MTU Aero Engines AG (MTX) Earnings Call Transcript & Summary

Welcome to the conference call on MTU Aero Engines Preliminary Full Year 2024 Results. For your information, the management presentation, including the Q&A session will be audio taped and streamed live or made available on demand on the Internet. By attending in the conference call, you grant permission for audio recordings intended for publication on the Internet to be taken. The speakers of today's conference call are Mr. Lars Wagner, Chief Executive Officer; and Mr. Peter Kameritsch, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words.

Yes. Thank you, Heidi, and good morning, ladies and gentlemen. Welcome to our conference call for MTU's preliminary full year results 2024. As usual, we will start with a review presented by Lars. Peter will give you the financial overview, a comparison to our initial guidance as well as a more detailed look into our OEM and MRO segment. Following that, Lars will walk you through the updated guidance for 2025. This will end the presentation part, and we will open the call for questions. Let me now hand over to Lars for the review.

All right. Thank you, Thomas, and welcome from my side to all. Let me start with some words on the market environment. The market environment remains favorable for the A&D sector. We expect to see robust passenger and cargo traffic throughout 2025. IATA forecast passenger traffic to grow by 8% and cargo traffic by 6%. While demand for new aircraft remains very high, the level of new aircraft deliveries is still lagging following ongoing supply chain challenges. This allows the delivery and sale of more spare and lease engines. Further, it led airlines to expand the services -- to extend the service life of older aircraft beyond their original plans, leading to increased demand for maintenance and spare parts. The already limited MRO capacities are facing an environment with high demand and supply chain constraints. This opened pricing opportunities for MRO services and lease equipment. MTU is well positioned in all of these areas and have benefited accordingly in 2024. We witnessed limited growth in new aircraft deliveries, allowing an increase in spare and lease engine deliveries. And additionally, we saw solid MRO demand for mature engine programs like the V25 (sic) [ V2500 ], GEnX, GE90 or CF34. The Spare Parts business performed quite well in 2024, particularly for narrowbody and mature widebody engine platforms. Moreover, our MRO business benefited nicely from the strong results of our Engine Lease and Asset Management business in Amsterdam. With these market trends and MTU's strategic positioning, we are confident to continue our success story in 2025. Let me now focus on the GTF fleet management plan. Firstly, I'd like to emphasize that it is no longer an emergency or crisis plan. It has evolved into a well-structured set of measures that are being executed accordingly. Notably, we have seen a significant increase in powder metal output by RTX. As mentioned before, on-time spare parts availability is a key and allows us to reduce turnaround time well below 100 days. However, we will continue to feel the effects of this plan in 2025 and 2026, both in terms of operational impact in our shops and financially on our free cash flow. Anyway, we do see the available capacity to increase and with that, the ability to support our customers. The market confidence in the GTF engine is evident through the strong orders placed in 2024, including over 220 GTF engine orders at the Farnborough International Air Show. And from the operations side, we reached a milestone with the delivery of the 1,000th GTF engine assembled at MTU here in Munich. The GTF Advantage program is on track to receive its final FAA certification in H1 2025, with first deliveries expected within the year. Additionally, the first A321XLR with PW1100G engines is expected to be handed over to WIZZ AIR in Q1 2025. Let me switch to some highlights from our business segments. In the commercial MRO sector, we secured contract wins totaling USD 5.6 billion, mainly for narrowbody and mature widebody engines in 2024. With over 45 years of experience, we have completed over 25,000 shop visits, demonstrating our expertise. To meet growing demand, we expand our global MRO capacities, including a new shop in China dedicated to V25 (sic) [ V2500 ] and GTF engines. In our Military business, we have important projects on the agenda, very favorable environment for the Eurofighter aircraft with Spain and Italy ordering 49 Eurofighters. Germany is expected to follow with an order for 20 Eurofighters. And further interest from various export countries could lead to further Eurofighter engine orders. Beyond that, we are concentrating on the Phase 1b development work for the New Generation Fighter Engine. Negotiations for Phase 2 demonstrator work are expected in 2025 with flight demonstrator work to start in 2026. Additionally, we established the EURA joint venture for Europe's next military helicopter generation with the Safran Helicopter Engines. Our industry is actively pursuing improvements towards more sustainable flight with the ultimate goal of emission-free flying. In 2024, we made good progress in the development work for both, further improvement on gas turbine technology as well on the Flying Fuel Cell. The latter includes successful tests on a liquid hydrogen fuel system or the establishment of a new test facility for the Flying Fuel Cell at our Munich site. The Flying Fuel Cell is also a focus of the EU technology program called HEROPS. Let me say some words on our upcoming management change in 2025. Already in our Q3 call, I elaborated on my personal decision of leaving my professional home MTU and taking on a new role at Airbus. In the meantime, our Supervisory Board nominated Dr. Johannes Bussmann as my successor at the helm of MTU. Johannes is an esteemed aviation expert with extensive high-level management experience. He has been a trusted companion for MTU over many years in his former role at Lufthansa Technik as well as a member of our Supervisory Board. We know, respect and appreciate each other and will ensure a smooth transition between us. However, time of this transition is still work in progress. Johannes will assume his role as CEO at MTU in the course of 2025, a specific date is not yet fixed. The reason is that currently, Johannes serves as CEO of a certification specialist TÜV Süd AG, and the company is currently in the process of finding a successor for him. Independently from my decision, Peter has also decided not to extend his contract, which expires by the end of this year. After over 25 years at MTU, including 8 successful years as CFO, he wants to move on to the next phase in his career. In the future, he plans to focus more on Supervisory Board mandates. In January, the Supervisory Board choose Katja Garcia Vila as his successor as our CFO. Katja joins the aerospace world after a long track record in the automotive industry. She served 27 years in various functions at Continental AG, including the role as CFO. She will join MTU already in April 1 and take over as CFO on July 1, 2025, after an intense transition period with Peter. I know this is more change on Board level than MTU had in the past. Nevertheless, MTU is an outstanding company and our successors deserve your full support. I'm speaking also on the behalf of Peter when I express our full commitment to ensure a smooth transition to Katja and Johannes. Both of them can rely on a stable, very capable and performing organization. We are sure that they will continue to enhance MTU's operational and financial performance on the path of profitable growth. In the remaining time, Peter and I will continue to drive MTU forward, working together with our colleagues to set the course for a positive, constructive and value-based future. Let me now hand over to Peter for the financials.

Yes. Thanks, Lars. 2024 was indeed another exceptional year for MTU. We achieved for the first time an EBIT exceeding EUR 1 billion, 1 year earlier than anticipated. I will provide you with the driving factors in a few moments. This impressive performance, combined with our positive outlook for 2025 was also reflected in our share price, which reached a new all-time high of almost EUR 350 at the end of January. As part of our 2025 outlook, we announced our dividend proposal for the fiscal year 2024. We intend to propose a dividend of EUR 2.20 per share at the upcoming AGM on May 8, 2025. This represents a EUR 0.20 increase compared to last year's dividend. It is important to note that our dividend proposal for this year strikes a thoughtful balance between the financial obligations associated with the GTF fleet management plan and the promising outlook for MTU. Furthermore, in September, we successfully launched our largest corporate bond in history, raising EUR 750 million. The bond carries a coupon of 3.875% and has a 7-year term. These funds will be utilized to refinance MTU's existing corporate bond and for general corporate financing. Additionally, in April, we secured a promissory note of EUR 300 million. Now let's move on to the key financials 2024, and let's kick off with a comparison of our full year '24 numbers versus our initial guidance for the year. Adjusted revenues came in at the higher end of our guidance range, showing the robust growth across all of our business segments. With EBIT adjusted slightly exceeding EUR 1 billion, we have already achieved our midterm target 1 year earlier ahead of schedule. The corresponding EBIT margin stood at 14%. Our free cash flow adjusted of EUR 183 million met our full year expectation. It was primarily influenced by payments for the GTF fleet management plan and the volatile supply chain leading to a higher level of working capital. In addition to that, we see an impact of higher receivables on the GTF program. They are built on our balance sheet when shop visits are performed earlier than initially anticipated, triggering payment at a later point in time. The cash conversion rate stood at 24%. Turning the page and comparing adjusted figures of 2024 with those of 2023. Total adjusted revenue showed an 18% increase in both euros and U.S. dollars, reaching a new record high of approximately EUR 7.5 billion. This growth was driven by all of our business segments. EBIT adjusted saw a 29% increase to EUR 1.05 billion, resulting in an EBIT adjusted margin of 14%. This positive performance was supported by a favorable business mix across all segments. Net income adjusted grew as expected in line with EBIT adjusted and improved by 29% to EUR 764 million. And free cash flow adjusted, as mentioned, stood at EUR 183 million, down 48% as expected by the -- as expected, impacted by the effects mentioned earlier. So now let's move on to the business segments and starting with our OEM segment. Total OEM revenues saw a 14% increase to more than EUR 2.5 billion. In military, revenues grew 14% to EUR 612 million, in line with our full year guidance. The main drivers behind this growth were the increases in funded development work for the next-generation fighter engine as well as higher volumes from TP400 and EJ200 engines. Commercial business revenues in euros and dollars rose by 15% to EUR 1.9 billion. And within that, organic OE revenues in dollars increased in the low 20% range, in line with our guidance. The main growth drivers were higher GTF engine deliveries and a healthy mix of spare and leasing engines. On a quarterly basis, OE sales also grew in the low 20% range. Organic spare parts sales in dollars increased in the low teens. Main growth drivers were mature widebody platforms and narrowbody engines. On a quarterly basis, spare parts sales experienced high teens growth. EBIT adjusted benefited from the favorable business mix mentioned earlier, resulting in a 26% (sic) [ 25% ] increase to EUR 612 million. The corresponding EBIT margin improved to 24.2%. Moving on to the MRO segment. MRO revenues experienced a 20% increase, reaching nearly EUR 5.1 billion. We saw solid demand across all engine platforms. Main drivers of revenue growth in our core MRO business were the GE90, the V25 (sic) [ V2500 ], the GEnx as well as our Leasing and Asset Management business in Amsterdam. The share of GTF MRO revenues accounted for approximately 31%, slightly below our full year expectation of 35%. Throughout 2024, we experienced lower material intensity while the number of shop visits was in line with our expectations. EBIT adjusted showed a strong growth of 33% to EUR 438 million, resulting in a margin of 8.7%. The higher EBIT margin was supported by the robust Leasing and Asset Management business and in addition, a better contract mix in the independent MRO business as well as a lower share and material intensity as mentioned of the GTF MRO that resulted in further upside. At this point, I would like to hand back to Lars for some insights on our guidance for 2025.

Peter. Thank you. The results of the year 2024 demonstrated that MTU was well positioned in the market and will accordingly benefit from the ongoing market trends. This gives us confidence in the outlook for 2025. Compared with the numbers we issued in late November of last year, we can confirm the organic growth rates and basic assumptions why we adjust the guidance to the changed FX environment. We're now guiding based on a U.S. dollar FX rate of 1.05 compared with 1.10 before. Therefore, we expect group revenues to grow stronger to a value between EUR 8.7 billion and EUR 8.9 billion. Within that, we expect the Military business to grow in the mid- to high single-digit percentage range, mainly driven by increasing deliveries of the EJ200 and TP400 engines as well as by growth in funded development work for the New Generation Fighter Engine. The Commercial New Engine business is expected to be up in the mid-teens percentage range, mainly due to higher production volumes for the GTF engines, GEnx and the delivery of the first GE9X engines. Compared to 2024, we expect a normalized ratio of spare and lease engines compared to installed engines. The Commercial Spare Parts business is expected to grow in the low teens percentage range, benefiting from strong demand for narrowbody engines, especially the V25 (sic) [ V2500 ] engine will benefit from robust market demand and higher utilization. Commercial MRO will experience growth in the low to mid-teens percentage, driven by increased GTF MRO work, high demand for freighter engines and strong contributions from our Engine Lease and Asset Management business. Overall, this should result in a mid-teens percentage increase in adjusted EBIT in absolute numbers compared to 2024. We expect some normalization in the delivery of spare and lease engines as well as some slowdown in the asset management contribution from MLS in Amsterdam. Adjusted net income will grow in line with adjusted EBIT. And the free cash flow for 2025 will be significantly influenced by payments for the GTF fleet management plan and the volatile supply chain. Therefore, we guide again for a low triple-digit million euro number, but we are aiming at the upper end of this range as the underlying business is growing profitably. Thank you very much for your attention, and we are ready now to answer your question.

[Operator Instructions] We will take our first question. David Perry from JPMorgan.

Peter, Lars, and Thomas. You're going to hate me starting the Q&A like this. I apologize. There's just a few accounting things I'm a bit confused by this morning. So I'd like to start with 3 questions. Maybe they're all for you, Peter. Apologies, Lars. The first one is, can you just -- on Slide 21, your free cash flow, the EUR 96 million, the acquisition payments in program shares, could you just clarify what that relates to, please? The next one is the Slide 23, I think it is, with your net debt there's a few numbers there that came out quite differently to what I expected. So in particular, the payments due to program participations. I see also the financial lease liabilities went up. If you could just comment on that. But I think those 3 things I've just asked about seem to lead to a net financial debt a lot higher than certainly I expected, maybe bad housekeeping by me. And then just the third one, on the other side of the balance sheet on Page 24, can you just explain the big jump in receivables, please?

Okay. Then let's start with acquisition of -- the cash flow statement. So we made -- in Q4, we made an investment in, let's say, further business opportunities where we cannot really talk about. So we will disclose that in the coming weeks and months, maybe in Q1 2025. So there's nothing to communicate at the current point of time, but these are positive investments into further business opportunities. I don't know if you want to add anything, Lars, but. Okay. Then on the net debt page, so going through financial lease liabilities in Amsterdam, in some cases, we buy engines or used engines. And in some cases, we also lease in used engines. So we leased in a lot of engines at MLS. And under IFRS 16, you know what you have to do when you lease in a lease engine, you have to capitalize the value of use on the asset side of the balance sheet. And the net present value of all the lease payments of the future, you have to account for on the net debt. So that has -- it's not an impact on cash flow. It's just an accounting issue, as you said. Regarding the program participations -- Pardon me?

Yes, that's right. The...

Yes, we had that, I think also, I think 1 year ago, we have to account. So we have agreed with Pratt on a long-term payment plan for certain payments we have to do. I mean we have -- we are a program partner in the GTF engine and have to contribute 18% of all costs. And in some cases, when you contribute only, let's say, 50% or 60% of manufacturing cost, you have to compensate the consortium for the shortfall of manufacturing costs. And in the past, they were part of working capital. But when you agree on a long-term payment plan, which goes beyond the 12 months, you have to account for that as a financial liability. Also just an accounting issue. It's not part of working capital anymore. It's part of a financial liability. So it's a pure reclassification of their respective liability. And then receivables, so we had -- I mean, you have -- you cannot only look on receivables. You have to look on the net value of receivables and liabilities. But what we saw is, I mean, we had a very, very strong Q4. That's the one thing. So when you have a very strong, let's say, December revenue, everything you book in December, you find it in receivables. Then we have obviously an FX impact. So the U.S. dollar moved significantly in December, so going from -- to 1.03 at year-end. So receivables were valued upwards. And we have -- the receivables also reflect the high workload in our MRO shops. I mean it's not part of inventories. If you have an unfinished engine in the shop, it's part of receivables. So these are so-called percentage of completion receivables. And so we have also a lot of, let's say, GTF shop visits where the payment comes at a later point of time, as I said in my statement. So the work is pulled forward and the payment in these fleet management plans come at a later point of time. That is reflected as a high receivable on the balance sheet.

Okay. Thank you for being so patient explaining all that. If I can just be greedy and ask 2 follow-ons. I mean should we assume some of these issues like receivables could reverse then in 2025? I mean the guidance is the same on free cash flow, a low triple-digit figure. [ They would be better in '25 than '24 ]?

I would say there will be some reverse effect, yes. I mean, as Lars mentioned, so our target for 2025 free cash flow is rather at the upper end of the low triple-digit range. So significantly better than the 2024 free cash flow, yes. Okay, let me call it, let's say, an unlucky combination of different factors, especially in Q4, as I just mentioned, yes.

We will take our next question. Ian Douglas-Pennant from UBS.

It's Ian Douglas-Pennant at UBS. I hope you can hear me. My line has been a bit crackly. I've got 2 questions, please. The first on management turnover. Look, I'm very sorry to see both of you leave in quick succession, obviously, a blow for your investors. Are you able to speak on behalf of the Board what criteria were prioritized in the search for your replacement? And I guess I'm especially thinking of Peter here given that, that was more recent news. And how long this transition has been planned for, please, at least at the Supervisory Board level? The second question, I'm afraid I going to go back to David's question because I think it's important. There's been a lot of accounting style questions in the engine space recently on both sides of the Atlantic. I think it's important to get on top of this. Can you help us understand why exactly there's lots of GTF shop visits happening today where the payment comes later? Is this -- yes, I mean, maybe you could just go in a little bit more detail on exactly how that mechanism works?

I mean the pull forward of shop visits is predominantly triggered by the GTF fleet management plan. So that you do the work today when you get the engine in the shop, but the payment comes at a later point of time. That is not a regular shop visit. So that leads to a buildup of receivables. You do the work and the payment comes at a later point of time.

And that work that you're doing then is not captured within the EUR 6 billion to EUR 7 billion program provision that was taken?

The program provision, so our share, the EUR 1 billion we built up -- we booked in Q3 2023, that's purely the support payments to airlines. So that has nothing to do with the shop visit work. So the material, the labor, transportation costs and so on. So the physical work we do on the engine. So the payments for the fleet management plan, they are purely the support payments to airlines for the AOG situation.

And sorry, what were the support payments made in 2024? Can you disclose that for us, please, against that EUR 1 billion?

Sure. It was in the high USD 300 million range, so USD 380 million, USD 390 million. So that's -- I mean, Raytheon said on their call $1.1 billion, and you can say they have roughly 51% program share, we are 18%. So you can scale it down, it's more or less the same. Scale down, so $390 million, that is the number for MTU. And the majority happened in the fourth quarter of 2024. That's why the cash flow in the fourth quarter is slightly negative.

And then the other question on the priorities of the Board, if you could -- if you were able to comment, please?

Not really. I mean the transition we have named Katja is coming in on the 1st of April, transitioning with Peter for 3 months and then the change of responsibility will happen on 1st of July. And the Board needs to speak for itself. But obviously, we were looking for an experienced CFO, both on the financial, but also on the IT environment. That is the responsibility that Peter currently holds. And we believe we have found a decent successor if that is ever possible.

The big shoes to fill. Appreciate it, thank you.

We will take our next question. Robert Stallard from Vertical Research.

A couple from me. First of all, on the Leasing business. I was wondering how much EBIT or cash flow is generated in 2024 ballpark number, if you could provide that? How much capital is tied up in this business? And where do you expect a normal level to be because that's what you've included in your '25 guidance? And then secondly, on the GTF fleet management plan, can you give us an update of your latest expectations on what the cash payments will be on this program during 2025 and 2026?

So I mean we don't split that really down. What we say on MLS or our Asset Leasing Management business is that business contributes roughly EUR 500 million of revenues in 2024 and roughly EUR 100 million of EBIT. So that's the contribution, and that's all part of our -- of the consolidated MRO revenue and EBIT figures. And I mean that is a very, let's say, opportunistic business, you scan several hundreds of engines every year and you do transactions on a very limited number. So it's a very opportunistic business. So in part, we buy the engines, in part, we lease them in. In part, we trade engines so buy it and sell it more or less immediately and so on. So it's -- but what we can say is that we really want to invest into the business because it's a very good business, and we want to grow the business significantly in the coming years. Regarding GTF fleet management plan I just said that we had an impact of USD 390 million roughly in 2024. That's the pretax number, I have to say. And we expect a similar impact in 2025 and some spillover to the remaining portion then in 2026. So the impact 2026 will be far lower compared to the 2025 impact.

Unchanged to previous guidance.

Exactly unchanged to our previous guidance.

Okay. Pete, just a quick follow-up on the Leasing business. You said you include expected a normal level of activity in the guidance. What is a normal level? Is it half what you did last year? Just some ballpark there.

I believe with normal, Peter means that the rates are normalizing because we used to have a very good favorable rates for the engine after COVID. The business itself is growing top line, but the leasing rates and this will be normalizing over the years. We've seen that already in '24 starting.

We will take our next question. Chloe Lemarie from Jefferies.

I actually had a follow-up from David's question because if I look at the -- your free cash flow, the CapEx was quite higher than what I expected, but a relatively large chunk of it was retreated out of your free cash flow in Q4. So could you confirm that this were entry fees that you paid? And I guess we'll need to wait further disclosure to know which program it is. But is that really the driver? Or anything else you can share with us to kind of understand what drove that? And then second question would be on the evolution of turnaround times in your shop. If you can update us on what you saw into the end of the year, that would be great.

Yes, Chloe. First question, entry fees. Yes, I can confirm that. So we paid roughly USD 100 million in Q4 2024 for, as just mentioned, different business opportunities. So you find it in the line, net investments in intangible assets. That's the jump from EUR 80 million to EUR 181 million. And it's adjusted according to our policy, which we also described in our annual report, it's adjusted for calculating the free cash flow. So that's the story.

Turnaround time on the GTF, we see continuous decrease of turnaround times. We are well below an average below 100 days, and it all depends on material availability. But as we have communicated previously, a 70-day plus turnaround time is also possible if material is available.

We will take our next question. Ben Heelan from Bank of America.

I've got a few follow-ups on some of the questions already asked as well, unfortunately. So on the program acquisition costs, can you confirm whether or not this is actually a new engine program? Or is this a payment associated with a program like the GTF? Because my understanding is there are still payments that are due on the GTF Advantage. I think some of your peers are paying payments on that over the next couple of years. And when we think about this program acquisition cost, can you talk about what this line is going to look like in the next 2 to 3 years and what we should be adding in because it was definitely a step-up versus what I was assuming. Secondly, on kind of your PPE CapEx, it was also a decent amount higher than what I was expecting. So if there's any color that you can give us around that as well? And then third, just quickly, again, sorry, on these receivables to kind of labor the point. I mean, you've talked about some payments for GTF shop visits coming in late or later than the work being done because of the GTF program. But how late is it going to be for these payments to be received, right? Is this something that you will receive in 2027, 2028? Or do you think actually the catch-up effect that you talked about with David, is that going to be something that happens in 2025 and 2026? Just any color you can give us there would be helpful.

So I'll start with your latest question. So that is a difficult, and that is because, I mean, it's -- that's a mixture between, let's say, 60, 70 different fleet hour contracts with different airlines. So the point of payment is very different. So the distance between payment and actual performance of the shop is very different in each and every fleet hour agreement. So I would rather expect so over the next 1 or 2 years, a slight moving up of that receivable position. You get payments, but you do also additional work. So it's -- and as the number of shop visits increases, so the position will rather increase slightly over the next 1, 2 years. And then it will rather go down. So that is the rough shape of that receivable curve. Then you referred to, I think, to the net debt page, the compensation payments due to program participation. That has nothing to do with the payments for GTFA or new programs. So that is especially for the GTF program. As I said, we are an 18% program partner and maybe deliver only 15% or 16% of the manufacturing cost. And so that is the compensation, therefore. And that line will rather -- will be paid over the next 2, 3 years. So that will go down over the next years. But the payment term is longer than 12 months. So that's why it's technically part of net debt.

Yes. No. So I was kind of talking more, Peter, sorry, about the EUR 96 million payment of program shares. Over the next 2 to 3 years, what does that line look like?

Okay, there will be additional payments, but later in the decade.

Okay. Do you have any view around how...

But it's not the GTFA. So it's definitely not the GTFA. We are already program partner with the GTF, so there are no further entry fees.

Okay. And just quickly on the kind of PPE CapEx costs, which stepped up?

A good chunk comes from acquisition of these engine at MLF. So the case where we buy engines ourselves and have it on the balance sheet.

[Operator Instructions] We will take our next question. Christophe Menard from Deutsche Bank.

I have 3 quick ones. The first one is on turnaround times. I mean one of your clients complain about turnaround times above 300 days recently filed something in the U.S. I mean, it comes a little bit in contrast to what you said. So I just wanted to have your view on this. And I heard you on turnaround times being down. So my question is also, does it mean that we could have a reduction in the cash payment versus the initial expectation because you're reducing the turnaround time. So it means that the engines are less grounded than initially thought? The second question is several times on the call, you mentioned volatile supply chain. Can you just explain a little bit more what it is because it seems to be impacting your working cap? And the last question is just for better understanding. You say your free cash flow guidance, low triple-digit million and you are more at the high end of this. What -- I mean, what does it mean? I mean, does it mean EUR 300 million or EUR 400 million? Just trying to understand the English here.

So maybe, Christophe, on the first one, yes, we had the shop turnaround time at MTU and other shops are in average below 100 days. We always talked about the wing-to-wing turnaround time, which will be higher because of ongoing capacity increase over these 3 years. So that means that there is a longer time above these 100 days that the engine is going back and forth between the customer and our shops. So that is the natural delta. And some of them, as the customer said, we need to expect that this is a proper timing. And while there is still wing-to-wing time higher, we don't see any reason now why we should decrease the charge. So we are in line with our expectation.

Okay. Then supply chain, I think predominantly in our MRO business, we see across the board higher turnaround times compared to, let's say, the pre-corona level as part supply, but also the performance of our outside vendor network is not as it should be. So -- and that drives working capital upwards. So the turnaround time in our shop is maybe 30%, 40% higher compared to pre-corona levels. And that means higher work in progress in all of our MRO shops. So you carry excess working capital on the balance sheet. Free cash flow guidance, I mean, what is low triple-digit, low triple-digit, I would consider something between EUR 100 million and EUR 300 million, and at the upper end this is somewhere between EUR 250 million and EUR 300 million or so.

Thank you. This concludes today's question-and-answer session. I'll now hand back for closing remarks.

Yes. Thank you, Heidi. And thank you all participants. Thank you, Lars. Thank you, Peter. For further questions, as usual, reach out to us. And yes, see you soon. Bye-bye.

Thank you. We want to thank Mr. Lars Wagner and Mr. Peter Kameritsch, and all the participants of this conference. Goodbye.