AIRBUS - 2020 Universal Registration Document

Risk Factors / 2 Business-Related Risks

H225 and H215 programme. Airbus Helicopters continues to drive improvements across its product range as part of its commitment to raise safety standards and increase the robustness and reliability of dynamic components. The H225 programme faces a challenge with the supply chain in a COVID-19 context. H175 programme. In connection with the H175 programme produced in cooperation with Avic, the Company faces the following main challenge: a tough market environment on its main offshore segment. NH90 and Tiger programmes. In connection with multiple eets in service, the NH90 programme faces the challenge of assuring support readiness while working on the deliveries of contracts signed in 2019. The Tiger MKIII contract is critical to the future of the programme and requires alignment with OCCAR ( Organisation Conjointe de Coopération en matière d’Armement / Organisation for Joint Armament Co-operation), Germany andSpain. TheNH90 programme faces a challengewith the supply chain in a COVID-19 context. Through the dedicated transformation plan launched on the NH90 and maintenance improvement plan initiated on the Tiger, the Company aims to reduce the maintenance burden and improve eet serviceability. H160 programme. The main challenge for the H160 programme is to secure the FAA certification despite the COVID-19 travel restrictions that impact negatively ight and training assessment. Even if significant de-risking has been achieved, the finalisation of post-type certificate activities is the priority to ensure the success of the entry into service. Direct Maintenance Cost of the helicopter, Product cost reduction and industrial ramp-up are key challenges. Border security. In connection with border security projects, the Company faces the following main challenges: meeting the schedule and cost objectives taking into account the complexity of the local infrastructures to be delivered and the integration of commercial-off-the-shelf products (radars, cameras and other sensors) interfaced into complex system networks; assuring efficient project and staffing; managing the rollout including subcontractors and customers. Negotiations on change requests in this respect along with schedule re-alignments remain ongoing. However, the repeatedly prolonged suspension of defence export licenses to Saudi Arabia by the German Government has significantly impacted the Company’s ability to deliver the project and is still significantly jeopardising the customer relationship. As a result of the consequential inability of the Company to execute the full scope of the 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 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 significant further financial impacts.

A320 Family programme. In response to the new COVID-19 market environment, the commercial aircraft production rate for the A320 Family was adapted to 40 per month in June 2020. In January 2021, the Company announced demand for the A320 Family is expected to lead to a gradual increase in production from the current rate of 40 per month to 43 in Q3 and 45 in Q4 2021. The Company monitors proactively and constantly the backlog, the internal and external supply chain, including engines, so as to ensure readiness for further rate adaptations in accordance with traffic evolution, to minimise inventory levels, and secure aircraft storage capacity. A400M programme. After the Company signed a contract amendment to restructure the contract, risks remain on development of technical capabilities (development effort as well as possible commercial agreement associated costs in order to reach Type Acceptance) and the associated costs, on securing sufficient export orders in time, on aircraft operational reliability in particular with regards to power plant and on cost reductions as per the revised baseline. For further information, please refer to the “– Notes to the IFRS Consolidated Financial Statements – Note 12: Revenue and Gross Margin”. A350 XWB programme. In connection with the A350 XWB programme, the Company faces the following main challenges: to secure revised quarterly delivery targets post-COVID-19, monitor and support the supply chain, reduce recurring costs to improve competitiveness within a widebody market recovering at a slower pace and deliver Step 7 as per adapted plan. Decisions on further rate adaptation will depend on traffic evolution. A380 programme. In connection with the A380 programme, the Company faces the following main challenges: programme wind-down, delivery of remaining A380s and secure in service support for next decades. A330 programme. In response to the new COVID-19 market environment, the commercial aircraft production rate for the A330 programme was adapted to two per month in June 2020. In connection with the A330 programme, the main challenges the Company faces are to secure revised delivery targets post‑COVID-19, monitor and support the supply chain. Decisions on further rate adaptation will depend on traffic evolution. The developments were on track in 2020: A330-800 was certified in February 2020, A330-900 251t MTOW was certified early October 2020 with a first delivery in November 2020 to Kuwait Airlines. A220 programme. In connection with the A220 programme, the main challenges the Company faces are to secure the A220 cost reduction trajectory with a strong focus on Design to Cost roadmap, and to ensure an A220 book to bill above one to fill current open slots. As a consequence of the COVID-19 pandemic, the commercial aircraft production rates were adapted in Mirabel to three per month and in Mobile to one per month in 2020. Attention will remain high on Pratt & Whitney engine maturity in service.

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Airbus / Registration Document 2020