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

2.1.4.8 Other Financial Result Other financial result includes the impact from the revaluation of financial instruments, the effect of foreign exchange valuation of monetary items and the unwinding of discounted provisions. Please refer to the “Notes to the IFRS Consolidated Financial Statements — Note 2: Significant Accounting Policies” and “Note 14: Total Financial Result”. Other financial result decreased from €102 million for the first three months 2018 to € -7 million for the first three months 2019, mainly due to the financial expense on hedge ineffectiveness. Other financial result decreased from €1,489 million for 2017 (restated) to € -531 million for 2018. This is due to a negative impact from the revaluation of financial instruments of €-732 million and foreign exchange valuation of monetary items, partly compensated by the net effect of the change of treatment of certain financial instruments under IFRS 9. In addition, in 2017 it included the impact of the refundable advances release. Please refer to the “Notes to the IFRS Consolidated Financial Statements —Note 23: Other Financial Assets and Other Financial Liabilities”. For 2017 (as reported), other financial result increased from € -692 million for 2016 to €1,477 million for 2017. This is mainly related to a positive impact from both foreign exchange valuation of monetary items of € +439 million and the revaluation of financial instruments of €+743 million. In addition, it included the impact of the decrease in the European Governments’ refundable advances primarily related to the A380 programme. 2.1.4.9 Income Tax For the first three months 2019, income tax was € -94 million as compared to €46 million for the first three months 2018 and corresponds to an effective tax rate of 68.1% (first three months 2018: -19.3%). This includes a deferred tax asset impairment, partially offset by the tax-free revaluation of certain equity investments under IFRS 9. For 2018, income tax expense was € -1,274 million as compared to € -1,462 million for 2017 (restated). The decrease, despite the higher income before tax recorded in 2018 (€4,285 million) as compared to 2017 (€ 3,826 million (restated)), is mainly driven by a lesser volume of deferred tax asset impairment than in 2017. The effective tax rate was 30% in 2018, mainly impacted by non‑realised tax losses in the period leading to additional deferred tax asset impairment. This was partially offset by the tax-free sale of Plant Holdings Inc. Without these impacts, the effective tax rate would be approximately 26%. Please refer to the “Notes to the IFRS Consolidated Financial Statements — Note 15: Income Tax”. For 2017 (as reported), income tax expense was € -1,693 million as compared to € -291 million for 2016. The increase was primarily due to the higher income before tax recorded in 2017 (€ 4,570 million) as compared to 2016 (€ 1,291 million). The effective tax rate was 37% in 2017. It was mainly impacted by non-realised tax losses in the period leading to additional deferred tax asset impairment. It also included an additional income tax charge related to the French corporate tax surcharge and the reduction in deferred tax asset due to the income tax rate decrease in the US, both enacted end of 2017. This was partially offset by the disposal of the defence electronics business, which is taxed at a reduced rate. Without these impacts, the effective tax rate would be approximately 26%.

For the first three months 2019, other income and other expenses was € 49 million net as compared to € 247 million net for the first three months 2018, which included the gain of €159 million following the disposal of Plant Holdings, Inc. For 2018, other income and other expenses was €1,474 million net as compared to € 645 million net for 2017. In 2018, the increase is mainly related to the release of liabilities on the A380 programme and the gain of €159 million following the disposal of Plant Holdings, Inc. For 2017, other income and other expenses was €+645 million net as compared to € +2,435 million net for 2016. In 2017, it mainly includes the capital gain of €604 million from the disposal of the defence electronics business. Share of profit from investments accounted for under the equity method and other income from investments principally include results from companies accounted for under the equity method and the dividends attributable to unconsolidated investments. For the first three months 2019, the Company recorded € -10 million in share of profit from investments accounted for under the equity method and other income from investments as compared to €36 million for the first three months 2018. For 2018, the Company recorded €439 million in share of profit from investments accounted for under the equity method and other income from investments as compared to €393 million for 2017 (restated). Please refer to the “Notes to the IFRS Consolidated Financial Statements — Note 7: Investments Accounted for under the Equity Method” and “Note 12: Share of Profit from Investments Accounted for under the Equity Method and Other Income from Investments”. For 2017 (as reported), the Company recorded €415 million in share of profit from investments accounted for under the equity method and other income from investments as compared to €252 million for 2016. 2.1.4.7 Interest Result Interest result reflects the net of interest income and expense arising from financial assets and liabilities, including interest expense on refundable advances provided by European Governments to finance R&D activities. Please refer to the “Notes to the IFRS Consolidated Financial Statements —Note 14: Total Financial Result”. For the first three months 2019, the Company recorded a net interest expense of € -36 million, as compared to € -63 million for the first three months 2018. For 2018, the Company recorded a net interest expense of € -232 million, as compared to € -328 million for 2017. The decrease in net interest expense was principally due to lower interest expense related to the European Governments’ refundable advances. For 2017, the Company recorded a net interest expense of € -328 million, as compared to € -275 million for 2016. The difference is primarily due to lower interest expense recorded on European Governments’ refundable advances in 2016. 2.1.4.6 Share of Profit from Investments Accounted for under the Equity Method and Other Income from Investments

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Airbus / Registration Document 2018