Airbus SE (AIR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for being with us. Welcome to the conference call releasing Airbus Q1 2020 results. I'm Amelia, the operator for this call. Please be aware that throughout the presentation, all systems will be in listen-only mode, and this conference is being recorded. Following the presentation, there will be a chance for you to ask questions. Right now, I'd like to hand the conference over to your hosts, Guillaume Faury, Dominik Asam and Thorsten Fischer.

Thanks, Amelia. Good morning, everyone. You're listening to the conference call covering Airbus's Q1 2020 results. Guillaume Faury, our CEO, and Dominic Asam, our CFO, will walk you through the results and take your questions. We expect this call to run for roughly one hour. That includes the Q&A, which we'll hold once the initial presentation is finished. There's also a webcast of this call. You can get to it through our homepage, where a special banner has been put up. A playback will be available on the website, though we don't offer a dedicated phone replay service. The supporting information package went out to you by email earlier this morning. It contains the slides, which we'll now take you through, along with the financial statements. During this call, we'll be making forward-looking statements. The package you received also contains the Safe Harbor statement that applies to this call; please read it carefully. Guillaume, over to you.

Thanks, Thorsten. Good morning, everyone, and welcome to the call on our Q1 2020 results. We appreciate you being with us today. I hope you and your families are well and staying safe during these hard COVID-19 times. Let me note that among the industries hit hardest by the Coronavirus pandemic — an unprecedented situation — indeed, as I've already said many times, every industry now confronts the biggest crisis in its history. That applies especially to commercial aircraft. Air travel demand has fallen away amid the travel restrictions and lockdowns that many countries around the world have imposed. Our customers, the airlines, have cut capacity, parked a very large share of their fleet temporarily, and are taking steps to lower cash spending. That also covers a full review of their CapEx and pre-delivery payment schedules. Not all of this is yet fully visible in Q1 2020 <<inaudible>> that EUR281 million and free cash flow before M&A customer financing at minus EUR8 billion, including the payments of the penalties from the fine of EUR3.6 billion. Before those penalty payments, free cash flow before M&A customer financing comes in at minus EUR4.4 billion, which is roughly at the level of Q1 2019.

Following the strong commercial and industrial results seen early in the year, we've taken careful measures aimed at safeguarding Airbus's future and at preparing ourselves as well as possible for a return to normal operations when the situation improves. During Q1 2020, cancellations stayed at a reasonable level. However, a large number of customers are requesting delivery deferrals, or they simply cannot physically take the aircrafts. We're adjusting to this new reality as quickly as we can in order to identify the most suitable solutions. We are — what I'd describe as confronting reality — adopting a realistic stance so we can proactively manage our order book and align production with our best reading of these new demands, while seeking to best satisfy customer expectations and commitments. Through our Watchtower process, we speak with airlines and Dassault continuously to grasp their various requirements, and we keep a close watch on their financial health and situation. We place special emphasis on delivering aircraft that will be industrially engaged by drawing on the related pre-payments on hand. According to our best evaluation of the overall situation, three weeks ago we made the decision to adjust our commercial aircraft production rates; Don <<inaudible>> was by roughly one-third, while preserving our capacity to adapt further as the global market continues to evolve.

The urgent thing for us is to put a short-term plan in place to contain cash. That is what we're doing, along with tackling the longer-term cost structure so the company ends up right-sized. Across our sites, in coordination with our social partners, we're rolling out a number of temporary social measures. We have rigorously ranked our cap expense projects and R&D within our general cost structure by how business-critical they are and by timing, which has produced a very significant reduction. Thanks to our strong balance sheets and the steps taken in March to further bolster liquidity, we've safeguarded our financial flexibility so we can adapt to the new environment and secure what I call business continuity. We are also advocating support from governments for our airline customers, for the ecosystem and, obviously, for our suppliers. This crisis is still at an early stage. So we have to stay humble. Things are still evolving, and we are managing very carefully our ability to grasp all the implications. After withdrawing the 2020 guidance in March, we keep assessing how COVID-19 is affecting our business. Given the limited visibility, particularly on the valuation equation, we are not issuing a new guidance. In summary, our industry is a complex, interdependent ecosystem with many different paths, and we're doing our best to keep those craft synchronized in a COVID-19 environment that is still evolving.

We remain in ongoing conversation with our customers, partners, suppliers, and the numerous stakeholders, and together with them we need to and we will navigate this crisis. Turning to our commercial aircraft environment in greater detail, we are beginning to observe certain indications of recovery in China, although the pace is very slow. At the height of the crisis in China in mid-February, passenger capacity fell by minus 85% relative to the pre-COVID-19 situation, and by April it had recovered to minus 60%. That is the most recent data available to me in the latest market report; I now expect <<inaudible>> to come in at minus 48% year-on-year in 2020, along with a reduction in passenger revenue of minus $314 billion compared with 2019 levels. Leading companies continue to play a significant role in actively financing and remarketing aircraft; for most of them, their financials were robust before entering the COVID-19 situation, with no repayment hours in the short-term. ECA financing was reopened last year, and we expect demand for ECA support to rise this year. Incidentally, I want to thank the ECA; the EDC confirmed the continuous availability of support for the crisis and beyond. This is very helpful. Now, looking at Q1 orders in Airbus, after a good start to the year in January, the commercial dynamic changed as the COVID-19 situation developed.

During Q1, gross orders came in at 356. Net orders totaled 290 aircraft, and the backlog sat at 7650 aircraft. Cancellations we logged reached 66, a figure below the prior year's level. For the Airbus A220, we booked 42 planes — 42 net orders — and the backlog was 529 aircraft. Within the A320 family, 248 net orders were added, and the backlog stood at the 6220 aircraft mark. As a result, our share of the market in the singular segments, measured by backlog, rose from 58% to 60% across the last 12 months, with half of that gain coming in the final quarter. The A330 backlog came to 323 aircraft following four cancellations. Turning to the A350: we booked 21 gross orders, among them 10 additional -900s for Air France, and cancellations recorded were 17. The backlog was 569 aircraft. On the next slide, looking at helicopters: during Q1 2020, net orders booked were 54, against 66 in Q1 2019. We closed Heli Expo 2020 with 38 orders, including 12 more H145s for Metro Aviation. On the H145, we also booked an additional order for six H145s for the Ecuador Ministry of Defense, and we additionally secured an order for 15 UH-72 Lakotas — the military version of the 145 — for the US Army.

Beyond that, we signed contracts for a pair of Super Puma helicopters destined for the Japanese Coast Guard. For 2020, we anticipate that civil and parapublic business will stay weak, especially in oil and gas, largely because oil prices are so low, though prospects in the military segment continue to look favorable. Last, in defense and space, we took in orders reaching up to EUR1.7 billion, which included military contract awards spanning services, secure communications and telecommunication satellites, plus Phase 1A of the FCAS project that was signed in February. In defense and space as well, talks continue on agreements such as the German Eurofighter, batch 1 replacement, and the Tornado succession. As ever, pinning down exactly when a contract lands is hard to do. Even so, in today's conditions, we identify quite a few opportunities across defense with our European governments, and those matter a great deal to us. With that, I'll hand things over to you, Dominik, so you can walk us through the finer points and the financial figures. Dominik, over to you.

Thank you, Guillaume, and good morning everyone. I trust you are all doing well and staying safe. For Q1 2020, revenues came in at EUR10.6 billion, which is 15% lower than Q1 2019. That decline mirrors the challenging market conditions weighing on our commercial aircraft business, and we handed over 40 fewer aircraft compared with a year earlier, partially offset by an improved mix and the more favorable foreign exchange environment. EBIT adjusted for the quarter stood at EUR281 million, a substantial decrease year-on-year, driven chiefly by reduced deliveries and the costs tied to them, though we did gain from more favorable hedge rates. Helicopters put in a solid performance during Q1, while defense and space continues to be affected by weaker business performance. Adjusted earnings per share came to EUR0.23, calculated on an average of 782 million shares. Free cash flow before M&A and customer financing was negative EUR8 billion. That figure incorporates the EUR3.6 billion of penalties paid during Q1. Even with fewer deliveries and a significant inventory build, we succeeded in keeping free cash flow before those penalties at roughly the same level as in the first quarter of last year. EBIT reported for Q1 2020 was EUR79 million. The EBIT adjustment totaled approximately a net negative of EUR200 million, made up of these items: minus EUR33 million tied to A380 program cost, minus EUR134 million of negative impact from foreign exchange mismatch and balance sheet revaluation, and EUR35 million of other costs, including compliance costs.

The EPS figure we reported includes a negative financial result of EUR477 million. That reflects a net negative EUR245 million tied to Dassault Aviation. In addition, OneWeb filed for Chapter 11 bankruptcy proceedings on March 27th. As a result, we fully impaired the associated loan, which had a minus EUR136 million effect on financial results. On the core business, the tax rate sits at roughly 27%. The effective tax rate on net income is negative 24%, driven by impairments and by certain tax jurisdictions and uncertain investments, along with updated tax risks. Net income comes out at minus EUR481 million, with a recorded loss per share of EUR0.61. Moving now to hedging activities: our overall US dollar hedging portfolio totals $95 billion, at an average hedge rate of 1.23. During Q1 2020, $5.1 billion in hedges matured at a rate of 1.19. We also put in place $2.1 billion of forwards and completed the restructuring of our colors portfolio, converting those into forwards, which gave a positive impact on the 2020 and 2021 hedge rates. We re-phased our hedges to reflect where things stood as of March 31. From Q1 2020 we rolled out $1.8 billion of hedges, and $0.8 billion was rolled out of 2020.

We’ll keep adapting the portfolio in light of recent developments—COVID-19 especially—so that it mirrors how our deliveries evolve going forward. Concretely, that means for now we won’t put any additional hedges in place, but we will roll the ones we already have to different delivery dates. Growth cash flow from operations of EUR0.3 billion mirrors our EBIT adjusted. In Q1 2020, we paid EUR3.6 billion in penalties. A substantial inventory build weighed on working capital, since it contains roughly 60 aircrafts that were unable to be delivered. A400M kept dragging on our free cash flow before M&A, though to a lesser degree than in 2019. CapEx came in at about EUR0.5 billion, unchanged compared with Q1 2019. We have reviewed fiscal year 2020 CapEx closely and chosen to reduce it by roughly EUR700 million. As a result, we now expect approximately EUR1.9 billion. Reported free cash flow was minus EUR8 billion. Customer financing added about EUR30 million, whereas M&A activities represented minus EUR0.5 billion, mostly tied to acquiring the remaining interests in ACLP from Bombardier. In view of today’s conditions, we announced steps to safeguard our financial liquidity and to keep funding operations by obtaining a new credit line of EUR15 billion, pulling our original dividend proposal and pausing the voluntary top-up funding in pensions.

On top of that, a bond of EUR2.5 billion was issued, which partly terms out the EUR15 billion credit facility. That transaction settled on April 7, so the cash proceeds are going to be accounted for in Q2 2020. Over the quarters ahead, our continued focus will be on preserving cash, and we will be lowering cash outflows with the goal of halting net cash consumption by Q4. Alongside CapEx reductions, the measures now activated include deferring and suspending activities that are not critical to business continuity and to fulfilling our customer and compliance commitment. With that, I'll hand it back to Guillaume.

Thank you, Dominik. Moving on to commercial aircraft and the outlook — first, I want to remind everyone that the innovation and digital transformation activities that used to sit in Transversal are now part of Airbus under the new segment structure. That gives us three businesses; they're reported in R&D, and obviously there's no effect on Airbus revenues. On the overall Q1 results, we handed over 122 aircraft to 49 customers. That's 40 fewer aircraft than a year earlier. In industrial terms, we actually made solid progress. But we closed the quarter with roughly 60-plus aircraft we couldn't deliver, since many customers were asking to push back deliveries, or we simply couldn't physically hand the aircraft over. Where do we stand on each program? Starting probably with the 220, we delivered 8 aircraft in Q1 to 3 different customers. On the 320, we delivered 96 aircraft, 91 of them Neos. During Q1 we kept up the ACF ramp-ups and made further industrial improvements. Turning to wide body, we delivered about 18 aircraft, including 14 A350s and 4 A330s. We also handed over the first A350 to 900 to Aeroflot. As announced previously, we're now lowering our production rates to rate 40 for the A320 family, 2 for the A330, and 6 for the A350.

That works out to a decrease of about one-third versus the average prediction rates we had before the crisis. Regarding the 220, the FAL in Mirabel should gradually get back to rate 4, the level we had prior to COVID, and the new FAL in Mobile remains targeted to open in May as planned. Now let's turn to the Airbus financials. Revenues largely mirror the reduced deliveries, which came in 40 aircraft lower year-on-year, comprising 30 A320 aircraft and 8 350s. EBIT adjusted likewise mostly mirrors those reduced deliveries and the related costs, partly offset by Forex. Turning to helicopters in Q1 2020, we delivered 47 in total. That's a similar level to the First Quarter of 2019. Revenues in EBIT adjusted mirror a favorable delivery mix and returns on growth in services. In Defense and Space, revenues were table, year-on-year, and the EBIT adjusted mirrors the weaker business performance, particularly in space as already said; for the A400M, one aircraft was delivered in Q1 2020. And given the severity of the coronavirus pandemic, we're assessing the incremental impact on our business, and we'd adjust the restructuring plan that we had started previously. We would adjust it to the new situation at Defense and Space also.

So what are the main priorities for us now? Growth overall was, is, and will stay a business built for the long term, and once this crisis passes, I'm convinced — we're all convinced — that people will still want to fly, and will still need to. We're equally convinced our product lineup is the right one for holding the lead position we have today, and possibly even strengthening it. Our strong competitive standing with the A320 in the single-aisle segment, the XLR included, which we're keeping up, continuing to develop at a good pace, matters especially because we expect those segments to bounce back before the wide body market does. A number of steps are being taken to secure the future of Airbus — the company's future. Cutting spending to the appropriate level so the business keeps running and our capacity to serve customer demand is preserved is our urgent priority. We're also tackling our longer-term cost structure so the business is right sized, while safeguarding our capacity to remain a giant and to adapt further as the global market continues to evolve. Monitoring how demand develops and handling our order book in a highly productive manner will continue. And we'll keep working alongside our customers to honor our commitments and secure aircraft deliveries.

Naturally, we're keeping an eye on the financial well-being of our ecosystem too — the airlines as well as our suppliers. And we're putting the newly announced production rates into place, lining that up across our entire supply chain. As you can imagine, that's very intricate and significant work, and it's continuing right now. Overall, we're making every effort to bring the ecosystem into sync — at times back into sync — and to get all stakeholders aligned as we steer through this crisis, and as I mentioned, we'll handle it together. Before I finish, I'd like to note that we're fully adhering to every health and safety requirement, even when those requirements sometimes shift. And while we're handling everything else I described earlier, health and safety takes priority. So as we confront this unprecedented situation, we remain focused on our resilience — both as a company and as an industry — to make sure we can get back to so-called normal operations once the crisis passes, in a strong position when things improve again, since the current situation will recover and get better later on. At this point we'll take your questions. Thank you.

We're moving into the Q&A portion now. When you ask a question, please state your name and your company. Kindly keep it to 2 questions per turn, and that counts sub-questions too. And as always, please do remember to speak clearly and at a slow pace so that everyone on the call, especially us, can follow what you're asking. So, Aurelia, please go ahead and walk the participants through the procedure.

We're going to start the Q&A portion now. <<operator_script>> Our first question comes from Ben Heelan at Bank of America. Your line is open — please proceed.

Good morning, everyone. Thanks for taking my question, and I hope you're all doing well. First, on the supply chain: could you speak a bit about which parts of the supply chain you see as most at risk right now, and how you can step in and, when needed, support some of those suppliers that are under stress at the moment? Then my second question — again, you noted in your remarks that 60 aircraft weren't delivered at the end of Q1. I assume Q2 deliveries will be quite a bit below the newly announced production rates. How high do you expect that undelivered aircraft figure to climb before you'd have to think about cutting production rates once more? Thank you.

Yes, thank you, and good morning. Turning to the supply chain, where do the risks lie? Well, in essence, they're everywhere. Which risks need the most urgent attention? Those fall on suppliers that went into this crisis from a weak position, and those are the first ones we're examining. In fact, we have a little time, since suppliers continue to get paid as they deliver what was ordered, in line with the payment terms. But clearly, later in Q2, there will be a significant drop in the cash flows heading to suppliers, and that's when the situation will get more critical. So we have roughly two or three months to get ourselves organized. We've done very substantial work with the National Associations so that we can organize ourselves and be in a position to speak proactively with suppliers — arranging support where needed. But we're only at the very start of this process. Suppliers already hit by the 737 MAX grounding and the subsequent halt in production are clearly higher on our radar screen, since they came into this new crisis already facing major difficulties. But there are a few others that were there for different reasons — sometimes for the wrong reasons.

When you're in a tough spot, saying that might come across as a little cynical, but that's just how things are. So, as I mentioned earlier, we're taking a very proactive look at the situation. We're examining both their capacity to deliver and their financial condition. And it's really a one-by-one, case-by-case kind of approach that has to pay off down the road. Regarding the count of aircraft that have been built but not yet handed over, yes, we stood at 60 plus at the close of Q1. Deliveries during Q2 are going to stay very low — will be very low, since we're right at the heart of the crisis itself along with the bans, and it's extremely hard for customers to come and collect their deliveries. We were also slowed down by the measures that hit offsets within the supply chain. So if things keep climbing before they come down, I'd say the likely pattern is that it will begin to decline in Q3, and there are two factors at play. We expect customers will find it easier to come, and probably in bigger numbers, to pick up their planes. But at the same time, we'll start to see the initial impact of our Ramadan of adaptation on the production side. So that's likely somewhere in Q3 when we'd hit the peak in terms of aircraft produced but not delivered.

At minimum, I should note that this is my best estimate as things stand right now, and as you'd expect, we're working through various scenarios so we can stay resilient and adapt to shifting circumstances. It remains a highly fluid situation.

All right, that's excellent. Thanks very much.

Our following question comes from <<inaudible>>. Your line is open now, so please proceed.

Good morning, everyone. Thank you for taking my question, and I hope you and your families are all safe. So sorry, the <<inaudible>>. My first question concerns the net impact we should anticipate from this year's reduction in deliveries. In the past, you gave us an indication of the approximate EBIT level we should expect from delivering additional A320s. Looking at the upcoming drop in deliveries, given that you will probably face greater negative leverage but will also work on your cost structure and eliminate penalties for delivery delays, how should we view that negative leverage? Do you think it will be of the same order of magnitude, higher, or much higher? Any qualitative remarks on that would be helpful. And the second one is about your negotiations with airlines: could you give us a sense of what share of the backlog has now had negotiations with airlines completed, and what is the philosophy behind these talks, or the mood of these talks with airlines at present? Thank you.

So, as you rolled, I'll make the end easy <<inaudible>>. I'll hand over to Dominik for the more difficult one. My easy answer to the first question is that we have withdrawn the guidance. And the reason we withdrew the guidance is because of the many uncertainties in the very dynamic and changing picture, and we are not at that point in time in a situation to indicate where we think we would most likely launch by the end of the year. That was the easy answer. Dominik, do you want to try to give a bit of color?

I’ll just say again what we’ve covered before about sensitivity. What we’ve said is that for every delivery we don’t get, there’s a fall-through of roughly the mid-teens type. That said, you’re right that in today’s environment, that figure is more like a normalized contribution margin or gross margin number. We also got stuck with some fixed costs that we can’t remove so quickly, so the fall-through, if anything, is higher on the downside than it would be if the ramp-up were happening as planned.

To put it another way, every kind of cost is under review right now. The traditional split between fixed and variable cost is being seriously challenged, and on top of that, the pace at which different cost categories evolve—natures, of course, sorry—isn't the same, so it's genuinely harder, more complex, and a picture with plenty of moving parts, but I don't want to hide behind complexity. We're here lining and now I come to the second part of the question as well. As soon as we have something that this study line, that is likely, that we can share, we try to share. But this is obviously not the case. I was commenting earlier today that we're still May-June, in the phase where we are having those very detailed negotiations. Sometimes, we have temporary agreements for the short-term; we are more discussing on the bigger, on the larger frame of the contract. Sometimes, we have a lot of difficulties to come to conclusion with airlines, which are themselves negotiating their own bailout or support plan or looking for financing. Sometimes, we have already formed some agreements with airlines or some are just willing to—it's a small number and some are just willing to keep executing the contract as before.

It's really hard to give you a fresh, hedged response, because if we overhedge, that would cover a massive range of circumstances that are, first, quite different, and second, still in motion and evolving. We think—I mean, what we're aiming for is to have more or less finished establishing a new stability, defining a new world, by June, and that's also why we've said we might readjust our production rates a second time around June—June-ish, I'd say. When we have a more granular picture at that point, it shouldn't shift significantly relative to what we're going to hedge on, but it could shift a little. At least that's prudently how I see it today, and that's all I can share, I think, while being as transparent as I can, but also acknowledging that this is a period of enormous change and very many things are shifting simultaneously. So giving an outlook for the future isn't easy, since we have so many moving parts.

Thanks very much, sir — that’s really useful, and best of luck.

Thanks. We need a bit.

Olivier Brochet from Credit Suisse has the next question. Your line is open now — please go ahead.

Yes, thanks, and good morning to Guillaume, Dominik, and Thorsten. Appreciate you taking my question. This is Olivier Brochet from Credit Suisse. I hope all of you are doing well. I have two questions: the first concerns non-current PDPs. Could you give us some insight into how those discussions with airlines and lessors are going, and share whatever you can that would help us grasp the direction and momentum — whether things are shifting? My second question is somewhat more — it's longer-term in nature, at this point, what would you say represents the greatest strategic threat you face, especially when it comes to the competitive balance with what I'd call your unforeseeable Chinese competitor? Thank you.

I'll handle the negotiation with our customers, the airlines, the lessors, and specifically on the matter of PDPs — pre-delivery payments — and deliveries. There's a contractual framework in place that establishes certain limits and grants Airbus certain rights, but, as I mentioned before, this is also a crisis that we all need to get through together, since tomorrow will come. We're working hard to strike the best balance between standing up for our rights and still being able to get through today, the coming month, the coming quarter, the coming year. Every airline's circumstances differ greatly. Once they've found a path through the crisis and secured their own financing, talks become simpler — the hardest point is when they're under intense short-term pressure from cash outflow. Naturally, as you'd expect, things get tougher then, and their first priority is surviving the near term. So the situations vary enormously, and we expect the lessors to play their part fully in the current circumstances. They came into this crisis in good shape, so we're counting on them to act as a very strong shock absorber and to help address the liquidity situation we're seeing across the industry. So we are enforcing our rights, but at the same time we're behaving as well as we can as partners — without putting our own position at risk, being very firm about protecting ourselves, yet doing so in a collaborative manner.

Honestly, this is a tough one. As for the greatest strategic threat — well, essentially, what we're concentrating on is how well we can adjust to the circumstances, rebalance the money coming in against the money going out, and make sure that we will be, once more at a later point, on stable footing and then generating positive free cash flows, so that when conditions begin to improve or speed up — which may happen, which will happen at some point — we can go full throttle and move as quickly as we can. Because the race that we restart once this phase of protecting ourselves and riding out the storm is over — and that will probably be better weather, good times — there we want to be extremely quick, extremely nimble, and we want to be in a position to invest further and advance our products, and that, I believe, is the greatest threat. The danger is getting stuck past the first month of the crisis, being unable to compete again. We're doing all we can to be in the strongest shape to compete again later. We believe we have the right products, we have plenty of ideas about what we could do better, and we have ambition for this industry.

Our view is that decarbonization of the environment and the demand for flight will remain as they were. We will continue putting money into the right products—as we have stated quite plainly—and we will keep developing the XLR, and we believe this will be an extremely, extremely competitive game in the post-COVID-19 landscape. So we are somewhat schizophrenic, I think in English that is—very cautious in the near term, yet in order to be, again, very aggressive and very ambitious over the medium and long term in innovating and investing, and that is what makes the situation complex. I attempted to draw a bit of a dividing line between the near-term problems we perceive and the more medium-term and long-term picture; I am, and we are, fundamentally convinced that the need and the willingness to fly will return after this confinement and this very painful loss of freedom caused by COVID-19.

Thanks so much.

Our next question comes from Zafar Khan at Societe Generale. Your line is open now. Go ahead, please.

Thank you very much. This is Zafar Khan from Societe Generale. Good morning, everyone, and I hope all of you are well and safe. Two questions from me, please. First, on how deliveries will be phased across this production period: given that at the beginning of the year you were aiming for 880 deliveries this year, I imagine there are quite a few aircraft in production right now. So how does the new production rate get phased in, and how does that connect with deliveries for this year? Because we've discussed production for this year but haven't really said much about deliveries. Second, you mentioned the need to adapt the cost structure to right size the business given the considerable uncertainty at the moment: what term assumptions will underlie the restructuring you will be doing, how do you view the future, and then how do you set the right cost base?

Those are all really important questions, so thank you. I hope you're staying safe as well. Thanks for what you said at the start, and we're fine on our side. Yes, we had issued guidance of 880 deliveries. In Q1 we delivered 122. We have 60 that were produced but not delivered. We've chosen not to provide guidance for the Euro, or to pull that guidance, since deliveries are the hardest thing to forecast right now, and that comes out of the very detailed effort we're carrying out — what we call airline by airline, plane by plane, and quite often at the top level of the company. That work isn't finished. We have short-term agreements in place with most of the airlines, but we still need to secure more of a mid-term nature. By mid-term I mean at least 2020 and 2021. That's what we're working through with the airlines, and we believe things should be restabilized at some point in June. By stabilized, I mean better visibility — better visibility not just for 2020, and here I come to the second part of your question, but also for what the recovery will look like. All the bottom-up work we're doing with the airlines, along with the modeling, the simulations, and the data we're gathering and computing, tells us the single line is very likely to recover faster than the wide bodies, though that depends on the data, on the assumptions we feed into the models, and also, I think, on this ongoing discussion with customers.

It's really hard to predict right now when a recovery is going to happen, or how fast it will move. So that's the reason we continue putting in the work. Our aim is to adapt costs to what we call the resizing of the business, and to gain more visibility than we currently have, so that we can be as fitting and as suitable as we possibly can. Naturally, there's a trade-off between the short term and the mid term. As we've mentioned previously, we believe a recovery is highly probable. Once this downward phase passes, there will be another ramp up. That second romp up might be extremely aggressive on the single line, so we need to bear that in mind — yet it won't stop us from taking the right actions in the short term, since we consider it absolutely essential to align our cash out with actual cash in, and to recover this profitability, this capacity to reinvest and to essentially restart competition and be a performing company. That's either a non-answer or my way of saying we haven't yet reached the point of knowing where we want to land when it comes to mid-term or long-term resizing. We're adapting very aggressively to the short term and assessing very comprehensively what the most probable new scenario for aviation looks like over the next year.

That's really useful. Thanks.

We now go to Doug Harned with Bernstein, whose line is open. Go right ahead.

Good morning, and thanks. Airbus has noted in earlier downturns that relying on temps and contractors provided room to shrink operations. At that time, roughly 20% of the workforce was the figure mentioned, though it was never truly required the way it is now. First question: regarding worker furloughs, you're referring to temporary staff usage — how large a workforce cut is achievable, on what timeline, and when would we see the effect? That's my first question. Second, as airlines seek cash and financing for progress payments and deliveries, as you mentioned, I know you're dealing with lessors, but could you say whether you're seeing the ECAs actually engaged now in tackling these issues? And would Airbus consider providing some of that financing on its own if necessary?