Airbus SE (AIR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thanks for joining us on short notice. Further to the announcement made this morning, Guillaume Faury, our CEO; and Dominik Asam, our CFO, will be highlighting the measures adopted in response to the coronavirus pandemic and will answer your questions. This call is planned to last around an hour. This includes Q&A, which we will conduct after the initial presentation. This call is also webcast. It can be accessed via our home page where we have set a special banner. Playback of this call will be accessible on the website, but there is no dedicated phone replay service. The supporting press release was e-mailed to you this morning. We have also uploaded on our website the slides, which we'll take you through now. Throughout this call, we will be making forward-looking statements. The presentation currently webcast contains the safe harbor statement, which applies to this call as well. You should read it carefully. Now over to Guillaume.

Thank you, Thorsten. Good morning to all of you, and thank you for joining us today. I sincerely hope that you and your families are doing well, and are keeping safe in this difficult time. Indeed, we are in the midst of a global health crisis reaching levels that none of us has probably ever seen before. An increasing number of governments have recently established [ stricter ] travel restrictions, and companies across all sectors are faced with unprecedented challenges worldwide. Our industry is particularly impacted as airline customers have to manage a situation in which they are facing historically low levels of demand for air travel. Our immediate priority at Airbus is on protecting the health and safety of our people, of our teams, of our employees and at the same time, ensuring business continuity. A week ago, on Monday, we decided to pause production and assembly in our sites in France and Spain with the aim of immediately implementing the health and safety measures, the new standards and processes required to protect people working in our facilities against the so-called now COVID-19. The same measures are also being implemented in Germany, U.K., U.S., Canada and across the world without full interruption of production. We leverage the lessons learned from our operations in China as our colleagues in Tianjin have been implementing measures that now prove to be efficient. Today, we partially resumed production and assembly work in our French and Spanish facilities. Workstation will only reopen if and when they comply with the new health and safety measures. In the meantime, we are adapting our working processes and standards to this new situation with the aim of progressively recovering efficiency. I'd like to say, I believe we enter this period of high uncertainty with a strong position compared to others, to competition in all dimensions that matter and in particular, with a strong balance sheet, a record high backlog and a supply chain that is geared for continuous production as we enter this crisis ramping up the A320 family. The situation of the supply chain will be of very high importance in the next weeks. We have a net cash position and ample liquidity took up with the months and quarters ahead of us. This cash position gives us enough time to adapt to the new aviation world we are going to live in post-COVID-19. We have achieved that with the management team and the Board of Directors by the withdrawal of the 2019 dividend proposal, the implementation of a new EUR 15 billion credit facility and the suspension of the voluntary top-up pension funding. In addition, measures to minimize cash requirements has been identified and keep being identified and will be activated, depending on the further development of the pandemic. First, there will be deferral of projects and capital expenditures, which are unfortunately becoming less time-critical with the situation. Depending on financial distress of certain customers, we would also consider adapting production while honoring our customer commitments. We could implement a higher increase, reduce the number of temporary workers, leverage flexible work and apply for government-sponsored short-time work in order to reduce our cost base. All of this is on the table. I stress that we are doing everything we can to keep fulfilling our customer commitments, and components for assembly are still available, thanks to the buffers we have created in our supply chain. Obviously, we monitor very carefully the health of the supplier -- of our suppliers in these times. We, therefore, highly welcome the commitments announced by many governments to support airlines and support also suppliers. Which, while in general, commercially viable, cannot always weather this very special crisis by their own means. Under the current circumstances and given the limited visibility due to the evolving COVID-19 situation, the Board of Directors also approved to withdraw the 2020 guidance. Before Dominik updates you on how we manage Airbus liquidity in that situation, let's have a look together on our backlog and the protection it provides. As you can see, hopefully, on the slide, our backlog is widely spread within customers and different regions around the world. In particular, in our A320 family, we benefit from a very competitive position by offering the most capable and technologically advanced products in that segment, highly appreciated by airlines around the world and really appreciated by customers. Our single-aisle backlog, which, as you can see, represents more than 80% of the total Airbus backlog in units, also includes a significant level of overbooking, which is now providing a cushion for deliveries. In times where we can expect to see airlines revisiting their CapEx plans, the size of that backlog and its quality will serve as a shock absorber. In general, our contractual rights in cases of deferrals or cancellations gives us a high degree of flexibility to withhold PDPs, to allocate production slots to different customers and to potentially remarket aircraft already industrially engaged. Of course, the implementation of case-by-case, customer-by-customer tailored solutions will take some time. And with the financial flexibility we have created, we will have that time to deal with customers and adapt to the new environments we are facing. It is not unlikely that the situation will be tougher on wide-bodies given that it's a global crisis, which will impact long-haul flights probably more severely. When it comes to the other bookings, we see some benefits from reducing LDs by aligning deliveries with production capacity. We also see some non-Airbus customers being interested in single-aisle slots, would they become available. So in summary, especially the backlog of the successful A320 family, offers protection, which makes me confident as we navigate through this very difficult crisis. Next slide. Let me also give some perspectives beyond the day-to-day crisis management. I'm convinced that our strong A320 competitive position in the single-aisle market is of particular importance given the undersupply situation due to our capacity limits and the 737 MAX grounding before the COVID crisis as well as the size of -- and the snapback potential in this market once the worst will be behind us. It's also promising to observe that our A220 shows above-average utilization due to lower traffic density on many routes. And finally, we recently saw some first signs of slow recovery of domestic air travel in China. Chinese customers were not able to take deliveries at the peak of the crisis in China, but we have some indications that deliveries will resume once operationally possible, actually quite soon, probably in the next month. By maintaining some production, maintaining production as an activity, managing our resilient backlog, supporting our customers and securing financial flexibility for operations, we will secure business continuity while -- and especially while ensuring the health and safety of our employees, of our teams. Well, that's the introduction I wanted to make and share with you. Now Dominik, I hand over to you. Dominik will give you an overview on how we are managing Airbus liquidity. Dominik, you have the mic.

Thank you, Guillaume, and good morning, everyone. Besides the strength of our backlog, we have a strong balance sheet and liquidity, and we benefit from our ratings. We finished 2019 with a strong cash position and started 2020 with around EUR 26 billion of available liquidity. Let me share with you some of the main moving parts year-to-date in 2020. We paid EUR 3.6 billion of penalties related to the agreement reached with the authorities resolving their investigations into Airbus. We also paid $0.5 billion net consideration to acquire Bombardier's remaining stake in the Airbus Canada Limited Partnership. And of course, we have funded our operations from the beginning of the year. Taking all this into account, our cash position is still strong. But given the crisis our industry is facing and in anticipation of higher cash needs in the event of an extended period of severe disruption, we've also taken additional actions. As we speak, we have further bolstered our liquidity by converting a EUR 5 billion credit line we had signed already as a precautionary measure in mid-February into a new fully underwritten facility amounting to EUR 15 billion. Consequently, available liquidity now amounts to approximately EUR 30 billion. This amount is before non-pooled cash and assumes no issuance in capital markets such as commercial paper. Besides strengthening our liquidity, we have also taken measures to minimize our cash requirements and strengthened our equities. We decided to withdraw the 2019 dividend proposal with a cash value of EUR 1.4 billion and to suspend the top-up funding of pensions. In addition, we have identified operational measures to reduce our cash needs that will be activated depending on the evolution of the situation. And please note that top-up funding for our German contractual trust agreement for pensions is purely on a voluntary basis. We have therefore decided to spend any top-up funding until further notice. Given that we have the right to extend the additional EUR 15 billion credit line, with an initial tenor of 1 year up to 24 months, we have the means to fund our operations reliably. Now to the next slide with some more granularity on how we can secure our liquidity even at times in which markets might be in severe disarray. As a reminder, in 2014, we acquired Airbus Bank, which allows us to ensure liquidity of financial assets in disrupted markets. It gives us both the ability to deposit cash at the Bundesbank as well as the possibility to borrow directly from the European Central Bank through the ECB repo program for eligible securities. So even if debt capital markets fail, we can draw liquidity from our ECB-eligible bond portfolio in a reliable way. We also benefit from our ratings. Our short-term rating is A-1+ by S&P and P-1 by Moody's. Our long-term rating is A+ stable by S&P and A2 stable by Moody's. This robust creditworthiness and our strong relationships with major banks are evidenced by the significant capital commitments we have received yesterday from leading European, U.K. and U.S. banks even at times of extreme stress in the industry. While spreads are wider than in normal times, the terms and conditions we have obtained in this highly adverse environment also speaks to the solidity of our balance sheet. Airbus has, as of today, not any refinancing towers looming, but the maturity profile of our debt is nicely spread over years to come. So when opportunities arise to reduce needs to draw on our credit facilities by issuing long-term debt at reasonable terms, we'll capitalize on them. Now onto your questions.

[Operator Instructions] So Kai, please go ahead and explain the procedure for the participants.

[Operator Instructions] So the first question we received is from Benjamin Heelan of Bank of America.

Yes, it's Ben from Bank of America. My first question is in the statement you make a reference to maintaining production. Is there any guide that you can give us around what levels you're going to be able to maintain production at on the different programs? And then my second question is regard to the ongoing conversations with customers. I assume a lot of this is still very early stages. But could you give us a little bit of color in terms of how those conversations are going? Is there a lot more focus around short-term deferrals? Is it long-term deferrals? And then also, how do we think about the buffer of double booking on 320 and what that could mean for deliveries this year?

Thank you, Ben. I hope you're well, too. So production first. It's a deep supply chain with quite large complexity. So we are very active on monitoring the supply chain. That's the first priority. I am happy to report that there was no disruption from the Chinese supply chain over the last weeks and months as they went through the initial steps of the crisis. We have sort of 100-plus suppliers that deliver from China and we monitored 500 critical work packages. So the supply chain has maintained its ability to deliver for the first wave. I would say, in China, it's becoming increasingly more complex and difficult as the crisis is impacting Europe and U.S. will be impacted as well. So that's the first point. And we are anticipating more difficulties, but the initial months of the situation have been, so far, managed not too bad. Then now it comes to our own business continuity, and we're putting full priority at the moment on combining the measures that we are inventing, creating, putting in place, deploying in all our sites to be able to deal with the coronavirus itself -- with the virus. And this is what we are doing as we speak. You know that we decided a week ago to pause production and assembly activities for a week basically, almost a week in France and Spain. We have implemented those measures. We restart today very progressively, putting safety and health as a must requirements, and things will resume at the speed we will observe. There's no objective in productivity or whatever or efficiency at the very beginning. It's just to make sure we can keep what I call the business continuity, which means the flow of parts and activities that keeps this complex supply chain working. Now when it comes to your question on customers, well, it's very active at the moment. It's very dynamic. It's very case-by-case. Obviously, we see a different type of behaviors, depending on where the airlines are located and how they are impacted. I mentioned before that we see a recovery of the flights, of the passenger traffic, I should say, in China. At the very bottom, it was, as far as I know, close to 15% compared to normal, so minus 85%. Mid of last week, number of passengers was back to 30%, 3-0. So we see that this is picking up progressively. In the rest of the world, the trend is the opposite, okay? So each and every airline is trying to assess its own situation, find for recovery, finding the measures and we see very different kind of situation, and we are addressing this one by one. It's premature to give an indication of what it will look like. That's why we've decided to withdraw the guidance to give us time to assess and to redefine the new plan. And that's why as well, we are very happy that we've secured this financial package that is giving us consistently time and room to maneuver so we can adapt and then start to be back to a situation that will be fully under control with clear production planning, delivery plannings reorganized with our airlines. Sorry, it's a bit of a long question, but you addressed probably most of the main or the most important topics.

And the next question we received is from Olivier Brochet of Crédit Suisse.

Olivier from Crédit Suisse. I would have 2 questions. Then the first one is on a question on the cash burn that you are facing today. If you could give us a bit of help on quantifying what sort of level we are looking at weekly, monthly, I don't know, the key drivers maybe. And second question is on production. At what level are we at the moment across the various programs, please?

Okay. Thank you, Olivier. We are well on the call, and I hope you are well too. Thank you for asking. Dominik, may I hand over to you for the question on the cash burn, and I'll take the one on production?

Yes, sure. I think if you look at the Q1, I think we can first look at what happened last year. We had more than EUR 4 billion negative free cash flow. There was also some spillover effect from accounts payable. And given that you clearly see that our deliveries are behind last year, if you look at the kind of through February deliveries, then it's probably not a secret or not unexpected that March will be very tough, too. We'll have lower deliveries and then probably a worse cash burn. But I think there were some strange numbers rumored in the markets which we couldn't really follow quite logically because they were basically assuming that we would not have a single PDP or a single delivery anymore and of course, in such a scenario, would also adjust the cash burn. So that's purely a theoretical number because as certain deliveries might be pushed out, we would adjust the production schedule and then also taking into account that about 75% of our cash burn in commercial aircraft is from sourcing. It's clear that we can very much curb the cash burn on that front.

Okay. So now back to production. Well, actually, except China and U.S., which are nominal, in Europe, as we have decided to pause for a week, we're restarting from a week of pause in France and in Spain. In Germany, we kept going, but we are not putting priority on flow. We are putting priority on defining those measures to be able to start to operate again. That's really the priority. So I would like to not answer that question today. We need to restabilize and see at what pace we can reasonably restart and operate. Obviously, the monitoring of the supply chain plays also a very big role, and that's also what we are doing at the moment in Europe with the many measures decided by governments. So again, short-term priority on health and safety and the right measures, dealing with this new risk and situation to be able to have a system that operates back again soon.

And the next question is from Robert Stallard of Vertical Research.

I have a couple of questions for you. First of all, on China, I was wondering if you could give us a little bit more detail in terms of what you've seen in China year-to-date, particularly with regard to aircraft deliveries to the airlines. And if you were to extrapolate China to the rest of the world, what sort of impact could we possibly have? That's the first question. And then secondly, as you look forward from here, do you have any sort of ballpark number for how much money you might have to help with the supply chain in terms of cash support going forward?

Okay. So China, the -- so I mentioned already what happened with the airline and the flights. The sort of general approach to the situation that was taken by the airline was to pause taking deliveries to a very large extent and start resuming slowly. And the perspectives that I gave before on the next months gives me confidence that we will see a return to high numbers of deliveries somewhere later in the half year or in the second half of the year. But it's still also quite early to be precise and to think that this is reliable, depending on how the situation of China will keep improving. And you know that now the risks for coronavirus in China are no longer linked to people in China, but the so-called inbound risks of people coming from outside of China into China. So I would be very prudent to not extrapolate, but just look at it as an example, as a reference that can give some learnings. But prudently applying to other situations, that might be somewhat different. Support to the supply chain. Well, in normal times, it's predominantly done by the aviation OEM themselves. Here, it's a very specific situation. That's why we are strongly advocating for the strong support of governments to the ecosystem, to the airlines, and that's probably the first priority, but also to some potentially distressed suppliers or suppliers in difficult situation. It's premature. We are not yet at that stage. Obviously, we are monitoring very closely. That's the big risk. I said before, the first wave that hit China has left the supply chain operating and working, and that's a very positive signal for me. It shows that it's possible, but we need to make sure that all what we've learned in the supply chain from the Chinese experience is also applied in the rest of the world, that the supply chain will adapt to this new situation, learn to operate. And that's basically, I think what the vast majority of players, of companies are looking at as we speak.

And the next question we received is from Tristan Sanson of Exane BNP Paribas.

So it's Tristan from Exane. The first question is, can you tell us whether you have any difficulties in delivering completed aircraft that customers actually want to get? So do you have any difficulties in having the customer actually traveling to come and collect the aircraft to the facilities or any certification difficulties related to the current crisis? That's the first question. And the second one, I would be keen to know if you see any risk of outflow coming from down payment that you've all received. So do you have any close, like force merger close that could prompt you to give back some of the down payment that you received? Or can you consider that is your own cash and would not be given back under any circumstance?

Okay. Thank you, Tristan. I hope you're well too. On deliveries, yes, yes, we see a lot of difficulties, obviously, and the international travel bans are putting a lot of pressure. The rules that are decided country by country on whether the people are allowed to fly, not to fly or if they come back, that they would be forced to be in quarantine for 2 weeks or more, is putting a lot of additional difficulties. We've managed to keep a certain flow of deliveries so far in the last weeks, but it's getting increasingly difficult. And therefore, we are looking at potential possibilities to store finished aircraft as we have done in previous situations, probably to a larger scale, before those bans are lifted and we can resume delivery. So yes, there are customers that would like to take delivery and don't find solutions to get the planes. When it comes to the certificates or the certification with design or production certificate or maintenance certificates, we have no issue, or I would say no issue yet because we are very much monitoring as well that situation. It's a very good question. There might be issues on -- and questions and difficulties on the POA, the production certificates, for instance, given the situation of the supply chain and suppliers, but these are risks for the moment, I'm not able to report any identified problem. PDPs, Dominik, do you want to take that question?

Sure, sure. I mean, first of all, the general rule is that we don't have force majeure in our contracts. And if you look into the most important jurisdictions like New York law and English law, if the contract is silent about force majeure, there is no force majeure. There might be some exceptions here and there, but that's the general rule, which means that we have a lot of flexibility to deal with the PDPs in case there is some customer distress.

The next question is from Celine Fornaro of UBS.

My first question would be regarding the wide-body. So Guillaume, you highlighted the resilience of the backlog in narrow-body. But clearly, we can see that the production level of wide-bodies have been under question for a while. So would you be ready to take dramatic actions or envisage some product discontinuity on the most weaker ones? And my second one would be regarding the ECA financing, which were helpful in previous downturns to step up in terms of allowing the airlines to take deliveries of these planes. So do you see this mechanism still working and coming back to it? And also is Airbus now fully cleared to benefit of this ECA financing, like before all these compliance investigation?

Hello, Celine. Thank you for your questions. I'll take the first one and give the one on ECA financing to Dominik. Dominik, if possible. So well, wide-bodies, first, the situation in '18 and '19 was the one-off oversupply, and there have been decisions in rate adaptation from the 2 OEMs that -- what I was saying a couple of weeks ago was, in my view, quite appropriate for managing the situation if the market would have stayed where they were last year. But obviously, this is no longer the case. So we'll see again that it's very likely a situation of strong oversupply, and we will have to take decisions. These decisions will be taken one by one after a discussion with the customers and having found an agreement on how we manage their situation and how we manage the planes one by one and the contracts one by one. No, I don't believe it would be appropriate to take hard decisions on products. And by the way, we have to stay very prudent. The one you might have in mind by saying they are weaker might emerge because they are very competitive in terms of price, as very strong. So I would not make judgments that will be too early. Sometimes we are wrong to be right too early. I like this expression. And here, we will be very granular based on facts and figures and discussion with customers. That's maybe what I can say, it was to address the wide-body. I think on the single-aisle, we've been quite explicit in our previous presentation. Dominik, can I hand it off to you for the ECA financing?

Sure. I agree that in -- the ECA financing might become more important in the current situation. And we have already resuscitated the flow of ECA financing post the compliance crisis. It's true that there are still some processes to be maintained in terms of due diligence, which are a little bit cumbersome, and we are engaged in dialogue with the ECAs to see how we can improve that. When we say we really would welcome support for our customers, airline customers and suppliers, of course, ECA financing is one of the topics which are very much in the middle of the fairway for that. And we really do everything we can to convince governments that this is a crucial tool in the current time.

And the next question we received is from Chris Hallam from Goldman Sachs.

So 2 questions from me. First, quite a simple one. Are there any customers not currently requesting deferrals or delivery flexibility? And then on the second question, how are customers currently paying for aircraft deliveries? Clearly, they're facing very adverse financial conditions, and many of them have talked about freezing or cutting CapEx. So could you elaborate on some of the financing mechanisms in place they can use to finance purchases at the moment, be it sort of lessor, say, in a leaseback financing or even financing from Airbus?

Maybe I'll start by a bit of a general answer and maybe hand over to Dominik, if you want to be more specific. Well, are the customers not asking for? Well, I don't know. I'm not chasing for those ones. They are many asking for, obviously. I would guess -- I mean Christian Scherer is not with us around the call. Based on the discussion I've had with him, I would tend to say, yes, there are some not asking for, but this would need to be checked carefully. Obviously, we are, as I said, in very deep discussions with the one, which are needing support in a way or the other, to find a way to do it that makes sense for them and for us. Yes, the role that lessors are playing is really very important in these very moments. And they keep playing their role, and they have. They will have to keep playing their role. That is very crucial in this very situation. But -- that these are -- the planes who are backed or procured by lessors keep being delivered, and that's when possible with the constraints we discussed before and that's very helpful and very important. Dominik, a bit something to add to my quite general statements or answer?

Just one comment. I mean just at the risk of stating the obvious, we are not delivering any aircraft before we get the cash. And in terms of our ability to do vendor financing, I mean, we did this EUR 30 billion total liquidity package now, but of course, it's good to support the Airbus business. It's very solid for that, but we are not going to kind of balloon our balance sheet on that, but do it very, very selectively.

And next question is from Christophe Menard of Kepler Cheuvreux.

Two questions on my side. First one is, we've seen, by some airlines, some discussions about the strategic change about their fleet. Have you seen this in the discussions you currently have? I mean some airlines saying that they will reduce their fleet. Is it something that is coming up in the discussion because that would be -- I mean that could be quite a change in, I mean, global market forecast going forward? And supply chain interruption, we're seeing also some players saying we're closing down our factories for 3 weeks or so on. Is it made in sync or is that concerning you? Or is it something that you're going to have to manage because at a given point in time, it will also urge you in a way?

Yes. So thank you, Christophe, 2 very good questions. All the best to you as well. Take care of yourself and your family. Well, do we see airlines considering or anticipating strategic changes? The answer is yes. They sometimes even see themselves as -- they project themselves behind the crisis. And seeing how this could accelerate some of the reflections they had already, how to emerge from that crisis in a better shape, in a better place to tackle the future. And in some cases, it's -- they're slowing down and trying to survive. In others, they are accelerating and anticipating and potentially taking stronger decisions. Well, we have -- I have, at least, to stay very prudent because I have seen a lot of reflections, ideas, scenarios. I'm not aware of players, airlines who have announced already very clear way forward and strategy. And we're trying, in the discussion we have with them, to provide ideas, support, answer questions and see how we could move together into that direction. So it's only at the very early stages of these discussions. But obviously, we see players, which are clearly looking beyond the fence, looking beyond 2020 and trying to -- okay, I don't know if this is the right word, but not waste the crisis and try to do something good out of it. And we think we can play a role, and this is what I hear as well. They expect us to play a role in that. Supply chain. Well, you're mentioning 3 weeks of stop. I didn't like this announcement this morning. It's unexpected and it was not coordinated, I have to confess. Now they might have good reasons of doing it. And this is a major company, so we will reach out to them and see what it implies. In some cases, we have situation of inventories and buffers. I'd like to simply remind that we had created a significant buffer to manage a potential no-deal Brexit. And sometimes, this gives a lot of headroom and ability to maneuver the situation. So I want to believe they are in that situation. Obviously, each and every player in the supply chain will play a very critical role in keeping the whole system afloat and alive at least in first weeks and months before it gets better. So I can share with you that we are in very close contacts with the whole supply chain in general that there are daily updates, weekly updates on a broader scale, and that keeping the supply chain working and operating has been the priority when it comes to suppliers in the last weeks, was successfully managed. And I want to believe it will keep being the case while the complexity is getting bigger. And we're reaching out to each and every one of them. My teams, I'm sure, will be or have been in touch with this company. And hopefully, there is a way forward in that very situation. But this is really something very important, keep synchronized and keep this working, operating, even if it's very challenging. And we respect that even if all companies, all players have, in my view, to do what we are trying very humbly to achieve, which is to define the new work standards, the new ways of working with these very complex new measures that are linked to managing the coronavirus in the offices, on the shop floor, in the logistics, everywhere.

And the next question received is from Sandy Morris of Jefferies.

Two things. I did some very crude arithmetic, just on your opening liquidity, your additional liquidity and where it is today. And I seem to get to a cash burn of EUR 6.7 billion so far. Now I mean that isn't a surprising number if last year was EUR 4 billion and the deliveries are lower, so there's more inventory. Is that simple arithmetic broadly correct?

So maybe I can take that one. Let's just make sure you have not forgotten any component here. So there was the final EUR 3.6 billion in between, there was the Bombardier purchase price of $0.5 billion, and then let's not forget that in the kind of available liquidity, as we highlighted, we exclude pooled -- non-pooled cash. So what's not pooled and not immediately available in treasury is not in there as a precaution, to be conservative. And that means that your number is probably overestimated in terms of cash burn.

Okay. Excellent. But you...

But I've not closed the books but don't want to comment in more detail here.

Yes. It was just crude arithmetic, so I was just double-checking. And then forgive my ignorance, but the Airbus Bank allowing you to access the ECB stuff and everything. I don't quite understand the magnitude of this, because it's such an interesting idea that every industrial company would have a bank in Germany. How important is that to you, please?

I mean it's not that every industrial company has a bank, but some have. We are not the only ones. So Siemens has one too exactly for that reason. So in the aftermath of the 2008/'09 financial crisis, corporates who can afford the ticket to have a regulated bank because, of course, regulation comes with cost, have, in some instances, done that, and now we benefit from that. It's like an insurance policy for liquidity.

But I mean in theory, it could be a gigantic amount of liquidity if...

There is a regulation -- it's not infinite, but don't forget, this cash will not be needed at once. So what you do is, basically, you start liquidating securities, then you deposit what you need very near term in the European Central Bank, so you have 100% certainty. So the gradual kind of process where you use the bank as a buffer, as a shock absorber, so to speak, for disrupted markets. You don't need to run a huge balance sheet for the bank to do that.

Well, but that's sort of way down the line because we're in pretty good shape as it is. And at the risk of sort of, again, leading you because obviously, I have my own particular agenda. Is it far too soon, do you think, for governments to have settled down or reached a point where they're willing to listen to more potentially constructive suggestions for protecting the ecosystem of aerospace? Or is it just too soon?

Well, Guillaume speaking. I think it's not too soon. I think they're looking at it. They're trying to assess the situation and the -- what is urgent versus what is important, what -- trying to make scenarios themselves, but they have expressed very strong commitments to support. So we are in the early stages. And I see the same in the U.S., in Europe and potentially -- or most probably in China. But I'm far less informed on the different means that the Chinese government is using for that. So yes, we need to wait a bit to see the forms, the ways that this will take.

And the next question received is from Jeremy Bragg of Redburn.

So guys, can you hear me?

Yes, we can hear you.

So I wanted to ask a question, please, on the liquidity. And really, without being blunt about it, is it enough in a very stressed situation? Say, for example, you had 6 months of materially fewer deliveries than planned or even right up until the year-end, is the EUR 30 billion enough? Would you have to seek state aid in the same way that Boeing has? And what would your balance sheet look like at the other side of it? And then the second question, really, and I appreciate -- Guillaume, it's probably too early, but I'm kind of going to ask anyway. Are you thinking about this as a bad year in 2020 with a recovery to a lower level of deliveries in most programs thereafter in 2021? Or is it just far too early to say? And this is potentially something that kind of could drag on in terms of delivery rates for several years?

Yes. So thank you for the questions. Well, first, on the second one. Yes, it's too early. And we are doing the work to try to assess the next weeks, the next months and obviously, the next quarters and 2020, 2021 with the airlines. The recovery has started in China, but has not yet started in other countries. So it's difficult to know when the low point will be and at what pace things will recover. And when we will have this behind us, then I think the scenarios will be easier for the midterm. So too early. On the other question. Maybe, Dominik, you want to take it?

Sure. I'll have a go with it. Of course, we size the facility in a way that we deem appropriate to protect us in this crisis. And I think the important thing to understand, again, is that the vast majority of our cash consumption on the kind of cash outside is to buy components and parts from our suppliers and some service providers and temps and that type of stuff, but of course, components being the lion's share of that. So that 3/4 plus of our cash usage is there. Now if we see certain customers not paying PDPs anymore, not showing up for delivery, and we know this is something that will be there for longer, and the then, we, of course, adjust our production plan and we'll start reducing the rate where we have these deficiencies, so to speak. So this is why, if you think about how much leeway we have, to kind of, in a certain control, look like we adjust the cash burn with a certain lagging effect, I have to admit, but adjust the cash burn to the cash in, you see that actually, we have a lot of runway with this EUR 30 billion.

And the next question we received is from Andrew Humphrey of Morgan Stanley.

Can I ask a couple? The first is around lessors, you alluded to those earlier. Clearly, in some market environments, when you see any weakness in demand, that might be an environment when some lessors are -- but have to earn their corn. Clearly, this is an exceptional scenario, and the share prices we see at the lessors on screen suggests that they're also in a very challenged financial position. Could you talk about any specific dynamics that you're seeing there and around enforceability of lessor deliveries? And the second question is just around non-pooled cash. You highlighted that a couple of times. I wonder if you could talk any more specifically about the position there.

Okay. Dominik, I'll let you take the second one. I'll take the first one. Well, I mean I made the general statement and explanation on the vessels, then you're right. This is a case-by-case situation as well. There are many lessors in the market now, and they have different situation to manage. They are our shock absorber, and the large ones are playing that role. Now in the shock absorptions, there are limits as well, okay? And as we said before, the depth and duration of the situation is still a question. Therefore, we cannot anticipate too much, but we're happy to rely on them to contribute to dampening the situation. And this is what they do for the vast majority of them. Dominik, second part?

On the noncash -- non-pooled cash, we talk really about funds, which are not available in a crunched scenario in treasury itself where we need it to fund our operations, but might be in some other places where we can't have access. But we talk about a very, very low single-digit billion number.

And the next question received is from Harry Breach of MainFirst.

My 2 questions, if I can, maybe one for Dominik. Dominik, given the importance of pre-delivery payment flows in, can you give us any sense of what percentage of anticipated or planned PDP flows are currently being made in? And then maybe my second one, maybe slightly more for Guillaume. Clearly, just overbooking, thinking back into the past, as I recall, the practice on the A320 was to look for very limited near-term overbooking over the next 12 months, maybe sort of less than 5%, rising up towards sort of up to 20% overbooking at 2 or 3 years out. Can you give us a flavor or some kind of understanding of what your -- what the normal overbooking practice was most recently at Airbus on the A320?

Okay. Dominik, I'll let you prepare the answer for PDPs and I'll take the one on the overbooking first. Well, no, the recipe of designing and managing the overbooking is not something we share, but I can give you a bit of color. We had managed the entry into service and the start of life of the A320neo family with overbookings. Then we faced engine situation, postponements of deliveries of the first neos, the ramp-up and the ACF situation. And therefore, we have accumulated quite a significant number of planes in the overbooking that is now very helpful. The reason why we have this overbooking policy is because we experienced in the last 20 years that overbooking was helpful to manage many different situations, including some crisis. Of course, we never had such a deep one. But in the other ones, this has helped to dampen the effect of the crisis on deliveries. And we anticipate that this is going to happen again with this one on the 320neo and the strong overbooking or the overbooking we're having for 2020/2021. Dominik, I hand over to you.

Thank you. So on the PDPs, yes, of course, in such a scenario, it's not surprising that some customers don't pay their PDPs, but I can also confirm that up to now, the vast majority of our customers still pay their PDPs. And the other, maybe color I can give you that, so far, in March, that kind of ratio was pretty similar to February. It's not falling off a cliff, but I don't want to be quoted here as assuming that might not be the case in the months to come, and this is exactly why we put these liquidity lines in place to make sure that we are also protected against debt. But I also want to highlight that if people stop paying PDPs, we will take the action on the sourcing side to make sure that we're not kind of having too much of a cash gap there. And I also want to highlight, this is why we said that we very much welcome initiatives by many governments to support our airline customers because to keep the supply chain alive, it's, of course, extremely important to pay the PDPs. And I think a lot of customers would love to pay them because there is a lot of consequences for them if they don't do so. And of course, there's also still the fact that we have been overbooked, which protects us a little bit. So there is that -- all these factors give us a little bit of a shock absorber on the PDPs, too.

So can I just clarify? If a customer is past due with PDP, just technically, as a contractual standard, how many months past due do they have to be before you have the right to -- or they are advised to forfeit PDP?

We won't answer that question. I mean this is confidential, okay? That's the relationship between us and the customers.

Presuming there is a point in time though, if they are past due.

I don't answer that question. It's a very important one, but it's one between us and our airlines, obviously.

And the last question is from Zafar Khan of Societe Generale.

Just a hypothetical one here. We keep talking about production, overbookings, PDPs. For me, the more fundamental issue here is oil is below $30, IATA is saying most of the airlines are bankrupt or will be in a couple of months. So there's this call from Boeing, yourselves, everybody else, looking for government aid. In this sort of situation, and I think this is exceptional circumstances, which airline would want to take delivery of an aircraft, given that most of these airlines are trying to ground their fleet? Now if you were to force the airlines to take deliveries this year, and you're entitled to do that because if you've cut metal for them, they have to take deliveries. But doesn't that create a massive problem for yourselves in '21, '22 with the overcapacity, et cetera? I was just looking at the Boeing deliveries pre the financial crisis, recessions we had pre the 2008, 2009, with peak to trough deliveries fell by 50% to 60%. So should you not really be thinking about the -- your production side and cutting that back quite severely to avoid this 60% peak-to-trough cutting deliveries over the next 4 years?

Yes. Thank you for the question. Well, I think you're making the situation very black-and-white, but it's a good exercise to stretch the rationale. That's why we are very actively working closely with the airlines. We are not -- I am not of the opinion that they will all be bankrupt at the exit of the crisis. I hope I'm realistic in saying this. They are fighting for survival, that's clear. There's a lot of governments around the world that have understood. They will have to step in to support the airlines that are very, very badly hit for quite a long period of time through this situation. But I see also a lot of airlines, as I said, which are dynamically managing the situation and looking at how to preserve the short term and survive that situation and emerge and continue to run their business afterwards. Well, in saying this, I'm not trying to deny the obvious. There will be a lot of consequences. We are looking at them very carefully. That's why we strongly believe that we need time to understand, adapt and resize to the right level and maybe in particular on the wide-bodies. This is for those reasons that we have made and we've decided all those financial measures. So we gained the time, the visibility, what I call the headroom, to be able to adapt to the very new situation, and we'll do it as good as we can, being -- facing facts and the realities as much as we can. When it comes to forecasting the future, it's always a bit difficult. But I think each and every airline is taking its own destiny in hand to see how to manage that. But it's going to be very hurting. That's for sure. It's not unlikely that the size and the shape and the form of the business emerging from the crisis will be different. We want to look at it, learn, understand, take the right decisions, adapt and emerge with our airlines that will be here behind the crisis to grow again and take business, and aviation will still be needed in our views.

Thank you for that very black-and-white answer. Thank you for that.

No, no. It was not black-and-white. I tried to make it not black-and-white. It's complex. And we value...

One thing that is black-and-white, I just want to stress that because you'd think -- I think you have implied that we would have gotten state aid for the package. The package we announced today has nothing to do with state aid.

No, what I'm saying, Dominik, is you're predicating here that the airlines will get stated and you can carry on delivering. All I'm suggesting is the -- surely, the prudent response. And sorry, I don't mean to be impolite here, but Airbus just need to cut production and be done with it because if you carry on delivering at the rate that was happening in the previous downturns, we're going to end up with a massive problem for the next 4 years. So what I'm saying is, let's look at it from the Airbus side and say, "well, what do we need to do here? Yes, we need to cut production. We need to cut it quite severely." Rather than forcing the aircraft onto the airlines because they've signed the agreements.

But this is what we said. We said that if the customer is in distress and it doesn't pay, then we cut production, sure. But we will -- our commitment, I think that's the other message of it, we will honor our commitment. We'll do everything we can to honor our commitment.

Ladies and gentlemen, this closes our conference call for this time. If you have any further questions, please send an e-mail to Mohamed, Philippe or myself, and we will get back to you as soon as possible. Thank you, and I look forward to speaking to you again soon and please stay healthy.