Financial Statements 2021

2. Notes to the IFRS Consolidated Financial Statements / 2.7 Capital Structure and Financial Instruments

35. Capital Management

The Company seeks to maintain a strong financial profile to safeguard its going concern, financial flexibility as well as shareholders’, credit investors’ and other stakeholders’ confidence in the Company. Consequently, operating liquidity is of great importance. As part of its capital management, it is one of the Company’s objectives to maintain a strong credit rating by institutional rating agencies. This enables the Company to contain its cost of capital which positively impacts its stakeholder value (entity value). Next to other non-financial parameters, the credit rating is based on factors such as cash flow, profitability, leverage ratios and liquidity ratios. The Company monitors these ratios to keep them in a range compatible with a strong rating.

Rating agency

Long-term rating

Outlook

Short-term rating

Standard and Poor’s

A

Negative

A-1

Moody’s Investors Services

A2

Negative

P1

Fitch Rating (unsolicited)

BBB+

Stable

F1

The stand-alone rating reflects the Company’s strong backlog providing revenue visibility, leading market position, operating performance, strong liquidity and solid balance sheet. It also reflects the Company’s reaction to the COVID-19 pandemic, including the adaptation of the production rate to meet customer demand, cost reductions and cash containment measures, as well as the uncertainties related to the length of the outbreak and the recovery pattern of demand for aircrafts post outbreak. Finally, it reflects the management’s focus on programmes execution, profitability and cash generation improvement. In accordance with the Company’s conservative financial policy, a strong rating is key to maintain a wide array of funding sources at competitive conditions, to have broad access to long- term hedging and to strengthen the Company’s position as a financially sound counterparty for its customers and suppliers. A five year plan for rating and a value creation ambition is constructed annually, and is composed of (i) EBIT and (ii) Free Cash Flow, which is defined as Cash provided by operating

activities and Cash used for investing activities less Change of securities, Contribution to plan assets for pensions, realised Treasury swaps and bank activities. The Company uses the WACC to determine the Net Present Value (“NPV”), which is used for any investment decision. The Company also monitors the level of dividends paid to its shareholders. The Company generally satisfies its obligations arising from ESOPs and Share Incentive Plans (“SIPs”) by issuing new shares. In order to avoid any dilution of its current shareholders out of LTIPs , the Company performs share buybacks to meet its obligations to its employees, following the decisions of the Board of Directors and approval of the AGM. Apart from this purpose, the Company generally does not trade with treasury shares. The Company complies with the capital requirements under applicable law and its Articles of Association.

2

36. Net Cash

The net cash position provides financial flexibility to fund the Company’s operations, to react to business needs and risk profile and to return capital to the shareholders.

31 December

2021

2020

(In € million)

Cash and cash equivalents

14,572 1,317 6,794 22,683 (1,946) (13,094)

14,439 1,618 5,350 21,407 (3,013) (14,082)

Current securities

Non-current securities Gross cash position

Short-term financing liabilities Long-term financing liabilities

Total

7,643

4,312

59

Airbus / Financial Statements 2021