top up pension funding and strong focus on suppor t to customers and delivery. In parallel, governmental partners have supported the aerospace sector since the beginning of the crisis either through direct support to airlines and suppliers, or through partial unemployment schemes. With these decisions, the Company has available liquidity to cope with additional cash requirements, including the amended production rates as described above. On 21 October 2020, the Company signed a new € 6 billion Revolving Syndicated Credit Facility also partially terming out the € 15 billion credit facility by € 3 billion in order to refinance its existing € 3 billion Revolving Syndicated Facility (see “Notes to the IFRS Consolidated Financial Statements – Note 37: Net Cash”). As of 31 December 2020, the Company has a net cash position of € 4.3 billion with a total liquidity of € 33.6 billion, before deducting short-term financing liabilities. Based on the above, management considers the Company has sufficient resources to continue operating for at least 12 months and that there are no material uncertainties about the Company’s ability to continue as a going concern. Restructuring provisions. In 2019, a provision of € 103 million related to restructuring measures at Premium AEROTEC was recorded following the announcement in December 2019 to the Works Council of the main features that would be carried out to increase future competitiveness.

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Airbus / Registration Document 2020