Airbus SE (AIR) Earnings Call Transcript & Summary

Dear shareholders, ladies and gentlemen, warm welcome, and thank you very much for joining Airbus' 2021 Annual General Meeting. This is my first meeting as Chairman. And I was actually very much hoping to meet you all in-person. But who would have thought last year, when the Annual General Meeting could not be held in its usual format that 1 year later, we would still be heavily impacted by the pandemic, which is restricting our daily life and work so much. We will show you a few examples in the following movie, which is called Truly Exceptional for what that means to the company. [Presentation]

Due to the existing travel restrictions, we had, again, to choose a setup, which allows a limited physical participation at this AGM from the meeting room in the Okura Hotel in Amsterdam, while other shareholders are viewing this AGM by video. The management and I will conduct this AGM remotely from Airbus operational headquarters, while 2 attorneys from the Dutch firm -- law firm, NautaDutilh, are representing Airbus in the meeting room. First of all, let me introduce the management team members who are presently seated here by my side. Guillaume Faury, you know him all, is the Chief Executive Officer, and he will give an update on Airbus business after this intro and after my speech; Dominik Asam, Chief Financial Officer, he will be ready together with us to answer your questions; and John Harrison, General Counsel, who will act as the secretary of this meeting. And I hereby officially open this meeting and leave the floor to John, who will start with the legal formalities, John, the floor is yours.

Thank you, René. Mr. Chairman, shareholders, ladies and gentlemen, I'd like to first draw your attention to some practical matters. In accordance with the company's articles association, this meeting will be held in English. However, for your convenience, a simultaneous translation into English, channel 1; French, channel 2; German, channel 3; Spanish, channel 4; and Dutch, channel 5, is available on your translation device. The use of mobile phones and recording devices are prohibited and must be switched off from now on, please. Please note that the meeting is broadcasted by public webcast until the presentations, shareholders that requested to follow the meeting and are not in the room will have access to the entire meeting broadcast. In accordance with the measures imposed by the Dutch government to contain the COVID-19 pandemic, I kindly ask you to make sure that you keep a 1.5 meter distance from all other individuals present at the meeting at all times. As you can see, we were compelled to adapt the proceedings of this Annual General Meeting due to the measures and restrictions imposed by the Dutch government in connection with the COVID-19 pandemic. So on behalf of the company and the Board of Directors, we thank you for your understanding in this. Now, in accordance with Dutch legal requirements and the company's articles association, we have complied with all of the relevant formalities on the 3rd of February 2021, the date of the Annual General Meeting was published on our company website. On the 3rd of March, 2021, a convening notice, including the agenda and attendance procedures, was also published on our company's website. The documentation for this AGM, which has been available for all shareholders, consists of the agenda, the text and the presentation of the proposed resolutions, the report of the Board of the Auditors for 2020, the audited annual accounts for 2020 and the report from the auditors for 2020. This documentation has been available since the 3rd of March, '21, the company's registered office in the Netherlands. In addition, it is also available on the Airbus website. The Board of Directors approved the agenda of today's meeting, and no request has been made by one or more shareholders representing at least 3% of the issued share capital to add to any item agenda. The total number of issued shares of the company amounts to 784,149,270 shares, and the number of voting rights currently present or represented amounts to 70.05%. Therefore, this annual meeting was legally convened and can validly decide on all the matters of the agenda. Now the meeting will proceed as follows: first, the Chairman will deliver a general introductory statement. Then the CEO will give an overview of major events and the annual accounts for 2020 and then there will be a presentation on their audit by Ernst & Young (EY) as statutory auditors for the financial year 2020. This will be followed by one combined question-and-answer session covering all the items in the agenda; finally, we'll proceed to a vote on the 13 resolutions. The resolutions will be submitted to the vote one by one without further discussion. I'm now going to take you through the agenda. So the agenda is as follows: As I said, opening in January general introductory statements, presentation by the Chairman, the CEO, including the report by the Board of Directors, with respect to the corporate governance statement, the report on the business and financial results of 2020, the policy on dividend, discussion of all agenda items and votes on the resolutions. Resolution #1 is the adoption of the audited accounts for the financial year 2020. Resolution #2 is the release from liability the nonexecutive members of the Board of Directors. Resolution #3 is the release from liability the executive member of the Board of Directors, the CEO. Resolution #4 is the renewal of the appointment of Ernst & Young as auditor for the financial year 2021. #5 is the approval as an advisory vote of the implementation of the for remuneration policy for the financial year 2020. #6 is the renewal of René Obermann, our Chairman, as non-executive member of the Board of Directors for a term of 3 years. #7 is the renewal of Amparo Moraleda as non-executive member of the Board of Directors for a term of 3 years. #8 is the renewal of the appointment of Victor Chu as non-executive member the Board of Directors for a term of 3 years. And #9, the renewal of the appointment of Jean-Pierre Clamadieu as non-executive member of the Board of Directors for a term of 3 years. #10 is the delegation to the Board of Directors of the power to issue shares, to grant rights, to subscribe for shares and to limit or exclude preferential subscription rights of existing shareholders for the purpose of employee share ownership, plans and share related long-term incentive plans. #11 is a delegation to the Board of Directors of powers to issue shares, to grant rights to subscribe for shares, and to limit or exclude preferential subscription rights of existing shareholders for the purpose of funding or any other corporate purpose of the company and its group companies. And the penultimate resolution, #12, renewal of the authorization for the Board of Directors to repurchase up to 10% of the company's issued share capital. And finally, we're getting the #13, cancellation of shares repurchased by the company. Thank you, Mr. Chairman.

Thank you, John. Dear shareholders and stakeholders, 2020 was dominated by COVID-19. The pandemic reached nearly every nation on earth, exacerbated divides in society and hit already vulnerable people the hardest. It also raised huge challenges for business and for political leaders, but particularly for those people working on the front lines, such in hospitals, schools, factories and many other areas. For the whole aviation sector, it was a massively challenging year as it was for us at Airbus, and it was challenging for our highly committed and qualified people. In a matter of weeks, we were confronted with serious implications on the business and needed to adopt to this unprecedented situation. The Board was impressed by how quickly and how consequently management under Guillaume Faury's leadership moved to safeguard the company. Starting with ensuring the safety of employees, the company then bolstered its liquidity, adjusted production rates to an appropriate level, swiftly contained spending and resized the commercial aircraft activities. These measures were all designed to ensure Airbus could sustain a prolonged downturn and still be well positioned to capture the market recovery. The actions taken were wide-ranging and proved to be the right ones to help to stem the cash outflow in the second half of the year. During the crisis, a close dialogue with governments has been essential and will continue to be essential. And we very much appreciate their support for the aviation industries ecosystem, from furlough/partial unemployment schemes through to no -- to investment, sorry, in research and technology. In such a testing year, Airbus' broad portfolio provided some protection. While the commercial aircraft activities were significantly impacted by the pandemic, Airbus Defence and Space and Airbus Helicopters were resilient and provided support. Commercial aircraft deliveries declined, although the final tally was broadly in line with the revised production plan. Airbus Helicopters earnings were bolstered by its governmental related activities, while Airbus Defence and Space booked important orders, including the purchase of significant numbers of Eurofighter jets by Germany and new generation telecommunication satellites. Despite the crisis, ladies and gentlemen, your company never lost sight of its long-term ambitions and the important programs that will be crucial to securing Airbus' future, including zero-emission technologies. Let there be no doubt, Airbus will play a leading role in the most important transformation aviation has ever seen towards a sustainable industry sector. It is an honor for me to serve as Chairman of the Board of Airbus, and I am truly grateful for the support of my predecessor, Denis Ranque, who helped me assume this role. The crisis had just begun when this transition happened, and I'm particularly glad to work with Board colleagues who have such high levels of experience and dedication to help the company navigate through these challenging times. And that leads me to the topic of Board membership and governance. In terms of governance, as you may remember, we introduced in 2016 the concept of staggered Board terms, with 1/3 of the directors being reappointed or replaced every year. Let me remind you that in 2020, we welcomed 2 new directors: Mark Dunkerley and Stephan Gemkow, who are bringing international strategic skills and specific expertise in aviation and in finance, and, of course, in business leadership overall to the Board. Two other directors had the mandates renewed. That was Mr. Ralph Crosby and Lord Drayson. So in this AGM, we will not ask for the appointment of new Board members. But with respect to the renewal of current mandates, 4 directors are proposed for reelection at this AGM. I will stand for reelection as a nonexecutive Director of the Board, along with my colleagues, Victor Chu, Jean-Pierre Clamadieu and Amparo Moraleda. I will now give you some brief details about these directors whose mandates are due to be extended. Let me begin with Amparo Moraleda. Amparo currently serves amongst others, as member of the Board of Directors of CaixaBank and Vodafone PLC. Formerly, she held top executive positions at Iberdrola and at IBM. With her sound technical background, her HR directorship experience and her membership of various international boards and trusts of different institutions and bodies, including the Spanish Royal Academy of Economic and Financial Science, Amparo Moraleda serves a crucial role as Chair of our Remuneration, Nomination and Governance Committee and an active member of the Ethics, Compliance and Sustainability Committee. In addition, she is the lead independent Director of the Board and serves as a member of the Board of the Airbus foundation. A personal note, amongst other topics, Amparo has been and is strongly advocating for and supporting an increased level of diversity at Airbus. Second, Victor Chu. Victor Chu serves as Chairman and CEO of First Eastern Investment Group, that is a Hong Kong-based international investment firm, which he created in 1988. In addition to its business activities, he has been very active with international institutions. In the field of education he is currently Chair of Council at the London University College and a wide array of mandates in the field of corporate, commercial and securities law, and his sound executive leadership experience bring valuable insight to the Board of Directors and its audit committees -- sorry, its audit committee. Based on his profound knowledge of the Chinese and broader Asian market, he provides an important strategic vision to Airbus and helps to build the bridges between East and West that a global company like Airbus needs. Third, Jean-Pierre Clamadieu. Since 2018, Jean-Pierre Clamadieu has served as non-Executive Chairman of the Board of ENGIE, that is a French large energy company. He also serves as a member of the Board of Directors at AXA. Formerly, he was the CEO of Solvay, a Belgian group, which he transformed into a major player in the field of specialty chemicals and advanced materials. Based on his technical background, his strong experience in M&A, communications with financial markets and leadership of international management teams, Jean-Pierre brings valuable insights to the Board to its Ethics, Compliance and Sustainability Committee, where he serves as Chairman, and to its Remuneration, Nomination and Governance Committee as an active member. And finally, it is myself, who is proposed for reelection as a director at this AGM. But as you find all the details in the documentation, I will not elaborate on my CV further. Now let me highlight some of the Board's activities in 2020. Due to the exceptional circumstances, the Board of Directors met 13 times during 2020 and was frequently informed of developments by reports from Guillaume Faury, the CEO, and of his team, comprising regular updates on the COVID-19 situation on employees and the company's health as well as on strategic and operational developments. The average attendance rate at these meetings was close to 100%, 97%. In 2020, a substantial amount of the Board of Directors' activities was directly or indirectly related to the pandemic crisis, obviously. Throughout the year, we reviewed and we discussed the operational and commercial situation of programs as well as the overall financial situation of the company with a strong focus on funding needs and cash management. Moreover, we reviewed the company's financial results, its forecasts, and we maintained an emphasis on both enterprise risk management and internal control. In the Board, we dedicated a full session in 2020 also to the review of key aspects of the company's strategy, including the announced zero-emission flight ambition by 2035. We also reviewed and discussed other topics of significant importance to the company, such as the measures taken to mitigate a potential no-deal Brexit situation, the impact of the U.S. elections on our industry and on our business, the reciprocal application of tariffs on commercial aircraft being imported to and from the United States and crisis management matters. The Board also worked on top management succession planning and it performed talent reviews. The impact of the COVID-19 crisis on the remuneration structure was also addressed and appropriate actions taken accordingly. Let me now turn to the Board Committee work, which had been quite a busy year for the committees. First, the Audit Committee. In 2020, this committee met 5 times with an average attendance rate of 100%. It performed reviews of internal controls, corporate audit activities as well as the accounts, forecasts and independent reviews of external auditors. In addition, regular ERM, which is enterprise risk management, legal and compliance updates were presented to the audit committee and discussed in meetings. Second, Ethics, Compliance and Sustainability Committee. To reinforce the role and involvement of the Board of Directors on sustainability-related topics, the remit of the former ethics and compliance committee, which was established in 2017, that remit was extended to sustainability matters in July 2020. Hence, the committee was renamed the Ethics, Compliance and Sustainability Committee and the internal Board rules have been amended accordingly. In 2020, the EC&S committee, that's the short form, met in total 4 times with an average attendance rate of 94%. In particular, following the settlements reached with the French, U.K. and U.S. criminal and civil authorities in January 2020 in relation to the serious fraud office, the Parquet National Financier, U.S. Department of Justice, U.S. Department of State Investigations, the committee performed regular reviews of post-settlement activities, including compliance and export control updates. Notably, the ITAR, and ITAR stands for international trade of arms regulation, the ITAR Special Compliance Officer who got appointed in 2020 under the consent agreement with the U.S. state department, was introduced to the EC&S committee, the short-form for Ethics and Compliance and Sustainability Committee, under its extended form, and that took place in October 2020 during which a sustainability strategic review was performed. Third, Remuneration, Nomination and Governance Committee, in short form, RNGC. The RNGC met 4 times in 2020 with an attendance rate of 94%. In particular, the RNGC discussed the executive remuneration structure in the COVID-19 context, the extension of the EC&S Committee remit, as described before, and the revision of the company's insider trading rules to align with current market practice, while remaining compliant with applicable regulation. The RNGC also worked on a 360-degree feedback exercise for the CEO and it performed in-depth reviews of the top management succession plan and more generally, of key talents. Pursuant to the internal Board rules, the chair of the RNGC automatically fulfills the function of what we call lead independent director. In this role, Amparo Moraleda, as Chair of the RNGC, she is responsible for replacing me as Chairman in case of absence at meetings of the Board of Directors, organizing the annual appraisal of the Chairman's performance by the Board and acting as an intermediary for and between the other directors, if and when necessary. Now -- so far to the committees, now on to corporate governance and the Dutch code. Our company is an SE, Societas Europaea, incorporated in the Netherlands and applying the Dutch corporate governance code, which includes non-mandatory recommendations for listed entities. Airbus already complies with the vast majority of these provisions of the Dutch code. In accordance with Dutch law and with the provisions of the Dutch code, on the occasions when we do not comply with this code, we explained why we have not done so in our 2020 report. Let me make the following remarks on gender diversity. The composition guidelines regarding gender diversity under Dutch law, designed to ensure that a Board of Directors is composed in a balanced way if it contains at least 30% women and at least 30% men, expired on January 1, 2020. A replacement legislative proposal regarding gender diversity rules is currently under discussion. The proportion of the female representation on the Board of Directors is currently at 25%. The company, our company, is committed to promote gender diversity within its Board of Directors and within management. We value diversity in its broadest sense, ranging from gender to ethnicity. To this end, the company is committed to promoting, supporting and leveraging initiatives to increase the diversity within its workforce as well as within top management and Board levels. And let me assure you, the company is diligently working on building a pipeline of suitable candidates. And because of these dedicated programs and activities, we are confident of notably improving gender diversity within a reasonable time frame. On to remuneration policy. The remuneration policy in the form set out in the Board report was adopted by the AGM held in 2020, with effect as of January 1, 2020. Given the robust structure of this policy, the Board of Directors does not believe that amendments to this policy are required this year. Therefore, the Board submits to you an advisory vote for the implementation of this policy in 2020. The company strictly applied the remuneration policy last year. And the Board has not revised the variable remuneration and long-term incentives and financial targets defined at the beginning of the performance period. The company works with top company objectives, TCOs, to measure its performance, they are disclosed in the Board report. And the individual targets of the CEO are comprehensive, and they are shared with all employees via this system of TCOs. They have been adapted to focus on the critical objectives that had to be achieved in order to successfully navigate the COVID-19 environment. The individual component is based on the CEO's performance and behavior, mostly with respect to the way the company reacted to the pandemic and the way it remained focused on its strategic agenda at the same time. The main factors considered are, in terms of outcomes: health and safety, operational, commercial, balance sheet related and innovation centric. And in terms of behavior, ethics and compliance, sustainability and stakeholder relations. The exceptionally low level of achievements for the 2020 common collective components and the 2017 LTI performance conditions are explained by the significant impact of the COVID-19 sanitary crisis on Airbus' commercial financial -- sorry, on Airbus commercial's financial performance. My last point is on dividend proposal. Given the continuation of the crisis, preserving the company's liquidity and its financial strength is key to us. And this is why there is no dividend proposal for 2020. We can't -- sorry, there is no dividend proposed for 2020. We kindly ask for your understanding and for your support for this prioritization, given the exceptional circumstances for our company. I would like to thank you all for your commitment, your trust and your support. And allow me at the very end, a personal, slightly emotional remark and word after this extremely challenging year. I want to thank the entire team at Airbus for their continued dedication, especially those most affected by the crisis. On behalf of the Board, I'd also like to underline our support to the management team, who performed an outstanding job in steering Airbus through this historic crisis in 2020. And I wish them enough strength for the extremely hard work, which is yet to come. This crisis isn't over yet. In my view, Guillaume and his team are purpose-led, modest, hard-working, extremely hard-working and successful business leaders, and they will emerge stronger from this crisis as they went into and so will our company. Thank you very much. Guillaume?

Thank you, René. That's probably too much, but thank you anyway. We'll continue to work hard to deserve your words. Firstly, let me thank you for your continued support and trust in our company in these challenging times, and thank you for being with us today. Now let's begin with a look at the key events of 2020. At the beginning of last year, we saw our business environment severely impacted overnight. We had to adapt quickly to large-scale change and take early decisions to weather the crisis. Our immediate priority was to ensure the safety of our employees by adapting the working environment to meet stricter sanitary standards. We also had to adjust our business to the new reality. In April 2020, we recalibrated our industrial system by reducing our rates by around 40%. This allowed us to converge production and deliveries in the second half of the year. We started as well to resize our commercial aircraft activities and to address our long-term cost structure. We announced plans to adapt our global workforce and fund agreements with our social partners. Following those measures, we saw an improved financial and industrial balance in the second half of 2020. In addition, Airbus Helicopters and Airbus Defence and Space contributed positively to the group performance in 2020, demonstrating the resilience of our portfolio. We ended the year with a total of 566 commercial aircraft deliveries, of which 150 were that are so-called the new e-deliveries. Overall, the early business adaptation and cash containment measures delivered the results we hoped for, and this is well reflected in our 2020 financial performance, together with the delivery number. In the continued volatile and uncertain environment, we decided to issue guidance for 2021, which aims to provide some visibility. Now some comments on our backlog. At commercial aircraft, the backlog in units remain above 7,000 aircraft at year-end despite a low level of order intake. It stood at 7,184 commercial aircraft compared to 7,482 at the end of 2019. At group level, compared to the record backlog we enjoyed at the end of 2019, we lost only 10% in value due to COVID-19. Looking at the market environment, we continue to expect the market to recover between 2023 and 2025, with domestic and regional markets recovering first. International traffic, mostly operated by wide-body aircraft, will probably remain weak for longer and will not return to pre-COVID levels for some years. In January 2021, we gave an update on production rates in response to the market environment. Production rates will remain lower for longer. On A320, production rates will gradually increase from 40 aircraft per month currently to 43 in the third quarter and 45 in the fourth quarter of 2021. On A220, we announced a rate increase from 4 to 5 aircraft per month from the end of Q1 2021. Wide-body production is expected to remain stable at current levels. Since the beginning of 2021, we have seen progress on the vaccination campaigns, but at a different pace across countries, which adds complexity and uncertainty to the restart of air travel. In Q1 2021, we just delivered 125 commercial aircraft. But there's still a lot to be done to make our delivery guidance for the year, and we remain humble. We continue to work hand-in-hand with all our industry partners and stakeholders as the crisis remains and will remain a reality for this year. Overall, we will preserve our ability to further adapt as the global market further evolves. Looking at Helicopters. Net orders totaled 268 Helicopters for the full year, including 31 naval versions of the NH90 for Germany's Bundeswehr in Q4 and 11 H160s. In 2020, we maintained our leading position in the civil and parapublic market despite the current environment. The 5-bladed H145, the new version of the 145, was certified by both the EASA and the FAA during the year. The European authorities also certified our new H160. Turning to Defence and Space. In 2020, our order intake increased to EUR 11.9 billion, this represents a book-to-bill above 1 and an increase of 39% year-on-year, mainly driven by major contract wins in military aircraft, including an order for 38 new Eurofighter jets from Germany. Space systems order intake growth was mainly driven by telecommunication satellites and Earth Observation and science. Our 2020 financial results reflected our efforts throughout the year to mitigate the impact of the pandemic on the business while protecting our liquidity and financial flexibility. We also preserved our ability to invest in the future. Our 2020 revenues decreased to around EUR 50 billion, reflecting the difficult market environment impacting our commercial aircraft business as we delivered about 34% fewer commercial aircraft year-on-year, therefore, compared to 2020. Our full year EBIT adjusted decreased to EUR 1.7 billion. This reflects the lower deliveries in commercial aircraft and lower cost efficiency. It also included a EUR 1.1 billion charge recorded due to impairments and write-offs triggered by COVID-19. In 2021, we focused on making our cost adaptation more sustainable and on addressing our earnings and cash growth trajectory for the period beyond 2021. Our full year EBIT reported was at minus EUR 0.5 billion. The level of EBIT adjustments totaled a net negative EUR 2.2 billion. It included a EUR 1.2 billion charge related to the group-wide restructuring plan. Our 2020 R&D decreased by EUR 0.5 billion to EUR 2.9 billion. We aim to keep our R&D at a similar level in 2021, in order to protect our competitive positioning going forward. Our full year EPS adjusted was EUR 1.36 per share, using an average of 783 million shares, and our full year EPS reported was minus EUR 1.45. Our full year free cash flow before M&A and customer financing totaled a minus EUR 6.9 billion, of which plus EUR 4.9 billion was in Q4 alone. The full year figure includes a minus EUR 3.6 billion penalty payment made in Q1 related to the compliance settlements. I would like to highlight our continued commitment and focus on ethics and compliance in 2020. I will come back to that later on. Our Q4 free cash flow reflects the solid level of deliveries in the quarter, the performance of the divisions as well as the benefits from a very strong focus on working capital management. Our strong liquidity position has been key in getting through this crisis. We moved very early on in the pandemic to protect it by securing credit facilities from financial institutions. As we entered into the crisis, our net cash position went down from EUR 12.5 billion to EUR 3.6 billion by the end of Q1. It continued to decrease by the end of H1 to a net debt position of minus EUR 0.6 billion debt. In March 2020, we announced measures to bolster our liquidity and balance sheet including a new EUR 15 billion credit facility, the withdrawal of the 2019 dividend proposal with cash value of EUR 1.4 billion and the suspension of voluntary top-up pension funding. In addition, we maintained a strong focus on support to customers and deliveries. We progressively turned out the supplemental liquidity line to EUR 6.2 billion. In Q4, we upsized and extended our EUR 3 billion revolving credit facility which stood at EUR 6 billion at year-end. As a result of the measures taken to adjust our business to the new reality, we ended the year with a net cash position of plus EUR 4.3 billion after being in a net debt position after the second and third quarters. In that context, we also would like to thank our governmental partners who have supported the aerospace sector since the beginning of the crisis, either through direct support to airlines and suppliers or through partial unemployment schemes. Our liquidity position exceeded EUR 30 billion, 3-0, at year-end. Looking ahead, we will strive to maintain strong liquidity and ratings to help navigate this crisis and position us for growth once the situation improves. On the basis for its 2021 guidance, the company assumes no further disruptions to the world economy, air traffic, the company's internal operations, and its ability to deliver products and services. The company's 2021 guidance is before M&A. And on that basis, the company targets to at least achieve in 2021 same number of commercial aircraft deliveries as in 2020, so 566. EBIT adjusted of EUR 2 billion, and breakeven free cash flow before M&A and customer financing. As mentioned by our Chairman, there will be no dividend proposed for 2020. Now let's have a look at how our share price developed in 2020. We started the year by reaching our all-time high in January at EUR 139 in the wake of the strong 2019 performance. Shortly after, the share price was hit by the COVID-19 outbreak and the spread outside China and declined to its lowest point in 2020 at around EUR 49 on March 18. While widespread lockdowns continue to weight on the stock's performance, it slightly increased in Q2 with the announcement of quick measures to strengthen our liquidity and the adjustment of production levels to reflect the new environment. Global markets remained very volatile during most of the year as optimism on a faster-than-expected economic recovery or slower infection rate was offset by a more pessimistic outlook on the recovery of the global economy, the resurgence of the pandemic and new travel restrictions. Shares recovered in Q4, supported by the announcement of effective vaccines as well as improved prospects on free cash flow for the remainder of the year and delivery performance which came in stronger-than-anticipated by the market. With an annual decrease of 31% in 2020, Airbus shares underperformed the Euro STOXX 600 and the CAC 40 as well as the aerospace and defense sector. Now on to sustainability. In 2019, we took time to reflect on our positioning as well as where we want to go. This reflection and analysis generated our company purpose, we pioneer sustainable aerospace for a safe and united world, which has acted as a northstar through this crisis and will serve us for many years to come. Our commitment will remain to lead the way in the decarbonization of our industry and sustainable global travel and to unite and safeguard the citizens of the world. This will be reflected, first and foremost, in the product and services portfolio we offer to our customers. Therefore, we have put sustainability at the heart of our business, strategy and governance, making it a clear priority. In 2020, to increase our focus on sustainability efforts, we revamped our sustainability strategic framework around the following 4 priority commitments: first, to lead the journey towards clean aerospace, with the ambition to bring the first zero-emission commercial aircraft to market by 2035. We also recognize our role in contributing to reduce the global environmental footprint of the sector and the importance of aligning and respecting the commitments of the Paris agreement. Second, to respect human rights and foster inclusion, which represent topics of growing importance for society, for Airbus, in line with our value of respect as well as growing legislative and stakeholder focus. Third, to build our business on the foundation of safety and quality, and reinforce our continued commitment to promote a strong health and safety culture. And last, to exemplify business integrity, with the aim to continuously develop a culture of integrity and speak up through the support to our ethics and compliance programs, structured around business ethics, anti-corruption compliance, export compliance and data production compliance. The objective is to set clear ambition across each of the 4 commitments with agreed KPIs and targets to monitor progress towards these ambitions. We improve only what we measure. This progress has begun in 2020 and will continue to further mature over 2021. In 2020, we also strengthened our governance framework, the former ethics and compliance committee of the Board of Directors was expanded, as René explained, to include sustainability as a whole and became the Ethics, Compliance and Sustainability Committee. With this, sustainability is now at the heart of our decision-making and is truly becoming part of our DNA. And to even better engage our leadership along this journey, we have now integrated CO2 reduction targets into the executive variable remuneration scheme. Alongside the occupational safety performance measured by the rolling lost time injury frequency rate, which is the monthly number of the lost injuries per million worked hours averaged over 12 months for the details. Looking back at 2020. We have made significant progress across each of our 4 commitments, ensuring that we put the right structural elements in place where we must accelerate must. In September 2020, we unveiled concept for the first zero-emission commercial aircraft known as ZOE, to enter into service by 2035. It supports our commitment to bring CO2 emissions to half of 2005 levels by 2050. With ZOE, we are exploring a variety of hybrid electric and hydrogen technology options with the ambition to develop, build and test alternative propulsion systems. Sustainable aviation fuels, the SAFs, which we are already using to fly our Beluga transport aircraft as well as in the delivery of aircraft to customers, will play a key role in reducing the environmental footprint of aviation, bringing solutions to reduce the climate impacts of our industry extends beyond the aircraft itself. It will also require efforts to adapt the entire ecosystem. As part of our transparency policy, we engage in the carbon disclosure project, CDP, providing climate change related data and information to the CDP annually. In 2020, Airbus has been awarded the A- score rating from the CDP, up from B in 2019. In addition and following recommendations from the task force on climate related financial disclosures, TCFD, we have extended our reporting to include the in-use emissions of commercial aircraft delivered in 2019 and 2020, known as scope-free use of sold products. By taking this significant step, we become the first aircraft manufacturer to report on the emissions produced by its product during their whole life, during their operations. During 2020, we formalized our governance on human rights, and we also continue to roll out the supply chain risk mapping program as part of our human rights due diligence. At Airbus, safety remains our chief priority, our #1 priority. We aim to exceed industry standards, focusing on safety enhancements in our product lines. Looking now at business integrity. Ethics and compliance continued to be a top priority as it was in 2019 and 2018. We are committed to deploy a best-in-class ethics and compliance program and become a benchmark. And now a few words to wrap up and address our key priorities. 2020 was a year when we had to adapt quickly and ensure our resilience. At the same time, we continue to progress and achieve significant milestones that pave the way for the future of Airbus. We have announced earlier this week changes to the Executive Committee as we are looking forward to the next steps in our civil and military activities, including the Future Combat Air System. These changes will contribute to ensuring the success of our ambition to decarbonize the aviation sector as well as the development phase of strategic European defense projects. Going forward, we aim to preserve our ability to meet customer demand while protecting our ability to further adapt as the global market evolves. We also aim to protect our competitive positioning. We see potential to optimize and simplify our industrial setup in Europe as it is currently rather complex and fragmented. We consider that making aerostructures competitive in Europe should be a top priority, in particular, in perspective of the future planes. Indeed, new ways of propulsion will significantly impact the architecture of future aircraft. And therefore, it is important to maintain the link between design and production in particular, at time of digital IT infrastructure and systems. So we believe aerostructures assembly should remain in Airbus and is considered as core. This will support our ambition to lead the development of a more sustainable global aerospace sector. Of course, a key priority will be to deliver on our 2021 guidance. But we will also focus on our earnings and free cash flow growth trajectory beyond 2021 always with safety, quality, integrity and compliance as the foundation of all we do. Thank you for your attention.

Thank you. Thank you, Guillaume, for your very good presentation. Before we are going to listen to a prerecorded speech by Mr. van Eimeren from E&Y, the company's auditors for the financial year 2020, who unfortunately couldn't join the plenary room in person today. I would like to make the following statements in respect of the company's and E&Y's legal obligations: First, for the purpose of this AGM, the company has waived E&Y's obligations of confidentiality. Second, E&Y has the obligation to correct any materially incorrect statements and/or announcements in relation to the 2020 financial statements or the independent auditor's report. And third, E&Y will discuss the audit process and the procedures in relation to the financial statements before the adoption of the 2020 financial statements contained in the 2020 Board report. So we will now listen to a prerecorded speech by Mr. van Eimeren, who unfortunately couldn't join the plenary room in person, please.

Dear shareholders. My name is Guus van Eimeren, and I'm the statutory auditor for fiscal year 2020 of Airbus SE. I'm based in Amsterdam, and I'm representing Ernst & Young Accountants LLP. It is common practice in the Netherlands that the statutory auditor presents to the AGM on the audit process and the audit filings. Unfortunately, due to COVID and the restrictions, I'm unable to present to you in-person, but I'm happy that I can at least be with you via this video. I would like to discuss with you briefly the audit plan, materiality and scope as well as the key audit matters. And maybe for your information, this is the fifth year already that EY acts as a single auditor of Airbus SE. And based on our understanding of Airbus and the information gathered during the previous years, we prepared an audit plan that was presented to the Board and the Audit committee in last year. For 2020, this plan also took into account our response in light of the COVID pandemic. The plan provides information on the operating companies in scope, the expected audit coverage as well as the materiality levels used to illustrate we have 43 operating companies in scope that represents 89% of consolidated assets, 92% of total revenue and 85% of total consolidated EBIT and adjustments to EBIT. We have audited the company with a materiality level of EUR 292 million, which is 5% of adjusted EBIT, and we use a reporting threshold of EUR 12 million. Because of the international travel restrictions and the social distancing rules due to COVID, we needed to restrict or have been unable to visit management and component auditors to discuss, amongst others, the business activities and identified significant risks or to review relevant parts of the component auditors on the documentation and to discuss significant matters arising from the evaluation on site. Furthermore, we were forced to perform our procedures to a greater extent remotely due, again, to COVID. In order to compensate for those limitations related to the absence of physical meetings and direct observations, we use predominantly communication technology and written information exchange. We attended calls and video conferences with local management and local auditors throughout the audit and the closing meetings. We intensified communication with component teams and required more granular reporting from components and reviewed remotely the component teams working papers in order to obtain sufficient and appropriate audit evidence. In our audit, we have certain elements we pay specific attention to. And we call it the so-called key audit matters. For Airbus, these key audit matters in 2020 were also included in the audit plan, and they are listed on our long-form audit report which is concluded -- included in the annual report. These key audit methods are: revenue recognition; estimates related to contract margin for the accounting of onerous contracts; recoverability of key program assets; valuation of derivative instruments and hedge accounting; and litigation and claims; and risk of noncompliance with laws and regulations. With respect to the first 3 key audit metrics, we focused on key programs such as the A320, the A330, the A350, the A380, the H160, the H165 -- H175, apologies, as well as the A400M. With respect to these programs, we reviewed the underlying processes and controls that are used to record program assets, work in progress and related revenue. We have challenged management on the assumptions used, also looked at the historical accuracy of previous estimates. Specifically, in 2020, we took into account the impact of COVID on production rates as well as future sales as well as their impact on valuations and revenue recognition. With respect to hedge accounting on top of our regular audit procedures, we took into account potential changes in delivery assumptions related to aircraft cancellations, customer defaults and aircraft postponement that could potentially lead to disqualifications of cash flow hedges. The key audit matter, settlement agreements reached with French Parquet National Financier, the U.K. serious fraud office and the U.S. Department of Judgment -- Justice and the U.S. Department of State, which was included in our last year's key audit matter, is no longer considered a key audit metric for this year as this was a one-off transaction. That brings me to the end of my presentation. Based on our procedures, we concluded that the financial statements give a true and fair view of the financial position of Airbus SE as at the 31st of December 2020, and of its results and cash flows for 2020 in accordance with IFRS. We also concluded that other information included the reports of directors is consistent with the financial statements, and we did not identify any other material misstatements. Thank you for your attention.

So that represents the end of the presentations, and we will now proceed with the Q&A session. Before we start the Q&A session, the secretary will lay out a few rules for this Q&A session. Thank you.

Thank you, René. So we will have one overall Q&A session before voting. And we ask the persons asking questions to address all of your questions in relation to all of the agenda items. As later, the vote will take place without further debate. Now only Airbus shareholders who have [Audio Gap]