Safran SA (SAF) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining us here both in Safran Campus and on the webcast. My name is Cécilia Matissart, VP Investor Relations at Safran. I'm delighted to welcome you this afternoon. Many of you were here with us 3 years ago. Welcome back. We value your loyalty. And for us at Safran, maintaining trust and transparency with the financial community is key. A few words about our agenda today. First, our Chairman, Ross McInnes, will open the meeting. Then we will have 2 main sessions to this CMD. First session, Olivier Andries, our CEO, will present the key elements of Safran's strategy. Eric Dalbies, Executive Vice President in charge of R&T and Innovation, will outline our R&T roadmap. And finally, Pascal Bantegnie, CFO on January 1, will present the financial ambitions for the next 4 years. After these 3 presentations, we will have a dedicated 30-minute Q&A session, followed by a 30-minute break. During the break, you will have the opportunity to discover 3 presentation booth. At one, you will be able to meet Thibaud Normand, our VP Climate, to discover more about decarbonization. At the second, you will learn more about Safran's role in the European fighter, FCAS program, with [indiscernible], our Project Director. And third, we'll focus on Safran's role in the start-up ecosystem, notably through Safran Corporate Ventures. For our online audience, you will have the opportunity to have a look at our videos called SimplyFly on sustainable fuels, additive manufacturing and electric propulsion, which I personally find informative and amusing. The second session will resume after the break at 3:15 with a focus on 2 of our businesses, civil engines and aircraft interiors, with a Q&A module of respectively 30 and 15 minutes after each presentation. Finally, we will close our CMD with the presentation of Safran's overall ESG strategy presented by Olivier Andries and Stéphane Dubois, Executive Vice President of Corporate Human and Social Responsibility. For those of you physically present today, this event must respect the COVID health care rules. So may I remind you that face masks must be worn at all times except when you are asking a question during the Q&A session. So everyone should sit one seat apart to ensure social distancing. Thank you. And let's start right away with the opening remarks of our Chairman, Ross McInnes.

Good afternoon. Welcome to the Safran Campus to those who are here and those who are zooming in. Particular thanks to those who flew here. We appreciate your contribution to our future shop visits. It's a pleasure to open Safran Fifth Capital Markets Day, Olivier's first as CEO. He's now become a familiar face to all of you over the years in his successive and successful roles at Safran. Pascal Bantegnie is here as CFO designate, another very familiar face to many of you. His appointment is yet another illustration of Safran's internal talent generation machine, and you'll see further instances of that bench strength later this afternoon. I should, before introducing this, take this opportunity to thank Bernard Delpit for his stellar contribution to Safran, including preparation for today's event. Now since we met here in 2018, a lot has occurred. What has not changed are Safran's key characteristics. If anything, our strong points have been enhanced, as you will hear this afternoon. We are realistic about short-term uncertainties, but we're sufficiently confident in the 2024 and '25 outlook to devote resources as early as now in 2022 to prepare for the near- and long-term future. That's particularly the case in our R&T. However, we should not squander what has been achieved during the ongoing crisis. CapEx, working capital and other precious resources will be allocated only as and when recovery develops with sufficient certainty to justify the required allocation of capital. Let me draw your attention to some of the issues we're keen collectively to address today. Defense and sovereignty, and that includes European access to space. They are and always have been, indeed, they are origin, fundamental to Safran. Technological duality irrigates our R&D and our R&T. The recent pandemic has demonstrated the resilience of these defense activities in propulsion and in our equipment business. Another point we shall dwell on today, ESG. It features widely in today's presentation. Now this is not a fact. It's not a gimmick. It's not an afterthought for an aerospace group. To focus on the E part, bear in mind that over 50 years, our R&T has focused on reducing noise, energy consumption and, hence, emissions. So quite naturally, these subjects are the backbone of our investment for the future and are, and that is new, increasingly reflected in management's remuneration, and I'll come back to that in a second. A word on Zodiac. At our last CMD, we had literally just finalized the merger with Zodiac. We focused quite naturally at the time on integrating Zodiac into Safran. You should all remember that there was always a lot more to Zodiac than seats, beautiful and comfortable as they are, Vincent; or to cabins, avant-garde as they are, Norman Jordan. A few examples. Electrical power distribution springs to mind, particularly relevant as we pursue our efforts to reduce emissions. But you should not overlook gems such as the evacuation slides, oxygen, refueling and fuel measurement systems. They sit and fit strategically and profitably in our equipment and defense business. Shareholder remuneration. You should remember, it's only a year ago that as part of our timely and successful action in early 2020, we had to cut 20,000 jobs worldwide. And that in France, our workforce signed up for some stiff measures covering 2021 and which have been partially extended through to 2022. We also benefited from government -- significant government-funded furlough programs. All this counts as the Board forms its view on shareholder remuneration. So for the 2022 dividend paid in 2023, we hope to resume our 40% payout policy. And as you'll hear from Pascal, if things go as we plan, as soon as 2023, we should be at or close to a net positive cash position. So while we're keen to maintain low leverage in a context where some uncertainties might remain and some development programs might require acceleration and boosting, the Board, as has been its practice, will review and adapt our policy to ensure growing and attractive returns for shareholders. A quick word. As I mentioned earlier on management remuneration, please note that there were no pandemic-adduced changes to any of the criteria for short-term or long-term management compensation packages. Going forward, there will be a growing component of remuneration criteria linked to our ESG objectives, notably for Olivier, our CEO, in the 2022 LTIP, where we plan to go from 10% to 20% weighting for ESG objectives. And that will include, quite naturally, a focus on low carbon targets and on gender equality. Well, to conclude this introduction. Looking back, there's every reason to be proud of what has been achieved, preserved and indeed enhanced. Looking forward, the ambition which was laid out in this room in 2018 has been maintained, mainly delayed by the pandemic. In particular, our target margins are unchanged. However, we recognize that some trends have accelerated, and we have adjusted our priorities accordingly. We plan to generate significant cash while funding the recovery-induced ramp-up and the R&T essential to greener flying. So in a nutshell, Safran's intrinsics are unchanged. Indeed, they've been enhanced by the measures which were taken as we dealt with a once-in-a-lifetime phenomenon. Thank you.

Thank you, Ross, for your opening remarks. Ladies and gentlemen, I'm delighted to welcome you today in this beautiful place, it's a beautiful day. Safran -- at the Safran University campus and also the webcast with several of our executive team members. Some of them have been -- 2 of them, indeed, have been appointed very recently. Pascal Bantegnie will succeed Bernard Delpit as CFO, and Jorge Ortega will succeed Norm Jordan as CEO of Safran Cabin. I would like to warmly thank both Bernard and Norm for their outstanding contribution to Safran and wish them the very best for the future. This is my first year as CEO of Safran, a year of transition as we come out of the worst ever crisis that the airline industry has ever faced. Indeed, not one crisis, but two: the Boeing MAX grounding and the pandemic. I'm glad to say that the worst is behind us. And through the crisis, Safran has demonstrated agility and resilience, agility as we have swiftly adapted to the new situation and resilience as we have posted a double-digit profitability in 2020. The COVID risk remains as the recent Omicron variant spread illustrates. And so as Ross has mentioned, we are realistic about short-term uncertainties. And therefore, we will keep a very tight control on our cost. But this Capital Market Day will focus on our medium-term outlook, and I am very confident that Safran is rebounding from the COVID crisis with a strong profitable growth at the forefront of sustainable aviation. My confidence is based on air traffic recovery; our reduced cost base; the fact that we accelerate our research and technology for the decarbonization of aviation; and the strength for our business model, which is anchored on solid foundation. We will go through all those points, but let us start with our leadership position. Since we acquired Zodiac, Safran is the third global aerospace group player, excluding airframers, of course. And as you can see on this chart, we are #1 or #2 in each of our activities or most of our activities. And we have a balanced split of revenues between original equipment and aftermarket. At the last Capital Market Day back in 2018, we have set major goals, and I'm glad to say that those goals have been achieved despite the crisis. We have executed successfully the LEAP ramp-up and delivered more than 1,700 LEAP in 2019. And we have positioned LEAP as the best-in-class reliable engine, as Jean-Paul will later on show you. We have successfully integrated Zodiac, and we have delivered and even exceeded on synergies. And we have reinforced our position as a fully-fledged engine manufacturer. We have kept our research and technology efforts during the crisis, and we have been designated as the leader of the architecture and the integration as well as the hot section of the next European generation fighter aircraft engine. Crisis has played an accelerated role in preexisting trends: decarbonization and what I call the sovereignty dynamics. I will lead you through those trends, our strong assets and our ambitions in each of our activities, starting with the air transportation recovery and growth. Our long-term view is that we will have a 2.9% average yearly growth over the next 20 years globally for air transportation, which is more than the GDP growth. If you focus on narrowbodies, this yearly average growth will be more than 4%, 4.2% in narrowbodies. This means that over the next 20 years, we expect the deliveries of more -- of around 35,000 aircraft, 2/3 of them being narrowbodies and 20% of them being widebodies. So as you can see, a strong momentum, especially for narrowbody. Coming to the shorter-term outlook. As we speak, the narrowbody air traffic is at minus 25% versus the prepandemic level. It was minus 28% last week. The very recent number as of yesterday is minus 25%. We expect the full recovery of the narrowbody air traffic market by the end of 2022. On the widebody, it's going to take longer because widebody is more exposed to international traffic and border controls. And here, we expect full recovery by 2025. Our in-service fleet in narrowbodies is young and active. Our CFM56 second generation fleet average age is just slightly above 11 years, which is young. This fleet has been highly utilized during the crisis, and we have seen a very low level of aircraft retirements in 2020, 80 aircraft, that's it. And in 2021, as we speak, 80 aircraft. I said 80, 80, 80 aircraft. This is why I do not expect any material impact from aircraft retirements on our aftermarket revenues in the next years. LEAP. The LEAP-powered aircraft cycles have doubled during the crisis as most airlines have prioritized the most recent models and because the fleet has been growing. On the widebody side, there are indeed retirement of old generation aircraft for which the Safran content is low. But the good news is that the 777, which is the workhorse, especially for the freight demand, is highly utilized, minus 15% versus precrisis level, highly utilized. And we are on board with a 24% share of the GE90 engine, and this will fuel the growth of our high-thrust engine aftermarket revenues. All in all, we have solid position on the most active aircraft in fleet, and this is fueling a very strong aftermarket revenue flow. Beyond engines, the same is true for our equipment. We have different business models here. It can be periodic interval maintenance for our landing gears or our aerosafety systems such as evacuation slides and oxygen system. It can be a per landing contract business model for carbon brakes and wheels, and this is very similar to our engine business model. Or it can be on-condition maintenance for our nacelle plus initial provisioning with a very strong ramp-up alongside the A320neo. So different business models, specific dynamics, but all fueling also a strong growth of our aftermarket revenues. Future fleet and deliveries. Narrowbody, we expect -- we see a very strong second ramp-up of our LEAP engine. On Airbus side, the A320neo has a strong order book, and Airbus has announced a strong increase of their production rates. We have a 60% market share on the A320neo and, for sake of clarity, on all A320neo models. And therefore, we expect a strong ramp-up there. Same is true on the Boeing side. Good news is that the MAX has returned to fly. I've heard this morning that this is now equally true in China. So the MAX is returning to flight. This is good news. Strong orders since the start of this year on the MAX. The inventory of undelivered aircraft is going to melt down in the next 2 years. And therefore, we should expect a very strong ramp-up here as well in 2023. All in all, we plan to deliver 2,000 LEAP engines as soon as in 2023. On the widebody side, both airframers have reduced their rates. But the 2 main platform that are going to dominate the widebody market for the next 10 years are the A350 and the 787. And the good news here is that the A350 and the 787 have high Safran equipment content. We provide the landing gear for both. We provide the wiring for both. We provide the electrical distribution for both and some -- and many other equipments. So what I would like you to retain is that we are on board the 4 high runners, the 4 platforms that will represent 90% of deliveries over the next decade. And this is here, again, paving the way for a strong, long-term aftermarket activity. Biz jet and helicopters are 2 market that have been resilient during this crisis. And here as well, we have a strong position. On helicopter market, we are #1 in helicopter engines, and we have renewed completely our portfolio of engines. On biz jet, we are #1 worldwide on nacelle and fuel system, and this is offering a nice springboard to develop further our position on future commercial platforms. Turning now to this very important topic of decarbonization. As you may have seen, in early October this year at the last IATA general assembly, all airlines and all aerospace industry players have pledged to net 0 aviation by 2050. This is an increased commitment versus the preceding one, where we were committed to cut by half the level of emission by 2050 compared to 2005. Here, we commit to net 0 aviation by 2050, and Safran has signed up. So we are committed and we are focused on the 2 main levers that will help get there, and that will wait for 80% to 90% of the journey, I mean, the disruptive technology on one side and the sustainable fuels. So our road map is very clear, and it's on 3 levels. The first one is our -- in the technology. Here, as a leader of the narrowbody engines, we have decided to go on the disruptive route. We have decided to be in a position to offer to the airframers a disruptive engine option. This is why together with our partner, GE, we have decided to launch the RISE technology program. RISE stands for revolutionary innovation for sustainable engine. And here, we aim, we target to offer a 20% fuel burn gain versus the latest generation of engine that we just brought to market 5 years ago, I mean, the LEAP, a 20% fuel burn gain by 2035. And if you add to that already airframer can do on the airframe, aerodynamics, wings and so on, I am pretty convinced that we can both bring to market a brand-new generation aircraft, narrowbody aircraft, bringing as much as 30% fuel burn by 2035. This means that we intend to go twice as fast as what we have done in the last 50 years, twice as fast. Second lever, sustainable fuel. We are going to push up our certified blend for current engine from 50% towards 100% through flight tests. And from day 1, our next-gen engine will be able to operate with a 100% blend of sustainable fuel. Third lever, electric and hybrid propulsion. This is typically where the acquisition of Zodiac has helped us to position as a leader in the electrical aircraft, and this is typically relevant for new air mobility. Eric will elaborate further -- our CTO, will elaborate further on our road map. Let's now turn to sovereignty. This is where our defense and space activities plays a role. Geopolitical tensions are rising. Therefore, military budgets are increasing everywhere. This is true in the U.S. This is true in the U.K. This is true in France. This is true in India. We have a strong position in defense and space. We are on board the French Rafale fighter aircraft with our engines and many equipments, and Rafale is enjoying a very strong export campaign dynamics. We're also on board other European, U.K. and U.S. military program through our footprint in equipment, especially in the U.K. or in the U.S. We are recognized as being state-of-the-art in the navigation and -- in navigation and optronics technologies. And as I said before, we've been designated to lead the engine architecture and integration of the next European fighter aircraft. Yes, as an aerospace company, we, Safran, are a dual company. We are built on 2 pillars, the commercial and the military. And this duality is essential for technologies, for supply chain and for maintaining and developing our competencies and talents. Being on board national or European sovereignty program nurture our technology roots. Defense has brought us resilience in 2020 and in 2021, where because our commercial revenues were hit by the pandemic, our defense activities represented as much as 25% of our total revenues. So defense and space activities are essential to Safran, are bringing resilience and cross-fertilization. To take benefits of those accelerated trends, we can leverage on strong assets: our unique portfolio of technologies, our operational excellence, our talented people and our financial position. Our technology portfolio is wide, as Eric will elaborate. We are going to dedicate 75% of our research and technology efforts in the years to come to the decarbonization of aviation. We have 12,000 employees working in our design offices, highly talented, highly motivated to work on decarbonization. We are going to spend EUR 4 billion on research and technologies in the years to come up to 2025, 1/3 of it being funded with public support, government support in France or in Europe. Yes, we are going to accelerate the pace of our investment for the decarbonization. Operational excellence. As I said before, we have swiftly adapted to the new situation with a deep rationalization of our activities. We have closed 4 sites in 2020. We are closing 3 sites in 2021. We are transferring work from high-cost countries to competitive-cost countries. We are streamlining our organization. So we will have a reduced cost base. We have a very strong asset with our One Safran operating system that we have developed in the last decade. One Safran covers all processes: engineering, program management, manufacturing, supply chain. One Safran has been the enabler to successfully integrate Zodiac, to recover the operational performance of the Zodiac legacy activities, as Vincent and Jorge will further describe. It has helped us to recover the performance and restore the customer confidence. At the start of this year, we have decided to go one step further in operational excellence, leveraging on digital. And this is why we have decided to accelerate what I call our digital transformation along 4 streams: engineering 4.0, aiming at reducing time to market, reducing the time of development; manufacturing 4.0, aiming at reducing the costs, the nonquality costs and improving efficiency; data 4.0, aiming at extracting the value from our products and processes; and also developing algorithm for our support and services activities in order to improve the reliability -- improve further the reliability of our engines and equipment as well as to go towards predictive maintenance. In order to support our digital transformation, we have decided to build up on our data scientists, data analytics capabilities both in our central center of excellence named Safran Analytics where we have 90 data scientists, significant part of them having PhD level, and also more broadly within the group with 160 data scientists and 210 data managers working on what we call use cases and algorithm, supporting all the streams of our digital transformation. Last but not least, our main strength is our people. We have talented people. I am very proud and highly appreciative of the agility, the solidarity and the commitment that they have demonstrated during the crisis. We have been resolute to keep our talents. And today, we are focused on recruiting and upskilling the additional talents and competencies that we need to meet the 3 challenges ahead of us: the ramp-up, the decarbonization and our digital transformation. Now having set the scene on the market perspective and taken you through our assets, I would like to detail our ambitions for each of our activities. Propulsion first. Four ambitions: execute the ramp-up of our original equipment deliveries, LEAP, of course, mostly LEAP, but also our military engines; ensure a smooth aftermarket transition from the CFM56 to LEAP; be at the forefront of the air transport decarbonization; and also, continue to consolidate our position as a fully-fledged engine manufacturer. Equipment and defense, where we have recognized long-standing high proficiency on mission and safety critical systems. We are going to leverage on our strength to grow organically and to expand further our portfolio. We shall prepare technologies for lighter and greener solution, and we have the ambition to be the leader in electric and hybrid propulsion, especially for new air mobilities. Aircraft interiors now. This is where we have combined the leadership in design coming from Zodiac legacy with the operational excellence that Safran has brought in. And this combination is extremely powerful. This is why our ambition is simply to provide unequaled passenger experience and to achieve a double-digit profitability by 2025, medium term, when top line comes back. We shall have an active portfolio management. At the beginning of this year, we have launched a portfolio review focused on the Zodiac legacy businesses. 3 years after the acquisition of Zodiac, it was time to -- it was the right time to do so. The criteria were the alignment with what I call Safran's DNA: high barriers of entry, be it technology, mission critical, differentiation; a strong aftermarket; and a profitable growth. We have come to the conclusion that 70% of the former Zodiac activities were confirmed as core. The 30% remaining are still under review. We shall look also at selective bolt-on acquisition as long as they make sense, meaning that we will be looking for complementary technology bricks in order to reinforce our position. We can relook at potential acquisition to secure our supply chain when critical. And of course, needless to say, a strong financial discipline. As a summary, Safran is extremely well positioned to take the benefits of the air transportation recovery and those accelerated trends that I was describing. We have 4 main ambitions for this that I want to detail at this Capital Market Day: execute the new LEAP ramp-up and ensure the smooth aftermarket transition from CFM56 to LEAP, leverage our leading positions in equipment and defense to grow organically and expand further our portfolio, achieve a double-digit profitability for our Aircraft Interiors when top line come back and spearhead the technological response to decarbonization. Ladies and gentlemen, thank you for your attention. I would like now to leave the floor to our CTO, Eric Dalbies, that will lead you through our technology bricks and our road map. Thank you, Eric.

Thank you, Olivier. Good afternoon. It is my distinct pleasure to share with you our technological road map for the years to come. As you said, Olivier, decarbonization is indeed deeply rooted in the DNA of the research and technology teams. We have always been at the forefront of state-of-the-art technology to reduce fuel burn and consequently emissions. What we are doing now is accelerate our efforts and provide solutions that are acceptable and adaptable to all airframers' scenarios. So research and technology at Safran is well resourced to succeed now. There are 4 key success factors for proper execution of the research and technology plan. First one, a structured and consistent approach. 40 very clear road maps are mapping all required technological bricks we need. Second, skilled people, of course. We have dedicated research and technology teams inside each business, plus a corporate research center up and running to maximize the synergies across the group and, on top of that, a shared center of excellence for intellectual property rights. We are filing, as you know, more than 1,000 patents a year run rate. Third, we tap into the best research and technology know-how. We leverage the research and innovation ecosystem, especially through partnerships, be they academic/scientific with research institutes or industrial or with start-ups, sometimes with investment in capital through our corporate venture fund. And fourth, the plan is fueled with solid budgets. Olivier already mentioned, our research and technology efforts yields EUR 2.8 billion just in self-funding and half as much again with external funding. So we have the right setup to drive our accelerated ambition of carbon neutral aviation by 2050. Safran is focusing the research and technology efforts on enabling technologies to win the battle of decarbonization with 3 main pillars: materials and processes, power and energy management and digital technology. So let's take each in turn, starting with materials and processes. Materials and processes are key differentiating drivers, especially in the race to lightweight and high temperature. There are 4 areas to make it happen. For metallic and ceramics, they are mainly driven by the quest for high temperature. As you know, the higher temperature, the lower the fuel burn, the smaller the engine core and consequently, the lower the weight. Additive manufacturing and polymer composites are instrumental for lightweight structural parts. All these technologies are serving both commercial and sovereign end markets and applications with cross-fertilization efforts and the extra resources made possible with governmental funding, which speeds up innovation and reduces the time to market. So additive manufacturing obviously brings weight reduction and more compact parts with very spectacular results. As you can see on the right-hand side, for instance, the weight of this very massive part, like a hydraulic block of landing gear, is divided by a factor 2 when manufactured with additive manufacturing. Additive manufacturing also reduces the pressure on the material supply chain. It dramatically improves the so-called buy-to-fly ratio. As you know, with conventional machining, for instance, the finished part represents only 10% to 30% of the procured quantity of material. With additive manufacturing, the ratio is just opposite. Another benefit, for sure, is also shorter lead times. So additive manufacturing for us is already a reality. 10 part numbers produced with additive manufacturing are already certified and today flying, and Safran has dedicated a brand-new shared facility that went live early October this year to leverage additive manufacturing for all businesses across the group. For new metallic materials, the research and technology effort is driven by 3 major categories of parts. For turbine disks, first, we are leveraging especially digital metallurgy to model and master the metal transformation during the manufacturing process and then fine-tune the properties of the metal. For turbine blades, the new single crystal alloys enable a step change in maximum allowable temperature. And high-powered compact reduction gearboxes will be part of our next-gen engine architectures. At engine level, in fact, the combination of a low-speed fan with a high-speed small engine core is maximizing the fuel efficiency. So the gearbox calls for very high-performance coated steels. The ceramics. The ceramic matrix composites actually offer a very attractive alternative to metals for hot sections in the engine. And they are 3x lighter, by the way. As you can see on the left-hand side, they give access to a step change in the maximum allowable temperature without the need to cool down the parts. So Safran is leveraging off a strong legacy of space and military application for these composites, these ceramics. We are leveraging also the benefits of a dual-use technologies, and we have a dedicated Safran technology maturation platform up and running since 2016. And ceramic parts are currently being tested on French sovereign programs for implementation on the Future Combat Air System and also the next gen of commercial engines. The fourth category of materials is polymer composites. They have been already a game changer for the current LEAP with much lighter fan blades and an outstanding performance against the most severe certification test, especially fan blade out and bird ingestion. This is a breakthrough 3D woven technology with resin transfer molding inside. Polymer composites are a must for the next generation with a much larger fan diameter than for the LEAP, as you can see on the right-hand side, as compared to the LEAP on the left-hand side. And they are also very promising to drive down the weight of equipment on board the aircraft as a substitute to metallic designs. Good candidates for this are, for instance, plumbing and ducts, aircraft seats and some structural parts for landing gear as well. So the second pillar for our research and technology efforts is power and energy management. The goal here is to develop the most energy-efficient system architecture that will reduce the carbon footprint. To speed up the decarbonization of air transport, the point is to find the sweet spot among the possible combination between alternative energy sources and power system architectures. Energy sources are ranging from fossil fuels to low carbon fuels, including hydrogen, to electricity. Power system architecture include gas turbines, hybrid electric to full electric systems. Not all options have the same merits. The 3 main subjects really deserve specific efforts. The first one is ultra-efficient propulsion. Why? Because it will pay off whatever the fuel. So it's clearly a priority. It's a no-regret choice. The second is electrification of aircraft function of propulsion because this is an amplifier for the efficiency of a gas turbine, but it also can be an ultimate solution for the propulsion of lighter vehicles. And hydrogen is seen as the ultimate step to decarbonize. It can be used either as a conventional fuel to be burned in a gas turbine or as the primary source to generate electricity in fuel cells. So where do we stand at Safran? First, the RISE demonstrator, as referred to by Olivier, is exactly at the crossroads of these 3 major levers: ultra efficiency, hybrid electric and SAF and hydrogen compliant. Second, Safran is fostering the adoption of alternative fuels, sustainable fuels. It's not ultra efficiency or SAF, it's ultra efficiency and SAF in our strategy. Third, we are preparing the era of hydrogen technologies. And fourth, we are uniquely positioned for electrification of aircraft functions. So the RISE demonstrator by CFM brings together all technologies for ultra-efficient propulsion. Let us discover, if you may, the features of this demonstrator with its Chief Systems Engineer, Delphine Dijoud, through a video. She would have been delighted to be with us today, but she's currently on maternity leave. So Delphine, the floor is yours.

Hello from Villaroche in France. I'm Delphine Dijoud. Today, I will talk you through a new chapter in this rich history of the CFM partnership as we launch the CFM RISE program. With this program, GE and Safran are continuing to revolutionize commercial aviation with uncompromising technologies that will help us achieve some very ambitious sustainability goals. Our objective with the CFM RISE program is to demonstrate more than a 20% reduction in fuel consumption and carbon emissions compared to today's most efficient engines. These reductions represent the single-largest decarbonization improvement we have ever achieved. Our extensive technology demonstration program is already well underway with several rig tests already successfully completed. We are focused on 3 key technology pillars, advanced architectures, advanced materials and hybrid electrification, to achieve our efficiency improvement. We are evaluating several promising architectures as part of our technology maturation plan. The most ambitious, the one that will yield the greatest benefit, is open fan architecture. For the open fan, our vast experience with carbon fiber composites is enabling us to achieve a larger diameter optimizing aerodynamics and acoustics. The resulting step change in propulsive efficiency actually represents a significant part of our expected efficiency gains and corresponding reduction in CO2 emissions. We are combining that with a lighter, more compact, higher speed booster and low-pressure system. This will help optimize engine operation across each segment of flight, providing further improvements in efficiency and emission reductions. We are developing a high temperature compact core design that will yield very high compression pressure ratios. To achieve this higher thermal efficiency, we are expanding the use of next-generation materials that have lower weight and higher temperature capability. Together, all of these technologies combined, this system of systems will deliver more than a 20% improvement at the engine level. And when this technology is coupled with sustainable aviation fuels or hydrogen fuels, we reduce CO2 emissions even further. The next technology we are going to highlight is hybrid electric. This system will optimize engine performance by providing additional electric thrust while also generating electricity for both itself as well as the aircraft. Embedding a generator in the engine, we will bring flexibility to engine controls throughout the entire flight envelope. Both GE and Safran have extensive experience and competencies in this field that will be brought to the CFM RISE program. We will also introduce an advanced waste heat recovery system that will allow us distributing heat more efficiently throughout the engine to contribute to reducing emissions. All of these interrelated systems are optimized for a series of advanced controls that help us monitor the engine remotely, minimizing the need for engine inspections and maintenance activities. We will ultimately provide an engine that meets the first requirements for the single aisle market with the same flight speed and engine reliability that customers count on from CFM today. The CFM RISE program embodies our shared vision and long-standing commitment to lead the path to 0 emissions.

So thank you, Delphine, and all the best for you. So moving to sustainable aviation fuels. They are key to accelerate the pace of decarbonization, provided 3 conditions are made. One is technical. The second one is industrial. The third one is economic. Technical condition is that the existing fleet is compatible with a higher blend of sustainable aviation fuel in operation. The second condition, the industrial one, is that SAF are being made available at industrial scale. And the third one, economic, is that they are being made available at acceptable prices, the latter being very much interrelated with the former because of the scale effect of demand and price. So Safran is actively working on the technical condition and the industrial condition in a very simple way. First, we are demonstrating the compatibility of existing Safran equipment with SAF blends at 50% and above, up to 100%, with ground and flight demos that have already been performed and that will go on, especially you may have in mind that we performed a flight with an Airbus 319 end of October this year with a 100% SAF profile. Second, the 100% SAF compatibility is inside the specification of any new development for any equipment of Safran. And third, we are also strongly supportive of the scale-up of SAF production. This takes the form of a strategic partnership recently signed with TotalEnergies and also the form of uptake commitments to perform acceptance testing inside Safran for engine and helicopter tests, actually, acceptance tests. In parallel, hydrogen is a promising candidate for ultimate 0 emission aviation, but the challenge is probably higher. We have a long heritage in hydrogen management through our activities in space propulsion today hosted in our ArianeGroup JV with Airbus. For the 2 distinct usages of hydrogen, either as a fuel to be burnt or as a source to generate electricity inside a fuel cell, we are pursuing both routes in order to advance the technologies associated with a liquid hydrogen aircraft. The plan for this is threefold: first, gaining experience about operations and emissions of a liquid hydrogen-propelled aircraft. So we did in CFM. Safran is supporting the Airbus in-flight so-called EarlyDemo with the adaptation of an existing engine. Second and in parallel, we are developing the technological bricks for hydrogen aircraft equipment. This calls for specific materials. This calls for fuel system technologies adjustment. This calls for combustion activities. We are leveraging for this the skills and the test facilities as well of our ArianeGroup JV. And for the fuel cells, we are currently developing the technology in a dedicated and proprietary center of excellence located in Toulouse. Then more electrical aircraft architecture will also play a prominent role in the decarbonization of aviation. There is a place for electrification in a broad variety of platform, as illustrated here on the slide, mainly hybrid electric-assisted propulsion for commercial aircraft, for military aircraft, for helicopter aircraft. And full electric systems are also a relevant option for smaller vehicles like UAVs or commuters. So the portfolio of Safran electrical products is a unique asset to address the full scope of applications. Safran is mastering the full chain of electricity on board today from generation to distribution to electric motors and, of course, power controls. So the research and technology efforts in this field are focused on the mastery of high-energy, high-voltage components in harsh environment for the 1-megawatt power class typically. And we already have generators and electric motors in the 500 kilowatt that are running in our test facilities. And of course, these efforts also benefit from external fundings from governmental programs. So after power management, the third pillar is the use of digital technology. To make it simple, the point here is not to improve the state of the art of digital science but to leverage digital technologies to improve the understanding of the physical behavior of materials, especially the design of the products and their controllability. To touch base, a very good example is the use of digital for the control of parts in the serial production process in a very effective manner. In the production process of a finish part, for instance, the nondestructive testing often account for up to 30% of the total cost of the part. And the higher the stress level, the more stringent the control must be. We are developing innovative methods here on the left-hand side, for instance, to use infrared thermography instead of dye-penetrant inspection to detect crack on the surface of parts, and it's very productive and repetitive. We are also leveraging artificial intelligence on the right-hand side, as an example, to process X-ray images of controls of blades so as to detect indications and to assist the human decision of keeping, reworking or scrapping the part. This is a game changer for productivity. So in a nutshell, we are speeding up our research and technology activity to anticipate all key technological bricks. We are clearly organized to deliver state-of-the-art solutions and be flexible to the various scenarios of the airframers. We have the ability to leverage off group's wide portfolio and maximize the synergies between commercial and sovereign applications, and this is done in a very disciplined manner based on the long-term vision and clearly focused on selected priorities. So these are really the conditions to make carbon neutrality for aviation in 2050 a reality. I thank you for your attention.

Thank you, Eric. Now it's your turn, Pascal, to tell us about our financial framework. Thank you.

Good afternoon, and good morning to our friends in America. It's very good to see familiar faces here today after all these years. Eric presented many exciting projects, so my job now is to explain how we'll pay for it. For those who don't know me, I was Corporate Treasurer, Head of Investor Relations and CFO of Safran Electrical and Power. I'm delighted to succeed Bernard, and I'm very excited to start this journey with Olivier and all the leadership team. Let me now share our encouraging outlook with you today. We are emerging from a period characterized by a significant drop in passenger demand, as shown by Olivier. The air traffic dropped by 80% in Q1 2020 compared to 2019. Now it's trending towards minus 25%. It's been a global crisis affecting all the industry. During the crisis, we have accelerated, accelerated the structural improvement on our cost base, accelerated to revisit our R&T portfolio to secure the net path to 2050 and accelerated portfolio review to reinforce focus. A quick look back at our performance in the past 2, 3 years. First, 2019 was a very special year with a record financial performance. The unexpected grounding of the 737 MAX led us to adapt our cost base and delay nonpriority spending in what was a blue-sky scenario at that time. Dollar was [ $1.12 ]. So first synergies from the Zodiac Aerospace integration were starting to kick in. We delivered a huge number of CFM56 spare engines, and aftermarket was at a peak. All these actions gave us a lead when we entered the COVID crisis. In 2020 and soon in 2021, our business model demonstrated extraordinary resilience to this drop in demand. We are able to deliver a 2-digit operating margin and to generate way north of EUR 1 billion of free cash flow generation. Financial discipline in cost control and in cash preservation speaks for itself. Moving now to the call for discussion today, which is our midterm financial ambition. Today, it's not about the 2022 guidance that we will provide once we publish the 2021 results next February. Here are the 3 things I would like you to remember. First one, growth is back. Second one, we will record -- we'll achieve record margins, and cash flows will fuel organic growth and shareholder returns. Starting with organic revenues. After a transition year in 2021, growth is back. We expect at least 10% CAGR over '21, '25, meaning you should compare 25 revenues over '21, driven by the usual suspects, higher OE build rates and aftermarket activities. This is built on an assumption of a euro/dollar of 1.20. Today the spot rate is evolving between 1.12 and 1.13. Should we use 1.12 as euro/dollar, it would add 1 point of CAGR over the period. narrowbody applications will be the most dynamic segment. LEAP deliveries will ramp up again to 2,000 units by 2023. Civil aftermarket index is expected to grow at a CAGR of 15%, starting from a low base with a strong 2-digit growth in the early years and trending towards its long-term growth rate, meaning high single-digit growth. Jean-Paul and Francois will provide much more elements on all the elements composing this index in terms of number of shop visits and content and so on. Despite a softer wide-body market, aftermarket activities are set to more than double in aircraft interiors during that period of time. We'll monitor a number of assumptions, which can represent either upside or downside risk to our plan. We do confirm a margin of 16% to 18% target by 2025, assuming a euro-dollar hedge rate of 1.16, and I'll come back on that in a couple of slides. This is exactly the same target we disclosed at the CMD '18 for year 2022. So we have the same target delayed by 3 years due to the pandemic. In other terms, EBIT should grow 2x faster than revenue or we should see an improvement of more than 5 points of margin in '25 compared to '21. As you can already see on this chart, the profit -- the margin profile will not be linear. We expect a few headwinds in the early days and the margin expansion to accelerate further in the outer years. Safran's breakeven point has been improved over the past 18 months. There have been lasting improvements to the group's fixed cost base, mainly on the industrial footprint and adapting the head count. We expect more than EUR 500 million of savings generated during the crisis to be preserved through 2025. This was sometimes referred as a 200 basis points improvement when you divide EUR 500 million over a revenue base of EUR 25 billion. As I say, the margin profile will not be linear. Let me try to provide some insight on how we see the phasing of margin improvement. A lot of colors on this slide, but it works like a traffic light. First, we divided the timing into 2 distinct ranges: '22/'23 as we believe the dynamics in these years will be slightly different from '24/'25. Then for each category on the left, we provide the expected incremental impact on margin. As you can imagine, green is a tailwind, gray is neutral and orange is a headwind. So this is incremental, meaning that '21 compares to 2020. '22/'23 average compares to '21 and so on. Let me take a couple of examples to clarify. On the CFM LEAP transition. It is orange in the first years. LEAP is largely taking over CFM56 on deliveries at a negative margin. Then it turns out to be green in '24/'25 as LEAP is expected to reach breakeven at the latest in 2025. On personnel, 2021 is green as we keep a low head count, and we benefit from a reduction in employee benefit and profit-sharing schemes. Eric, presenting a lot of projects. He has a lot ongoing and is planning so we are accelerating the R&T spend. So the expense position is a cost that we have to offset as is IT. So now that you got the idea, you understand why we anticipate margin expansion to accelerate further in '24/'25. Let's have a look now at margins by divisions for 2025. 20% plus for propulsion, which is a level we already achieved in 2019. Here, again, narrowbody will drive the profit, both in OE and then in aftermarket. Target for Equipment, Defense and Aerosystem is 15% driven by narrowbody rates. Driven by aftermarket is related to traffic like carbon brakes are related to mandatory or regulatory spendings in evacuation [ slides ] in sales or in landing gear. This level is slightly above what we already achieved in the past. Then Aircraft Interiors. Starting from a negative 10% operating margin, we expect to see a 20-point improvement over '21 to '25, which is a strong improvement. Cost base has been resized, and top line growth is key, and Jorge and Vincent will explain later on how we can achieve that. So the main milestone for Aircraft Interiors will be to achieve breakeven in 2022. Let's zoom in on aftermarket activities. CFM aftermarket model will evolve from a time-and-material business model, namely the CFM56, to rate-per-flight-hour service contracts, namely the LEAP engine. This will be a gradual transition. Today, 42% of LEAP orders are based on a service contract and a rate-per-flight-hour service contract. It should reach 60% to 70% by 2030. Nevertheless, the business model will still be a time and material globally as a proportion of LEAP compared to CFM56 by 2030 will still be below CFM56, and there is a slide that Jean-Paul and Francois will show later on. So the dominant business model will remain a time and material for long. Now from an accounting perspective, we are taking a conservative approach with no margin recognition on LEAP service contracts, meaning that revenues are recognized when the costs are incurred. We do receive cash according to flight hours. So this is a benefit to working cap, but we postpone margin recognition. Once the RPFH contracts will start to be material, meaning 2026, it will be about 20% of the total aftermarket revenues. Once the maintenance cost will be solidly confirmed, once the technical model will be fully validated, then we'll start to gradually recognize margin still with a cautious bias. Hedging. I guess you are all very familiar with that as we publish the situation every quarter. We are using derivative instruments to hedge our currency risk. We are currently managing a book of more than $30 billion. That makes us confident to achieve the 1.14, 1.16 corridor by 2025 as we start to book hedges for that year. Our hedging policy helps us reduce the volatility over time, and we demonstrated our expertise in that domain in difficult times. 2020, we saw a rise in the euro/dollar of more than EUR 15. This year, we started at 1.23, and today it's closely -- it's close to 1.12, 1.13. So a lot of information is shared on this topic every quarter. As I said before, the 16 to 18 margin target is built on the 1.16 hedge rate all over the period. Let me now turn to the most important part of the story. As the saying goes, revenue is vanity, profit is sanity, and as you know, cash is reality. The main drivers for our free cash flow generation are twofold: the doubling of EBITDA over time and a good control in working capital. After CapEx, R&D and working cap free cash flow will amount to EUR 10 billion on a cumulative basis '21 to '25. This is 70% a EBIT-to-cash conversion rate, which is a record level we used to guide for 50% to 60%. So let me focus now on working cap, CapEx and R&D. We expect nonmaterial changes from -- nonmaterial impacts from changes in working cap. So positive impact of Rafale advanced payments will last up to 2023. By the way, new export contract was signed last week in Croatia for 12 jet fighters. Inventory DSOs stand at 130 days. This is a pretty high number reflecting the flattish market we are in. With growth coming back, a normalized level below 100 days is our target. On the right-hand side, there is a clear evidence of cash received in connection with the LEAP service contracts. As the fleet grows with a high proportion of service contracts right per flight hour, this becomes to be material and the balance sheet. So all in all, working capital should be more or less stable over the period. Turning to CapEx. Intangible CapEx is mostly capitalized R&D and will remain flat. On tangible CapEx, after 2 years of strict control, we will now resume tangible CapEx spend to support growth in capacity, bringing additional capacities to the LEAP MRO activities. We'll focus on digital projects, spending more than EUR 700 million over the 5 years on that topic and have also low-carbon initiatives with our CapEx spend. As we are accelerating, the expense position will grow from 3 to 3.5 from '21 to '23. The graph now shows the R&D expenses profile over the period. In the absence of any major development program to date, development expenses will be stable. On the other hand, in light blue, self-funded R&T is growing, both in euros and as a percentage of sales from 2.5% to 3%. 3 quarter is pointed towards our decarbonization objectives and is supported by growing funding from EU and France. The R&D impact on P&L after tax credit, capitalization and amortization should be, on average, 4.5%. So summarizing our financial framework for 2025. Growth is back. Margins will reach record levels and cash flows will fuel organic growth and shareholder returns. Capital allocation is our next topic. Let me walk you through our vision and capital deployments around 3 pillars: M&A, leverage and shareholder returns. As Olivier has previously covered, a few comments on M&A. We are planning active portfolio management going forward, both on the divestment side and on bolt-on acquisitions. 30% of Zodiac Aerospace activities are under review. Businesses not meeting Safran's DNA, as illustrated by Olivier a few moments earlier, will be good candidates for divestment. This should have globally accretive impact on group margins. We will also be looking at very selective and bolt-on acquisitions that would fit our portfolio. These are as a fast track to a market or as a fast track to a technology or to secure an upstream critical part. As you can see on this chart, we have been active on the 2 fronts, and we already divested a number of nonaerospace activities for a total of more than EUR 130 million in proceeds. Safran is now rated BBB+ with a stable outlook, easing access to debt capital markets and reducing cost of funding. We've been very proactive on the funding, on the financing front since 2 years. We have been securing EUR 3 billion of new financing since March 2020 with very long-term transactions up to 12 years. The average debt maturity rose from 1.8 year in 2019, up now to 5 years. Debt profile is very well distributed, and we already secured a EUR 500 million green loan from the European Investment Bank to support our R&T engine programs. We already had a loan of EUR 300 million, which started in 2009 and ended in 2020. So this loan is not yet drawn. We expect to draw it next year, and it will help refinance the 2022 USPP maturity. Safran is emerging from the crisis with a very strong leverage ratio of approximately 1x EBITDA. Free cash flow generation should continue deleveraging the balance sheet to a net cash position by 2023, and we would like to preserve flexibility to fund any new development of an engine program, for example, that would cost us $1 billion or $2 billion or for any change in working capital needs. Therefore, leverage will be kept below 1x in the current context. Last but not least, the third pillar is regarding our dividend policy. Our shareholders enjoyed a steady TSR of 15% over the past decade and growing annual dividend based on a 40% payout ratio. We will return to this level for fiscal year 2022, meaning paid in 2023. In the short term, moderation is vital. First, we need to take into account the efforts agreed by our employees for the second year in a row; and second, the government support to share the cost of furlough schemes. So the 2021 fiscal year dividend paid in 2022 should reflect that. Now it should be clear to everyone that we are not expecting or not planning any share buyback programs in the short term apart to minimize the potential dilution on our convertible bonds or to serve long-term incentive plans for management. As Ross said in his introduction, the Board of Directors will review its practice in 2023 to ensure growing and attractive returns to shareholders. As a conclusion, we have set ambitious but reasonable objectives. Olivier, the leadership team and I are fully committed to deliver this performance. Thank you for your attention.

Thank you, Pascal. We are now going to open our first Q&A session, which will last 30 minutes, as I said earlier. So please try to limit each of your questions so that as many people as possible can join, including from our remote participants. To moderate this Q&A session, I welcome Adrian Dearnell, a French-American economic and financial journalist.

Thank you. So what we're going to do is to try to take as many questions as possible from the room. So raise your hand, and a microphone will be handed to you, and I will recognize speakers in the room and I will also try to alternate from the questions that I'm receiving online. Unfortunately -- could somebody refresh the screen? The queue of questions from the Internet, and there's a bunch of them, has disappeared now. So we'll go first to questions in the room, and we'll sort out the Internet-related questions.

Okay. So here. Sir, please introduce yourself and ask your question.

Rob Stallard from Vertical Research. Pascal, a question about your margin slide, the traffic lights, as you called it. I was wondering if you could maybe help us out with some idea of different weighting of those various items. Are they all equally weighted in trying to figuring out the margin or there are some that are bigger than others?

No. Adrian, can you hear me?

Yes.

Okay. So my traffic light slide, I'm sure it will get a lot of attention. We won't provide the different weight of the different categories. I can give you one, for example, on purchasing. We are discussing inflation. Inflation is clearly a headwind today to the margin. Could it be on raw material prices, on energy, gas and electricity? We've seen sometimes 40%, 50% increases and transportation costs as well. All in all, we expect a 30 to 40 bp headwind in 2022 coming from inflation. So we have to offset that through adapted -- further adaptation plans.

Other questions in the -- here -- is that -- okay. Is there a question over there? No. Who has a question in the room, please? Oh, here we go. Can we bring a microphone to this gentleman, please? Right here.

Andrew Humphrey, Morgan Stanley. Could I ask one market question and one technology question? On the market, you've highlighted a narrowbody recovery by end of '22 but a relatively modest rate of growth thereafter. If those are the right assumptions and that's the central scenario that we should be looking at, why aren't we seeing more retirements today? And the second question around technology. You've highlighted RISE as a potentially disruptive technology offering for the next generation of aircraft. Safran and GE as partners in CFM are clearly in the best position to disrupt the industry given financial strength, market share, but we've just seen a generation of aircraft that has significantly benefited the airframe as through a more incremental approach to innovation. So why should airframes or why will airframes take the risk?

I will take those. So the rate of growth, we see a narrowbody air traffic recovery, as I said, by the end of 2022. Then we see -- and it's going to be mentioned during the engine session, we see a 5% growth from 2022, end of 2022 to 2025, okay? So we have modeled our medium-term financials around that. And as you have seen on the long term, over the next 20 years, we see on narrowbodies specifically a 4.2% average yearly growth. So you might consider it's a little bit cautious, yes. This is slightly below what the airframers are saying over the long term. This is in line what -- with what IATA is saying over the long term. So if the air traffic goes beyond that, then it's an upside, and it's going to be a nice news. Retirements. Before the crisis, the average hedge of aircraft retirement was 23 years. With the crisis, we see that average hedge going down to around 20 years, but with an average hedge of 20 years, the bulk of the aftermarket revenues coming from the shop visit is going to be preserved. This is why I stated that material impact of retirements coming from -- yes, material impact from -- coming from retirements would not -- would be unlikely in the next years -- I mean the next years' medium term. You mentioned RISE. At the end of the day, the timing for a new aircraft launch and an aircraft replacement is an airframer decision. You're absolutely right on that. And at the end of the day, it's going to be an airframer decision to select what they consider the best engine option. But as you mentioned, we are today the leader in this market through CFM with our GE partner, and we strongly believe that it's up to us to basically propose a disruptive option. So RISE is not an engine launch. RISE is a technology, is a launch of a technology program, which is focused on a disruptive architecture, as it has been explained by Eric and Delphine, this open-fan architecture, which we believe is absolutely compelling, and the only way to get to a minus 20% fuel band versus the latest generation engine and we believe the best way to meet the climate challenge and the zero aviation pledge that we made. And we believe -- I mean it's up to us to demonstrate this technology, and this is what we are going to do, and to be in a position to provide the best engine option when time will come. But once again, we are [ able ]. At the end of the day, you're right, it's an airframer decision. Thank you.

Okay. Back there. Yes?

Charles Armitage, Citi. On the electric and electric hybrid, I don't think there was any reference to the urban air mobility, whether it's the Jobys, the Liliums or whatever. When do you think you'll start having revenue coming from an electric-propelled or hybrid-propelled vehicle?

Eric, you want to take that one?

Yes. You're right. We have not made today a forecast on the moment where -- for especially new mobilities, I think you're referring to that. Urban mobility and so on, we could capture additional turnover with this. For hybrid electric propulsion, hybrid electric is a feature that is already introduced for sure in the RISE technology demonstrator program because the 20% reduction we are referring to is the combination of all technological bricks inside the RISE, including the hybrid electric. So part of the answer is that for the next generation, it has to embark the hybrid electric and as a successor to the CFM, then the LEAP generation. The next one that will renew the portfolio of products and generate the revenues for Safran will, for sure, include the hybrid electric dimension if only for this next generation of our mainstream. For urban mobility, that is more unlikely today. Our point today is to prepare the technological bricks so that if this is an alluring market that is consistent with the DNA of Safran, then we will be in a position to be a player on this market, provided this is consistent, as you referred, Olivier, with all the characteristics of the DNA of the businesses that we are able to address. That's typically what we are doing.

Now we -- I would complement by saying that we have a road map of developing electric motors that we can potentially combine with turbo machine and propose, what we call, turbo generators for new air mobilities. So this is why it can be full electric or hybrid electric. We have engaged with many projects and many companies, small companies and big companies, and our road map aims at being able to certify those electric motors at the low end of our road map next year, at the higher end of the road map by 2024 and potentially generate revenues from then.

Here. The third row, here.

It's Harry Breach here from Stifel. Can I ask you 3 slightly different questions? And firstly, guys, when we think about escalation rates at the moment, are there any parts of your business to which industry standard escalation formally do not apply, okay? And can you give us some feeling about the tailwind that, that might bring to revenue growth over the next year or 2? Because it strikes me that, certainly, there are some PPI indexes in the U.S. that are running at 20% plus at the moment. Secondly, clearly, you may have caps, and that's an important issue to address. Secondly, I think in October on the call, Olivier, you said from the point of view of propulsion and the civil aero aftermarket, you're anticipating October order intake would be very strong. You could see that with the orders that you had in front of you. Can you give us your feeling today about sort of how aftermarket demand is going? Is it sort of more or less what you expected then? Is it maybe a bit better? And then just finally, one of my favorite slides from past CMDs was the one that looked at the LEAP-CFM transition and the combined effect of the 2, and I used to try and get my ruler out and estimate the rate of loss on the LEAP. And clearly, it's been a complicated couple of years with declined LEAP production. Can you give us a feeling, should we be thinking today that the level of sort of -- sorry, the level of in-year loss on LEAP somewhere in the sort of low to mid-triple-digit range heading towards that breakeven by 2025 at the latest? Is there any light you can throw on that? That would be helpful.

Pascal, would you like to take the first one on escalation formulas and potentially caps? I'll take the second one on aftermarket. And the last one, Harry, the CFM-LEAP, what I suggest is there is going to be a full presentation on civil engines, both OE and aftermarket. So we will give you more colors on that, and maybe if you still need some more clarification, then you can reask your question, please.

Thanks, Harry, for your question. On the pricing escalation, some contracts have, what we call, back-to-back clause where we pass on through all pricing from what we buy from the supply chain to the customers. In other cases, we have preagreed escalation pricing included in our contracts, meaning that each and every year, we will apply the contract, and the pricing will go up by x percent. And in a very few number of examples, there won't be any escalation pricing clause included in our contracts.

Is that just for Propulsion, Pascal? Or is it...

[indiscernible] propulsion, as you well know, and it will -- sorry, and it will be discussed by Jean-Paul and Francois. Typically, on the spare parts, we have an escalation policy, which leads to increased pricing by 6%, 7% a year, every year on the 1st of December, and that is why usually the November month is a huge month in terms of aftermarket because airlines are coming to the shops before they will suffer from the price increase.

Harry, your question on the aftermarket in Q4. Yes, indeed, at the end of October, I said that we would have a strong order intake in October and, therefore, a strong month in November. That's what indeed happened. So we had a strong month in November. And therefore, if you remember, I reconfirmed then our guidance for this year, and I can repeat it again. We reconfirm our guidance for this year.

Mademoiselle, this gentleman here.

All right. George Zhao from Bernstein. So coming back on the retirement. I think the concern for the market has been on the used serviceable material side. So for a typical aircraft that's retired, how do you think about the value there is in the engine components that could service USM? Or I guess, alternatively, approximately how much of the engine spare sales that you do make relate to parts that can't be substituted with USM? And I guess second question is on the technology side. If some of the electrification or hydrogen do take on, how do you think about any challenges that could pose on the engine aftermarket business model that you have today?

On retirements and used parts, first of all, there is a lag. I mean there is a cycle time between an aircraft being retired and the inflow of used material in the market, which is around 12 months plus, and we -- as I said, we've seen a very low level of aircraft retirements in 2020 and 2021, which is good news for us. The color I'll give you on your question is about 50% of parts will not be impacted -- cannot be impacted by used parts availability simply because through the, what we call, life-limited parts that have to be replaced by new parts or high-consumption parts that basically we know when an aircraft is being retired are scrapped. So all in all, 50% of the content and the spare part revenue is anyway not impacted should there be availability of part in the market. And today, there is almost none today on CFM56 second generation. On the engine business model, in aftermarket, I guess your question is relating to new-generation aircraft. Will that change our overall business model? We don't think so. There is no reason that the business model would be changed. No reason.

Maybe in complement, if I may. To illustrate Olivier's point, for the bulk of our business, airframers and so on, of course, at the end of the day, the decision will be the one of the airframer about the concept, but we all agree between airframers and engine makers that there will be the need for an engine that will preserve a gas turbine because the limitation of the full electric design does not go up to the airframer. It's behind for lighter concept that there is a chance that the full electric is applicable. So for the bulk of our business, there will be a gas turbine. With SAF, with hydrogen anyway, you will preserve, as Olivier said, the typicity of the activities that have to be done for the maintenance of this in term of work scope globally. There are some adaptation but not major. And where electricity has a chance to serve the future of aviation, it's related to categories of aircraft or flying vehicle that, for us, would look like additional business as compared to today's position of Safran. So for us, that's the reason why it's not that much a subject of -- well, changing dramatically the business model of Safran, as you know it already.

So the good news, Eric, is whatever the fuel, there's always going to be an engine. Always.

I suggest we recognize some questions that were sent in via the webcast platform. There's a lot of them. Maybe we could do a rapid fire with as many questions as possible and short answers to cover as many as possible. So I'll just dive right in here. "Can you explain what would be the main differences in your scenario underpinning the bottom versus the top of your 2025 margin target?" Who wants to jump on this one?

Pascal?

I'm not sure I got the question. Sorry.

"Can you explain what would be the main difference in your scenario underpinning the bottom versus the top of your 2025 margin target?"

Air traffic rate. More or less 1 point of traffic makes a big difference in aftermarket. And again, we'll come back to that on the next discussion, that air traffic is clearly an assumption that makes a difference in the margin. Then the OE rates, should we see the widebody market ramp up quicker than we expect? Today, it will be positive. On the narrowbody market, we are planning to achieve a 65 rate for Airbus by 2023 and something like in the 50s for Boeing at the same period of time. Should we go beyond that, it will be a positive as well.

Okay. Next one, "Do your margins and/or revenue targets include the impact of divestments?"

No, it does not. This is short.

Yes. "Should we view the lack of EBIT margin on LEAP RPFH through 2025 as a sign that you believe costs are coming in higher than expected once you have good data prior to 2025 on costs?"

No. No. It's not a lack of confidence in the cost we will experience during the shop visit. It's purely adopting a cautious accounting method by not recognizing margins up to 2025. As soon as we have enough volume, enough confidence, enough visibility, then we'll start to recognize margins. But as I said, gradually, from 2026 up to 2030, with a cautious bias. So we are postponing margin recognition over time.

Okay. "How do you reconcile Airbus' confidence on increased rates to 70 or 75 on the A320 and your own cautiousness?"

We have committed to accompany Airbus up to rate 65 by 2023. This ramp-up is going to be a challenge because for us as well as for Airbus, by the way, because our supply chain has been extremely fragilized during the crisis. Therefore, we are going to focus on meeting this challenge and delivering on this ramp up. Going beyond today is just a scenario. It's not yet a firm ask from Airbus. It's just a scenario. So going beyond that, it is not time yet to take a decision. Premature to take a decision today.

Okay. Next one, "What are the production rates of A320 and 737 MAX that you have taken into account until 2025?"

As I said, we plan to deliver north of 2,000 LEAP engines as early as 2023. So the rates that we have assumed to get there is rate 65 for Airbus with our 60% market share on LEAP, and we have also assumed rate increase on the Boeing side. As I said, the inventory of MAX -- undelivered MAX is going to melt down in the next 2 years. So in 2023, we have to expect a very strong ramp-up at Boeing, and we have assumed that the rate would be around 50 by the end of 2023. Then after that '24, '25, we've just we've just continued on the same rate as the end of 2023 to date.

Okay. Next question, "What will be the profitability of the LEAP aftermarket compared to the CFM56?"

So the CFM56 business model is based on the time-and-material model where we sell spare parts, which is a dominant model we have with CFM56. On the LEAP, we are selling much more than spare parts. The majority, at least by 2030, will be made of rate-per-flight-hour service contracts. These contracts include a much larger scope of activities beyond spare part sales like labor and repairs, like fleet management, lease coverage and so on. On the spare part side, if I isolate only spare parts, there is no reason why it should be different. Now the revenue base will be different, and we won't disclose -- we don't disclose the CFM56 margin. I'm not going to disclose what will be the LEAP aftermarket margin.

Okay. Moving on to the next question. "Is your assumption on average age of aircraft retirement the same as Airbus' 18 years old? How do you model engine retirement?" I believe this was more or less covered earlier.

Yes. I mentioned that our model was assuming an average age of 20 years.

Okay. Next one, "What is the target leverage level? And what will Safran do with excess cash as approach cash positive, i.e., M&A, repurchase, et cetera?"

I guess we covered that. The target leverage will be in the current context below 1. In order to preserve flexibility to fund any new development, as I said, an engine program could cost us $1 billion, maybe $2 billion. Any change in working capital could also be in the range of $0.5 billion or $1 billion. So we will keep leverage below 1x. Now in terms of capital allocation, I guess I've covered that. Organic growth is our first priority. On the M&A front, we should have some proceeds from a few divestments, subject to market interest. It could be reinvested into some bolt-on acquisition, and then we expect to return to a 40% dividend payout by 2022 fiscal year for our shareholders.

I think we have some last questions in the room. Raise -- here. Anybody else, please? Over here.

Yes. It's David Perry at JPMorgan. Just one question maybe for you, Pascal. On the Slide 63, which is really interesting, and the deferred income is kind of a new growing part of the business model. Just as CFO, do you consider that your cash -- and when we start to think about the 2023 potential shareholder returns, how do you factor that in when your Chairman said you'll have a net cash position, but you also have a lot of customers' money on balance sheet?

4 I guess you are referring to the deferred income?

Correct.

Yes. So yes, there is a strong increase in deferred income, first, for RTDI but also coming from the service contracts per flight hours on the LEAP. What we recognize there is the difference between billings and revenues that we book as a contract liability on the balance sheet. We have to perform the shop visit in a few years' time. So it's really a liability we have on the balance sheet before we can recognize more revenues, meaning more margins in the future. Does that answer your question, David?

Yes. I guess you're just comfortable with the stickiness of it, and it's not something that would stop you raising shareholder returns is what I'm really asking.

No, no, no. We are comfortable with it, yes. It means future business.

Okay. Let's keep going in the room if there are questions in the room. Sir, yes.

Christophe Menard, Deutsche Bank. One question on the EUR 500 million-plus cost reduction. You're reducing -- I mean the reduction in personnel is less than what you'd guided to. What does it mean in terms of the structural savings factory? Did you do better than expected on this to achieve EUR 500 million plus?

So starting point was EUR 2.3 billion back in 2020 when we started to adapt our cost base. This EUR 2.3 billion will fade out over time. I took the example on personnel. We benefit today from cuts agreed by our employees in France to stop as there are some profit schemes and wages. Last year, they had no wages increase. This will fade out by 2023. We have agreements with unions that will last up to 2023. So all in all, at the end of the day, what will benefit the cost base is a lower head count, more or less 10% less in 2025 compared to 2019. We have adapted the footprint. We've closed a number of sites. Olivier mentioned 4 sites closed in 2020, 3 different sites closed in 2021. We have also transferred -- and Jorge and Vincent will discuss that as well, we have transferred some work packages from high-cost countries to more competitive-cost countries, namely Morocco and Mexico. So it's clearly footprint, head count. It is also a bit of RTDI that makes the bulk of the EUR 500 million plus of savings being preserved through 2025.

Okay. I believe this brings us to the close of the first Q&A session. We're going to have a 30-minute break -- coffee break and additional content outside of this room, and then we resume with more presentations and more Q&A after that.

Thank you.

Thank you.

Thank you. [Break]

So welcome back. Civil engines is our next session with a focus on our OE business and aftermarket perspectives, followed by a Q&A, 20-minute Q&A. I would like to welcome Jean-Paul-Alary, Safran Aircraft Engines CEO; and Francois Planaud, Director of Safran Aircraft Engines Services and MRO.

Thank you, Cecilia. Good afternoon, everyone. I was delighted that so many of you were able this morning to join us at Villaroche. I believe you saw for yourself that the LEAP assembly line is a very good example of our capabilities and excellence. Just to let you know, I started my career at Safran Aircraft Engines as a young engineer 30 years ago. I joined the engine business once again at the end of last year, and I can tell you that each time, I'm impressed by the achievement made possible by a great team. I will now update you on our position on the LEAP market; our ramp-up as we get back on track; and finally, our effort to reduce cost towards profitability. Let us start with a few words on the performance and the commercial success of the LEAP. If the slide -- okay. As you know, we have the LEAP-1A on Airbus and 1B for Boeing in service. As of today, 141 airline operators place their confidence on us. As you can see, our customers are very diversified and based all around the world. This means that as we exit the pandemic and the MAX crisis, more than 1,600 aircraft powered by the LEAP are currently flying, logging up to 13 million flight hours. This success starts with an excellent product meeting or even exceeding our commitments. The high-level performance objectives have been set and met for the reliability, for the fuel consumption and the environmental goals. LEAP reliability record is already very impressive, only 5 late departure for 10,000 flights. This exceeds the outstanding reliability of our venerable CFM56 5 years after the LEAP entry into service. This means our customers can fly the aircraft with an average of 10 hours utilization per day and could be 14 for some of them. Key to this, our Safran advanced digital monitoring and our customer support organization. This include 3 call center; 300 field support engineers; on-site support force operating 24/7; and finally, a network of 7 MRO shops. What is the best testimony to our success? 95% of the fleet -- the LEAP fleet available today are currently flying as our customers relaunch their flight schedules. What does LEAP, as a winning engine, mean in the market? A few highlights I want to share with you. First of all, a 72% market share for the narrow-body segment. As you can see, nearly 9,600 aircraft are or will be equipped with the LEAP across 3 platforms: 737 MAX; A320neo; and the newcomer, the C919. Secondly, we are strongly positioned across the entire A320neo family where we -- as you know, we face a good deal of competition. Our penetration on this aircraft now stands at 60%. The pie charts on the right show the excellent win rate per aircraft, especially a great success rate for the A321 with the LR and the new XLR variant. There is here a special win I would like to share with you. Last May, we won the largest engine order from the Indian operator, IndiGo; a further 310 aircraft LEAP A320neo in addition to an initial batch of 280 aircraft order in 2019. What is most encouraging there is that IndiGo renew their confidence on us based on their experience with the actual fleet of 34 LEAP and 70 Pratt Whitney aircraft. Finally, in the first 9 months of this year, we have booked 1,816 new orders, giving us a firm backlog of 10,300 engines, a very promising momentum as we exit the crisis. So what does this imply in terms of production volume? As Olivier announced earlier, LEAP production will reach nearly 2,000 engines in 2023. Those engines represent a 15% increase compared to the highest level of 2019. So the objective is now to deliver more than twice this year production level. This implies for the LEAP-1A, Airbus has maintained an assembly rate of 40 aircraft per month, now growing. This has kept the LEAP-1A at a quite high level. From now, we have started increasing from 12 engines a week this quarter to reach 17 by 2023. This is fully consistent with the Airbus demand. For the 1B, acceleration will be steeper, times 4 in 2 years, from 6 engines a week during the crisis to 25 by 2023. Looking longer term, 2024 and beyond, we are aiming to -- for more than 2,000 engines per year. This run rate, as mentioned by Olivier, is still under discussion with both Airbus and Boeing. So back to the '21 and '23 period. So let me -- okay. Such a sharp ramp-up during this period requires building blocks and taking actions. The first ramp-up meant starting from 0 and be able to deliver 1,700 LEAP engines within 3 years. We did it, and this achievement proved by itself the strength of our approach to manufacturing. We have invested heavily in a state-of-the-art worldwide footprint. Our dual- or multiple-sourcing policy, coupled with the systemic risk management, made us reach a peak of 40 engines a week in 2019. We are now able to push this advantage further. Next, the way we supported our suppliers during this crisis is helping a lot to reenergize the supply chain. We implemented a minimum rate to maintain flow, skills and quality level. We also set up a specific control tower to detect and manage some critical suppliers and critical situations. Last but not least, a year ago, we decided to launch a comprehensive supplier -- supply capacity and quality monitoring initiative to anticipate risk well before any rate acceleration. We run formal capacity analysis. More than 100 critical supplier sites have been assessed so far, resulting in nearly 15 action plans, and no surprise. Focus today remains around competencies, raw materials, forging and casting. We have shared this comprehensive assessment with both Airbus and Boeing, and I can tell you it has been very valuable in order to agree of the ramp-up rate for '21 to '23. Our second target from LEAP is to continue our cost-reduction efforts. As a reminder, we successfully cut the cost of sales by 50% between 2016 and 2018. At that time, the aim was to cut another 10% by 2020, which, in fact, we achieved 1 year in advance, as you can see on the chart. During the crisis, LEAP cost has been maintained steady despite strong headwinds, lower volumes leading to load transfer balancing, investment slowdown, nonoptimized market share for our dual sources and few production stop and go. Just to be clear, this cost stability exclude sub-amortization of fixed costs. As explained by Pascal, tackling fixed cost has been our first priority during '21 -- '20 and '21 period. Our action plan results will surely help us through the upcoming volume increase. We are pursuing now our action plan to tackle variable costs going forward, driving for an additional minus 15% between '21 and '24. So first, in-house manufacturing regarding cost. Two fundamental operating cultures run across everything we do. The first one is lean. It's about removing non-added value. In fact, it's doing more with less. And the second one is right first time, anticipating risks for best quality. They both apply 3 main pillars: design optimization, manufacturing enhancement and quality robustness. All that, all the 3, can be fully embedded for new greenfield facilities, generating maximum value in such case. Let me give you a few examples about optimizing design. Opportunities remain to be seized in a number of areas. Removing part could be, of course, challenging but still doable. We also work on [indiscernible] material. For example, on the engine kit, moving from metallic to composite has generated a 30% cost reduction. Secondly, we will continue to upgrade our existing manufacturing using, one, Safran-based practices but also the manufacturing 4.0. Just one example here. With closed-door machining, we get a 50% saving in machine capacity by using digital monitoring and full automation. We have now deployed such breakthrough all across 4 facilities. In the quality domain, inspection time can vary typically from 10% to 30% for the most complex part. So cutting inspection time is another strong lever for productivity. Finally, we are still investing in state-of-the-art greenfield facilities. Two more will open and will be up and running in 2022, 1 in China for [indiscernible] casting and the other one in India for cutting seals. We are aiming to improve overall productivity by a further 30%. Turning now to the supply chain. We are using there 3 main drivers to maximize supply chain cost efficiency. The first area is supply chain streamlining. Market share adjustment is one key example where we can leverage our dual-source policy and if one supplier is ahead of the game. We also work on low-complexity part. We screened more than 1,600 part number this year and creating global commodity packages, and we achieved a 30% cost reduction in tenders. Furthermore, we launched the Leap Together initiative 4 years ago, as you know. We maintained this approach active during the crisis, focusing on very expensive part with tangible saving, as you can see on the chart. Finally, we drive strategic sourcing, for example, to secure raw material prices and volumes where we anticipate some risk. It's also about optimizing the use of raw material -- expensive raw materials. A particular effort has been made, leading to a 60% material recycling for titanium and nickel alloys. To sum up, we have a solid momentum. In 2021, more than 1,500 cost action items have been completed and implemented. We will continue at a higher pace going forward to reach the LEAP target cost. So to conclude, the product and the system supporting the fleet in service are delivering the expected benefits for our customers. We have a solid plan to ramp up once again and meet the LEAP 'OE gross margin breakeven no later than 2025. LEAP has been winning from the start and still is. We are highly confident we can keep the momentum in the coming years. So thank you for your time, and now I hand over to Francois for the aftermarket section.

Thank you, Jean-Paul. Good afternoon, everyone. I would now like us to review the CFM56 and LEAP aftermarket perspectives, which, as you will see, are showing a strong and positive outlook. First, let's look at traffic assumptions. As Olivier showed earlier, traffic for the narrow-body applications is the fundamental driver of Safran aftermarket activity. Our recovery scenario assumes that we will hit the 2019 narrow-body traffic level at the end of 2022. We then anticipate a significant growth in the following years, 4.8% per year up to 2025, which will drive our aftermarket activity. So what have we seen in the past 2 years on CFM56-5B, 7B aftermarket, our second-generation family of engines? After the dip of the second quarter of 2020, 5B/7B shop visit have been steadily recovering. The number of shop visits in Q4 this year should be close to 70% of the average quarterly value of 2019. If you compare with traffic recovery profile, this is a little behind because of green time effect, that is to say airlines or rotating engines or airplanes to deferments. Use of green-time engines is mainly the consequence of airplane storage levels in the period. However, we are seeing CFM56-powered airplane quickly returning to service, and the storage rate for the CFM56 is decreasing rapidly. In addition, I want to highlight an important point. The retirement of CFM56 5B/7B-powered airplanes have been historically low in the last 2 years. In terms of spare part revenue per shop visit, we've seen a stable trend over the last 2 years with escalation and stability in used serviceable material usage compensating some work scope optimization by airline. We believe this point to be short term, and in addition, MRO have been using up their precrisis inventory. So the CFM56, as a champion in its category, is well positioned to benefit from the recovery. Let's look at LEAP now. On LEAP, utilization has been quickly recovering as airlines prioritize young and efficient engine and airplane combination. 2021 has already seen a strong growth for LEAP with LEAP cycles being today twice what they were in 2019. Where are we on LEAP services contracts? Our portfolio of services contract has proven to be very robust through the crisis and continues to grow. We added north of 3,000 engines to our portfolio of contracts of our 2019/2021 time period. This is bringing to 42% the proportion of LEAP orders that include a signed service contract. And based on ongoing discussion with customers, we are still finalizing the maintenance schemes. We confirm that RPFH agreements will represent between 60% and 70% of the installed fleet. So as a conclusion, for LEAP, a quick recovery and a confirmation of the business model. Looking at forecast. We have a comprehensive spare part model, which we continuously refine over time. It starts with forecasting shop visits. The main input for this are the fleet in service over time and how and where it is utilized and a very large variety of technical parameters ranging from in-depth engine behavior modernization to operating data. This results in a long-term trend for shop visits with year-to-year variations, which are essentially due to airline strategy and decision specific to their own situation. Then we model spare part revenue at shop visit. This is a function of 3 main parameters: work scopes, taking into account module exposure and repeat standards; part replacement rates, and by the way, our model fully takes into account the fact that used part availability will evolve going forward; and the third parameter is catalog price evolution. Now let's focus on CFM56-5B/7B. This fleet has a very large installed base with 23,000 engines in service and is very young. 40% of the 5B/7B fleet is below 8 years old, and as said previously by Olivier, an average age of 11 years. 50% of 5B/7B engines have had no shop visits, which means they have their full aftermarket revenue in front of them, and looking forward, the proportion of engines with a large maintenance potential will remain significant. As an example, in 2025, out of a population of 19,000 engines expected to be in service, 75% will have had 0 or only 1 shop visit. What a clear illustration of the robustness of the maintenance outlook going forward for CFM56. A key assumption in our forecast is how the engine cycles generated by traffic will distribute across the different CFM engine generation. Between the different generation of product, cycles will be allocated first to latest generation, more fuel efficient, less maintenance work on the short term. So looking at LEAP cycles, this is dark blue on the chart, they will continuously increase as new LEAP engines enter into service. This will quickly grow, and we expect 2.4 more LEAP cycles in 2025 compared to 2019 -- compared to 2022, sorry. The CFM56 cycle, this is light blue on the chart, will still represent the bulk of utilization over the horizon, and there are no new engines entering into service. And because of progressive retirements, the number of cycles will gradually decrease and will not return to the precrisis level simply because of the 3 years of lost traffic growth. But the good news is that because of the crisis and the hours not flown during this period, the CFM fleet -- the CFM56 fleet will exit the crisis younger compared to what it would have been in our previous forecast; hence, providing a larger maintenance potential with some shop visit pushed out in time. So in short, CFM56 will remain the backbone of the civil aftermarket going forward. So as a result, we forecast a very solid 5B/7B shop visit recovery profile, very strong growth in 2022, a return to 2019 levels in '24 and a peak in the '25/'26 time frame, around 2,500 shop visits. As a potential tailwind, any additional traffic we believe will translate in more cycle and shop visit on CFM56 as the LEAP fleet is already utilized at its maximum. This could represent a potential upside to our base scenario. The LEAP shop visits would start to be significant in the '24/'25 time frame then growing rapidly and be a relay to the CFM56 activity. LEAP will reach almost 2,000 shop visits in 2030 with a shop visit profile for this program that will be ramping faster and higher than CFM56. So as a summary, the combined quantity of CFM56-5B/7B and LEAP show visits will provide a solid high single-digit growth profile from 2022 to 2030 and beyond. So let's look at revenue per shop visit. Looking at the different drivers of the revenue per shop visit, what really matters is a shop visit rank because the different shop visit in the life of an engine do not have the same value. The 2 first shop visits have significant higher value. They correspond to heavy work scopes with full performance restoration of the engine and often -- very often including the replacement of life-limited parts. Our outlook is that the proportion of shop visit 1 and 2 in the mix will be even higher than before the crisis, representing 75% of the shop visit of a given year today and in 2025. This is because some of the shop visits have been pushed out in time. Engines are younger in terms of cycle, and on top of this, the proportion of shop visits 3 and 4 in the mix will reduce because of retirements. So the other element we take into account to project the net revenue per shop visits are the following. We anticipate stable work scope as a consequence of the favorable shop visit mix. We expect to continue with a historical trend concerning price escalation, and for used part content, we anticipate an increase but a limited one as the offer will remain low for high-consumption parts and life-limited parts. So the balance of these parameters will lead to a net positive evolution of the revenue per shop visit for CFM56. So as a result of the trends I have shared with you concerning the number of shop visit and the revenue per shop visit, we expect a strong growth going forward for CFM56-5B/7B spare part consumption. We will return to the 2019 levels in 2024 and then have a high ongoing run rate over the 2025-2028 time period. And of course, higher traffic could materialize as a potential upside as well as for shop visits. So now moving to the overall outlook for CFM56 and LEAP aftermarket, including spare part and services for each model. We see LEAP growth picking up from 2025, gradually relaying CFM56, and we expect CFM56 and LEAP contribution to Safran Civil Aftermarket Index to post a high single-digit growth with a progressive switch from the mainly spare part CFM56 model to the RPFH model that will be prevalent on LEAP, as explained by Pascal. So as a conclusion, we are emerging from the crisis with a very robust aftermarket perspective. Before closing, let me share with you how we manage the various drivers of the long-term LEAP services contract. First, key to service contract is fleet management by anticipating and predicting engine behavior and leveraging our OEM expertise around design knowledge. We are extensively using digital tool and analytics and have the ability to monitor much more data on LEAP than what we had on the CFM56. This allows us to reduce or eliminate the need for physical interventions on the engine and allow us to offer really bespoke solution with customized maintenance airline-by-airline and even going down to the individual engine serial number, which is very effective. We have in place, in term of organization, dedicated teams to individually manage each service contract. These teams are responsible for the customer relationship and managing the profitability of the contract through drumbeat of very rigorous processes supported by IT tools. We are fully engaged in the LEAP MRO industrial ramp-up. It will be a combination of upscaling and modernizing our current capacities and creating new ones. Indeed, we intend to decide, in 2022, the launch of a new LEAP dedicated MRO site, which will be operational in 2025, and we implement similar approaches than on the OE side to monitor our capacity increase and demonstrate rates. Another key area of importance is maintenance cost management key to services contract. We have in place a massive plan to develop and industrialize a large number of repairs, 250 per year, a huge number, as a lever to reduce shop visit costs. And at shop floor level, we work on operational excellence, high-tech inspections and tailored work scope for each engine. So in short, and as a summary of those 2 charts, we are well organized with a comprehensive road map in place to meet our services contract performance goals. So to conclude, the outlook for civil aftermarket is very robust. CFM spare parts will continue to drive aftermarket growth with return to precrisis levels in 2024 and then a very high ongoing run rate. The LEAP services will progressively ramp up and generate sustained growth, and the combination of spare parts and services outlook leads to a high single-digit growth for total CFM56 and LEAP aftermarket revenues from 2022 and well beyond. Thank you for your attention.

All right. Let's begin this second Q&A session in the room. Again, raise your hand if -- yes, here we go. [Foreign Language]

Yes. It's David Perry of JPMorgan again. I'm sorry if this is -- I might look a bit silly in this question. I just want to check something. Your Slide 90 and your Slide 96, because on your Slide 90, you talk about high single-digit CAGR 22 to 30 for shop visits, and on Slide 96, the last bullet point says high single-digit growth for CFM and LEAP contribution to the aftermarket over the same period. I would assume the second one is a sales number, and the first one is a shop visit number, and the CFO, in the earlier session, said you raised your prices 6% or 7% a year. So apologies if I'm misunderstanding something, but why are the sales not growing faster than the shop visits there?

Okay. We need to distinguish CFM56 and LEAP in the answer. On CFM56, as I explained, we have a net pricing evolution per shop visit up to -- at least up to '25/'26 time period. So this is clearly providing a growth on revenue, which is, I would say, superior to the growth on shop visits. On LEAP, what is a little bit -- the effect we have to look at is that the conservative approach that has been taken in terms of accounting, and explained by Pascal, is kind of amortizing the translation between the shop visit and the revenue. Hence, the fact that globally, we are on the high single digits on the 2 aspects but with a trend which is more positive on the CFM56 and which is a little bit amortized on LEAP because of the accounting approach we've decided.

A question here.

It's Rob Stallard from Vertical again. A question on the aftermarkets again. You've got 2 very different business models here now, one with time and materials and selling spare parts on the CFM56 and the other being the long-term service agreements on the LEAP engine. I was wondering how you practically manage it because under time and materials, it pays you to sell as many spares as possible, and the LTSA obviously makes sense to sell a few spares as possible. So how are you going to manage the business, 2 very different drivers?

Well, the way we manage it, and this was what I wanted to highlight in my last 2 chart, is that we are really -- set up an organization and processes to manage the long-term services contract for which the key lever for profitability is the management of the cost of the maintenance. And so the -- I would say the -- what we are putting in place is ranging from technical fronts, implementing repairs, working on serviceability criteria, which are really, I would say, cost levers and making sure that we are very efficiently managing those contracts from an organization standpoint, whereas this is in the industrial aspects of the contract or in the business aspect of the contract.

George Zhao from Bernstein. First question, maybe a follow-up to David's question. On -- just as said, even on this CFM56, you're talking about the shop visit getting back to 2019 by '24. You talked about the growing revenue per shop visit, but you're also saying the spare parts consumption, which I assume is the revenue, getting back to 2019 by 2024. So is that just based on rounding or why we're not seeing a faster recovery for revenue versus shop visit? Second question on the LEAP fleet management or the contract management. Beyond the conservative accounting, what does that mean, right? Are you getting more revenue compared to CFM but potentially at lower margins from the fleet management that you're doing?

I'm not sure I really captured your first question. If you can...

The first question is just on the idea that you're talking about CFM56 shop visit getting back to 2019 by 2024. You're also saying the spare parts consumption, which I assume means revenue getting back by 2024, even though the revenue per shop visit is improving there. So I guess what's going on?

Well, the point on this question, the point is that we start from a point where, over the last 2 years, as I explained, we've seen a stable revenue per shop visit. So we start from a point where we didn't have an increase, and in fact, yes, going forward from 2022, we expect, as I said, a net positive increase in the revenue per shop visit that will drive this trend on revenue. On the question of -- on your second question, I would refer to the point that has been made by Pascal in the earlier session of Q&A on the fact that on a long-term service contract, the scope of activity is larger. It goes beyond spare parts. It includes labor, repairs and, very often, additional services we are able to include in the package of the contracts such as fleet management, engineering support, lease coverage. There is a variety of things we can have in a contract. So that provide a base for revenue, which is larger than just the base of the spare part portion, if you will, of the aftermarket activity. And on the margin, I think I would make the same comment as Pascal would make some -- no additional specific comment on margin.

Let's switch now to some -- I'll come back to you just after. We'll go to some questions from our online audience and then come back to the room. A question here. "LEAP OE. What profitability do you expect after breakeven in 2025?"

Okay. I will take this one, and for that, I will refer to the previous Capital Market Day back in 2018. I think there is a chart that has been displayed to you where after the breakeven, we put some -- 2 illustrative scenario. One of them is by making the assumption of some improvement in terms of pricing and reduction of costs, and the second one with just reduction of costs, and if you take the reasoning today, I mean it will be exactly the same. So the same curve illustrative scenario that you see in the previous Capital Market Day but with the 3-year shift due to the crisis, so the breakeven starting later than in the previous Capital Market Day.

Next question, "What is your view on green time effect and how much time it could last?"

Okay. I will take this one. So green time effect is mainly the result of the fact that a lot of airplanes are stored and not being utilized at the moment, and so it gives the airlines the ability to turn around engines or airplanes. It depends. The way we see the green time effect is that we believe that as soon as airline will reuse their fleet at a very high level, return to a way of managing fleets where assets utilization is maximized and really making sure that the best hour of flight is extracted from any equipment, then at this point in time, green time effect will disappear, I would say, naturally, and we expect this to happen somewhere in 2023 when, really, the rebound will be effective, and the airline will have confidence in the recovery and will be able to set up their fleet plans accordingly.

Okay. Next question, "A 15% CAGR in civil aftermarket versus 2019 levels implies a return to 2019 civil aftermarket revenue not until 2025. How do you reconcile that with the market recovery by year-end 2022?"

Can you repeat the question?

Okay. So it's a little bit of math here. "A 15% CAGR in civil aftermarket compared to 2019 levels implies a return to the 2019 civil aftermarket revenue levels not until 2025. So how do you reconcile that with the market recovery by year-end 2022?"

Wow. I need to do some math here. First, the first comment, the first statement is wrong. What I said is that the CAGR of civil aftermarket will be 15% from 2021 up to 2025. Not -- I'm not referring to 2019. So I guess we need to look at the point and answer separately, if you don't mind.

Do you want to take a look at...

Later on.

Okay. Okay. Now the last question, "Given your pricing power noted in civil aftermarket and your expectation that retirements remained low, what does recovery in civil aftermarket -- no, sorry, why does a recovery in civil aftermarket lag recovery in shop visits?"

Well, in what I have presented, we have a rather consistent recovery between shop visit and aftermarket in terms of evolution of the spare part consumption, and globally, the combined contribution of CFM plus LEAP to the total aftermarket. So I'm not sure I really understand the point.

Would you like me to repeat the question? Or...

Yes. Because I think we are consistent, and the recovery on revenue is very consistent with the recovery on shop visits. 24 is a recovery point where we go back to the 2019 level, I think that's the simple answer to the question.

Okay.

Maybe I can complement a bit on that one. Yes, we expect narrow-body air traffic recovery by the end of '22. As presented by Francois, we expect shop visit recovery and aftermarket revenue...

In '24.

CFM56, recovery to the 2019 level by 2024. So your question is why the lag? Simply for 2 reasons. The shop visit is not a question of the instant air traffic level. It's a question of cycles over the life of the engine. So the fact that we have not flown in 2020 and in 2021 makes the engines younger in a way. And so it delays, it push out the shop visit for those engines. That's one reason. And the second reason is the short-term cash optimization from the airlines through green time. So those are the 2 reasons for this lag of almost 2 years. So you just cannot say instantaneously because the air traffic has recovered to the pre-pandemic level, certainly, at the same instance, the number of shop visits is the same as 2019. Does not work like that. Thank you.

So this gentleman was first, and then we'll go to you, so...

It's Andrew Humphrey at Morgan Stanley. I just want to have followup on David's question from earlier about the differential between shop visit growth and revenue growth in the aftermarket. You've highlighted the conservatism around profit recognition, which feeds into revenue recognition on the LEAP. But my understanding is by the time we get to 2025, actually, a small proportion of those LEAP shop visits would actually be under long-term service agreements, the earlier part of LEAP deliveries and more kind of time and materials. So I'm just surprised it's that material effect -- an effect or that dilutive effect on the difference between shop visit growth and revenue growth. I guess -- so I guess the question is, is that right or what proportion of LEAP shop visits in 2025 would you expect to be under time and materials versus long-term service agreements?

Okay. Well, in 2025, I think the answer is very simple. We expect the vast majority of LEAP shop visit to come under long-term services contract. And there would be -- this is really the predominant model, especially in this period of the program based on where we are today in coverage of the fleet through long-term services agreement.

[indiscernible]. Thanks for disclosing the 6% to 7% price increases on CFM56. I was wondering, is it going to be the same for LEAP?

Well, we intend to have a very similar pricing policy only compared to CFM56. This is the essence of our business model. As you know, the engine business model is mainly based on the aftermarket. So yes, we intend to have a similar practice on LEAP going forward compared to what we do on CFM56.

It's Harry Breach here from Stifel. Can I ask just a couple of questions? Just technical one with the LEAP. If on the long-term contracts, we are not recognizing any profit until 2025 because we are counting conservatively in the early years, when we get to 2026 and we revise our cost estimates at completion of each contract to reflect our in-service experience, we have maybe a onetime sort of in-year catch-up effect or will it be spread over the remaining lives of the contracts? And if it's over the remaining lives, can you give us some idea of how long the average term of each of the long-term contracts is? And then final bit, sorry, is there an agreed build standard of the engine at the end of the contract?

I'm sorry?

Is there an agreed build standard, for example, whether the LLP stack that will be fully replaced at the end of the current year?

Okay. I will take the 2 last technical question, and then will hand to Pascal. So from your question, the average time duration of a LEAP service contract is around 12 years. That's the order of magnitude you need to have in mind. And yes, there is generally in those contracts, what we call a [ main ] build, which is a closer defined build standard that we have to do at each visit under this contract for the given customer. And by the way, that [ main ] standard can be variable depending upon the customer.

First, I would like to clarify a point that you made. On the CFM56 time and material model, we have price escalation policy every 1st of December. You said the order of magnitude is 6% to 7%. On long-term service contracts, we have escalation included in the contract, which is not up to the 6%, 7% that we have on the spare parts. So that makes a difference. Now on your question about the margin recognition. No, there won't be any onetime effect in a given year. It will be spread out over a large number of years. We expect to start recognize margin from 2026, but it will be gradual year after year. It will be small amounts at the beginning. So don't expect a onetime impact on margin.

Gentlemen, thank you very much. We're going to now move on to the next discussion. Thank you. Please regain your seats. And I will now call Cécilia up on stage to present the next section.

So the second business session is Aircraft Interiors. That will be also followed by a 15-minute Q&A. So I would like to welcome Vincent Mascré; Stéphane Cueille, CEO; and Jorge Ortega, our new Safran Cabin CEO since yesterday, and who succeeds Norman Jordan. Vincent, the floor is yours.

Thank you, Cécilia. Good afternoon, everyone. It's my pleasure to be with you today. 3 years ago, I was in front of you presenting the roadmap for the growth and the development of our seating business under the new leadership of Safran. Today, I'm delighted to share with you what we achieved, where we stand and what our ambition and objectives are for the future. For the sake of clarity is that I know that you are going now to absorb Slide #99. I would like to summarize my message on this one slide. Of course, we are operating in a post-COVID environment, meaning a significantly reduced market, which will remain reduced for a while. However, we are strong in this market. We have successfully achieved an operational transformation, which continues with a strong momentum. We have completely renewed our portfolio through an innovation dynamics. We have also taken benefit from the crisis to expedite the streamlining of this business, and we have improved our breakeven point by 40%. And we are on track to demonstrate our leading position in this market and to deliver a double-digit profitability. Let's dive in what I just said. I'm very happy to tell you that the deep business process engineering that we launched 3 years ago with the support of Safran skills, teams and tools is now bearing fruit. And firstly, fruits to our customers. We have been delivering our Line Fit seats to airframers on time since end of 2019. We have drastically improved the level of quality we deliver. And this is recognized by the airlines of customers through the annual surveys we make with it. And our products now are fully offerable to both Airbus and Boeing. These fruits are also useful for us internally in terms of health and safety, in terms of cost control, in terms of lead time and cost reduction for our new developments. Of course, the transformation is not over and maybe will never be over. We are continuing to work actively on several projects, on supply chain, on engineering processes, on quality right first time, because we achieved the right level of quality, but the cost to obtain it is still too high and towards a fully customer-centric company, and I'm proud to see the momentum we have on this project. We have completely renewed our portfolio. And today, decision-makers at airlines can select from our offer the product that fits the best their needs from the economic class seats to business class seats to first class. You can see on this slide a few examples of the recent products we have put on the market, some enter into service this year, like the Z400 with Emirates. Some are going to fly next year. And on the right, sorry for you, hidden, we have a few confidential projects we are actively developing for our large customers. This renewal of the portfolio has been made through modular platform concept, meaning for each product, we have a structure, behind-the-seat backbone that will remain the same for all the customers. And on this backbone, we can plug highly customized devices that will give each airline their precise expectation. This concept and process enables us to reduce the cost and the risks of the new developments. These new products have been also created through innovation. We have been working mainly recently on passenger comfort and privacy, as we see privacy a major trend on our market. Passenger enjoy creating their own personal bubble. And we won -- Safran seats won this year 2 Crystal Cabin awards, which I think are a good official recognition of our innovative spirit. We started as soon as Safran [indiscernible] to streamline this business. And already, end of 2019, we have generated EUR 50 million savings for the seat business from synergy with Safran legacy entities, and we reached breakeven. When the pandemic hit, we decided to execute quickly a major restructuring plan of the company, which included headcount reduction by almost 40%, reduction of the total footprint by 30%, the closure of 2 sites. The usage of furlough, of course, in France, but not only in each of our sites and countries in order to quickly adjust the capacity to the load while keeping and protecting the skills for the rebound. And of course, we have trimmed our capital expenditures while protecting and safeguarding the digitalization roadmap as we knew that we were and still are a bit behind on this topic. We achieved a reduction of our breakeven point by 40% and we target to be back to breakeven in 2022 despite the fact that in 2022, our sales will likely be still 40% below the pre-COVID level. This leads me to our views on the global market for the aircraft seats industry. Of course, the pandemic created a huge shock of demand for this industry. And today, the average sales in this business are 60% below the pre-level COVID 2019. However, so far, we have not seen any consolidation in the market. All players are suffering but all of them are alive. And the good news is that we see the market is now recovering. Starting H1 2021, airlines restarted cabin interiors seating projects, as these projects are so key for the attractiveness and the competitiveness of these airlines. In particular, we see great opportunities on the retrofit market because airlines, which are indebted might prefer to modernize and refurbish their cabin rather than to buy a full line fleet aircraft. However, we consider the recovery will be progressive, and we will be back at the pre-COVID level around 2025. And our view is that most of this market fundamentals are not changed. The aircraft seating business will remain a business of short cycle and high level of customization. It will be organized towards airlines. Airlines will remain definitely our customers. The biofurnished equipment model is confirmed. We'll be facing more and more severe certification rules, which are barriers to entry to this market. As I said, there is -- there will be a huge -- a lot of opportunities for retrofits. We will need, especially retrofits, to activate quickly a high level of skills in engineering and then in industrials, because when an airline wants to have a new cabin, they want it quickly and for its whole fleet. And finally, there has been a big question of will the business class segment remain as high as it was pre-COVID? I don't know. But what I know is even if the market share is reducing, and there will be more economy or premium economy, it will be retrofit projects. And by the way, Safran seats, as a generalist, is well positioned on premium economy and economic seats also. So as a conclusion, I would like to convey to you a message of confidence in Safran Seats. In a market that will recover and has started to recover, we have the strong asset of a completely renewed portfolio receiving a good welcome from airlines and enabling us a solid book-to-bill ratio. We have completely improved our operational performance. We are delivering the improvement of this business transformation to our customers. So we are very well positioned to demonstrate our leading position that we will achieve through relentless innovation. We need to stay ahead on this side of the business, delivering on time, on quality, attractive products and building and continue to build a long-term partnership, intimate partnership with our customer, the airlines. And of course, being a leader means being also leading in terms of profitability, meaning reaching a double-digit profitability when the market recovers, meaning by 2025. Thank you. I will give the floor to my colleague, Jorge.

Good afternoon. It is my pleasure to be here following the recent appointment as a CEO of Safran Cabin. I was previously working for Safran Electrical Wiring Systems in U.S. and Mexico activities. I have spent most of my career with Safran Electrical and Power. And I have been working a lot in customer satisfaction, improving performance through achieving leadership on my team. The cabin business, like the wiring business, is very cost competitive. And as with seat, we have suffered a lot during the crisis due to the delay in the wide-body recovery. Olivier was very clear in my primary assignment to continue the cost adaptation that has been led by Norman Jordan and to return to breakeven in 2022. The global market of Safran Cabin was $6.7 billion before the pandemic, and the price competition in our industry drive us to increase our engineering and production activities in more competitive cost countries. Safran Cabin has strong assets to build on, a leading market share, a full product offering, a technology for the connected clean and green cabin of the future. Our innovative products offering covers all of our product lines and has been recognized both by customers and through awards. For example, in 2021, Safran Cabin received the Crystal Cabin award for our clean lavatory concepts. Air France has selected our efficient cabin open space shelf bin as a strategy solution to gain significant extra storage capacity. Our new range of fire-resistant containers able to transport safely the highly inflammable lithium ion batteries in smartphone has been selected by Qatar Airways with a contract of more than 10,000 containers and our cool trolley improves the cooling capacity and provides an environmental-friendly solution. Turning now to our ongoing adaptation and cost reduction programs. We have put in place an aggressive transformation plan to improve our operational and financial performance. After COVID-19, we had to adapt to the new market reality, reducing our headcount worldwide, optimizing our footprint and transferring production to more competitive cost countries. Since 2017, we have put in place an aggressive site closure and optimization program. Since then, we have reduced 1/3 our total square meters. We have closed 7 sites in the past 2 years and additional ones to come in 2022. At the same time, we have been implementing best practices across Safran Cabin using our proven One Safran standard. In this area, I have a lot of experience since I have deployed the One Safran standards across all the wide in sites in U.S.A. and Mexico with very good results. We were able to achieve high level of customer satisfaction, a strong leadership. We have been using better our assets, cost optimization and overall, we had a better financial performance. In summary, Safran Cabin will reach to double-digit profitability by 2025. We will continue to drive cost synergies and business processes reengineering across the board. We will invest in innovation driving growth. But above all, my first commitment is to achieve breakeven in 2022. Thank you very much.

We now come to our last Q&A segment, and please let's give the room.

Charles Armitage at Citi. Historically, I think both Zodiac Interiors and B/E Aerospace were reaching mid-teen margins. Is there more juice in the tank from that double digit? Or have those Halcyon days gone forever?

Once again, I would say for the seating business, we consider -- we can go back and we will go back to the double-digit profitability. We will do that by 2025, and the key levers for this achievement will be, firstly, the operational improvement transformation we made, which enabled us to reduce our cost base and improve our efficiency. And the second one, of course, the volume because currently, we are in a volume which are so low that -- which are not the right one in this market. But yes, double-digit profitability is feasible.

Another question in the room?

For many years, Zodiac and B/E Aerospace were doing 14% to 16% margins. Mid-double-digit, to me, says 10% to 12%, not 14% to 16%. Is that 14% -- is there more to come beyond that 2025? Or is it low double digit is what the market is these days?

I would say that we see the trend -- a global market trend on this business and the global air traffic has been presented by Olivier and Pascal. It will be valid also for the Seating business.

Charles, I don't know where you are. Okay. It's really a step-by-step improvement in margins. So I guess, the main milestone we have to reach is next year. First, we need to go from minus 10% to 0 in 2022. Then for the next years, as Vincent mentioned, it's a question of top line. I guess we've done a lot of job on the cost base, which has been resized with site closures. We have less people. We continue to invest in innovation. So 10% plus, you're right, it's 10% to 12% by 2025. Then beyond that, we have not guided yet. But I don't see any reason why we should not be to mid-teens at some point in time, but not 2025.

In the room and here we go.

George Zhao from Bernstein. Focusing on the top line. I guess how dependent is the recovery on airline profitability and wide-body traffic. And maybe could you just remind us how much of your business is exposed to wide-bodies versus narrow-bodies?

For the seats business, our exposure to widebody is roughly 70%. And it depends on our business units. In Wales, our business unit is working only for business class and first class. So clearly, highly exposed to wide-bodies. In the U.S., it's 50-50.

And for cabin business, it's less impact. So we have around 30% exposure. And we have in our forecast already counting this projection. And for our target to be breakeven is already defined. So we have to continue following carefully the evolution of the wide-body in order to be sure that we take the right actions on time based on that evolution.

Here, [Foreign Language]?

It's Harry Breach again from Stifel. Maybe 2 very quick ones on seats, Vincent, if I can. Firstly, just you talked a little bit about all the existing players where it was still alive despite the market situation. Can you help us understand, just in market share terms, has Adient Aerospace, that joint venture, made any significant change or made any significant gain in share in the market in recent years? And different question. Just looking at the regulatory barriers, as I'm sure you remember, one of the great challenges sort of 5, 6 years ago was the head impact criteria and the flammability criterion, which were very demanding for Zodiac and others at the time. Can you -- you talked about regulatory change continuing to be severe. Is it as severe as the head impact criteria and the flammability criterion [ word? ] And does that mean the sort of cost, the ongoing sort of engineering cost and the certification cost is stuck high?

Okay. So on your first question, as of today, Adient has not earned a significant market share on this business. And today, the 2 major players, meaning Collins and us represent around 60%, 65%. And third one, with the third one, we go up to 80% of the market share, and Adient is not among these 3. Concerning the barriers to entry, yes, the certification authorities are adding new criteria. The newest one -- the first dynamic criteria, simulating hard landings have been introduced in 1988. Since that, you mentioned the [indiscernible] head impact criteria. After that, there has been a lumbar load and the new one is the neck load. So we are having new criteria. But for us, it is almost an advantage because we have the skills and simulations. We have the test ventures. We have the assets, which enable us to respond quickly. We are going to certify a seat. We are doing now less and less tests than before despite more and more requirements because we do more and more simulation.

Does it keep sort of cost being relatively higher, Vincent, because of the certification burden? Or do you think that the mid-teens comment sort of beyond 2025 is still achievable even with...?

Yes. Absolutely. Absolutely. Absolutely.

Why don't we transition to a question from our online viewers. First question, what makes you confident in your ability to deliver a double-digit profit margin by 2025? And what does it depend on volumes, product mix, wages, raw material prices?

So as I told you, I think what makes me confident is the huge transformation that we have successfully achieved during the last 3 years in terms of processes, in terms of organization, purchasing structure, engineering processes. The fact that we have renewed the portfolio, which is really a key asset. We have a very attractive and very modern product portfolio. And of course, also the agility and resilience of our teams who have been really engaged. We are determined and really are working and agile. Then what are the key factors? Firstly, the volumes, of course. And the volumes mean firstly, the recovery of the global market; and secondly, our market share in it. And I'm confident on both. That's it for me.

And in Cabin, okay, as Pascal said, priority #1 is to achieve breakeven next year. And we can see a positive trend. Just to give you an information. Last year, our book-to-bill ratio was 51% at the end of last year. Today is 124%. So that means that we are getting more orders, so it's good. It's good because we are getting more orders in aftermarket that are more profitable. We are getting more orders in cargo area. So the first goal is to be breakeven next year, but it's a good trend to go to the, let's say, to the 2025, but it's depending also in the wide-body recovery.

So we have a question here about wide-body. So in a world of low wide-body deliveries, what can you tell us about retrofit?

Well, once again, I think for airlines, which are indebted, retrofit will be a very good opportunity to have -- as soon as the market and the demand is coming back to have a modern and attractive cabin by refurbishing the cabin on aircraft, which are 7- to 12-year old. And it will be shorter lead time, cheaper in cost and as efficient in terms of passenger attractiveness.

Okay. One last question from the web. Could you give us a sense of the profitability difference between economy, premium, economy and business class seats?

No, I think, I would not communicate on this. I would say, pricing topics, which are highly confidential.

Okay. Is there another question in the room? One last question in the room? Yes. One last one.

Yes. Christophe Menard, Deutsche Bank. Two questions. The first one, it's on consolidation. There's been no consolidation. Would you consider some bolt-on acquisitions? We understand there will be probably some disposals, but are you looking at specific skills? And can you disclose, I mean, kind of the areas? And on retrofit growth, last CMD, you were saying, I think, 5% growth per annum. What would you be considering on this forecasting period now? Is it higher?

So on your first question, our scenario is purely organic growth. On the second one, it's still -- it depends on which period, but it's very -- it's still quite fluctuating and quite volatile. So on the short term, it's really difficult to give figures. It would be for sure, on the short term, higher, because we go from a lower point.

Okay. Thank you very much, gentlemen. Please regain your seats, and let us now welcome Olivier Andries and Stéphane Dubois for the final discussion presentation on ESG matters.

We will close today's session with our ESG strategy, which we have called Engage for the Future, which is derived from our corporate purpose to contribute to a safer world and more sustainable world. Let me start with a short movie. [Presentation]

Our ESG strategy 2025 is built around 4 pillars with 12 commitments, aligned with 12 out of the 17 United Nations Sustainable Development Goals. For each of those commitments, we have set goals to be achieved by 2025, and we monitor our progress. Decarbonization is our first priority and the cornerstone of our strategy. It does not only embrace our research and technology efforts towards sustainability as described by Eric Dalbiès earlier, but also the reduction of the emissions from our own operations. Being an exemplary employer is our second pillar. As I said before, people are our main asset. And we are fully dedicated to promote diversity and to increase the number of women leaders as well as develop skills and talents. Responsible industry is our third pillar. With a strong culture of ethics and integrity and also a strong commitment to support and engage our supply chain. Last but not least, we have integrated into our ESG strategy a commitment to contribute to the stability of the world and the protection of our citizens. I will not go through all of those commitments, but only focus on a few of them highlighted in gray. We have put in place a dedicated ESG governance led by our executive committee and monitored by our Board of Directors. The aim is to ensure full deployment of our ESG strategy across the group with a full engagement of our employees and also to monitor the progress towards our goals. ESG is crucial. And so achieving our targets represent a key part of my compensation as CEO. As you can see on this chart, 18% of my variable compensation is related to ESG objectives with a dedicated focus on gender diversity and low carbon project. Our long-term incentive plan for the Executive Committee will also take into account ESG criteria in 2022 from 10% to 20% subject to the Board approval. Here, we can see on the next slide that Safran ESG performance is recognized by the main nonfinancial rating agencies. For those key ESG rating providers, we are among the top performers in the aerospace and defense sector. We are ranked BBB by MSCI. We are second in our sector for sustainability analytics. We are in the top quartile in the transport OEM sector, according to CDP, which is focused on climate. Moving now to our first pillar on decarbonization. Since this year, we have included a dedicated climate section in our Universal Registration Document. We will go further in 2022 by declaring all products, by declaring the emissions, all categories of emission arising from all our product range, and this is referred to as Scope 3, and we will disclose our objectives for the reduction. Regarding emissions from our operations also referred to as Scope 1 and 2. We have set an ambitious goal to reduce emission by 30% in 2025 compared to 2018, which is a commitment in line with the 1.5-degree scenario. This means that our upcoming growth objectives and ramp up will be achieved with no additional CO2 emission compared to the low point in 2020. We are making excellent progress, and we are fully on track to achieve those goals. We activate 4 levels. We have set up an internal carbon price for our investment process, and low target -- low carbon target for our top management. We have set up what we call an energy management system across the group in order to reduce our consumption -- energy consumption. We are going towards green energy sourcing and green electricity sourcing such as photovoltaic panels. And I can testify not only in Mexico and Morocco but also in the U.K. I visited our key -- our teams in the U.K., they are very proud to show you what they were doing for low carbon and with the photovoltaic panels and an increasing use of sustainable fuels for our engine testing from 10% in 2021 towards more than 35% in 2025. So you see a very clear action plan that we monitor. And as I said, we are on track. I will now leave the floor to Stéphane Dubois, our EVP, Corporate Human & Social Responsibility to provide you more color on our second pillar. Stéphane, welcome.

12,000. This is the number of employees that we will have to recruit every year in the next 5 years. In the meantime, we will have to adjust our jobs, our skills to the digital transformation and climate challenges. Attraction, retention, upskilling of all employees but also transfer of knowledge when managing retirements will be core to our HR agenda. In addition, we have to be mindful that employees, newcomers, fresh out from universities are choosing their company according to the work experience that they have. And I can testify that on a daily basis, employees or newcomers tell me that they have chosen our company because Safran endorses key navigation or topics like home office. And in fact, being an exemplary employer is now absolutely critical. And at Safran, we have defined 4 main responsibilities that we share with our employees. The first one is to ensure diversity and inclusion, and they make the difference; reinforce career opportunities and skill development and they shape their future; strengthen a trustworthy workplace and they dare to act and innovate and promote collaboration and mutual support, and they are part of the team. Let me give you 3 tangible examples. The first one is about inclusion. We strongly believe that inclusiveness is critical to keep and attract our best talents. And we have put many actions in place. Typically, we train all our employees on nondiscrimination. We fight against unconscious bias. We have engaged action against sexism. We have redesigned our diversity charter. We pay attention to recruit people with disabilities. Today, we have more than 5.3% of our total employees that have disabilities. And we have reinforced the pay equity policy, and I can tell you that at Safran, there's no gap between men and women at management level. But you know what gets measured, gets done. And we are going to launch a global survey early next year to get a direct feedback from all our employees in all the countries on diversity, on nondiscrimination and inclusion. And according to the results, we are going to set up action plans to make sure that there will be significant changes when needed. And we are proud to say that at Safran, in this field in Europe, we are pioneers. The second example that I would like to address is gender diversity. Safran is a high-tech industrial company. And it's fair to say that in this sector, we still have a strong male representation. And even though we have a strong employer branding in our targeted engineering schools, women at best represents 20% of the population. We understand that we need to make significant evolution of the gender balance in our senior management. Our commitment is to overcome the situation by reaching 22% of women in our senior management by 2025 and 30% at [ ComEx ] level by 2026. In the last 2 years, we have made huge efforts to change the situation by having dedicated recruitment programs by strengthening our talent pool, but also training on typically to avoid the opting out phenomena, mentoring. We have also developed training to fight against unconscious bias, starting with our company [ ExComs. ] We have also partnerships with advanced companies such as L'Oreal. In terms of results, we have recruited last year, 31% of women in our management open positions. We have moved from 12% to 15% of women in our senior management pool. We have enlarged our female bench strength by 25% in 2 years. The third example is on people development. We, at Safran, develop skills, and this is part of our DNA. We truly believe that providing career path across businesses, across companies makes a huge difference. Last year, it's 7 mobilities that took place across companies. And we have also engaged with skilling programs. For instance, proposing to mechanical engineers to become data or architect -- sorry, data or industrial architects. In total, it is more than 600 employees that have changed jobs internally. In terms of training, we have committed to give 26 hours of training per employee, including a digital academy. This is twice as much as before. And last, anticipation on the retirement of our experts, 100% of our succession planning are ready. In conclusion, inclusion, gender diversity, up and reskilling are game changers. We are moving together in a very collective manner from the shop floor to the top of the organization across the companies, across the countries. Our platform is ready. We will reach our goal, because this is a deep and shared conviction. Thank you.

Thank you, Stéphane. Coming now to our third pillar, responsible industry. I will start with ethics and integrity. Maintaining the highest standard of business integrity is simply nonnegotiable. This is the only way to secure sound and sustainable growth. The tone must come from the top, myself as CEO and the Executive Committee members, zero tolerance of corruption. We have a robust trade compliance program. We have a dedicated collection risk mapping system. We have put in place a whistleblowing system. All our employees signed the ethics charter and the code of conduct. And we have set the goal to train 100% of our exposed employees in anticorruption by 2025. Regarding our supply chain, we are strongly supported our suppliers through the crisis, including, as an example, our investment in the French ACE Aéro Partenaires fund, and we are engaging our supply chain towards sustainability. Our goal is that 80% of our purchasing will come from suppliers, having signed the Responsible Purchasing Charter by 2025. Now the fourth pillar. Contribute to a safer world. Many of you, as investors, have asked us about Safran's involvement in different activities. Here are some key messages that I'd like to deliver today. As I said before, Safran is a dual company built on 2 pillars: commercial, and defense and space. Through our defense and space activities, we are proud to contribute to a safer world. We are proud to contribute to the stability of the world. And the stability of the world is simply a prerequisite for achieving our sustainability goals, as simple as that. We operate in a highly regulated sector, and we abide strictly by the rules, by the export regulations, not only from France, but from countries with which France have signed agreements. We are not involved in any activity related to controversial weapons. Through our ArianeGroup, which is our joint venture with Airbus, we are involved in space activities. And especially, we are proud to provide Europe with an autonomous access to space since decades. Through ArianeGroup, we are indirectly involved in the French deterrence program, which is aimed at bringing peace, security and independence, not only for France, but also for Europe. And for the sake of clarity, we are not involved in the provision of nuclear warheads. Just as our American counterparts, we are proud to provide the best of our technologies to contribute to the stability of the world, to contribute to the democracies and to defend the value of the democracies. Ladies and gentlemen, our ESG strategy is built around 3 priorities: decarbonization, diversity and stability. This is our purpose. Those goals provide a strong meaning for our people, boosting their engagement and the engagement of our best talents and our young generation. This is closing the ESG strategy session. And now -- you can stay, if you wish, Stéphane. Now is time to close this event. Ladies and gentlemen, what I would like you to remember today for this meeting, air traffic recovery. Air traffic is recovering, and we foresee the long-term growth. We are well positioned to benefit from this air traffic recovery and those accelerated trends that I was mentioning, because we have a young fleet of civil engines. We have onboard the high-runners, which will represent most of the future aircraft deliveries, and we enjoy a strong leadership position. We have now a leaner organization before the adaptation that we've made since the start of 2020 that will enable us to deliver an increased profitability, and we shall accelerate the pace of investment for the decarbonization. Yes, Safran business model is anchored on solid foundation. With these highly positive drivers, Safran is rebounding from the COVID crisis with a strong profitable growth to be at the forefront of sustainable aviation. Closing this event, I would like to warmly thank Cécilia Matissart and the entire Investor Relations team for the successful organization of this event. Thank you. Lot of dedication. Thank you. I would like to thank you all very much for attending and spending the time today with us. Thank you. I would like to thank my executive committee colleagues for their presentation, and I would like to thank our Chairman and the Board for their support. Thank you very much, and keep safe. Thank you.