AIRBUS - 2019 Registration Document

REGISTRATION DOCUMENT 2018

Management’s Discussion and Analysis of Financial Condition and Results of Operations  /   2.1 Operating and Financial Review

During the first three months 2019, 5 A330 aircraft were delivered including 3 NEOs. The flight test campaign of the A330-800 variant is progressing. A220 programme . As of 1 July 2018, the A220 aircraft programme has been consolidated into Airbus. In 2018, the Company delivered 20 A220s. The focus is on commercial momentum, production ramp-up and cost reduction. Generally, the Company makes estimates and provides, across the programmes, for costs related to in-service technical issues which have been identified and for which solutions have been defined, which reflects the latest facts and circumstances. The Company is contractually liable for the repair or replacement of the defective parts but not for any other damages whether direct, indirect, incidental or consequential (including loss of revenue, profit or use). However, in view of overall commercial relationships, contract adjustments may occur, and be considered on a case by case basis. Restructuring provisions. In 2016, a net €182 million provision related to restructuring measures was booked by the Company. A restructuring provision associated with the re-organisation of the Company of €160 million was recorded at year-end 2016, following the communication of the plan to the employees and the European Works Council in November 2016. The French social plan was agreed between the Company and the works council in June 2017. The German social plan was agreed between the Company and the works councils in September 2017, and the reconciliation of interests were finalised on 21 February 2018. In Airbus Helicopters, the restructuring plan launched in 2016 was signed by the three representative trade unions and validated by the Work Administration Agency (DIRECCTE) in March 2017. Defence export ban. Due to the prolonged suspension of defence export licenses to Saudi Arabia by the German Government, and the consequential inability of the Company to execute a customer contract, a €190 million impairment charge has been recognised mainly on inventories and a €107 million financial expense related to hedge ineffectiveness as of 31 March 2019. The Company is engaging 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 risks. Litigation. For information, see “— 1.1.7 Legal and Arbitration Proceedings” and “Notes to the IFRS Consolidated Financial Statements — Note 22: Provisions, Contingent Assets and Contingent Liabilities”. Brexit . In June 2018, the Company published its Brexit Risk Assessment outlining its expectation regarding the material consequences and risks for the Company arising from the UK leaving the EU without a withdrawal agreement (“No deal Brexit”). The Company has also launched a project to attempt to mitigate against the major disruptions Brexit is likely to cause to the Company’s business and production activities. To date, progress has been made in mitigating these risks. However, because of the unprecedented nature of a No deal Brexit, this potential scenario would plunge the aerospace industry into unknown territory where, despite the actions the Company is taking internally (including e.g., modifying Airbus’ customs systems, stockpiling of parts associated with complementary transportation and logistics means), the Company’s operations

Yet, despite the progress, the A400M programme is not entirely risk free. Risks remain on development of technical capabilities and the associated costs, on securing sufficient export orders in time, on aircraft operational reliability in particular with regards to engines, and on cost reductions as per the revised baseline. The A400M contractual SOC 1, SOC 1.5, SOC 2, SOC 2.5 and SOC 3 development milestones remain to be achieved. SOC 1 fell due end October 2013, SOC 1.5 fell due end December 2014, SOC 2 end of December 2015 and SOC 2.5 end of October 2017. The associated termination rights became exercisable by OCCAR on 1 November 2014, 1 January 2016, and 1 January 2017, respectively. Management judges that it is highly unlikely that any of these termination rights will be exercised as with the upcoming contract amendment these termination rights will be completely reviewed. During the first three months 2019, 1 A400M aircraft has been delivered, totalling 75 aircraft as of 31 March 2019. A320 programme . In 2016, 68 aircraft on the A320neo programme were delivered to 14 customers. Both engine suppliers committed to deliver in line with customer expectations. Challenges remained with the A320neo ramp-up and delivery profile. For the Pratt & Whitney engine, challenges were to (i) meet the delivery commitments in line with agreed schedule; (ii) fix in-service maturity issues in line with Airbus and customer expectations. In 2017, a total of 181 A320neo Family aircraft were delivered. Supplier Pratt & Whitney introduced new engine fixes in the fourth quarter which were certified. Unfortunately a new issue arose likely unrelated to the prior fixes, the impact of which was under assessment with respect to 2018 deliveries. Engine supplier CFM International meanwhile experienced some maturity issues in 2017 on some batches of the LEAP-1A engine. The A320neo ramp-up remained challenging and required that the engine suppliers deliver in line with commitments. In 2018, A320neo Family deliveries increased to 386 aircraft and represented over 60% of overall A320 Family deliveries during 2018. The first long-range A321LR was delivered in the fourth quarter. Deliveries of the Airbus Cabin Flex version of the A321 are expected to increase in 2019 although the ramp-up will remain challenging. Further upgrades of the Pratt & Whitney engine for the A320neo are due to arrive in 2019. Airbus continues to monitor in-service engine performance. Overall, the A320 programme is on track to reach the monthly targeted production rate of 60 aircraft by mid-2019 with rate 63 targeted in 2021. During the first three months 2019, a total of 96 A320neo Family aircraft were delivered. A330 programme . In 2016, the A330neo development was ongoing. In 2017, 67 A330 were delivered. On the A330neo, the first flight was completed in October 2017. Two test aircraft were available. The programme was on track to Type Certification. In 2018, 49 A330 were delivered. On the A330neo programme, the first A330-900s were delivered and the A330-800 conducted its maiden flight in the final quarter of 2018. In 2019, A330neo deliveries are due to ramp-up. Airbus is working closely with its A330neo engine partner to deliver on customer commitments.

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Airbus / Registration Document 2018