Airbus // Universal Registration Document 2023
Risk Factors 2 Business and Operations-related Risks
Acquisitions, Divestments, Joint Ventures and Strategic Alliances
Governmental customers may request proposals and grant contracts under schemes known as public-private partnerships (“ PPPs ”). PPPs differ substantially from traditional defence equipment sales, as they often incorporate elements such as: – –the provision of extensive operational services over the life of the equipment; – – continued ownership and financing of the equipment by a party other than the customer (such as the equipment provider); – – mandatory compliance with specific customer requirements pertaining to public accounting or government procurement regulations; and – – provisions potentially allowing for the service provider to seek additional customers for unused capacity. As part of its business strategy, the Company may acquire or divest businesses and/or form joint ventures or strategic alliances. Executing acquisitions and divestments can be difficult and costly due to the complexities inherent in integrating or carving out businesses, technologies or products and the related operations and human resources. There can be no assurance that any of the businesses that the Company may acquire or divest will be integrated or carved out successfully and in the planned time frame or that they will perform as planned and deliver the expected synergies or cost savings once integrated or separated. In addition, regulatory or administrative requirements, opposition by social partners or other stakeholders, or other contractual
The Company is party to PPP and private finance initiatives (“ PFI ”) contracts: for example two UK Ministry of Defence projects, Skynet 5 and related telecommunications services, and the AirTanker (“ FSTA ”). One of the complexities presented by PFIs lies in the allocation of risks and the timing thereof among different parties over the lifetime of the project. There can be no assurance regarding the extent to which the Company will efficiently and effectively (i) compete for future PFI or PPP programmes, (ii) administer the services contemplated under such contracts, (iii) finance the acquisition of the equipment and the ongoing provision of services related thereto, or (iv) access the markets for the commercialisation of excess capacity. The Company may also encounter unexpected political, budgetary, regulatory or competitive risks over the duration of PPP and PFI programmes, which tend to be of long duration. For further details, please refer to “Business and operations-related risks – Availability of government and other sources of financing”. or financial market conditions can prevent transactions from being finalised. Each acquisition, divestment, joint venture and strategic alliance is highly specific in its nature, purpose, risks and opportunities. The Company identifies risks through a detailed and systematic due diligence process and addresses identified risks through price mitigation and/or appropriate and specific contractual mechanisms (such as indemnification provisions), in each case reflecting extensive negotiations with the sellers/ buyers and/or partners. The Company’s business, results of operations and financial condition may be materially affected if any of these transactions are not successfully completed or do not produce the expected benefits. – –protect priority projects and deliver developments as per plan in an environment of increased certification scrutiny and greater complexity, including A321XLR, A220, ACJ TwoTwenty, A350 Freighter, A350-1000 Sunrise project, and Digital (DDMS and Skywise). A320 Family programme. In view of demand for the A320 Family the Company has announced a gradual increase in production for the upcoming years, with a monthly production rate of 75 A320 Family aircraft being targeted in 2026. Reaching this production rate will depend in part on the success of our industrial adaptation and the performance of our suppliers. For additional information, see “Business and operations related risks – Industrial system adaptation” and “Business and operations-related risks – Dependence on key suppliers and subcontractors”. The Company proactively and constantly monitors the manufacturing backlog (including the internal and external supply chain (including engines)), so as to ensure readiness for further rate adaptations in accordance with demand evolution, to minimise inventory levels, and to secure aircraft storage capacity.
Public-private Partnerships and Private Finance Initiatives
Programme-specific Risks
In addition to the risk factors mentioned above, the Company also faces programme-specific risks that could have a material impact on the Company’s business, results of operations and financial condition. The Company faces certain main challenges across its commercial programmes, including: – –commercial adaptation to achieve planned production rate increases while maintaining high safety and quality standards, including focus on regulatory obligations such as our Production Organisations Approval; – – monitor and support the supply chain with a specific focus on certain key suppliers, including engine manufacturers (with respect to the availability and maturity of both production and in-service engines, including the effect of required updates and maintenance cycles) and producers of key elements such as wings, aeroframe components, and other production elements for which sufficient alternative suppliers are not available; and
18 Airbus Annual Report
Universal Registration Document 2023
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