MTU Aero Engines AG ($MTX)

Welcome to the conference call on MTU Aero Engines First Quarter 2026 results. For your information, the management presentation included in the Q&A session, will be audiotaped 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. -- Dr. Johannes Bussmann, Chief Executive Officer; and Mrs. Katja Garcia Vila, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words. Please go ahead.

Thank you, Nadia, and good morning. Welcome to our conference call for MTU's Q1 2026 results. We will begin today's session with Johannes sharing some thoughts on the current environment and recent developments. Following that, Katie will walk you through the financials. Johannes will walk you through the guidance and will summarize the key takeaways before we open the floor for your questions. With that, it's my pleasure to hand over to Johannes.

Thank you, Thomas, and welcome to our earnings call for the first quarter 2026. We had a very successful start into the year, group revenues increased by 7% to more than EUR 2.2 billion. Adjusted EBIT rose by 6% to EUR 320 million, translating into a margin of 14.2% free cash flow improved by 18% to EUR 177 million resulting in a cash conversion rate of 77%. Despite the current situation in the Middle East, which I will touch a bit later, we confirm our full year guidance today strongly. We fully support our customers and their operations and the safety of our employees in the region is, of course, our top priority. Before Katja takes you through the financials, let us first take a look at the market environment and our key highlights on the first quarter. I'll start with a view on the current macroeconomics and geopolitical environment and how MTU is positioned. Geopolitical tension have driven a sharp increase in jet fuel prices and possible physical supply chain constraints putting pressure on airlines as we see. As a result, several airlines have announced moderate capacity reductions, any traffic impact is expected to be absorbed mainly by the older, less fuel-efficient fleets, which demand for modern and fuel-efficient aircraft and engine remains largely unaffected. Against that backdrop, we also maintain our MTU positions very well positioned with our resilient product portfolio, especially in fuel-efficient engine types and of course, our active and decisive management of supply chains and cost management. The ongoing capacity constraints in our end markets, in particular, in the MRO segment provides protection from any significant impact on our business as we see today. Our product portfolio is resilient with a strong focus on next-generation fuel-efficient engines, driven by airline structural needs to reduce fuel burn and emissions. Just to name 2, the GTF and the V2500 platforms continue to see solid demand. The GTF backlog across OEM and MRO provides us with a high visibility of the market scenarios. The V2500 remains a key asset in our customers' fleet. Supply chain resilience remains our top priority, rely on multiple sourcing and long-term supplier contract to manage these dependencies. Our approach results as of now, in a stable, reliable supply chain. And for possible cost increases, we are in the comfortable situation of being able to pass price increases on rather easily. For the limited number of MTU suppliers located in the Middle East, appropriate measures have been implemented to ensure continued availability. Staying on the cost topic, MTU continues to apply a highly disciplined cost management approach. Just 2 examples for that. We continuously validate our work distribution and our increasing workload volumes and repair activities at our best cost facilities as we speak. Other topics like energy costs are put under review very regularly, even though energy costs have only a limited impact on our products, we manage our cost exposure here very diligently. One of these examples is our geothermal plant here in Munich, which covers 80% of the heating demand of our Munich production site, which makes us independent from these effects. I would like to share some reasons to remain highly confident while navigating through these definitely dynamic environment. Our portfolio is resilient by design. Growth in the military business remains strong as guided for 2026. In the new engine business, demand continues to be driven by fleet renewals and the need for more efficient engine technologies is ongoing. Airframe order books are basically sold out through the end of the decade. For the aftermarket, spare parts and MRO demand for shop visits remains strong, and there are no signs of weakness. In our shops, we have not received a single cancellation or meaningful deferral as of now. From a regional perspective, our MRO exposure in the Middle East is low. While certain platforms such as the GP7000 and GEnx show higher regional concentration, this does not affect the overall robustness of our portfolio. With the highly efficient GTF engines and the still very young V2500 fleet, we are certain to have the right products for almost any scenario. This confidence is further underpinned by our strong group order book of around EUR 32 billion, providing high medium- to long-term visibility. As you see, we are well protected by our resilient portfolio mix and our strong MRO positioning. At the same time, proactive risk analysis is firmly embedded and is part of our daily management in the business. Looking beyond this near term, the long-term growth fundamentals of the aviation industry remain unchanged. We fleet renewal and structural growing demand for more fuel-efficient aircraft continue to support our business. Coming to a real highlight in the first quarter of 2026, we took an important strategic step to further expand our military business. unmanned aerial systems are becoming a key capability in modern defense and propulsion is a critical enabler of their performance, reliability and mission effectiveness. And this is where we ceased the opportunity to enter into another area of a rapidly evolving UAV market. With the acquisition of AeroDesignWorks, we gained immediate and substantial access to this fast-growing and attractive market, creating long-term value for MTU. AeroDesignWorks already develops and produces propulsion solutions for lower thrust drones. The demand for military drones is clearly visible. The global market for military drones is expected to grow by around 12.5% per year for the next 5 years. And that has been -- what has been missing so far is European-made propulsion system that meets military requirements in terms of quality, reliability and especially industrial scalability. This is where we as MTU come into play. Combining AeroDesignWorks capability with our long-standing experience in the military segment, our technology, proven engine expertise and global market access for production positions us very well and to be a powerful and scalable propulsion platform for the European drones market over the coming years. In addition to that, we also stepped in the so-called conventional light market. We see clear opportunities to further scale the business through organic growth, selective acquisitions and strategic partnerships with leading players across the defense ecosystem. With [ Imosis ], we are already in a position to offer electric propulsion solutions for drones, while on the upper end of the range, loans can be served with more conventional engines. This empowers us to power drones with our entire spectrum. Given the strong market dynamics, the rapidly increasing relevance of drones, this step will support MTU sustainable and profitable growth. Our clear ambition is to establish MPU as a core European supplier for UAV propulsion systems. Let me conclude the business review with a brief update on the geared turbofan program. The GTF fleet management plan remains on track. MRO outputs increased by 23% in the first quarter. Turnaround times continue to benefit from improved supply chain. Airlines confirm easing aircraft on ground numbers. And based on this progress, we expect ongoing improvement on the [indiscernible] situation throughout 2026 which remain with remaining compensation payments to be settled within the year. With the [ GTF A ] certification, an important milestone has been achieved this month. Entry into service is planned for the second half of this year. So this is the most efficient narrowbody engine offering higher thrust, improved durability and full interchangeability with the base GTF engine, a great next step in the GTF evolution. GTF continues to ramp up across all 3 platforms, supporting airlines around the globe. The GTF is already in service for more than 10 years which we celebrated recently and it has accumulated over 50 million flight hours and currently has a remaining order book of 8,000 engines. With that, let me hand on to Katja for the details on the financials.

Thank you very much, Johannes. And also a very warm welcome from my side. Let me begin with an overview of our key financial highlights. The ramp conflict had no impact on our first quarter results. Group revenues increased by 7% to EUR 2.44 billion. In U.S. dollar terms, revenues grew 18%. The main drivers were the military business and our commercial MRO activities. Within the commercial OEM segment, the business mix remained favorable, supported by spare engine volume and strong spare [indiscernible] business. Commercial MRO revenues were primarily driven by GTF MRO increases. Adjusted EBIT rose by 6% to EUR 320 million, resulting in an adjusted EBIT margin of 14.2%. Both segments, OEM and MRO contributed to the EBIT expansion. Adjusted net income increased by 3% to EUR 229 million. Free cash flow had a very strong start into the year and grew by 18% to EUR 177 million, resulting in a cash conversion rate of 77%. This performance was fueled by dividend income and a seasonally lower cash flow from investing activities in the first quarter. [ GTS AOG ] payments of around USD 60 million are reflected in the numbers, a slightly lower impact than in the first quarter 2025. Let's now dive more into the OEM segment. Total OEM revenues were stable at EUR 621 million. Within this, commercial OEM revenues declined 5% to EUR 479 million. On an organic U.S. dollar basis, commercial revenues increased by 5%. Military revenues increased 25% year-on-year to EUR 142 million. Organic new engine sales in U.S. dollar terms remained stable reflecting lower new engine deliveries with a higher total number of spare engines. We expect a sequential delivery ramp-up in the following quarters, in line with full year expectations of mid- to high-teens percentage growth. Organic spare parts revenues in U.S. dollars grew by 10%, driven primarily by narrow-body platforms, notably the V2400 and the [indiscernible]. Pratt & Whitney Canada engine also contributed, while mature wide-body and industrial gas turbine programs were broadly stable as expected. The military opens the year very strong with robust performance. Revenue growth was driven by higher [ EG-200 ] and TP400 volumes. Additional support came from the new generation fighter engine, which remains fully contracted through September 2026. Results also benefited from catch-up effects following delivery delays in 2025, which pushed volumes into early 2026. Overall, the favorable business mix translated into EBIT growth of 7% to EUR 188 million, resulting in a strong EBIT margin of 30.2%. Also, the commercial MRO business entered the year with strong momentum. In Europe, commercial MRO revenues were up 8%, and whereas U.S. dollar revenues increased 20% year-over-year in Q1 2026, clearly exceeding the full year guidance of low to mid-teens growth. This was mainly driven by GTF MRO revenues, which accounted for 44% of total commercial MRO revenues, up from 34% in Q1 '25. An absolute U.S. dollar terms, GTF engines delivered the strongest revenue growth. In addition, our leasing and asset management business, MLS in Amsterdam, contributed nicely to U.S. dollar revenue growth as well as our [ ITP ] business. On profitability, adjusted EBIT increased by 5% to EUR 132 million, resulting in a margin of 8%. Headwinds from higher GTF MRO share and ramp-up costs at MTU maintenance [indiscernible] were partly offset by a strong EBIT contribution from MLS and our independent MRO business. Let me provide you with a brief overview about the drivers in our free cash flow. Q1 2026 free cash flow was up 18% year-over-year. We benefited from lower [ PPE ] spending and received dividends. Additionally, GTF AOG compensation payments at USD 60 million was slightly lower than in Q1 2025. A headwind came from higher working capital. As Q1 2026 cash conversion rates being clearly above our full year expectations, let me bridge this to our free cash flow guidance for 2026. Key tailwinds supporting the achievement of a cash conversion rate of 45% to 55% in 2026, our improved net income and lower GTF AOG payments compared to the previous year. The main headwind arises from the buildup of the facility in Fort Worth as well as the continued increase in receivables for prefinanced GTF MRO work. Our 2026 free cash flow target underpins our midterm financial ambition towards 2030 with a cash conversion rate targeted in the high double-digit percentage range. Let's take a brief look at our U.S. dollar hedging position for which we have made again continuous progress. As shown on the chart, we have further worked on our hedge coverage over recent months, following the release of our full year 2025 results. For 2026, benefiting also from improved natural hedging, we are now fully hedged at a leverage hedge rate of [ 130 ]. Looking further ahead, a comprehensive exposure review led to adjustments in our net U.S. dollar exposure, and we've continued to systematically build our hedge position. As a result of the currently weaker U.S. dollar, the average hedge rate for the subsequent years are higher than those secured for 2026. Before we switch to the guidance, let's have a look at our strong financial position. Net debt of approximately EUR 1.1 billion and a net debt-to-EBITDA ratio clearly below provides us with substantial financial settle. In January 2026, the company proactively strengthened its capital structure through the successful issue of a EUR 600 million convertible bond. The proceeds were used to early repurchase the EUR 500 million bond due in July 2027, effectively eliminating near-term refinancing needs. Together with the EUR 500 million revolving credit facility maturing in 2029, this provides the company with a robust liquidity position and flexibility across market cycles. As already announced at the release of our full year results in February, we proposed a dividend of EUR 3.60 per share. This is an increase of EUR 1.40 or 64% compared to last year corresponding to a payout ratio of 20%. This will result in an expected cash outflow of around EUR 193 million in Q2. To ramp this up, our strong balance sheet and financial flexibility positions us well to support on our long-term growth strategy and to deliver sustainable value for our shareholders. With that, I hand back over to you, Johannes.

Thanks, Katja. Let me now turn to our outlook for 2026, which we confirm today. Based on our careful and proactive assessment, we do not expect any major adverse impact on our business at this point in time. Operation remained stable. Our supply chain is resilient and demand across OEM and MRO market continues to be robust. On that basis, we expect group revenues to reach EUR 9.2 billion to EUR 9.7 billion. Adjusted EBIT at EUR 1.35 billion to EUR 1.45 billion, net income to grow broadly in line with EBIT and a cash conversion rate of 45% to 55%. In a dynamic and uncertain environment, we very closely monitor developments, anticipate potential impacts and act. We brought actively manage risks, seize opportunities and continuously strengthen the company's strategic and financial positioning, as you just heard. Supported by a strong balance sheet, a resilient business model and a clear long-term vision, we are well equipped to navigate market cycles and to create sustainable value for our shareholders. Let me now summarize the key takeaways from our Q1 2026 results. We started the year with a very strong performance, which underpins our confidence in the 2026 guidance, which we reaffirm today. The acquisition of AeroDesignWorks enables us to expand in the highly attractive and fast-growing drone market. The GTF management plan is well on track operationally and financially, and [ AGs ] are trending down. We are strongly positioned with a growing order book and a very resilient business portfolio. Our management approach allows us to actively manage volatility and maintain stability in a dynamic environment. In a nutshell, we are very well prepared for the challenges ahead and have full confidence in our structurally growing market, our product lineup and in our ability to continuously generate long-term value for our customers and our shareholders. With this, we close our presentation and I'm happy to take your questions.

[Operator Instructions]. And now we're going to take our first question and comes from the line of Robert Stallard from Vertical Research.

A couple of questions for me. First of all, in your commentary, you mentioned old aircraft and how they could be vulnerable given their fuel efficiency to retirement. I was wondering if you could clarify what MTU's exposure is to these older planes in the active fleet and whether you've seen any sign of this negatively impacting your numbers? And then secondly, following the acquisition of AeroDesignWorks. I was wondering if you could clarify what your estimate is for MTU's revenue exposure to drones or UAVs going forward?

Okay. First one, we have no cancellations of any slots so far from none of our customers and we still have a backlog, of course, in front of our shops. So that means even if something comes up, we are able to compensate the work with other engines awaiting. So in the long run, how the airlines behave if the fuel price stays high, in the mid and long term, it is very likely that they, of course, want to optimize their direct operating costs, which would result in favoring lower fuel burn engines and aircraft and that is the basis of our appointment. And we have a very, very low retirement rate that we see today. It's almost none. That's why there is no move that we see so far from the airline reacting that is affecting us. On AeroDesignWorks, we are in a couple of discussions with players in the market that are coming -- or that are waiting for the decisions of politicians. Of course, because we need to see what the [indiscernible] discussion comes out with and how the structures of the system looks like. So that's why we are very confident that this is a growing market. concrete numbers, we are not ready to share so far.

And you should also leave us some room, Robert, to provide you with some interesting news when we have our Capital Markets Day in November 30 this year.

Now we're going to take our next question. And the question comes from line of Chloe Lemarie.

Yes. has I have 2, if I may. The first one is actually building on the plane question on the [indiscernible] exposure. Just could you maybe share how much of the [ PW2000 ] and [ CF6 ] spare parts revenue generation from military versus CAGR versus passenger please? And the second one is on the Q1 cash conversion comment. So you mentioned obviously it's ahead of your expectations for the full year, but was it ahead of your expectation for Q1 as well? Or is it just part of the phasing that you expected as part of the guidance?

Okay. Yes. Chloe, I'll start with the cash conversion question first. You know that we don't guide for cash conversion rates on a quarterly basis for sure, something like the dividend payment happens at the beginning of the year as it also did last year at the same period of time. to the development of the pricing, for example, on the leased business, we expected also a higher dividend in 2026 than what we had in Q1 2025. So that was also part of the story when we provided the guidance. I think it's also clear when you look at normal cycles that on the PPE that they are stronger spending in the second half of the year. So overall, all that brings us entirely into the guidance that we have put for this year. So you should not take the now already as the basis going forward. On the [ PW 26 ] revenues, I cannot definitely you with the detailed breakdown. But what I can say on the [ PW2000 ] is that the largest part of the revenue is rather for the military business. And the CF6 is rather largely for the freighters business.

Okay. If I can just follow up on the cash conversion. Can you tell us how much of the -- how much of the year-on-year increase in the dividend impact of Q1, please?

I cannot record the figure entirely from my mind that there is a significant contribution coming from the dividend payment. I think it's in the lower double-digit million number and absolute.

Now we're having a question from Benjamin Heelan from Bank of America.

Yes. I had a couple on MRO, just a follow on from some of the comments you made there about not seeing any changes with regards to shop visit volumes. Have you seen anything in terms of lower scope? Have there been any requests for lower scope and if there's any comments you can give there? And then in the quarter, the kind of independent MRO business, you say was broadly stable. Do you have a breakdown of the independent MRO and then the MLS business so we can understand what was going on a little bit within the 2? And then a follow-on, on spare engines. It's clearly a big contributor in the first quarter. Should we assume that this is the high for the year in terms of absolute spare engines and mix, given you've talked about an improving kind of quarterly trajectory in terms of deliveries. And then a quick follow-on from your comments on [indiscernible]. You mentioned in your prepared remarks, it was funded up until 2026, September obviously, we see in the press, the program is not exactly going too well on the airframe side. So if the -- what happens to the engine program if the airframe has decided not to move ahead with the airframe side of it in its current form.

Okay. That's a lot of stuff. Let me start with the MRO side. No, we don't see any work scope requests so far in having lower work scopes, lower volumes there. So we didn't lose any shop load event so far. And I would turn that around even if customers would come up, we are with our independent customer base and also experience very well positioned to find very good solutions for our customers to help them out if that would come on the table, which would bring us in a favorable position in the competitive environment between MRO providers. So from that perspective, even if that comes, we see that as a strong site and an upside and not as a threat. On the spare engine side, that is an ongoing demand, which we think will continue also because that's mainly driven, of course, by the new fleets and growing fleet there. and there are the aircraft and engines that are very likely to be operated even more due to the high fuel prices. On the [ ACAS ] side, of course, we are waiting for a decision. Everything we hear is also that the politicians are knowing that the industry requires an answer. And the -- you're right. Of course, on the airframe side, there are discussions or that is the main point of disagreement. Our collaboration with our French colleagues is working very well. And we continue, we still need to provide until the end of Q3 of this year results on the development phase, which we are performing well, and we are optimistic that by then, we have a solution. And we are also confident that the European governments come to the conclusion that they need a European defense system. So that then is the question whether we need 1 engine or maybe even 2 for 2 different aircraft types, which is the likely scenario right now as we see it, the others as well, but that's the likely 1 as we see it. And then of course, we are part of this development in the European landscape. Third one was on the -- what was that independent?

If we do share a breakdown of [indiscernible] the MLS business. And what we can say is, just for you, Ben, maybe to clarify a little bit, the MLS business has grown in line with our growth expectations for the full year on the MRO business.

Now we're going to take our next question. And this questions comes from George Mcwhirter.

It's on the MRO margin. You cited the Fort Worth capacity expansion as a reason for a slight drop in MRO margin. Can you just talk a little bit about the size of the cost of the expansion in Q1 and what you expect for the full year?

Thank you very much for the question, George. What we said is that also on the cash flow side, you will see continuous headwinds also for the year coming from the ramp-up. You know that in July, we expect to induct the first leap engine into the plant, which means we are currently in full ramp up. When you look at the cost position, so there are a couple of positions to consider, for example, we need to train people. At the moment, we need to hire. We need to ramp up. We need to certify, et cetera, et cetera. And we also do have PPA spending. Overall, we expect to invest around EUR 120 million in CapEx into the plant. Not this year, but as an investment overall during the ramp-up phase. And we do expect a headwind of around EUR 100 billion -- I'm sorry, EUR 100 million on our free cash flow, and this headwind will also continue to stay over the next coming years.

Now we're going to take our next question and comes from the line of Adrien Rabier from Bernstein.

Could I ask a follow-up on the retirement rate, please? You mentioned that the retirement rate is still very low for [ V25 ], but could you share a ballpark number where you expect them to go in 2027? And after that, and would it be fair to assume that there will be some more accelerated by the improvement on the GTF? And then second question, could you talk about the pace that you expect for the rollout of the GTF advantage [indiscernible] we go, please?

Well, the retirement rate on a mid- and long-term perspective, I think that's too early to look through. That really depends on how long the conflict stays on and what the midterm effect on the fuel prices is. We analyze the -- our portfolio, of course, that we are providing services for and as I mentioned, it's very, very strongly dominated by the modern aircraft types. And we also consider [indiscernible] as being very strong and also a young fleet. You know that more than half of the fleet has not even received more than the first shop visit. Our portfolio is on the upper side, on almost every scenario that we think of in our simulations. And that's what we see right now. As I mentioned, there are no increasing retirements confirmed so far, and that's how we plan for it. The deliveries on the advantage, that's a very hard to judge picture because there is, of course, the advantage going to be delivered new, but we also have option with the [ hot sections ] where customers decide on what part of the new hardware they want to have built in, in their shop visits or not. And that is the basis of the assumptions that we still need to see what the customers decide. And so there is a rollout over the next 3 years, of course, planned, but concrete numbers is very hard to tell.

Now we're going to take the next question and it comes from the line of Ian Douglas-Pennant from UBS.

Ian Douglas at UBS. The first question, could you help me understand what was the increase in the imbalance payments within receivables that you saw year-over-year, please. It looks -- total receivables increased about [ EUR 650 million ], but I don't know what imbalance payments was within that, please. Second question, could you help us -- within spare engines, what proportion of those engines are sold at the current market value versus sold in advance. Maybe if you could give us some kind of qualitative idea there. What I'm really trying to get at is what is your sensitivity to GTF fair values if they start to decline with some lessors and appraisers are telling me may possibly be starting to happen already.

Let me first start with the receivables. You've seen quite some increase in the receivables now in the first quarter of the year. And if you look also at the growth in our sales or our revenues that follows more or less the normal business case going forward. There is no significant impact from the imbalance payments now in the first quarter to be seen. I think when you look at the pricing level of spare engines going forward, so far, we have not seen any weakening in demand. And you also have to keep in mind that there is not the 1 spare engine pricing that we have. There are 2 ways to have spare engines entering into the market. The one is contractually agreed with the airline customers and the other ones other than the, let's say, open available spare engines that they can sell at a more flexible market pricing. So there's no significant overweight in that area at the moment. So overall, we do not expect or we do not see any weakening in those prices at the moment in the mix.

What roughly is the split between sales that are contractually agreed versus openly available?

Sorry, the figure we don't disclose. I'm sorry.

Now we're going to take our next question and it comes from line of David Perry from JPMorgan.

Yes. Johannes, Katja, I hope you are both well. Two questions, please. One, just on your spares be up about 10%. It's quite a bit lower than we've seen from perhaps [ Safran ] and GE. Just wonder if you want to comment on that, if you think there's anything particular in your mix that would make you have slower growth or whether it's just a temporary issue for the quarter? The second one is a bit more philosophical probably for Katja. Just on your -- obviously, we're in an uncertain geopolitical situation, so we get a lot more questions from investors about cash flow. And if I take your guidance for cash conversion, I add back the GTF and I add back the number you just hopefully gave on Fort Worth. I think you get to -- if my math is correct, you've got about 70% free cash flow to net income. It's still quite a lot lower than some of the peers. So I just -- you've been in the business for a while Katja, if you can just maybe give 2 or 3 reasons why that is the case? What is it that has your free cash flow at the current level? And what are the specific things that will lead to an improvement going forward?

Okay. So let's first start with the [indiscernible] mix. So just to frame that clearly. So there is no specific issue that we have compared to others and it also always is a question of what's comprised in the spare parts growth. in the respective references. Overall, for this year, David, we have guided a growth rate in the low to mid-teens area, and with 10% growth in the first quarter. We are fully in the ballpark of our guidance that half of the year, there are price movements to be expected, which will then support a further expansion of the growth rate throughout the year. So no structural reason why that is of any greater concern for us. Regarding the cash conversion rate, I think if you look at the history of MTU, the cash conversion rate has always been a topic that people have discussed about a lot. And I think if you look at what we are doing at the moment, so that we are continuously expanding our portfolio. that we are continuously also investing into the profitable growth of our business moving forward. These are the parts that currently have an impact on our cash flow plus we still have in the first place. So this year, the GTF payments directly for the AOG compensations, but also moving further until 2028, late or beginning of 2029. We still expect the buildup of the receivables for the prefinance shop visits, which still provides a headwind to our cash conversion rate, but which will then turn into over proportional cash conversion contribution in the years to come. So from a structural perspective, David, let me reassure you that there is no reason why MTU should, at any place, be less able to create attractive cash conversions than anyone else in this business.

Okay. And just very quickly, and you have said it before, can you just remind me the Fort Worth GBP 100 million a year. How many years is that for? Or is it on free cash flow? Sorry, until the --

Yes, that was also part of our guidance that we have laid out at the [ Paris Air Show ]. So there is no structural difference to that, which means that this is also included in our high double-digit cash conversion rate guidance for 2030.

Now we're going to take our next question and it comes the line of Milene Kerner from Barclays.

I have 2 questions, please. The first one a follow-up on [indiscernible]. We see demand actuating for the 777 target ER freight conversion, how do you see aftermarket demand evolving for your 757 and 767 powered fleet, especially at today's fuel price? And could you also remind us what's the share of the commercial spares that today, CF6 and PW2000 represents? And then my second question on back of what you just replied to David, could you help us framing the scale of the GTF-related receivable headwind until 2028?

Okay. Maybe let me first talk about the receivables side in the first place. I think we have not provided a specific guidance on how this continues to ramp up what you can say is from today's perspective that there is still some quite significant increase over the next years to come. And there is currently no specific time line that I can give you for individual impacts, but we will always include that into the guidance that we provide for the next year. And as I said, it's also part of the guidance that we've provided for the midterm. And I have to say I didn't get exactly the first part of your question. Was it about the freight of conversion?

Yes. So we see now a lot of [ 777-300ER ] being converted. I just wanted to see what could be the impact on the 757 and 767-pound fleet on which you actually powered these 2 planes, especially given the fuel price today? And if you can also share how much and the PW2000 commercial fleet represents today as a share of your crucial car parts revenue?

Okay. So thank you very much. I'm sorry, I didn't get it in the first place. So in principle to say freight conversions do take time. So that's nothing that is going to happen overnight. I think that's the first important message I would like to send with regards to this portfolio. The second one is that the demand for freight is continuously growing, which also means that the freight that the flights are continuously growing, which will then again fuel demand going forward, yes? So our expectation at the moment is that there is very limited impact for the coming years to be expected. And we don't disclose specific shares of individual spare parts on the overall portfolio. What we said is overall, the expectation for this year is that we will have a strong growth in the commercial spare parts business between 10% and 15%. And when you look at the outlook for 2026 also there, we do guide with a continued strong increase in our portfolio.

If I may, we don't see any structural moves in these kinds of business where the freighter conversion or fleet composition due to the conflict so far. And that's the picture that we can see right now. And as Katja mentioned, conversion time, the contracts behind it are long-term contracts and also long-term work. So that does not react on this more short-term events that we see right now.

And just maybe following up just on your guidance for spare parts for this year. Can you just remind us what's the outlook for the CF6 and PW2000 in terms of growth?

That's more or less flat. Sorry, I just want to add the big drivers for this year. Commercial spare parts are definitely B2500 and the A320, also the GTF spare part is going to be increasing for the mature engine programs. We expect that to remain broadly stable.

[Operator Instructions]. And now we're going to take our next question. And the question comes line of Rory Smith from Oxcap.

It's Rory from Oxcap. I just wanted to talk a little bit more about this idea of a very strong order book, EUR 32 billion. You say technically sold out for 3 years. I guess technically is doing a lot of heavy lifting here. Maybe if you could just help us understand how that backlog falls between the 4 business areas. And then really just how -- what kind of visibility do you actually have particularly within commercial spare parts and within commercial MRO, any kind of differentiating dynamics you can call out there? Anything call it [indiscernible] that can help us think about as we travel from this year into next year and modeling this out would be really helpful.

So I think I'll take the order book and then you head up at [indiscernible]. So of course, we have on the side, just additional production setup where you have capacity and a fairly linear production rate on the MRO side, of course, we have everything from single events to 10 and even more years contracts. And that's why I mentioned technically. And this is something, of course, that is a wide composition of MRO contracts. If you add it up, it comes to the number we shared, and that's why the term technically was used from my side.

And I think if you look at the order book development overall, you see that we have what I can state to more details is that we've seen growth in both segments. So we don't break it down into multiple segments. So we do see growth in both segments. You see the order intake in the first quarter for the MRO business, but we also do see continuous strong increase in the order, for example, for the [ GE9X ] or for the [ PW1100 ] business. So overall, that is a strong order book, and it's also quite some strong visibility with regards to our shop loads, for example, on the MRO side.

Okay. Great. If I could just follow up there. Let's assume that the current trend of RPK growth sort of turning negative continues for another quarter or 2 quarters or whatever the outcome is. Would you expect to see that first in commercial spare parts or commercial MRO or roughly analysis?

Well, I mean, we have -- we still have a backlog of work there, the situation of capacity available on the [indiscernible] capacity available for shop load events is still below the market demand. So even if these developments come, we have then we swap on engine type with the other one, which we are able to do with the shop setup that we are running. So that's why we -- our target is not to lose any slot that has been also a very positive impact of -- on the second part, on the spare parts of your questions. And this is something where the visibility that we are having in the system and the close customer contact, which allow us to [indiscernible] around maybe a little bit too dynamic, but we are able to mitigate these topics in order not to lose any slot. We were very successful with that for the last 6 months, and we are also very optimistic that is going to continue for the rest of the year.

Maybe let me clarify or let me add maybe to it a little bit. We would not expect to see any material impact on us during the course of this year. So there is no -- and this is also why we are so confident to be able to achieve our guidance for the full year on the MRO side. And if you look at timing, if you look at where we are at the moment, so people are still very actively searching for slots, and we don't have a lot of open slots to offer at all to the industry. So there is no reason to believe that this should have any material impact on us in the upcoming quarters.

Now we're going to take our next question. And it comes from the line of Sash Tusa from Agency Partners.

Yes. Thank you very much. Two questions. First of all, on AeroDesignWorks, the numbers that you give there are terribly big. I recognize you'd like to talk about this more at the Capital Markets Day. But November feels a terribly long way away at the moment. Of that market size and growth, how much of that is in Europe as opposed to the rest of the world is the first question. And then you talked about the business being optimized for military performance, but an awful lot of drones, clearly, grain covers a huge number of things or one-shop throwaway systems effectively now. So does the market actually really need military specification as opposed to [indiscernible] that are cheap enough for a single mission. That's my first question. And then a different one on MRO. When do you think that customers have to specify or have to finalize the scope of a shop visit with you? How early is it in the process?

Okay. The market size, that's a very good question, of course, because that depends on the government. And you pointed out that, yes, of course, it's 1 cycle or 2 cycles, once you test it once you use it. And that's exactly the market where we want to enter and why we made the deal with AeroDesignWorks. And that is something where we are 100% sure that there will be growth. The concrete numbers, of course, depend on the orders of governments in Europe, and that's hard to judge, but that it is a good potential and good business for us. We are very confident. On the work scope, design for the engine shoppers. That's a normal routine process that runs with every customer and the shop that is performing then the engines couple of weeks, maybe 2 months, depends a little bit on what the what the engine type is. That is decided then between the customer and us and of course, the requirements from the worthiness perspective. And so that's a routine process. There is so far, nobody that is doing this earlier or later. That's a very normal process, and there are also, of course, strong guidelines from the aviation authorities, what is possible and whatnot. But within these frames. We are discussing with our customers what is suiting best in their fleet as most of them operate couple of engines and aircraft, we have all the flexibility to have good solutions for them together.

Dear speakers, there are further questions for today. I would like the conference over to Thomas Franz for any closing remarks.

Yes. Thank you, Nadia, and thank you to all participants and to MTU's management. This marks the end of today's Q1 call. Thank you for joining. And yes, have a great rest of the day. Bye-bye.

We want to thank you, Mr. Dr. Johannes Bussmann and Mrs. Katja Vila and all the participants of this conference. Goodbye.