Dassault Aviation société anonyme (AM) Earnings Call Transcript & Summary

[Interpreted] Good morning, everyone, and thank you for being with us for our Press Conference Presenting our 2022 Business Result. The background, we're still having this war in Ukraine, the war between Ukraine and Russia and our country is engaged to protect the neighboring countries of Ukraine, and we are supporting our Air Force that is deploying aircraft locally in those countries. The French military programming law is important to cover 2024, 2030. It was announced by the Head of State, and we are waiting for the adaptations in the coming weeks. The 2023 budget was already decided upon, and this military programming law will begin in 2024. The COVID pandemic, the issues related to the shortages because of the war in Ukraine. This created a lot of constraints in our logistics, supply chain and our supply chain is in great difficulty. It's true for us and for the aircraft manufacturers, especially at this time where there is a ramp-up of our profession, whether it's us, Dassault, or our friends from business jets. And it is difficult for our subcontractors, and it requires particular attention at all moments. Not to mention the increase in the prices of energy and the smallest of our providers can have some difficulties. But the backlog is full, so the morale is good. A lot of fragility regarding the increase in the pace. The orders are there everywhere, but the ramp-up is a bit delicate. There's an energy transition too, as you've seen it in the film, we are involved in large research programs. I'll tell you more about this later on. And there are laws in France, the Climate and Resilience Law in France or the directors from the EU. 2022 will be a record year in terms of order intakes, especially the contract with UAE, 80 Rafales, and also a very good year for the Falcons with 64 Falcons and the Russian aircraft because we are following the embargo on all the Russian projects. We're not selling any more to the Russians, and we've canceled the aircraft that we had in our order intake. So, the 64 should have been slightly above. So the number of order intake is EUR 21 billion, revenue EUR 6.9 billion. That is a delivery of 46 aircraft, 13 Rafale export plus 1 Rafale France. So considering the guidance, we have delivered 14 Rafales. And I'll get back to this 32 Falcons were delivered slightly under our forecast, which was at 35. So the backlog historical, EUR 35 billion, 251 planes, 125 Rafale Export, 39 Rafale France and 87 Falcons. At the end of 2022, after many discussions and negotiations, we received the awarding of the Phase IB of the FCAS with NGFs. The activity and programs, and I want to go back to the UAE, which is our major Rafale contract. There was an additional tranche of 6 Rafale for Greece. And the first tranche out of the 42 Indonesians aircraft that has been signed, the first tranche that was enforced of 6 Rafales. We are waiting for the entry of the 36 Rafales. There'll be 2 phases of 18 each this year. We are pursuing prospection. The success of the Rafale doesn't need to be demonstrated anymore, and it's generating a lot of questions and interest around the world, particularly in India, where we have sold and in other countries, have you seen like Colombia, and there are a certain number of other countries. We've delivered 13 export Rafales. That's the end of India. Qatar, the first contracts signed, the 36 for India, 36 for Qatar, and we've begun delivering aircraft to Greece. The delivery of 1 Rafale to France after many years with 0 Rafale. I'd like to specify this once again. I say it each and every time here, if we do not deliver any Rafales to France, it isn't because we favored export. France asked us to do so for budgetary reasons. We're pursuing our developments. The F4 standard, that was one of the first milestones and an F4 aircraft is being experimented at the Air Force and delivered by the DGA in 2023, we're expecting the fifth tranche, so the 30 aircraft that were planned since a long time, plus 12 replacement aircraft from Croatia, the 12 Greek ones having been replaced and the order having been placed 2 years ago. The President of the Republic announced his intention to upgrade all Rafales in the coming years. And so gradually, we will give up the Mirage 2000 for the Air Force. Support to our military fleet, this is important with the war in Ukraine. There are verticalized contracts for all the fleets. The Rafale with the RAVEL, OCEAN for Atlantic 2 and BALZAC for the verticalized contracts for the Mirage 2000. We are discussing today verticalization contracts for the Air Force -- French Air Force Alpha jets. Exports, we've deployed our teams to set up our support to the aircraft that have been delivered, and this required a reinforcement of these teams and support. Croatia is not mentioned in our new aircraft because these are French aircraft, and we're beginning to deliver the aircraft for Croatia, which comes from the French Air Force and we've begun the training with the French Air Force, and we're beginning this launching of the Rafale in Croatia. The Future Combat Air System, as explained in the film, this was made concrete after the end of Phase A in 2022. We had to wait for the end of 2022 to go on to the next step, which is Phase IB. These are detailed studies on the definition of demonstrator. As far as we are concerned, the aircraft demonstrator of the NGF in partnership with Airbus and Indra in Spain. These are the 3 leaders for these countries. And under our leadership, our architects, this contract will begin officially in the coming weeks with the setting up of teams here in Saint-Cloud. We are taking part in the other pillars, which the remote couriers or the system pillars. And we have the item Zero, which very strange name, but this is the continuation of the technical studies where the military are also part of all this. And we have the GCS phase that have been completed in 2022, and we are resuming this to improve the operational concepts, and we have the pillar 8. Pillar 8, these are the main that will allow our teams from the different countries and the different companies to work together with the Dassault System 3DExperience-based platform, which will allow us determine these future aircraft with the same definition production platforms and support platforms. The Eurodrone, the chief contractor, prime contractor is Airbus. We are one favorite contractor. We prepared the flight controls, the communication and data, liaison systems with Thales. The mission aircraft, we are pursuing the development of our mission aircraft, the maritime surveillance Falcon for France, and they will be delivered during the PLM, the Falcon 2000. There are 5 that are contractualized -- sorry, 7 and there'll be an option of 5 more that will be activated in the coming years Archange based on Falcon 8X, which is pursuing its development. Atlantic 2 that was upgraded, the retrofit of the former ATL2 to go on to this new system. This is underway. And we have received the sixth aircraft. The seventh one will arrive in the coming weeks. We have provided the future PATMAR and DGA has sent a call for information to 2 companies, Dassault on the one hand, we will prepare for Falcon 10X for maritime patrolling, and this is all our experience since 1958 on maritime patrolling and Airbus. Airbus will certainly propose its derived commercial aircraft. For export, we have delivered the last Falcon. That's the sixth one. So now there are 6 Japan Coast Guards Falcon, which are operational for the Japanese Coast Guards. And we have taken orders for 4 aircraft for South Korea. And these aircraft are electronic war aircraft, we're going to deliver 4 green and the Koreans will do the work in Korea. The Falcon context, the number of orders received was good because the 64 orders that is net of the canceled Russian orders at the end of 2022. So therefore, up compared to 2021, which was different compared to the previous COVID years, so 32 deliveries. There are difficulties in the supply chain at the end of the COVID, this did not help us to deliver more. So we are ramping up. The market was very active in 2022. As you know, the end of 2022 was more complex because there were a lot of fears of a recession and the beginning of years with commerce, so it's slightly less active than last year. And today, we hope that all this is going to resume because now the recession is behind us, I hope so, but forecasts are difficult to make in this world because everybody was saying that there would be a recession. And finally, there's no recession. We will see what will happen in 2023. The preowned market is difficult. It's very difficult to find preowned markets and the stocks of Falcons to be sold in the world have drastically fallen. We are pursuing the enrichment of the range with the development of the 6X and the 10X with a priority, which is given to the 6X, which will enter into service in mid-2023, but we first have to go through the end of certification and obtain the certification. The last days, the last weeks are the most touchy ones because there's still a lot of work, and the agencies are very meticulous because of the aeronautical environment we've had in the past few years. Continuous improvement of the aircraft and service. We are trying to improve our Falcons. For example, by changing the avionics in the 7X and the 8X. We will pursue this in the entire range, and we will improve the completion in all our aircraft. Now aviation bashing, we cannot avoid this. The whole aviation sector is attacked by a certain number of NGOs and organizations. This has been criticized for the last 4 years. This is just to recall that aviation in general, it's 2% of the CO2 emissions in the world, that business aviation in general, the entire business aviation is 2%. So 0.04% of global CO2 emissions. And the Falcon fleet, which is made up of 2,100 Falcon flying in the world that is a little less than 10% of business aviation. So if you count the 0, if you add an additional 0 after the point, you will have 0.04% of emissions. That doesn't mean that we have to remain idle. Since 2009, we want to reach net 0, which was recalled the International Organization for the Standardization of Aviation by 2050. In order to do so, what is important are the SAFs, which I'll talk about this later on. So 1 year of flight of Falcons, that's the equivalent of 24 hours of global flows of video streaming, and that is just to give you an idea. It's 5 years of global truck traffic or 2.5 days of operation of German thermal plant. So if you really want to fight against the CO2 emissions to help the climate, we have to look at the whole world. We have to address that. And we have our share. We are engaged in the Corac Clean Sky programs. And we have alternative fuels. We have 50% of alternative fuels, kerosene mixes. Today, we have blends at 30% in France with biofuels today. And we're working for the future. We're going to increase this capacity, and we're going to make sure that there are developments of new alternative fuels and especially e-fuels, and they could be CO2 means of sequestering CO2. So we're spending money and we're receiving help from the public authorities. As for the eco responsibility and pursuing along these lines, the 10X will be on 100% of alternative fuels, will be fully decarbonized. So as we find fuels, we have to develop these alternative fuels and distribute them. I'm quite confident because when we go to the United States, I find American companies that are engaged, that have incentives to do so. You know that in the United States, this momentum is generated by these incentives. In Europe, it's the bans, the laws. And the Americans will decarbonize before us because it's not by banning that we'll be able to progress. And the objective is to encourage us to do so because we have the will to do so. So I'm confident that the United States will develop these new technologies, and we'll develop alternative technologies. And in the automotive sector, they're going quite fast. Just to give you a figure, they've given an objective of 50-50 between the traditional thermal engines for cars and the electric motors and it's going very fast. We are banning thermal engines by 2035, and countries are realizing that this is silly. Italy and Germany are saying that this is silly to ban thermal engines by 2035. I'm closing this diversion. This has nothing to do with the Dassault results for this year, but it gives you an idea. So we are engaged in this decarbonization. We are engage with the ICAO. Once again, I'm repeating, if we want to save the planet, it's got to be done globally. It's not just in France, it's not just Europe. It's going to be done in the whole world. And at the ICAO, we have the Chinese, the Indians, the U.S.A., some number of European countries and those who issue a lot of CO2 and together, we'll find the right way of doing things at the ICAO. The Falcon range, you have the whole range, the Falcon 2000, the 10X, the 6X that will and will enrich the range. 4,000 nautical miles up to 7,500 nautical miles for this range. The Falcon 6X, as I have already said, we have a lot of flight hours. We have a lot of experience. Therefore, we've gone around the world to be capable of understanding the maturity of the aircraft and look at the small faults, but it's brand new, and we're correcting all this before the commissioning. So this well world tour lasted 4 weeks with 50 stop, and this is very enriching for our ability to reach full maturity when it will enter into service. Production ramp-up, it's not very easy in the current situation, but a certain number of aircraft are already fully kitted, and this was shown in the trade shows at the EBACE, NBAA in Orlando. And the first aircraft are being fitted in Little Rock because the aircraft have been sold since some time now and now, we have to ramp up this production. The 6X cabin is regularly awarded. In 2022, we received another award. It's a beautiful cabin. And for those who will look at the trade shows, trade fairs, you will have a visit and it's wonderful. The 10X would be more spacious, even better. It's like a flying flats and those who are traveling for a long time and for long hauls, they will feel at home in the aircraft. They can keep working. They can take rest and erase the flying hours. The 10X is pursuing its development, and we are closely watching the development of the engines. Rolls-Royce for the 10X, which is in Germany because it's Rolls-Royce, Germany for the design and manufacturing. And we have permanent teams that are following the development of this engine, which is slightly different from the one equipping the Gulfstream, so the development is storage for other aircraft, too. Falcon support, we've already talked about this in the previous years. This global network is very important for us. We can have a footprint around the world to support our clients, who themselves fly all around the world. And in 2022, early 2023, we've opened a maintenance hub in Dubai. In 2024, we will open. This was launched in 2022. We'll open a new center in the East of the United States and Florida because we've closed down Wilmington in the East of the United States because the facilities were becoming bit of obsolete, it was easier change places and to fully rebuild something that will prepare for the arrival of new aircraft like the 6X, and this is underway, and we've opened a new center in Kuala Lumpur. And I'm saying it, we have recuperated the maintenance of the state aircraft that we will do at Villacoublay, and we have an MCO for 7 years for the French governmental aircraft and they weren't with us until 2022. CSR, we talked about this. We can talk a lot about this, for those who are patient enough. In the management reports that will be at your disposal. You have some 50 pages explaining what all we are doing in terms of CSR. We are engaged. It's our will. We are engaged by the laws of the European directives. It's very burdensome. We have to change the material. For REACH, there are new standards, and this forces us in our profession to requalify a certain number of things. So it is very burdensome development, and it is disturbing our supply chains, too. We're doing the work a certain number of things I talked about energy sobriety. And all this is keeping our teams busy. Human resources, the company is hiring more people. We've received a lot of new orders. So we've hired a lot of new people. A lot of people are taking their retiring, sorry, not at the age of 62 later than that, and we've hired a lot of people. At Dassault, we can hire people. The conditions are good unlike what some people might think. And we are putting particularly efforts to hire women in 2022. So 24% of new women hired, we are at 19% for men/women at Dassault. It's progressing. It's not easy because the entire industry has trouble finding women engaging themselves in this industry. It's true in the schools, in the engineering schools or the apprentice schools. The ratio is not good, and we need to make efforts with all our different branches, upstream in the education, on the attractiveness of this job -- industrial job. The industry is the place where people are paid the best compared to other sectors. So it's good for women to enter into the sector, but they have to be aware of all these scientific jobs as early as possible. Sharing values. We've talked a lot about this. I'd like to thank the agreement signed with the trade unions, with the MEDEF, also the MEDEF negotiator and the General Director of EMM. And thanks to this agreement, we respected the smaller ones and profit sharing and participation at Dassault. We are upstream from all these discussions. And thanks to the Dassault spirit, we're contributing. There is a lot of value sharing. This year, EUR 210 million of employee profit sharing and incentives will be paid to the employees. And this is roughly 4 months of additional salaries for 93% of the employees. So the higher paid employees will get a little less. We added EUR 4 million in value sharing bonuses that I decided at the end of 2022, a EUR 500 bonus that will be paid to all those that receive less than 3 minimum salaries to help the smallest salaries that are affected by inflation, especially for the first necessity project. And I haven't put this here, but you have the UAE bonus that was paid, and you see it's not too far from what we also share with our shareholders. So it is well shared. The transformation plan this is being pursued. We are modernizing our plants, all our infrastructure. You've seen it in our film. We did last year. We inaugurated in Mérignac, in Seclin, where we closed between the 2 buildings and we are preparing Cergy, which will replace Argenteuil. And we are pursuing the digital modernization with the 3DExperience of Dassault Systems, which will apply to the 10X, which will applies to the NGF. And we will generalize that for our other aircraft as well as for the completion in Little Rock.

[Interpreted] Now the actual order intake, EUR 21 billion, thanks to the 64 Falcon and 92 Rafale. So it's up compared with 2021. EUR 6.9 billion for the net sales, we've delivered fewer Rafales than in 2021, 14 versus 25. The consolidated backlog, EUR 35 billion, much than the EUR 21 billion in 2021 with a breakdown, which is mainly towards exports because of the Rafale. It's still high for France, but as I said, you can have in your backlog a certain number of Rafales if you never deliver them, then it does have an impact. It's the case of 42 with 28 aircraft, which remained in the logs for a long time, but we're going to start the second phase of the 40 deliveries. Falcons are smaller in the share of the backlog, but there is a high turnover. R&D is self-financed, and it was higher in 2022 than in 2021, because of the 10X. R&D Dassault is twice of what we do. So we self-finance 50% of our R&D. Thales has reported its business results yesterday. They're also performing very well. We are enjoying, therefore, this high and good result, and this is also part of our net result. So net sales of EUR 6.9 billion, an operating margin of 8.3% and operating income at EUR 572 million. So that's up 1% versus last year. Financial income, EUR 11 million it's positive as opposed to last year. The financial management has made sure that our cash was not losing money. That's unfortunately due to the higher interest rates. Thales, EUR 384 million that's the contribution of our shares in Thales. Taxes, minus EUR 147 million. So net income, EUR 830 million with a 12% margin, the R&D 8.3%. Of course, it all depends on the sales, but it's also up compared with last year. So earnings per share will be EUR 10. The cash is also on the rise because of our exports with down payments from our clients, EUR 9.5 billion, allowing us to manufacture the aircraft with a free cash flow of EUR 4.9 billion. And for those of you who do not do the math, it helps to have EUR 3.8 billion of cash that we directly own. The distribution of capital and voting rights, we've had share buyback program. And that's for the changes, and it will be approved at the next shareholders' general meeting. So the proposed dividend of EUR 3 per share, slightly better than last year, which will be paid out EUR 249 million. I was talking about EUR 210 million of profit sharing for the employees plus the value sharing bonuses and compared with the legal obligations, which would be EUR 38 million. And we're far above this EUR 38 million. So it's rather close to what we pay as a whole in terms of dividends. Now future outlook and strategy. We need, first and foremost, to secure the supply chain. It's a daily concern for our teams to detect the challenges, be the financial challenges or manufacturing or human resources. We have great difficulties in recruiting in the supply chain. It's even more difficult and within our teams. Now in GIFAS, we also try to improve and secure the supply chain. But it's in the international supply chain, not only in France. For the Rafale, we have to perform more current contracts and secure the tranche 5 order for 42 aircrafts, while continuing our business development Rafale. Military developments, we want to continue the programs underway and prepare the future standards of Rafale, which will also be exported. So that's the F4 standard. We're also preparing the F5 standard after 2030 for the French military. Support and availability of ministry aircraft's, we want to continue and meet our commitments to be close to the armed forces staff and their needs. That's 95%. When we have a virtualization control, it's close to 90%. Falcon, we need to obtain the 6X certification to start its service and keep on developing the Falcon 10X and keep up with our sales effort. Supported availability of civilian aircraft. I'd like to remind that it's always difficult because unlike what you might think for commercial aircraft with larger airports, big airliners, we support and maintain 1 aircraft at a time. So -- and that's true worldwide. So it means that we have to be present sometimes in very small airports at the other end of the world. So it's a very particular type of service that needs to be improved. Therefore, we have to have an aftersales network for spare parts and for all the services that we aim to improve energy transition. I've already described it. Make in India. We continue ramping up in spite of the challenges you've seen in the video, you've seen the front part of the Falcon 2000. Made in India for all our Falcons. So that's ramping up. That's important. And India is becoming a country where the aeronautic industry is getting prepared for the future. And that's not only true for Dassault. So NGF and FCAS, we've launched the Phase IB of the demonstrator. And the heart of the development will be done here in Saint-Cloud with some of our partners. Guidance, delivery of 15 Rafale next year as per our contract and 35 Falcons. And it will depends on the entry into service of the 6X, and we are expecting a decrease in our net sales. In spite of the Rafales where the backlog is not the same scope as the exports because we do not sell the radar and the engine in France, well, on export market, we sell the whole set. So that was from my introduction, and I'm ready to answer your questions.

[Interpreted] Good morning. Mathieu Rabechault from AFP. We have delivered fewer Falcons because of the supply chain challenges, as you said. Are you fearing that these difficulties will have an impact, the ramping up of the Rafale?

[Interpreted] Yes, there is a risk. As I said, we try to deal with problems and challenges 1 by 1, but we are up to our standards. We've delivered 32 instead of 35. So we're almost online. But it's really a daily hard work when you are on the eve of the delivery of some equipment and the supplier says well, they won't be able to deliver everything we've ordered. You have a little time to respond, so we have to get prepared, and we have teams in our industrial operations divisions and procurement and supply teams so that we rely on the suppliers who are in better health or sometimes, we shift the production mode in order to deliver and there are risks on both, that is on Rafales and Falcons. But the strength of our company is that you have to be very agile. Sometimes I have to shout out loud. And during the pandemic, we've delivered all our aircrafts on time. Everything was delivered on time. And it was quite appraised by some of our clients like India, for instance, which means that our staff, our employees were working in difficult conditions with all the precautionary measures that had been introduced. And that's the strength of our company and of our subcontractors. We are also working with more than 500 subcontractors. And even when some of them are going through difficulties, we try and manage to find solutions and we need to find a solution to each and every problem. If a screw is missing, you cannot deliver the aircraft. That's the problem.

[Interpreted] [indiscernible]. You've answered many of my questions. I have 2 to 3 questions. You've talked about the MCO earlier and the improvement of operations. Now in terms of outlooks, what about MCO in the future -- the MCO contracts? I have further questions. You've talked about the Aero India, Bengaluru trade show and said that the outflow was really possible. And what about the Phoenix work? And when are you going to inaugurate this site? And then other -- 2 other questions about some breakthrough. You have mentioned, you have had some problems, sorry, shortages in hiring resources -- human resources or raw material. I'm thinking about titanium, for instance. And same for the skills.

[Interpreted] We've experienced something terrible in France where there is a corrosion of the cooling systems of the nuclear power plant, and you will no longer have a qualified and skilled welding operators. We are not EDF, and we still have welders and welding operators at Dassault. We managed -- I mean, we have difficulties for all our business line. We try and make sure that supplies are there now. In addition to digital political context, where in a context where many are retiring, so we have to make sure that the skills from the best of engineers in our engineering study development or welders can transfer their knowledge and their expertise and improve it because the young generations will improve these skills, thanks to new technologies. But the basic skills have to be transferred. So that's a difficulty of a small business because Dassault is a small business, but there's also our strength. We are very agile and constantly, not every day, but we're working hard on this, and that's something we're working on. We're trying to maintain and keep the skills, welders and our border makers are also very happy because these are considered as the highest in the pyramid of the employees in the aeronautic industry. So we hire them, and then we train them, and this is traditionally done at Dassault Aviation in the form of shadow training, that is a senior operator will teach and train a junior in the work -- on the spot, in the shop floor. And we have many young coming up, and we have difficulties in recruiting. And on top of that, the backlog is full, and we also want to recruit women. So difficulties are adding up for the HR department, and they're working on this with all our managers. So that was for the last question. Titanium. Well indeed, for some time, we were dependent on titanium from Russia. Penalties and sanctions are enforced. It seems normal that we do not have titanium for jet fighters. So we have relied on alternative suppliers with whom already worked before. So they have to supply us with more quantities, and we are trying to develop new sourcing solutions for titanium, for electronics components. There are some components in our flight computation systems. In all the components that are delivered for the Rafale, so far, it's so good, but it's also been complicated. And when we find suppliers, sometimes we have much higher prices like steel, for instance, and all this was taken into account. It has kept us quite busy in 2022, and I'm sure it's going to be keeping us busy again in 2023, plus the higher prices of energy and this has an impact on SMEs. As for the first question, provided, I can read my handwriting. MCO contracts. Well, the MCO, as I said, is about supplying a service to the users. So the virtualization of the contract is such that as the aircraft manufacturer, we take care of everything. The engine is a bit separate so we deliver to our client and availability based on scenarios. And when we commit over 10 years, it helps to better adjust the supplies, the spare parts to work with the suppliers for the standardized and required inspections, avoiding some peaks in the activities because I remember that all the orders were coming at the same time, the manager are not happy, neither were we. Now we can roll out our schedules and planning. And for the Rafales, it worked so well that it was extended to the Atlantic 2, which is quite a feat because there are only 2 currently in operations. All the original suppliers have given up on their maintenance commitments, and we are taking them up. And it's difficult to maintain it in operations, but we are doing it because it is our duty towards our customers and the French Navy. Same thing for Mirage 2000 because unlike the Rafale, you only have 1, let's say, 1 standard, more or less. For Mirage 2000, you have several differences in models. So the fleet is more difficult to manage. With the Rafale, you have a standardized system, that's easier for us for the export contracts and maintenance contracts and MCO contracts in France. It will help us to better organize our logistics flows and the human resources allocated to the MCO contracts. Cergy. The delivery will be at the end of the year. [ Sailing ] with a lot of caution because in the building, it was even more complicated than the manufacturing of Rafale. There was a lot of delay, people saying, we're not much do get your roof anymore because energy cost so much this top right in the middle, and we have to manage all that. But it is progressing.

[Interpreted] Anuradha Chappard, Times Aerospace. I have a question on business jets. During the crisis, that is the segment that really withstood things compared to commercial aviation. What about the evolution of this market? And what are the perspectives for Falcons, especially the new generation of Falcon? And you talked about the ramping up. Thank you.

[Interpreted] So a lot of good things for the new Falcon, the 6X, and in a few years from now, the 10X, this is what is expected from the market. The market is very dynamic. Why is the dynamic growth unlike the image, it is dynamic because the world and the countries need and the companies need to develop, make sure that industry is advancing, the trade is advancing. And the best way to do trade for some large companies, that are companies everywhere, that have suppliers around the world, that have customers around the world, is to fly and instead of using business jets because you go from 1 point to another. That's not only do you fly to a place, but you can follow a whole route with your aircraft and change the appointment time because it's not always the exact time. They can go to the United States. Can visit 4 or 5 sites in the United States. And you don't have to use the domestic flights with all the constraints that can pose with larger airports, flights that are canceled, et cetera. So for business aviation, I see a very strong development. And business development will decarbonize before the commercial flight because somebody who uses a business jet will pay more for the fuel, which will be synthetic alternative fuel in the future, it's more difficult for the commercial flights unless they increase the ticket price as well. Business jets will be decarbonized before the large airlines will do so. So I see a very strong development. And the market, it's mainly made up of the United States and Europe, and Asia is coming up without China.

What about the Middle East?

The Middle East has always been a very small share. It is there. We sell and deliver aircraft to the Middle East, and a few 6X, which is an interesting range for the Middle East. They can go to the United States to Asia. And I hope that the success will really develop and will help us progress in the Middle East, amongst other countries, not only the Middle East.

[Interpreted] Véronique Guillermard for Le Figaro. You've just mentioned the topic. I had a question on China. We saw the sudden end of the zero-COVID policy. So therefore, will this make -- it's an attractive market for the Falcon or not at all because it is too early still? A question regarding Russia. Can you tell us how many aircrafts were canceled in your backlog? And a question regarding HR and all the social aspects. I read in 1 of the slides, 1,500 hires, was that in 2022? Or was this the forecast for 2023? So can you specify what is your action plan in terms of hirings in 2023? And finally, can you tell us how the NAOs went -- the pay negotiations went? And can you tell us the outcome of all that?

[Interpreted] Thank you, Véronique. For Russia, I'll answer immediately. We're not able to give you the figure of the aircraft canceled, but it's roughly 10% to 15% of the backlog. So you have an ordinal of magnitude. It was quite significant for us. And it was significant for our stations. The Russians would overhaul their aircraft in Europe. And all our overall stations in Europe, all our competitors also experience a real drop. And that's for Russia. Now for China, I will answer with a joke. It's the largest market in the world. That's where we sell the least number of aircraft. And it's as usual, it's a huge potential. We really believe in it. But we don't sell because of the COVID, we don't sell, because we say that there are some political issues. We don't sell because they'd rather make the aircraft themselves rather than buying. They want to have a price for 100 instead of the price for just 1. And the sales people will scream at me, will scold me. But it's not thanks to China that we are surviving. In the future we do not know. As my friends from the Middle East say [ Bukra Insha'Allah ], but we are not forecasting anything for China. But the 10X would be totally adapted to China as it will be adapted for the Western Coast of the United States and for France, where those want to fly, for example, to Asia. As for the hirings, yes, we have hired 1,500 people in 2022, which is huge because we have to integrate them, et cetera. We will hire roughly 2,000 in 2023. That's our objective. And you will see because you see the workforce. Some people have gone on retirements. So we're really renewing our workforce right now. And since we are developing, the equations are not so simple. We're giving work to our subcontractors too. It was harder during the COVID years, and now we're giving them more work because we have a lot of work. So we're sharing this work with our subcontractors. And the third point are the pay negotiations throughout the 2022. We had a crisis. We came out of the crisis with pay negotiations for the white collars at 4.2% and the others at 5.2% on an average. On an average, because actually, there was a uniform increase. We gave EUR 140 to everybody, so that's an average increase for the non-white collars to 7%, much more for the small pace, and we can count them on the fingers on 1 hand. And we are not taking into account the profit sharing and the bonuses. And in 2023, we are right in the middle of our negotiations. Actually, at the end, I proposed 6% for the white collars and the others. It doesn't seem to satisfy them that much. So we'll see what's going to happen in the coming weeks and days. So it's 6% of increase in salaries. We increased it by 7% for the non-white collars to which we add 4 months, plus 4 months of net salary to which we add EUR 500 of bonus that we paid at the end of 2022. And this year, there is no Emirate bonus, but there will be the air show, et cetera, et cetera. I don't think you can find anything better in the rest of France. And you, the journalist, have you received a 6% increase? Le Figaro is going to scold me, but I'm not working for you, Charles. So you see, when I see some articles that say that this is a scandal, Dassault increasing its prices only by -- it's paid by 6% only. And with the results, I show you, 8.3% operating margin. We're not among the top margins. We are just good. I'm not criticizing, but that's not the top margin. But we are among the top for the increases that just to give you some feel for your articles.

[Interpreted] Vincent Lamigeon, Challenges. Calculation, you have 164 Rafales in your backlog to deliver. If you count the 42 from the French tranche and the 36 from Indonesia, 42 minus 6, we go beyond 240 for 2023, for only 15 Rafales produced during the same period of time. So my question is the following: When will we see the main ramping up? And what is your maximum ramping up that you can reach? Is it 30% or little more? And the question is, what is the limit for the industrial tool at Dassault? Can you go plus 3 per month?

[Interpreted] So 2023, it's quite simple. The contracts -- there were 2 parts: The former contracts in 2015, et cetera; and then the new contracts. Actually, 2023 will be exclusively reserved to France. We will deliver 14 aircraft to France. And we deliver 1 to Greece, that will be the only export delivery. For once, I'm giving you this detail. And so all the new contracts, the 31 Egyptian ones, the 80 Rafales, I'll tell you more about this later on, and the additional one to Greece, will begin delivering Greece next year, and 9 new ones. So this will come afterwards. So you are right. It isn't with 15 a year that we will get the right flows, especially if we get the orders. Right now, we still haven't got the orders. So we have anticipated the passage to [ pace 3 ] since a few months. What is important is to warn our supply chain. There were difficulties because of the ramp-ups. We have to program them and tell them careful, go up to pace 3. We're going to organize ourselves so that when the orders will have to be delivered, and when new orders will arrive -- I'm saying might arrive. We are still taking orders at Dassault. We haven't closed our wicket. So we should be able to keep delivering. So we can reach pace 3, and we can still increase our pace, and then we'll be flat. If you take the years 2027, 2030, you have the UAE, because it's great to be in those years. We're going to see how France will adapt the 42 because as I said earlier on, take orders, that's 1 thing, deliver them as another thing because we have certain authorizations and then there are the payment credits we have to pay because when you deliver an aircraft, you have to pay for it. We're a bit mercantile at Dassault. Pay for them, that means we need to have the budget and not just the military programming law. We need the budgets. So there's the temptation in general to smoothen out this whole 4 years. For 4 years, it was 3x less 2 years ago. But thank god, we had exports. Otherwise, we have stopped manufacturing completely. So now it's the other way around, but we haven't reached pace 3. 2027-'30, we can still take on new contracts and we're going to go and look for them.

[Interpreted] Tara Patel from Bloomberg. Can you comment the perspective, the new Rafale contracts in the future, Colombia, India and the others, Indonesia, et cetera.

[Interpreted] Well, I'm not going to do this because I never do this. And I might be mistaken because Colombia, I cannot really bet on Colombia. Last year, when we spoke here I talked about it. So I'd rather be cautious. It came out in the media, this will of the Colombians. So we are negotiating with the Colombia. Will we sign? We'll see. We are engaged -- we would like to win a contract in India. 26 Rafale for the Indian Navy. It would be a first contract for the International Navy. We've done this before. I'm not going to tell you where, but it will be quite interesting. It would be quite logical, too, because we have Rafale with the Indian Air Force and to have the same aircraft for the Navy, it's quite logical. So we are engaged to have these contracts in India. Indonesia, it's a question of implementation rather than contracts. We have signed the 42 aircraft for Indonesia, plus 36, and there are other prospections. Yes, we do have them. We do have them down.

[Interpreted] Yes, Mr. Chairman. By accepting to be at the head of the FCAS with the cooperation, is this something a bet that you cannot keep because I see 3 hurdles which are very difficult to overcome. The first is that you have to juggle with the Bundestag, that keeps changing its mind all the time. And the second point is that you're going to have to satisfy 2 armies that have -- at least 2 armies. The first, which has turned towards the East, quite rightly so. And we are to the west with the whole overseas territories. And the third point. You have to cooperate with Airbus Defence that has not built any military aircraft for a long, long time because Airbus Defence, these are bids and theses of old companies that have never already manufactured military aircraft, unless I'm mistaken. The only bit coming from France is Nord-Aviation that build the Griffon in 1950. So at the same time, you seem to be very peaceful at ease. So you have the right weapons to defend yourself. I think it's the Rafale. Tell me if it is right or wrong? And another totally different question. You talked about the exceptional annual pay negotiations at Dassault. But is it really related with the exceptionally exceptional results, financial results that you presented.

[Interpreted] I'll go straight to the second question. The first 1 -- the second one, the exceptionally exceptional results. No, it's not exceptional. These results are not exceptional for Dassault. It's good. 1% better than last year. That's not exceptional. The number of orders is exceptional. Yes, I agree with you, and I said so. But the results, 8% operating margin. If I look at my peers, I'm under. I don't want to say it in front of our shareholder representative. But if you take the large [ electronicians ], we got Thales yesterday. They were at 11% operating margin. If you look at the American companies, it's much more -- if you look at Airbus. So what are -- where are the operating results? And these are normal results. And these normal results, when you look at the net, thanks to the contribution of Thales, and our own results. Well, I share it 50-50 between the employees, et cetera. So the annual pace, it's got nothing to do with the profit sharing, that's very good. And if the annual pace have got nothing to do with profit sharing, it's legal. So if I got rid of that and if I went back to the legal, what would the employees say, they wouldn't be happy because they only get 3 to 4 months. So when there are good results, they get bonuses. And if we were negative, it's already happened in the history of Dassault, there are negative results, they won't get any profit sharing, but we don't reduce their salaries unless we have to lay out, which happened once in the beginning of the 1990s. So honestly, I think that this is reasonable, and then there are negotiations, we'll see where we reach. And I'm not against -- I do understand that there is inflation, all that. So I'm not blocking things. I'm not saying what to do like the others and will only increase their salaries by 4% or 5%. Who was doing 6% increase? Very few people. So I think that we are reasonable and everybody should be reasonable. And then I hope they will find an agreement because otherwise I have to increase my prices. If I increase my prices for the Falcons, I have to face the international competition. And so you see you have to maintain a balance. As for your first question, why am I at peace? I am at peace because we've obtained what we want to obtain at Dassault Aviation in this 1B Phase. That prefigures the Phase 2 and we want to make our demonstrator fly. We have the levers. We will cooperate with our partners so long as they play the game, too. So that we are leaders so that we might have a flying demonstrator at the end of -- from the end of 2029, that will help us make the future choices. The real challenge, and I do agree with you, this is a political challenge. I'm not going to negotiate with the Bundestag. I negotiate with the person who will sign the contract with me, our armies, and the French Defence Directorate. If they ask it to do something that I cannot do or that I do not want to do for legitimate reasons that I've already explained, we will not sign the contracts because it is our DNA. We sign the contracts only if we know how to fulfill them. Of course, there are always risks with the right prices, with the right schedules, with the right technical definition. So if it is cooperation with the right parameters, with the right cooperation rules that our armies might have the right project, et cetera, we are not the leaders of the FCAS, but we're the leaders for the NGFs. So there are other parameters, other pillars, and other companies are in charge like Airbus. So there are no leaders for the FCAS, there are pillars, and we are in the technological phase. What I find interesting for my company and for my French partner, in particular, is that we're going to fly a demonstrator. And that is very important in -- for the teams who've worked on the Rafale, on the nEUROn, and who are making this demonstrator flight, and we'll see what will happen in the future. But what we -- those were negotiated with the Bundestag. It's not going to be easy for them. We have to find the engagements so that we can do away with politics when we have cooperation. It's complicated, but we will not replace politics.

[Interpreted] Sorry for taking up the microphone again. I'd like to come back to what you've said about the Phase 1b. You've talked about [ SCHUMAG ] and transmission. This is something that appealed to me. I started the SCHUMAG -- I started at Dassault in 1975. But when I read this news about the Phase Ib contract with this war to know who is the leader, at that time, I remember going through something terrible. Mr. Marcel Dassault came back to the plant and asked people to start the work again. For 3 weeks, there was a downtime in production. We had the F1 market at the time. And it was replaced by YF-16. It was supposed to be the biggest contract for Dassault at that time. So how are you protecting yourself? Since we're the leader, more or less for the NGF, how do you protect our know-how, the patents, et cetera? I think it is essential. Now regarding the drones, not far from a base where the Naval Group is going to start military drones with EUR 140 million allocated to this. So drones are very important in Avionics. I would like to know your point of view about that.

[Interpreted] No intellectual property protection and our patents is something we pay particular attention because very -- because few companies have accumulated such a know-how in jet fighters. Even in the United States, sometimes it's Lockheed or Boeing or another operator because there are several players on the market. So for us, it's the same engineering studies, the same manufacturing since the end of the Second World War. So we are paying great attention to it. So we're not going to give away free of charge are know-how, for sure. It will do that only if it is a win-win that is for us and for the program. So no bargains. And it's not -- because we're protecting our intellectual property rights that we do not cooperate. There are some arrangements to share intellectual property. The technology will belong to the 2 partners. It's not because we have a screw of 5 that I will have to give away 50 years of experience to the other partners. Generally speaking, industrial partners fully understand this because they also protect their intellectual property rights. Let's consider my friends and partners at Airbus, they also protect their know-how and their patents. If they want to cooperate, everything is put on the table. Policymakers do not anyway understand this because they do not consider the very long-term life of a company that has grown based on its know-how and intellectual property. And this is what I explained to those people. Since we have gone through all the items of our agenda, I'd like to thank you for your attention, and have a nice day. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]