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

Welcome. Welcome to this press conference for 2023. As usual, we're going to begin with the film summarizing the major highlights for 2023 for Dassault. [Presentation]

So now we're going to go on to the results. Just to tell you about the context, the contact is very complicated with the war at the doors of Europe, the war in Ukraine, the conflict in the Middle East since last October, disruptions in supply chains and global trade, all the environmental challenges that are very important to prepare for the future. And this year, elections in the United States, Europe, India, Indonesia, it's done. And this could have an influence on our markets. Now just to recall, as I said in the film, 18 Rafales for Indonesia, this allowed us to have the 42 Rafales signed a few years ago, 18 Rafales, which are not in the official figures for 2023 because they were signed after the 31st of December. The highlights for this year, I think the film summarizes the commercial success of the Rafale is being pursued. The entry into service of the Falcon 6X, which is very important for us, difficulties in our deliveries, whether for the Falcon or Rafale mainly Falcon with Rafale to historic backlog with EUR 38.5 billion and net income, which is record income, EUR 886 million, and this is 1 of our best results in our company. Activities and programs, as you were saying, this is the Rafale moment, since the beginning of the program, 495 aircrafts have been ordered, including the 18 from Indonesia in January, that is 234 for France, 261 for exports. We are close to the 500. We are close to what we have managed to do for the Mirage 2000 and we have many years ahead of us to pursue the success of the Rafale in exports. And the decision of India to purchase 26 Marine Rafale, this is still ahead and we're going to keep taking orders, and we are still prospecting. So this gives us the hope to increase the number of orders. And as said in the film, this will allow us to have a production of Rafale for minimum 18 next year, 23 the military procurement law Dassault Aviation is part of this program with the production of Rafale, the delivery of Rafale to the French forces, especially the Air Force because the Marine has already been served, we have started the delivery of the 42. The 40 tranche or batch have been stopped for budgetary reasons. Exports have taken over and now we are beginning to deliver these 42 aircraft, it had begun last year. It will be pursued. This year, there are the 12 aircraft that were ordered and budgeted in our military programming law that have replaced the Greek aircraft. We have the 42 plus 12 aircraft to replace these aircraft that will be delivered to Croatia. We are also developing because here, again, we've delivered the F4 standard. So for those who know F42 and F43, so there are 3 sections. The first part has been delivered. The other 2 still remain to be delivered. We're going to obtain study contracts, design contracts to prepare the FI standard that will be ordered later on, but it's part of the military programming law. We are developing definition designs for the FCAS and NGF and in the military programming law is going to be a second phase. First for the demonstrated flight of the NGF in 2029. There's the Maritime patrol. We're going to ramp up the ATL 2, and we are preparing the successor of the ATL 2 we are proposing the Falcon 10X which is in competition, these are studies, and we will deliver during this military programming law, maritime surveillance Falcons, the Falcon 2000, therefore, and the Archange electronic war Falcons. So we are really part of this military programming law. Now as for France, 2023, we ordered the 42 aircraft at the end of 2023, with deliveries between '27 and 2032, which now in 2027, there will be the deliveries of the 42 and 40 plus, that's the 12 [indiscernible] ones for Greece. The deliveries were 2023, 11 Rafales were delivered for France. And as for the development of the F4 standard, this was also carried out in 2023. We begun the preparation of the FI standard. And we should receive study order in 2024. The commercial success Indonesia, 18 aircraft entered into service last summer, it's not the same as the 18 that were commissioned in January. So the orders for Indonesia equaled 36 in 2023. India, I've already talked about this. In addition to these contracts for new aircraft, we've delivered to Greece 6 pre-owned Rafale coming from the French airflows and France delivered 4 Rafale aircraft to Croatia. These Rafale aircraft that we're going to support when they will be sent to Croatia from April onwards. The support of the military fleets. This is keeping us busy, especially in France, considering the crisis and the war in Ukraine, there are requests to support this war economy. So therefore, there are assumptions and scenario on which we've worked with the French military state to strengthen our support in this war economy. We've also enlarged -- that we have vertical contracts for Rafale, Mirage 2000 and Atlantic 2. We've just signed 1 for the Alpha jet. As for exports, we are supporting the fleets that have been delivered to Egypt, Qatar, India and Greece. As for the FCAS, we are pursuing the Phase 1b studies that is the development of a demonstrator that is supposed to fly by 2029. We are in Phase 1b that goes up to 2025, and we will need a Phase 2 contract to realize this demonstrator in 2026. The teams are mainly working here in Saint-Cloud in a plateau in a design office with the people from Airbus, mainly from Germany and Spain, and of course, the Saint-Cloud Dassault teams. As for the Eurodrone, Airbus is a prime contractor. We are providing the air flight controls and the mission communication systems. As for the mission aircraft, we are pursuing our work on maritime surveillance [indiscernible], whether it's for the maritime surveillance or the strategic intelligence so this is all the electronic equipment for maritime surveillance. We have delivered the seventh and last modified aircraft for the new ATL2 standard and we've begun studies. We are in competition with Airbus that is supposed to propose its A320 with our Falcon 10X. As for exports, we've delivered 2 of the 4 Falcon ordered in 2022 to South Korea. We will deliver them green that is MT and Korea will equip these aircraft with their equipment. The Falcon range, we have received 23 Falcon orders in 2023 and delivered 26 aircraft, this shows a slowdown in sales, especially in Europe. The United States have done well in 2023. I'll have to remind you that in 2023, we had higher order intakes, 64, so there are some years that are positive and the years that are are not so positive. We can explain this drop because the 6X, and I'll talk about this later on, this was delayed because of the certification and because of the supply chain issues. I'll tell you more on this later on. As for deliveries, we were hit by what we call supply chain issues, especially for the aerostructure. And here again, I will tell you more about this later on. So we are under our guidance for the delivery of Falcons 26 instead of the 36 we have announced, 32 we had delivered last year 2023. We should have delivered 6X. We delivered the first 6X last month. Certification of the Falcon 6X, we reached an important step. The 6X was developed after the stopping of the 5X and it is after the Boeing accidents, the certification agencies are more meticulous and quite rightly so to make sure that the passengers will be safe. So therefore, things are a bit more difficult, but -- this is very good news that 6X is certified. It's a full aircraft that has been certified after the problems with the Boeing. Ongoing development of the Falcon 10X. I'll tell you more about this later on. This has been delayed because the delays in the 6X have had an influence on the 10X. As for the taxonomy, you know that we are engaged, as said, in the film to reach carbon neutrality by 2015 Aviation altogether, that's 2% of the CO2 emissions. Business aviation is [ 2% of this 2%, so 0.04% ] of the global CO2 emissions. So we have to work on this, but everything is quite relative in life. As a comparison, a year of use of our 2,000 and a few Falcons in service today. This is equivalent of 24 hours of global video streaming 5 hours of worldwide truck traffic, and it's equivalent to 2.5 days of the German thermal power plants. So here again, it's all quite relative. People are interested in aviation, especially business aviation rather than other domains that issue a lot more carbon. But we're working on this. And before telling you more about this, I just wanted to mention that the taxonomy that's the simplification we are having standards, standards and standards. So we are in the business aviation, and we are legally attacking the European Commission. I'd like to mention that because we believe that in the wording of this taxonomy that says that those who are working on decarbonization should be included in the taxonomy. We are growing faster than our friends from commercial innovation because we are using the SAF rather than commercial aviation. And the ambitions of Europe on the use of SAF is much lower than what we are imposing on ourselves for our business aviation. So therefore, we believe that the taxonomy is to encouraged to decarbonize and not punish those who use business aircraft and business jets. So for us business jets and that's also true for our general aviation, we will see the results. I'd like to recall that in the U.S., we don't have all these problems. In the U.S., they're trying to encourage, they are really advancing and progressing in the decarbonization of their aviation. But they're doing it through by inviting them to do something. And we will see what will happen in our fight with the EU. Now more positively, we are working on the SAFs. So we are working with 100% of SAF in our future aircraft, whether it's with the 10X because that's being developed. So it's easier to plan for that with our people designing the engines, but also with the other aircraft, we'll be able to fly with 100% SAF in the future. We're already flying with sustainable aviation fuel in-house. In 2023, there were 413 flights for Dassault Aviation, and we did with 30% SAF. So therefore, a great saving of CO2, it costs more, of course, but we've decided to go in this direction to show the example to those who use business jets. In technology, we're working on this integration at 100% in the future. We are participating in scientific programs to see what can be done in terms of decarbonization. What can be done technologically with other things other than SAF. And the choice of clients to fly by saving you, this will be doable. It is programmed in the aircraft, and it will be according to the choice of the client and the pilot. This is operational. This is called Falconways, and we will optimize the CO2 emissions. And we are working not to have a full decarbonization. We will have to buy CO2 emissions and the storage of CO2 emissions. This is why we've begun with philanthropic support in the [indiscernible], which is close to the plant we're going to open soon and will pursue this type of operation in the future. As for the 6X as I said, we have obtained the certification through the EASA and the FAA, the EASA is in charge. This was done on the 22nd of October 2023. We had to, however, modify things, and these modifications were made to enter it into service. And the 6X will enter into -- was entered into service on November 30, 2023. And the industrial ramp-up is being done. We've delivered the first aircraft to ourselves. This is our demonstration aircraft. And here on this map, you can see the flights of the Falcon 6X since early December. It flew a lot, countless number of hours, more than 200 as Carlos is saying, 250 flights -- demonstration flights. So we have a greater experience feedback and clients have flown around the world. You can see in the United States, Europe, which are the 2 major business markets, but also the Middle East and right up to Australia. They use our aircraft. And next month, we've planned for a campaign for India. The first 6X was delivered last month. For content, we have also to postpone our program and we also had to adjust with our suppliers because some of them also had some difficulties. Let me remind you that there is a huge research and development, development of all the parts of the aircraft. We work on this with all our suppliers. All these definitions were made during the pandemic in 2020. Usually, we work on the same office work. So we had to work online with conference calls. So it was not ideal, so the postponing of the 6X has obliged Falcon, that's what its partners to postpone our 10X. So we've worked with our suppliers. The first deliveries will be in 2027. So that means manufacturing the aircraft, the first test and the certification by the authorities. Now, Falcon support. We are striving to have a higher standard. We've improved our global software. We had merged together some tools. We had some difficulties, but not it is fully operational, and we think great attention to this capacity to use our aircraft worldwide. We've also opened a new service stations. We have upgraded our center in Dubai. We've done that in Malaysia and in Florida for the American market. Support for government Falcon, we have now the contract which were initially held by our competitors in Switzerland. So now we are providing maintenance to the French fleet, the French government fleet. In terms of CSR, we have drawn up a plan and we have saved. You'll have all the details with figures in terms of energy consumption, water consumption, CO2 emissions have also been reduced. So we are saving on water and energy. You know that next year, we are going to change the rules. We are moving on CSRD, the European directive, which means that we all have to produce far more comprehensive and committing report. We are all prepared for that. And as you will see in our management report, we already have some results and some outlook for 2024. Human resources is a big challenge for us because the workload is greater. So in 2023, we have hired 1,732 people 215 apprentices, so that's almost 2,000 people. So we have had to make ourselves more attractive. We are still in the top 5 of all the company's young people want to work for us. So we've massively recruited, which means that we have to go through a strong induction programs so that people feel comfortable in our development teams, but we also have to have them part of the Dassault GNA which is part of our identity. We are still implementing recruitment plan because in 2024, we also have plan to recruit another 2,000 people and we also have many people going on retirement. So that's 1 of the big challenges of our company to recruit people, make sure that those people are well supported when inductions takes place and prepare for those who are going on retirement. And for 2 reasons, are well aware of that we need to consider the bargaining agreement for the metallurgy industry, which is imposing more guidelines for careers and jobs across entities. And we are outperforming these guidelines in some areas like prevention, health prevention programs and some support funds in case of diseased people. It's difficult to change the bargaining agreements. So you have to go through a complicated changing period. But now this is up and running because it has become mandatory since January this year. We're still upgrading our industrial sites. For those of you who had the opportunity to visit these sites, you see that there new buildings replacing the older ones are coming in addition to the existing 1 because of the increase in our production capacity. Marignac has changed greatly. For those of you who visited Marignac, you know that the tertiary teams are out there, but also in the forthcoming years for the Falcon 10X, it's a bigger plane. So once you put the wings, it's a bigger plane. It's a bigger aircraft in terms of volumes of the 10X is like an A320. So it's not a small aircraft. Once it is fully fitted, so you need to have a bigger buildings on top of the additional staff. Cergy was postponed. It should have been delivered earlier this year, but we've had some construction issues. They were -- had a shortage of material and then human resources and then some of them went bankrupt. It's just like when you have a new house build, you have to find new providers. So we have had to postpone the delivery of this building. And we think that Cergy will start operations before the summer. Make in India, this program is still ongoing. We have the T12 and the T4 sections of Falcon 2000 are manufactured there. The parts are on time, up to our quality standards. They are cheaper than in France. So that's a very positive experience. So we will carry on with our development in the supply chain in India. Just like for the Rafale and also to get prepared for the future. And I think that we are going to speed up our production transfer for Rafale and maybe for what will be the future of India. It's not only about manufacturing aircraft. It's also to make sure that the Indian supply chain will be up and running with the main parts manufactured there. We've also worked with other companies such as Dynamatic, a very dynamic company in India, which could manufacture. We've already signed some contracts with these companies for Falcon 6X, and we've also worked with a PTC group, which is well known in India with the Tata company. They're already very busy working for Boeing, Airbus and others. But we're also working with them to get prepared for the future. We also have some engineers, an engineering center in Pune, which is fully operational so that we can ramp up this program of skills development in India. Now regarding the supply chains, indeed, there were some disruptions and shortages. It has disrupted our production in Merignac, some parties were missing. So we've had to postpone our schedules. It's not so sensitive for the Rafale. As we've delivered 13 aircrafts instead of 15 plus 2 to the French army, which were delivered in 2024 instead of 2023. So there was a short delay, but it's more complicated for Falcons because there are several supply chains with different suppliers for the 8X, for the 900, for the 6X and also the 10X and we have to manufacture the first aircraft with very different -- many different suppliers. So more difficulties and since we have some difficulties in being on time in Merignac, we still send out the aircraft into a little rock for the furniture and we try and catch up with a fitting in Little Rock, so we have to send out our teams there. But then we also have some aerostructure supplies. They have some human resources shortages. They were also delayed in some aerostructures, namely in France, for instance. There are 0 U.S.-based companies that are delayed. Only the French companies have such shortages. Our European companies had outsourced in Eastern Europe, and we have to reindustrialize, relocate now, and that's many teams of Dassault who are providing additional support in terms of management of shop floor work to help these suppliers. So it's been quite complicated. Thirdly, the 6X was supposed to be delivered in a certain number of items in 2023. But since the certification was not granted and the entry into service was postponed and those who were delivered in 2023 were postponed to 2024, but it is also simultaneously happening with the supply chain disruptions. Now the things are improving. And internally, we try to have a better picture of the supply chain in order to anticipate what's going to happen with those companies that are going through difficulties, we observed that an increasing number of small suppliers are going through difficult times, but that's also true for some of the big suppliers. So it has made our life a bit more difficult in 2023. Now for the 2023 result, EUR 8.3 billion of order intake EUR 1.7 billion for Falcon, EUR 3.6 billion for the defense export for Rafale and EUR 3 billion for the French defense. Net sales of EUR 4.8 billion compared to the previous year with the delivery of 26 Falcons, so less than the previous years, EUR 1.8 billion to Rafale aircraft for exports as planned, EUR 1.5 billion, 11 French aircraft for EUR 1.5 billion. So the 2 missing aircraft, I mentioned, will be postponed to 2024. The backlog is a record backlog. So EUR 38.5 billion with EUR 4.6 billion for the Falcons that is 84 Falcons in our backlog, EUR 24 billion for the Rafale export, that is 141 Rafale to be delivered and 70 Rafale aircraft to be delivered to France. So that is some EUR 10 billion and here you have the breakdown per pie at the bottom. We have pursued our R&D efforts. It's down compared to 2022, but that is normal because the 6X is now behind us in terms of development, it's almost completed. And we are really ramping up. We are focusing on the development of the 10X. So the figure is high, but less than last year. So when we compare to the total sales, that is some 10% this year, considering the total sales that has slightly gone down. [indiscernible]-- we received the results yesterday, so very good results that are contributing to the net income of the company. We are always very happy to be part of Thales, and we have reinforced ourselves because we have bought some Thales shares in -- and our net sales is EUR 4.8 billion; operating income EUR 349 million, so an operating margin of 7% financial result of EUR 200 million. Thales for EUR 460 million, taxes EUR 130 million. So the net income, which I announced at the beginning, is EUR 886 million, which is a net margin of 18.5%, which is up compared to 2022. The self-financed R&D 10%. So the earnings per share will be EUR 11 plus 10% compared to last year. The catch is going down, which is normal because we have received advanced payments for the Rafale, but we have to make the aircraft, so the cash is used to build and make these aircraft. So there's an increase in the outstanding. We've also bought the Dassault shares to relate to our current shareholders, and we've bought Thales shares, roughly EUR 1 billion, if Add up Thales and Dassault. And these 2 topics lead us to a free cash flow of EUR 1 billion and proprietary cash, which goes from 4% to 3%, if I'm not mistaken under the ages of the financial director. The breakdown of the capital after dilution accretion -- so 31st of December 2023, we're going to have an accretion This year for the shares we bought at the beginning of the year, it's going to really increase the shareholders, GRMD is at 65%. The free float is roughly at 23%, Airbus at 10% and we have fewer self-owned shares and the voting rights of the GRMD is more than 79%. Proposal for the dividend for our shareholders, EUR 3.37 per share, which will be submitted to the approval of the Annual General meeting, which will be held on the 16th of May this year the dividends account for EUR 266 million. That's a payout versus the results, so up compared to last year. And just as each of the year, at the same time, we pay a dividend per share for 2022. There's always a gap between the decision and the payoff and in 2023 to be EUR 210 million for the incentives in [indiscernible] contribution for 2022. And in 2023, the before months of additional contribution to our employees who are already well paid, if I may say so compared to the rest of the profession. But 2024, the profit sharing will go down slightly and would be equivalent to 2.9 months of salary. Outlooks and strategy. We're going to focus on the delivery of our aircraft, the production of Rafale. We're going to go to pace 3. We have not yet reached that pace at Merignac where we are assembling our aircraft. We are delivering the 6X mainly. The development engagements are on time and according to our cost, but that's business as usual. And Currently, it's not that easy because all our suppliers are really increasing their prices. The support for the availability of our aircraft. This is very important from the military point of view because of the current geopolitical context especially important for our Falcon clients. They need their aircraft when they travel. And there is a strong activity on our end when they're submitted to a certain number of topics at the other end, the world is important to get a contract for the FI standard, pursue the studies for the NGF demonstrator and prepare ourselves for Phase 2 ramp-up for the make in India. This is the time to do this, and we have dedicated teams working on that. We are pursuing sales. We don't want to stop anything, considering the demand for export focus. And for the 6X, we have to go onto the next range and our parent contractor has to work to reinforce our commercial efforts to sell more because we are at a turning point. A new aircraft is arriving, and we are preparing for the arrival of the 10X. And as per CSR, considering all the new constraints we have, we have to work better to prepare for the future in this area and efforts in HR that is extremely important for the future. [indiscernible] hire new people and properly integrate our teams. We have changed the way to do our guidance in the future, that is in 2024. I'm going to just talk about the number of aircraft because that's not a very good representation of the total sales. So we prefer guiding with the total sales, and we're planning total sales of the EUR 6 billion range for 2024, and this should correspond to a delivery of 35 Falcon and 20 Rafale. But there will be "deliveries in development, deliveries and support," support price, which weighs heavily on our total sales and to simply guide aircraft, that is not a good representation of the total sales. So this is what I wanted to tell you about the results of this year 2023. And now I'm ready to answer all your questions.

Michel Cabirol, La Tribune. I would like to have an assessment for the Rafale export. Do you have figures over the next 5, 10 years? What is the potential for exports of the Rafale? You said 261, 25 for exports? Have you included the preowned aircraft or not? And a second question, you said you have bought back Thales shares. Would that change your share ownership with the state?

As for the number of Rafale, normally, if I'm not mistaken, that there are people correcting me, 261 that does not include the preowned aircraft. So this is why I put them separately. So you have to add the 12 preowned Greek aircraft and the 12 Croatian aircraft. For the moment, we do not have 12. We have delivered 4. France has delivered them. So you have to add them. And we were honest, we did not counting the French aircraft twice. So these are new aircraft when we talk about the figures you have here on the slides. As for the potential to increase the Rafale, well, it's a bit like the chicken and the hen. 5 years ago, if I were told we're going to go on to pace 3, I would say we cannot anticipate that. We should sell first. So there's a limitation to increase production chains, but actually, we need some time. When we set up a Rafale chain, and we increase the potential, we need more surface area. We have planned the right service area in our plants and especially in Mérignac. So therefore, we can increase this pace. Today, we have set this pace at 3 so that we can deal with the current orders. If we have more orders, of course, we've anticipated the 26 orders. But if we have to increase them, we can still further increase. I'm not going to give you an exact figure on how much more we can do. We cannot reach pace 20, but we can go above pace 3. It's not just us, it's our suppliers, too. But once the supplier has developed, he's happy because the production of the Rafale that was not very significant in our backlog of our suppliers, now it is becoming more significant. So that is good news for them. And the third question, it's Thales. Of course, we have bought Thales shares, but we have remained in the pack. And we're not going to go above the magical figures that would force us to make a takeover, but we're not going to have a takeover bids on Thales, not you but the state.

[ Bruno Chenik ]. I have 4 questions. Should I put them all in a row, yes. So to put aside the inflation effects, the increase in the pace, does this have an impact on the production cost and the sales of Rafale, up or down? And then you said things could happen in India. So I have 2 questions on that. The controlling of DRAL by Dassault, will that be done or not? And in the framework of -- and MMRCA 8.0, will there be an additional production line to support industrialization in France to help the supply chain? And a very easy question. There are a lot of people who make up the development of production and delivery for Falcon. So when will we see 2, 3, 4 Rafales coming out from Mérignac? And there's a German report that questions Dassault for the delivery of the Euro MALE. Do you have any comments to make on that?

So there are 5 questions and not 4. So I'll try to answer one after the other. So the first question was on the schedule -- the increase in the pace -- in the development pace and as for the cost in theory, yes. The increase in the pace will bring down costs, but the costs are increasing. So you're going to say, well, you're not good. Yes, we are not good because everything is increasing because of inflation. And actually, all the prices are increasing. Our suppliers are also increasing their costs because of inflation, because of the increase in the prices of energy. And so therefore, we are following inflation. But as for our prices to our clients, we are following inflation. It's simple. We have to remain within our cost. If we can bring them down good, we can earn our lives better. If we cannot control those costs, we will not earn our lives that well. So the reality is such that there's a lot of tension for Rafales and Falcons, as for the increase to our suppliers, which is greater than the increase in inflation seen from the side of our suppliers. As for India, yes, with DRAL, we might buy back a certain number of shares because to go on to the next step since we've done a joint venture, we have to increase the capital. We need more equity since they have more equity. We have to increase the capital. So we have to discuss about this with our partner. There are several solutions; either they will increase their financial participation and then there'll be no problem or they'll have trouble increasing the stake and then we might buy back some shares. We are 49-51, so we may not buy the 49%. So this is a normal discussion for the moment. We have stabilized reduction there. It's working well. We have the mix team there, a few French and a lot of engines. We are very happy of the work done by the engines and the gen mastery of all this. So we want to still develop Nagpur with DRAL, whether it's with the Dassault's capital or more finances from both, from Dassault and our partner. For MMRCA, this is the preparation of additional orders in the future. This is not called MMRCA. It will be aircraft to be made locally partly. And if we obtain these major future contracts in the next decades, this will guarantee a sustainable manufacturing line. We will make a lot, and this will benefit our French factories as it's the case today. So it will be a win-win for everybody, but we just have to develop India, as I said in my presentation. And the fourth topic, we have reached pace 3 in our upstream factories. We are increasing our rates. It's always easy because at Seclin, we are helping the supply chain manufacture the primary parts. So we're doing additional work, but they've reached pace 3. Mérignac, this pace will arrive later. It will be there in a year or 2. And we will go through a rate 2. We have a guidance for 22 Rafale aircraft. So 20 means 2 per month because we are counting 11 months out of [ 22. ] So we are materializing this passage to pace 2. Considering our difficulties with the supply chain, it's a great challenge. So we will go on to pace 3 to face the deliveries where we will have more than 22 Rafales. And the last point is the MALE. The MALE, It's difficult with Airbus. We are holding discussions that are reversed compared to what we do usually. So in -- when you are the prime contractor, what we tell our subcontractor, our search and specification, and then we wait for them to deliver. We can modify our specifications during development. But we know more or less in which direction we are going. We know the size of the aircraft, the orders, the expense and we are expecting a lot from Airbus, the prime contractor to give us the specifications. So what was written in Germany is not the truth.

I'd like to know what you think about the European Defense Strategy presented by the European Commission yesterday as well as the implementation of this tool. [indiscernible] merger and various mechanisms that the commission has put forward to the member states.

I'm delighted about it. It means that the European thing that it's good to work together on defense. And that's very good news because in the past, it was not like this. There was a taxonomy for each type of weapon. You were blamed and it is still in the mind of many people in Brussels and in Paris. You still have this saying, well, weapons or arming or Dassault and the defense industry, we'll not talk about that. It will take a better controversial arming or armament. It does not exist in the international vocabulary. So they're going around in circles and beating around the bush. So we don't see why the environment is not to be considered that the weapons will have to be on our side, whether on the side of our enemies or potential enemies. So I'm delighted that Europe is realizing it. But between this realization and developing European defense industry, there will be many years and even decades. So it's good that the European institutions have realized these needs now. If on top of that, European member states by European products, that's good, but it's not the reality. Some progress could be made in pooling the purchases. Why not? No, this realization is very good, but my recommendation to Europe is that keep it simple. Don't make it complex with very complex rules and standards such as what I read in some documents. Too much -- too many requirements and standards so that what is required by some European countries in the case of war economy, we do not develop standards. We have to develop weapons and our economy from one day to the next. We will push armament at the heart of our concerns. We're not in that stage in Paris. In Paris, in France, we do have a greater capacity in terms of production made in France that is compared with other countries. But when it comes to ramping up in quantities, it takes time. You cannot do that in a fortnight. You need to have the appropriate budget to make sure that this ramping up will happen. Now if there is an open mobilization, that's very good, but it's going to take time. And I'm delighted that such realization has happened.

You said that you've said you sold fewer Falcons this year in '23. What does it say about business aviation market today? What about the preowned market?

Well, I'll first answer the second question, which will shed light on the first question. The pre-owned market was not as dynamic as before the pandemic, where the inventories were very low. The preowned business aircraft are more numerous, meaning that this market has shrunk a little. Now for the new aircraft, our case is a bit particular because we're selling pretty well in the U.S. That was the case in the United States in 2023, not so much in Europe. Maybe this is reflecting some concerns in Europe. But from the economic standpoint, the U.S. market is doing well, full employment. There is a bit of overheating. That's why it's difficult to control inflation. But in Europe, some countries are in recession. Some are close to recession. Some have a very high debt. So they will have to have some stringent decisions at the national level for some countries. So this is not so encouraging to buy business aircraft in Europe. Asia is awaiting for the 10X because Asia is far away. But when you compare with Bombardier and others, they are selling the Global 7500 and LGE 750 and also waiting for the certification, LGE 700 has not been certified yet. It is pretty much delayed for our competitors. No, we are waiting for the sales of the 10X, but that's not tomorrow. And in some markets, if you don't have the aircraft ready for the next 18 months, people are ready to wait. So the sales will go up when the 10X is operational. The 6X has just been delivered so gradually for the U.S. market, we think, for instance of the 6X, note that it is operational after the maiden flight and that our customers can use it on the demonstration flight, we will increase the number of orders. So it's slightly behind compared with others, but we have to compare comparable aircraft. Our competitors have a wider range than we do. We go from the 2,000. So that's 4,000 nautical miles. And we don't go up to the same 7,500 nautical miles for the ultra long range because the 10X is still under development. Now when we compare on this market segment, we've always been the #3 in terms of quantity. This is a rank position that we have maintained. We would have liked to sell more. In 2022, 64 were sold. Ups and downs when the economy is doing better, we sell more, which means that in 2023, the European economy was not that good. And the Russian market has just disappeared, literally. It was 10% of our customer base.

I have some questions about your supply chain disruptions that you've mentioned. What is the share for the disruption on the structure side and motorization? And regarding the technological transfer in Make in India. Have you taken any specific measures regarding the sovereign cloud? And I'll stop here.

So for -- we do not have problems with the engines and motorization. So maybe I would have said that a few years back. It means that some progress has been made. It's difficult for the engine manufacturers because they also have their own supply chain problems. They have great difficulties. Now they're delivering. They are not delivering on time. but they're not postponing all the aircraft that we have delivered. No, all the big ones, GKN, Latecoere, Daher, 3As and many others, those are the ones that are late, so much so that we have to postpone our plans. So this is our main focus regarding our supply. So we need to program for the future deliveries and see what kind of support we can provide them with. In India, it's a manufacturing transfer. So there is no technological transfer. It's transfer of know-how for the manufacturing of Falcons parts and in the future that of Rafale. They are big partners. They know how to fly the Rafales and they also buy Falcons from us. So there is a balance between the Dassault know-how and our capacity to start a partnership with a few Indian companies.

I have 2 questions. One regarding your appeal to the European Court of Justice. Did you submit it as Dassault where you're in a consortium with others? And what about the [indiscernible] President has gone to Sweden. And apparently, they've talked about some cooperation with SAB. Will you be considering this for this future system?

So we are the only one who have appealed to the European Court of Justice. We did not start a consortium or a class action, if you wish. We started to negotiate with the commission, Rolls-Royce, the manufacturer of the 10X engines based in Germany and Safran for noise standard reasons and Daher is also supporting us as well as other companies in the industry. But we are the ones submitting the appeal because we are the big business jet company in Europe. I'd like to recall you that in the EU regulations, what was told to me by the commissioner in charge of transportation, if you use SAF, you are in the taxonomy. And if you manufacture aircraft with the SAF, you're not included in the taxonomy. So I don't understand their approach. It seems that there is a loophole in Europe. Now if it's political, it's going to be difficult. But if it is a legal issue, then maybe we have some changes. But I didn't know that the commission was involved in politics. SAB is a company for which we have great respect of the design and manufacture aircraft. We've had excellent cooperation with them for the Eurodrone. We really worked pretty well with them. We have very nice memories of our work with SAB. Now if France and other countries were interested in having in [indiscernible] 10X, we would be ready to discuss it. We've talked about it with our friends at SAB, but what remains to be done is to build a program, but [indiscernible] is difficult to design. They are specialized in radars. So they would probably work with our friends at Thales, and then we'll have to select an aircraft. And if we would have to compete -- and if we were to work with SAB, we would be very happy. 10X works or any other topic, the Swedish industry is an industry we can easily cooperate with.

Sarah White from the Financial Times. I have 3 questions, one on the supply chain. Can you give us the details what is wrong with the subcontractors? You talked about the difference between the Americans and the Europeans. Can you tell us more what are you doing at your end? What types of support? Is it financial, et cetera. As for defense in Europe, you have pleaded for a simplification or a simple approach, if possible, or what would you recommend if we had to deliver faster in terms of defense? What would you need to do more money, more political decisions? And the last question I don't know if I missed it, but how many people would you hire net this year if you take into account the departures and the new hirings?

As for the supply chain, there are several types of aid we are providing to our supply chain. First, what I'm saying is factual today. There are no American or Canadian companies with whom we are used to working that are delaying our deliveries. There are some French companies or European companies. GKN is a company that puts us in difficulty for the 6X because they had made a choice of the subcontractor far away from Great Britain and far from France. So we have to change. So that costs us money. That means we have to find a new partner in France, and it's going to be [indiscernible]. And we have to industrialize in a certain way. We have to set up new teams and this is done together with GKN. So we are investing. We are setting new teams, industrial teams, teams to launch this chain, and we have to support the manufacturer -- the new manufacturer of the different parts. So this is a major human and financial effort. There are companies where they have difficulties. So we are sending people from quality, from production. We have to help them understand what help -- understand what are the difficulties. And we have teams that are being sent to various companies. To give you the example of 3A that was sold recently to [indiscernible], we have teams that are going to help there because there are delays. And then there are some small companies that are facing working capital requirement issues. At one point, there was no more money to pay the employees, and we forget that because we are very large company, but that is our job, we have to pay. We have to be able to pay. So we need to have money in our coffers. So we are making advances. We, Dassault, so these small companies might be able to survive because it's in our interest. It's not just for everybody's happiness that we're doing this. But we are, of course, taking risk when you're working with a company that is not totally secure, we are taking risk. And we put money in aeronautical fund with our friends from Airbus, Safran and Thales. And this fund can help provide equity to a certain number of companies in difficulty. I'd just like to remind you that there was a high-density oxygen because of COVID. So does oxygen -- more oxygen makes us euphoric? And when you remove the oxygen and you have to live without the oxygen, well, all of a sudden, it's more difficult. So we have to refund the loans. If you step up production, you have to invest, you need money, so you need working capital requirements. And when you go to see the bank, well, the banks right now with the high interest rates and the lower volumes, you have to go and meet the banks to ask them to lend and they're less altruistic than Dassault. And they don't lend to someone who's going to collapse. So it is downward spiral. So there are some companies that will wind up. That is everyday life before the COVID. We have to get used to living as before the COVID and these companies should be able to manufacture and supply with other companies. And we considering our manufacturing, we don't have double, triple quadruple sources. So we really have to anticipate things. So this is how we're helping. It's human help. We're sending talented teams. When we send them away, we don't have them with us anymore. So this some voids. And we have all kinds of aids, funds, and we make payment advances so that they can make ends needs. For the next 2023, we are at plus 1,200, sorry 2024. 2024, he is correcting himself. So the 2,000 that we're planning to hire, we are anticipating the departure of 30 people, so it would be 1,200 net. So this is a progress in terms of our staff in the group. It's true in France and in the U.S. because in the U.S., the phenomenon is different. In France, we have preserved our employees during the COVID, thanks to the loans. In the U.S., there was no aid from the state and they left and it was difficult to get them back. So we had hiring issues in the U.S. And in the U.S., there is full employment. When you're in Arkansas, in Little Rock, the unemployment rate, according to the government is 2.3%. I've met them. And they're still saying that they're trying to get more people. The advantage in the U.S. is that when you create a company, when you create new jobs, people come. They come from all over the United States. In France, we create in a given place, and in another place, there's unemployment, things don't move. Mobility is difficult in France. And what do you expect from defense in Europe? No, that's [indiscernible] I didn't want to answer that question actually. But we're waiting for something -- we are trying to be pragmatic and we need to help from the states. The states have know-how. They have skills. And if these states want to do things together, that's perfect so long as we do not sacrifice our efficiency to adopt. There's no time to waste. And we have to use the faster simpler solutions, the most easy ones, the most pragmatic ones. Today, if we were supposed to have a war in the future, which I don't hope for. And I mean, the NATO is ahead in terms of military efficiency. And to build equipment for the NATO, we've understood that the U.S. were not absent from this whole story, including in Europe, which I'd say again, if you want to tell me that I'm bringing my guard down, that's an American preference when we buy in Europe. So if somebody talks about European preference, great. We will see the efficiency of this declaration of intent versus reality. But then the European defense tool that has not been planned for that, that should be developed. And that is one of the questions. Today, it's true in France, and it's true in the whole of Europe.

[indiscernible]. Two questions on supply chain and one question on taxonomy. The supply chain -- is the Rafale supply chain less exposed than the Falcon supply chain? And considering the MMA problems, are you tempted to call on your Indian subsidiary to offset things? As to the taxonomy, can you tell us what are the issues at stake to be part of this taxonomy or not for your business jet sector?

Now for the Rafale, we do have difficulties too. We're not going to hide that, but it's just easier. Why? Because you have only one supply chain, whether it's for France or for the export, it's the same chain. It's the same parts. So when we have a difficulty, we are focusing our efforts, and we are solving one difficulty. Secondly, we deliver our aircraft to Mérignac, not to Little Rock as for the focus. Not the fault of Little Rock, but when we are behind time for basic aircraft, which is not equipped with all the completion, we don't let it go. So that creates an additional difficulty and it's more complicated to catch up. So for the Rafale, it's easier to focus to have all the parts. The engine supply chain is not really helping us in our everyday life. What we hope is that in the future, they will be able to contribute to this stepping up in production. And the taxonomy, it is not really affecting us at Dassault. It is affecting the financial tools. So the funds are setting criteria, this thing that if not following the taxonomy, we're not going to help you. We're not going to enter into your capital. We're not going to give you loans. And that's where the things will be difficult for our supply chain, for our business jets and for our military aircraft because even if it is not the environmental taxonomy and there is no more social taxonomy, some people mix both, and they're confused. They did not know what Brussels wants in terms of taxonomy, the environmental taxonomy or the social one. And then they exclude defense and the business aviation. So that is the risk, and we have to really say loudly and clearly that if you want to be in defense, it should be said everywhere, not only at the Ministry of Army's. I don't always hear this in [indiscernible], it should be said in [indiscernible]. So you're going to say to them, and they're going to call me because they'll tell me that I'm saying something foolish, but it's just a slight exaggeration of things to make people aware. That's what defense for this taxonomy that does not exist, as you say. And for business aviation, I hope that people will understand that it isn't that we don't want to work on the environment, but we do not want to have a political stigmatization on people. We're working for the future. We're working on the environment, but they have needs. Business jets, it's not only a caricature of the person who has a lot of money and who's going on holidays. It's 90% flights for business. These are people who need to go somewhere. Then he goes somewhere else, not too far, and they optimize their time. They optimize their trips, so that they can put their companies at the best level considering the suppliers, their partners, et cetera. It's only here in France, we have to explain this. We don't have to explain this elsewhere. Everybody knows and in France, it is known to, but there are people who criticize. And when they talk about private aviation, well, what do they mean by private aviation? It's a nonsense to talk about private aviation. When you have a private company, that does commercial aviation, do we call it private aviation or commercial aviation? We call it commercial aviation. So what do they mean by private aviation? This is stigmatizing things that it's for the people, but it's companies or even governments that use this type of business jets, 10% of this is used by the government.

I'm an independent journalist. You were happy with the financial results of Thales. And as a shareholder, what about the price list of the list price of Thales since the 24th of February 2022, it's increasing. It's increasing. But as for in [indiscernible] Leonardo, BAE, the price of Thales shares has not gone up that much.

So I don't to hurt any financial specialists here, but our list price is not our subject, neither for Dassault nor Thales. We are happy with the share price since we have entered Thales, it has rocketed. We've made a good investment and we are paid off dividends that contributes to our net. So everybody is happy. But we are at Thales, just as Dassault family is at Dassault and we're there over the long term. And in terms of the long term, the share price is not important. It's not important over several years. Over several years, it's going to progress. It's going to progress well. If your question is to say it could be better, that means we have a huge potential for evolution. So it's better to be within Thales. So why isn't it as high as it should be, I can't answer. The analysts are much better than I am in that topic. I'm at 25% or 26% now because we have increased it. Once again, we're very happy to be at 26% within Thales. We have a good capital. We're not going to sell it. So we are not interested by the share price. We've bought here. So if you tell me that it was under that means we were right to buy. You should always buy when the price is under. So we are right to buy when the Thales share was lower, and now we've reached a maximum level.

[indiscernible]. I have a topical question on Saudi Arabia. Are you still negotiating with them or the German vito that has been put off -- that's delaying everything. And another question on the SCS. What are the next deadlines for you?

We always feel that it's going to be later, but it happens very quickly. We're working on Saudi Arabia. We're doing things -- as people do it locally, we are having discussions with the armed forces because of combat aircraft, we have to make sure that the aircraft is good. And we think that our aircraft is better than the Eurofighter. If I told you the opposite, you would be surprised, but there is not just me who thinks that, there are a lot of people who think that. So that's one of the main points. And the second thing, Saudi Arabia would like to form partnerships in the industry. So we're working on this. And we're very interested and we are having discussions with Saudi companies, with the Saudi Air Force and with those who have been appointed to discuss all these topics with us. So we're doing this normally. Good if the Germans have opened up some exports. I mean, as the Americans say, in God, we trust. For the second question, the FCAS well, developing a fighter jet and demonstrator. It takes time even more so when you have various partners. So it's the normal pace. We are on track considering the contracts we've signed, not only with the states, but also with our industrial partners that is Airbus. The next milestone will be the Phase II contract, which is the development and manufacturing of a demonstrator further to the detailed studies, and that's in 2026. So there will be a whole preparatory work. It's not only an industrial preparatory work. We have also to make sure that the budgets are allocated by the 3 countries that are part of the FCAS. But we're on track.

I'd like to talk about your favorite topic, FCAS. I'd like to know if there has been any progress as to the potential closer relations with SAB, [indiscernible] to have patent on Bloomberg on the same topic on the new generation fighter in GF. What about your relations with Airbus? Have things smoothed out? How do you work with them? And if your relations are not as good as expected, what are you expecting?

We've been working with Airbus. These relations are quite normal for the 1B phase. When the Phase II manufacturing stage starts, we'll see if we have good relations or if it is like when we sign for the 1B phase when it was a bit difficult. Now since we are taking the lead, we work as per the Dassault methods. So those who can keep up with the pace, that's no problem. We are aiming for efficiency, and we will see for Phase II if we can find a good agreements, and we can agree with them and find some common ground. It's a normal business relation with Airbus. If we can come up with an agreement, and we come to common grounds and work together, then it's a normal type of business relation.

I have 2 short questions. We've noted that you will be the head of GIMD before January 8, 2025. My first question is what about the -- leading Dassault [indiscernible] I've understood that you will still have the 2 caps. What are the combat drone with the Rafale F5? Any idea as to the schedule for the development phase, the maiden flight, the entry into service and what is the development cost of such aircraft?

Press release has been issued to answer your first question. The entry into force will be next year. I have 1 year to get prepared. The important thing is that you have more responsibilities, you rely more on your teams that are more directly at the frontline solving the problems. You know that the CEO usually doesn't do this type of work. So the answer to your question will be given in less than a year. For the second question, how should I answer this? Just like wait and see, wait -- you'll have to wait. Be patient. You do have the answers, don't you? Maybe be more specific in your question. So maybe I can provide you with more details.

You've said you were expecting an order by the French DGA for the F5.

Well, for F5, we're waiting an order for the study. So we have to check the budget, what Dassault and its partners can do that is mainly Thales, what will be the requirements by the French DGA. So we are studying anything that is possible regarding drone fighters. It's an announcement which was made by the minister, as you know. So we're still waiting for further detailed engineering studies on this. So we're waiting for the French armed forces to work on this. The French defense procurement agency has to provide us with their terms of reference.

Back to what you said earlier, with the U.S. Germany, NATO, let's not forget the problem you've had with F1 versus F16. It's good also to remember all this. Now what about the pace problem you've had between the industrial transfer of the Argenta plant to the Serge plant?

No, operating feedback is very easy. It's just need to plug the computers, make sure that there is a power supply. There is no issue there. It's a digital routine and moving from one side to the next, doesn't mean any problem between Argenta and Serge. It's more physical thing. You have to move everything, the equipment, the people without wasting time and shut down the Argenta plant in a proper manner. Now for the F1, I'm not -- I'm young, so I don't remember all this, but I haven't gone through that. But for the F-35, for instance, the Czech Republic is fighting -- is buying F-35. Just like Belgium and the Netherlands, Germany has bought F-35B because they have good reasons for that. This is what is more concerning to me that than the past, it means that there was a strong strategic decision made. The European countries are buying from the U.S. It will not repeat [indiscernible] what I have said except for those who are supposed to buy Eurofighter. I have no problem with a Eurofighter, it's a European, but those who've developed the Eurofighter are also buying from the U.S. That's the case for Italy, Germany and the U.K., and that's not the case yet for Spain. So yes, we are concerned, but it's not Germany, the U.S. are competing with no cons. But when we talk about this realization in Europe, we're discussing earlier, we shouldn't have cons in Europe either, even though I think there are some cons here around. Question with no microphone. Platform is doing pretty well. For the 10X, we are fully operating it, and we are hoping to deploy it for all our aircraft in the future. On a step-by-step basis, it is providing us with a great capacity to have our software that are not Dassault Systèmes software on our platform. So that's very good for us. So it works pretty much with our platform. So we can keep on using our own tools and the tools from other platforms with a preference for the Dassault System tools, of course. Well, thank you for having attended this press conference, and see you soon. Have a nice day.