Airbus // Universal Registration Document 2023

Risk Factors 2 Business and Operations-related Risks

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$ 67.1 billion nominal value at 31 December 2023) and cash investments (€ 23.2 billion nominal value at 31 December 2023). 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’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 (and if neither is available, 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 counterparty credit exposure of the Company is reviewed on a regular basis and the respective limits are regularly monitored and updated. In addition to monitoring the Company’s overall credit exposure, the Company regularly analyses counterparty credit exposure in terms of its potential contribution to unexpected losses. As of 31 December 2023 the Company’s credit exposure had been estimated as follows (in € million) (1) :

Source of risk

Exposure Unexpected Loss Contribution

Banks

3,823 (2)

41

Corporates

6,119

134

Sovereign issuers

832

7

Money market funds

12,399

20

Total

23,173

202

(1) Not audited. (2) Does not include the nominal value of hedging instruments.

The Company also seeks to maintain a certain 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 the event 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.

Moreover, the progressive implementation of new financial regulations and adjustments to existing regulations may have an impact on the business model of banks (as did, 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 will have consequences on the funding, 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. Necessary adjustments of such provisions include but are not limited to (i) the discount factor (dependent in part on interest rates) and the inflation rate applied to calculate the net present value of the pension liabilities, (ii) the performance of the asset classes which are represented in the pension assets, (iii) behavioural assumptions regarding beneficiaries, and (iv) additional cash injections contributed by the Company from time to time to the pension assets. The Company has taken measures to reduce potential losses on the pension assets and as a long-term objective to better match the characteristics of the pension assets with those of the pension liabilities. Nevertheless, any required additional provisions would have a negative effect on the Company’s total equity (net of deferred tax), which could in turn have a negative effect on its future financial condition.

Pension Commitments

The Company participates in several pension plans for both executive and non-executive employees, some of which are underfunded. As at 31 December 2023, the provision for retirement plans and similar obligations amounted to € 2.7 billion (compared to € 2.9 billion as at 31 December 2022). For information related to these plans, please refer to the “Notes to the IFRS Consolidated Financial Statements – Note 31: Post-Employment Benefits”. The Company has recorded a provision in its balance sheet for its share of the underfunding measured in accordance with IFRS based on current estimates. These estimates will be reviewed annually and, as the case may be, revised leading the Company to record lower or higher provisions.

Airbus Annual Report

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Universal Registration Document 2023