Airbus // Universal Registration Document 2021

Risk Factors / 1 Financial Market Risks

Liquidity

On 26 February 2021, the Company exercised the f irst extension option of the maturity of its undrawn New Credit Facility (implemented in 2020 for €15 billion in response to the COVID-19 pandemic and reduced to €6.2 billion after take-outs) from 30 March 2021 to 30 September 2021. In August 2021, given the increase of its net cash position and its robust liquidity, the Company decided not to exercise the second extension option of the €6.2 billion New Credit Facility that matured on 30 September 2021. In the meantime, the Company extended the maturity of our € 6 billion Revolving Syndicated Credit Facility to 21 October 2024. Going forward, the Company will continue to adopt a prudent approach when it comes to managing its liquidity with the objective of maintaining its robust credit rating.

Counterparty Credit 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$88.3 billion nominal value at 31 December 2021) and cash investments (US$ 20.65 billion nominal value at 31 December 2021). 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. 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); and – – access to USD funding (through a US$3 billion US Commercial Paper programme, and a 144A US dollar bond market).

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 are 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.

As of 31 December 2021 the credit exposure had been estimated as follows (in € million) (1) :

Source of risk

Exposure Unexpected Loss Contribution

Banks

3,074

43

Corporates

3,917

90

Sovereign issuers

1,326

12

Money market funds

12,328

21

Total

20,645

166

(1) Not audited.

Moreover, the progressive implementation of new financial regulations and adjustments to existing regulations will have an impact on the business model of banks (for example, the split between investment banking and commercial banking activities) and on the capital structure and cost of such banks’ activities in relation to over-the-counter derivatives, and therefore on the funding consequences of central clearing and collateralisation of over-the-counter derivatives for corporations like the Company. This may ultimately increase the cost and reduce the liquidity of the Company’s long-term hedges, for example, as banks seek to either pass-on the additional costs to their corporate counterparties or withdraw from low-profit businesses altogether.

The Company also seeks to maintain a cer tain level of diversification in its portfolio between individual counterparties as well as between financial institutions, corporates and sovereigns in order to avoid an increased concentration of credit risk on only a few counterparties. However, there can be no assurance that the Company will not lose the benefit of certain derivatives or cash investments in case of a systemic market disruption. In such circumstances, the value and liquidity of these financial instruments could decline and result in a significant impairment, which may in turn have a negative effect on the Company’s financial condition and results of operations.

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Airbus / Registration Document 2021