AIRBUS - 2020 Universal Registration Document

Risk Factors / 1 Financial Market Risks

In addition, the Company has backstop commitments to provide financing related to orders on the Company’s and ATR’s backlog. The Company’s sales financing exposure could rise in line with future sales growth depending on the agreement reached with customers. The Company remains exposed to the risk of defaults by its customers or significant decreases in the value of the financed aircraft in the resale market, which may have a negative effect on its future financial condition and results of operations.

aircraft, the Company would be exposed to losing as much as the difference between the market value of such aircraft and the guaranteed amount, though such amounts are usually capped. Through the Airbus Asset Management department or as a result of past financing transactions, the Company is the owner of used aircraft, exposing it directly to uctuations in the market value of these used aircraft.

Liquidity

The Company is exposed to liquidity risk in case of funding needs during a market disruption situation. The liquidity risk can arise when money markets and debt capital markets are closed for new issuances for a period of time. In order to mitigate this risk, the Company maintains: – – significant amounts of highly liquid cash on-balance sheet; – – undrawn committed credit facilities; – – diversified Euro funding programmes (such as a €12 billion euro medium-term note (“ EMTN ”) programme eligible to the Corporate Sector Purchase Programme of the European Central Bank (“ ECB ”), a € 11 billion Negotiable European Commercial Paper programme eligible to the Pandemic Emergency Purchase Programme of the ECB, and a €4 billion Euro Commercial Paper programme eligible to the Covid Corporate Financing Facility of the Bank of England); and – – access to USD funding (through a US$3 billion US Commercial Paper programme, and a 144A US dollar bond market). On 23 March 2020, the Company announced measures to bolster its liquidity and balance sheet in response to the COVID-19 pandemic, including a new € 15 billion committed

credit facility (the “ New Credit Facility ”), 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 support to customers and delivery. On 31 March 2020, the Company priced a €2.5 billion triple- tranche bond transaction across 5, 8 and 12-year tenors in the Euro Debt Capital Markets out of its EMTN programme in order to raise long term liquidity. The proceeds have been used to partially term out the €15 billion credit facility. On 2 June 2020, the Company priced a €3.5 billion triple-tranche bond transaction across 6, 10 and 20-year tenors in the Euro Debt Capital Markets out of its EMTN programme in order to further raise long term liquidity. The proceeds have been used to partially term out the €15 billion credit facility. On 21 October 2020, the Company cancelled its existing €3 billion revolving credit facility and signed a new €6 billion revolving credit facility with a tenor of 3 years in order to raise long term liquidity. The incremental portion of the new facility has been used to partially term out the €15 billion facility.

Counterparty Credit

The Company’s credit limit system assigns maximum exposure lines to such counterparties, based on a minimum credit rating threshold as published by Standard & Poor’s and Moody’s. If neither is present, Fitch ratings is used. Besides the credit rating, the limit system also takes into account fundamental counterparty data, as well as sector and maturity allocations and further qualitative and quantitative criteria such as credit risk indicators. The credit exposure of the Company is reviewed on a regular basis and the respective limits are regularly monitored and updated.

In addition to the credit risk relating to sales financing as discussed above, the Company is exposed to credit risk to the extent of non-performance by its counterparties for financial instruments, such as hedging instruments (US$81 billion nominal value at 31 December 2020) and cash investments (US$ 21.4 billion nominal value at 31 December 2020). However, the Company has policies in place to avoid concentrations of credit risk and to ensure that credit risk exposure is limited. Counterparties for transactions in cash, cash equivalents and securities as well as for derivative transactions are limited to highly rated financial institutions, corporates or sovereigns.

As of 31 December 2020 the credit exposure had been estimated as follows (in € million):

Source of risk

Exposure Unexpected Loss Contribution

Banks

4,722

143

Corporates

3,245

56

Sovereign Issuers

737

6

Money market funds

9,486

16

Total

18,189

217

12

Airbus / Registration Document 2020