Safran SA (SAF) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Safran Capital Markets Day. It's my pleasure to see so many of you here with us today. I would also like to thank all people connected online. Many of you have been long-term shareholders. Some analysts here with us today have been covering the stock for years. At that time, we were discussing figures and strategy with Pascal Bantegnie as Head of IR; and with Ross McInnes as CFO. And the share price was below EUR 15. What a journey in the past 6 years. Fostering trustful relationship and ensuring transparency with financial community is key. Your loyalty in Safran is invaluable to us. Some of you have the chance yesterday to visit our LEAP MRO shop in Brussels. I hope you enjoyed it. I trust you all appreciated our exhibit display during the launch and especially our very comfortable business classes. Try it, you'll love it. And now let me walk you through our agenda as presenting behind me. First, our Chairman will open the meeting. The afternoon, we will split in 2 parts, each including a Q&A session. In the first part, after our strategic overview our sustainability strategy and our R&D road map towards decarbonization will be outlined. Finally, our leadership position in safety and mission critical equipment will be highlighted with the focus on 3 businesses: Safran Landing Systems, Safran Aerosystem and Safran Seats. During the break, our audience online will have the opportunity to watch video showing how Safran is on board many platforms. After the break, we will first focus on our Civil Engine busines, providing insights on OE and aftermarket services. Last, but not least, our financial ambition will be detailed. And now let's start right away with the opening remarks of our Chairman Ross McInnes. Ross, the floor is yours.

Good afternoon. It's a pleasure to welcome you here in the room and online to Safran's 6th Capital Markets Day. On stage this afternoon will be some very familiar figures, notably Olivier and Pascal, not untypical examples of Safran's successful internal promotion policy. There will also be some new faces, further proof of our talent reserves and a useful reminder that success rests on technology, but also on men and women. 3 years ago in this room, we spoke of the challenges and uncertainties as the impact of COVID receded, but only to be replaced by the challenges come from brought by inflation, supply chain bottlenecks and the far-reaching implications including the above, a Russian aggression on Ukraine. Now Safran's management successfully dealt with these difficulties, minimizing the impacts from our customers while meeting or indeed exceeding virtually all of our financial targets. At the same time, continuing to invest for the future, there I say a greener future, as you know, the bulk of our R&T is devoted to meeting ambitious CO2 emission reduction targets. Now the Safran Board, in whose name I speak before you today, has demonstrated that we listen to our stakeholders and notably to our shareholders. 3 years ago, I told you that having shed 20,000 jobs outside France and benefited from French government furlough programs during COVID negotiated significant reductions in overall staff profit-sharing schemes covering 2020, '21 and '22. Our Board took the view that our shareholder return policy to take into account all these factors, and indeed, the uncertainty include -- on air travel recovery as we saw things in 2021. Well, by 2023, thanks to the efforts of our management team and colleagues in a rapidly recovery air travel context, we have now returned the dividend to within pennies where it was pre-COVID, and we've implemented some initial share buyback program. I'll come back on this later again. The Board has also, I think, been attentive to your views on the capital allocation over and above the issue of shareholder returns. The portfolio has been pruned notably in the ex-Zodiac businesses, which do not match our priorities. And further pruning indeed is likely as and when conditions permit. The Board also authorized acquisitions in areas such as artificial intelligence, engine MRO, resilient timing systems and of course, the pending Collins flight controls and actuation business. These acquisitions while being in different categories, all constitute relevant building blocks, boosting Safran's potential in the near and longer-term future. For instance, geographically optimal MRO facilities. You'll hear more about that later. That's the CapEx saving. Some of our acquisitions can be considered R&T and R&D shortcuts and some importantly, give us incumbency on existing defense and civilian programs, which gives Safran credibility as we prepare for and indeed contribute to with our partners to shaping the aircraft of the future. Olivier will stress this at many points in his presentation. Aerospace and Safran is not just about propulsion, as we know it today. Safran's equipment activities considerably strengthened, I'd like to remind you, by Zodiac's electrical distribution activity and Aerosystems, which you'll hear about in detail. They are relevant if we are to shape, contribute, enhance and maybe even defend, in some cases, our enviable positions on future airframes. Now I said the Safran Board listens to shareholders, has a duty to prepare for the future while sticking to the commitments we make to you, remaining disciplined and focus. This brings me back to the issue of capital allocation and shareholder returns. Now the Board has very thoroughly reviewed our medium-term plan, which underpins the ambitions, which Pascal will outline. But as it fits the business where investment decisions span decades, the Board has done its best with the help from management to look way beyond that horizon and look at various scenarios covering engine and equipment development going as far as the middle of the next decade. Of course, these are rough numbers. They're approximate. They're subject to caution. And before anyone asks, it would be foolhardy to disclose them. The conclusion, however, the Board came to is that such a Safran's cash generation capacity in the next 4 to 5 years is that we -- while spending at the same time what we feel is needed to prepare for the future beyond that horizon, such as our capacity that we can and should indeed consider returning a further EUR 5 billion to shareholders via share buybacks in addition to the existing dividend policy. Now we all understand that if circumstances were to change materially, we'd obviously adjust a share buyback program. It's one of its virtues. I should also mention, and the comment for this for context, that the uncertainties on the final content of the French budget might require us to adjust these plans. But all we can do today is to work on the basis of the existing tax fiscal framework and set out the Board's decision in that context. The shares we buy back will be canceled as the current AGM resolutions allow and if the 2025 and Safran's AGM review -- renew that authority. As you know, our employees are important to us, and they're also important because they are significant shareholders in Safran. Hence, it was important for the Board to ensure that the decisions we have taken to proceed with share buybacks on an unprecedented scale to be taken in a context where our employees understand that we're striving for the right balance in terms of funding the future and rewarding all our stakeholders. Now the Safran Board is confident that we're striking that balance. Now we have a lot to be proud of, and the Board's gratitude goes to our employees around the world and to our leadership team, who are either on stage later today or sitting in the front row of this hall. Now this pride is actually a form of stimulation for the future. As you'll hear from our executive team, all our stakeholders, notably our shareholders have a lot to look forward to. As the seeds of success have been sown and we should be, to quote John [indiscernible] constant governance. Now that is the easy part. So next part, I'll hand over to Olivier.

Thank you, Ross. Ladies and gentlemen, it's my pleasure to welcome you today to our Capital Markets Day. As you can see from our [ ID card ] behind me, Safran is the world leader in Aerospace and Defense across all our businesses, operation, aircraft equipment and aircraft interiors. When we last met in 2021, we were just rebounding from COVID, and we have navigated through many challenges since then, but we have remained focused on delivering on our ambitious targets. Looking ahead, we see a nonprecedented demand for new aircraft and aftermarket services, leveraging on our state-of-the-art portfolio of products and technologies, Safran is ideally positioned to deliver a further period of sustained profits and profitable growth. Through CFM, our 50-50 partnership with GE Aerospace, we are the largest civil propulsion fleet in the industry. Our aircraft equipment, we are on board the fastest-growing platforms, the high runners, commercial high runners. I'm happy to share with you today our strategic vision that will set the base for a sustained growth and higher earnings. If you come to industry mega trends, we are positioned on markets that are growing faster than the GDP. This is the case for the civil air traffic, where we forecast a compounded annual growth of 3.2 revenue per passenger kilometers, in the next 20 years. The speed of growth is going to be even faster. On the narrowbody side, where we forecast a 3.7% annual growth in the next 20 years and 2.2% growth on the widebody side. Looking at defense, in 2023, the world defense spending has hit a record high at $2.2 trillion worldwide, which is close to 7% increase versus the preceding years. And considering the geopolitical context, it will still increase. It will still grow. Climate change is obviously also a mega trend. And climate change will drive the need for a road map to decarbonization of aviation. And innovation and technology is going to be a significant lever to get there. We'll come back on that later on. Several crises since 2020 have impacted the industry. First, the COVID-19 that drove the world air traffic close to 0 in March 2020, which has significantly impacted the overall supply chain and industry and led to a lasting fragility of our supply chain. Secondly, beginning of 2022, the invasion of Ukraine, has create a shock on the raw materials. So our upstream value chain has been impacted heavily on titanium, steel, metal alloys. And in the aftermath of this war, an invasion, the inflationary pressure has propagated across our value chain, weakening even further our suppliers. So all in all, the sequence of challenges have indeed strongly destabilized our supply chain. And this is why strengthening the supply chain must continue. This is why build up a more resilient supply chain is obviously one of our priorities. I will come back on that. Let's now focus on the Civil Aerospace, which is representing 80% of our revenues. Our activity in Civil Aerospace is indeed boosted by strong tailwinds. New aircraft, we forecast 34,500 new aircraft to be delivered in the next 20 years. This is our forecast. I have to say the Airframers are even more bullish, 28,000 of them being narrowbodies and 6,500 of them being widebodies. 38% of those volumes are already in the backlog of our Airframers. This gives us a very significant great visibility ahead of us. Our propulsion business is indeed benefiting from very strong tailwinds. Our CFM56 still powers more than 50% of the overall narrowbody fleets. This is beyond the expectation we had back in 2021. Indeed, the CFM56 utilization is enduring, is lasting and is indeed extended, driving the need for aftermarket services. On the LEAP side, the LEAP has become the engine of choice. We have a single source position on Boeing 737 MAX. We have a single source position on the COMAC C919. That has entered into service now, so it's real. And we enjoy a 60% win rate on the Airbus A320neo. The LEAP is growing very fast. The expansion of the LEAP engine in fleets is twice as fast as what the CFM56 at the time did. We are expanding on the LEAP twice as fast as the CFM56. So this combination of the CFM56 on one side and the LEAP on the other side or at the engine of choice because of its best-in-class performance, reliability and durability, as Florence later on will detail, is indeed, creating a very positive environment for us. So a robust demand boosting both original equipment and aftermarket services on the propulsion side. Now coming to Aircraft Equipment. The same is true. We are very well positioned on the fastest-growing platforms, A320neos, 737 MAX, A350, 787. And we don't expect the move for a next generation aircraft, we don't expect the next-generation aircraft to enter into service before 2035. So this gives us a period of 10 years with a solid stream of original equipment revenues and also aftermarket revenues on the equipment side as well. All in all, combining propulsion and Aircraft Equipment on the commercial side, aftermarket revenues do account for 52% of our total revenues. Ramp up, ensuring production ramp-up is indeed a priority for us to accompany the needs of our Airframers customers as well as our airline customers. And in order to ensure the ramp-up, we need to build up, as I said before, a resilient supply chain. So we have launched a dedicated action plan and a dedicated strategy to build up the resilience of our supply chain. First, on our LEAP program, we have decided from day 1 to ensure a double sourcing a 100% double sourcing for each and every parts of our LEAP engine in order to avoid any single point of failure. Second, we made specific investments in some critical supply chain segments. We have acquired Aubert & Duval together with Airbus and a private equity company named Tikehau. Aubert & Duval is a strategic supplier of forgings, of metal alloys, nickel alloys and metal powder. We have invested in additive manufacturing, and we have created an additive manufacturing center of excellence in Bordeaux. And we have announced and made the decision to invest in a new foundry in France for Turbine Airfoil casting. And this facility will start operation in 2027. Concurrently, we have announced -- we have decided and announced a compressor blade facility in Belgium that will start operation as soon as next year. So you see, we have decided to invest in some critical segments in order to build up resilience. On top of that, we have put in place a very strong Supplier Performance Management program. That means the size of our teams dealing with the suppliers, upskilling our teams through specific supply chain program we've put in place, what you call a Supply Chain Academy, and also partnering with our suppliers in order to foster on performance improvement program. Defense. Defense and space do represent 20% of our overall revenues at Safran. Here as well, we continue to benefit from a very strong momentum on the Rafale fighter jet, which has been ordered above 500 aircrafts -- above 500 aircrafts have been ordered. So meaning 1,000 engines for us. The Rafale fighter jet program is so successful that it will continue to ramp in the second half of the details, more to come. We are also actively involved in international program. In Europe, we are leading the engine pillar of the Future Combat Air System alongside our German partner, MTU. In India, we have been partnering with HAL since 50 years, we are powering most of the Indian military helicopters and we have decided to go 1 step beyond and to co-develop the engine of the future heavy Indian helicopters. In the U.S., we are very proud to be on board the Future Long-Range Assault Aircraft program, which is led by Textron, and for which we will provide the landing gears and the electric generation. I should have come back. Beyond engine, we also possess a state-of-the-art defense electronics portfolio that we continually enrich through bolt-on acquisition, navigation and timing, optronics, drones, satellite thrusters to name a few. These products are particularly well adapted to the new evolution of the battlefield and the warfare transformation that we can see today. Our goal here in defense is to change scale and to establish ourselves at the reference equipment partner for the leading integrators of the world, international, on multiple platforms, aircraft, helicopters, UAVs battle ships and submarines. We are indeed committed to expand worldwide and to transform position from an export-oriented culture and business model to a more international white spread business model and culture, where we will develop local footprint in order to address international markets. As an example -- as a vibrant example of that, we have decided to put in place a company in the U.S. named Safran Defense & Space Inc. under a specific security agreement, an SSA, Special Security Agreement, as we say, in order to address directly contracts with the U.S. DoD as well as with the Five Eyes countries. This is already in place. This is already running. Prepared for next-generation aircraft, looking ahead, looking towards the future and positioning ourselves at the forefront of the decarbonization of aviation is indeed one of our main objectives. So we are actively preparing the next-generation aircraft. At the heart of it is our RISE technology program. RISE Revolutionary Innovation for Sustainable Engine technology program, aiming at delivering 20% improvement fuel burn improvement versus the latest generation of engine that have only entered into service a few years ago, namely LEAP. Eric Dalbies will further elaborate on RISE and where we are. Electrification is another major pillar of our strategy. Well, we have indeed now a complete portfolio of electrical capabilities coming from the various acquisition that Ross reminded. And indeed, we are well positioned to here as well prepare for the next generation of aircraft, which is going to be more electric aircraft. And the electrification is not going to address only the aircraft and the aircraft equipment, but the engine as well. We are also investing heavily in lightweight and recyclable materials. All in all, to achieve our ambition, we dedicate 75%, at least, of our self-funded research and technology to decarbonization. Safran's successes is leveraging on key strengths. First and foremost, our people -- our talented people are our great assets. Indeed, we are committed to being an exemplary and attractive employees, enabling us to recruit the best talents and also to grow those talents within the company, along their career path. Hence, nurturing our culture of excellence. The second strength is our breakthrough innovative spirits. We will come back on that later on. But as we prepare for the next generation of aircraft, we plan to invest EUR 5.2 billion in research and technology from 2024 to 2028 with more than 80% of the spending being self-funded. Operational excellence is our third pillar, another core strength. Our One Safran operating system is spread across all our businesses, across all our activities, across all our sites, processes as well. continuously looking at ways to improve further our performance and reduce our cost, improve quality. We launched each and every year 1,000 Lean Six Sigma projects across our various activities. Last, acceleration of digital transformation leveraging on artificial intelligence to improve our performance. Two examples, artificial intelligence enabled digital inspection and also leveraging on generative AI to collect much more quickly the information, which is embedded in our accumulated knowledge management, allowing our engineers to respond to customer requests much, much faster and much more efficient. M&A. Our M&A strategy is set forward and fully aligned with our DNA, defining our core businesses, high barriers of entry for safety and emission critical equipment, a strong aftermarket revenues stream and profitable growth. Therefore, we are focusing on what we call bolt-on acquisitions. Bolt-on acquisition to strengthen our core businesses, enabling, as Ross, our chairman, mentioned earlier, enabling us to shortcut research and technology efforts or research and development efforts, but also enabling us, providing us incumbency as a stepping stone to get on board the next generation aircraft. In the last 4 years, our acquisition have all served one of our strategic goal, prepare for next gen, expand in defense and space, build up a resilient supply chain and ensure a smooth CFM56 to LEAP aftermarket transition. We have spent, invested, EUR 1 billion so far in acquisitions since 2021, excluding the Collins flight control acquisition project, which is expected to close by H1 2025. Portfolio pruning is the second pillar of our M&A strategy, divesting on non-core activities. At our last Capital Market Day, we have announced that 30% of the ex-Zodiac portfolio was indeed noncore. This is still valid. Since then, have executed the divestment of 10% of the ex-Zodiac portfolio for an amount, a total cash-in of EUR 0.6 billion. We still plan to divest the remaining non-core activities of this ex-Zodiac portfolio as soon as the market conditions are met, meaning as soon as we have reached the certain level of performance and profitability. Now ladies and gentlemen, let me summarize our strategic road map to deliver a profitable growth in the years to come. Should go with us saying that our overarching priority is safety and quality first. So reinforcing our supply chain resilience. We are fully committed to ramp up request and to accompany our Airframers and airline customers. We are going to ensure a smooth aftermarket transition from the CFM56 to LEAP with those 2 ingredients of an extended utilization of the CFM56 from one side and the very rapid expansion of the LEAP engine in the fleet. We will continue to scale up our defense and space activities -- equipment activities. Defense and space equipment activities. Finally, we have a very clear road map to keep here for the next generation aircraft and be at the forefront of the decarbonization. Thank you for your attention. I will now leave the floor to Nathalie Stubler and Eric Dalbies, who will describe our sustainability and innovation strategy. Thank you.

Good afternoon, ladies and gentlemen. Safran's performance is based on an ambitious sustainability road map. At the heart of it is the industry target to reach collectively net 0 carbon emission by 2050. Our policy is fully integrated within the group, and it starts with a strong governance at the top. At Board level, our reference director on climate, Patrick Pélata, chairs a dedicated committee, the Innovation, Technology and Climate Committee. The Audit and Risk Committee will review our sustainability report following the implementation of the new European directive. In terms of compensation policy, 12% of our CEO remuneration is based on ESG criteria. Also, 20% of our long-term incentive plan performance is based on ESG criteria. Beyond this aspect of governance, I would like to focus today on the importance of people and on our decarbonization road map. As Olivier said, Safran will continue to grow. And we are an attractive company. Last year, we hired 18,000 employees, and we are still continuing to recruit this year a similar number of people. We need to ensure to our employees, not only a safe working environment, but an environment where they feel comfortable, thanks to the highest standards of FX. As an example, 10 Safran companies are certified ISO 37001, highlighting the importance of our anti-corruption program. We also promote diversity and inclusion. And we are on track for our commitment of 22% of female executive by 2025. Two, retain our employees. We also associate them to our economic performance through our employee profit sharing and our employee share ownership. We ensure the upskilling of our employees by providing the right training tools. Physical campuses. Today, we are in Safran University. More importantly, and close to the operator, 66 on-site industrial school, and 3 dedicated online training school at Digital Academy is quite important considering our ambition in AI, a supply chain economy and the sustainability academy. Committed and skilled teams are key to support our growth. Also to support our growth, we are embarking our supply chain on the sustainability journey. Why don't we hear directly from some of them through a short video. [Presentation]

We have clearly encouraged our top 400 suppliers to engage on a decarbonization road map in line with the Paris Agreement. And what about our own decarbonization road map? We are exemplary on the carbon emission of our sites, factories and processes. We have committed to reduce our Scope 1 and 2, CO2 emission by 30% in 2025 when we compare to 2018 and by 50% by the year 2030. These targets are in line with the Paris Agreements that are validated by the science-based target initiative, and they require strong action plan. Are they set in absolute figures while we are growing at the same time. The do-nothing scenario shows a strong increase above 800,000 tonnes of CO2 or are we going to reach it to levels, reduce our energy consumption and purchase renewable energies. We have signed, for example, this year, our Purchase Agreement for renewable electricity in U.K., U.S.A., Poland, Mexico, we are also purchasing sustainable aviation fuel for our test -- engine test facilities. And last year, we incorporated 20% of this sustainable aviation fuel in the [ kerosene ] use in France. All these efforts put us on track to reach our targets. More importantly, in terms of carbon emission, we are committed to the decarbonization of our products. Here also a clear target to reduce by 42.5%. The carbon intensity of our sold product by 2035, still comparing to 2018. And this target is also validated by the science-based target initiative. 2035 will be a key milestone on the road map to the net 0 by 2050. And to better understand how we are going to reach it, I would like to hand it over to Eric.

Thank you, Nathalie. So 3 years ago, we shared with you already the trajectory for the decarbonization of the aviation sector. And it is reflected here on the graph displaying the evolution of the annual greenhouse gas emissions of aviation over time. These emissions, as you know, are expressed in millions of tonnes of CO2 as the climate warming effects are primarily attributed even not limited to CO2. This trajectory, the one we shared with you 3 years ago is still valid today. But how do we do it? Just renewing the current fleet when obsolete with the latest generation of aircraft, would result in more than doubling in 2050 the emissions of the sector as compared to 2019. Although beneficial for sure, this is not the solution to accompany the growth of air traffic. The first objective of the plan is to reduce emissions by as much as 1/3 with the use of ultra efficient engine and aircraft technologies to reduce silver. And this is the best possible investment in terms of research and technology because the best you'll ever for aviation is just the one you don't even need to produce and burn. This is reflected in the upper dark blue band of this graph. The light group and in the middle here is about technologies for more efficient air traffic management to fly more direct routes or reduce airport congestion, for instance. This is commonly agreed that this may account for 5% to 10% additional reduction of emissions. These 2 categories indeed fall under the less fuel banner. The third one, the order or better fuel avenue, the green band down in the graph, consisting the substitution of fossil kerosene with alternative CO2 regenerative fuels that can be biofuels, but also synthetic fuels made out of atmospheric CO2 hydrogen furnaces. For sure, none of these 3 categories alone can be the silver bullets, but the addition of them, in fact, has the potential to close the loop towards net 0 aviation by 2050. So now what about Safran in this picture? The broad portfolio of Safran products gives us a prominent role in the decarbonization of the aviation sector as an engine maker, as an aircraft equipment and interior manufacturer. Safran is leveraging the technologies and know-how to address almost 90% of the scope of the possible decarbonization of the sector. So we are factoring the ultra-efficient aircraft challenge with the disruptive propulsion architectures for gas turbines with lightweight equipment across the board of all Safran products. And with the electrification of propulsion and aircraft systems, when this is a more efficient solution to existing thermal hydraulic or pneumatic solutions, and we are fully engaged, as you know, in the adoption plan for sustainable aviation fuels, both for our engines, but also for our equipment in contact with the fuel, like fuel systems for sure, that hydraulic system, for instance. Olivier recalled the magnitude of the financials related to the technology efforts over the period 2024, 2028, and our commitment to dedicate more than 75% of the self-funded efforts to the decarbonization of our products. This commitment is actually audited and has been met in the past 3 years in a row. The flagship for sure of our decarbonization effort is the RISE demonstration program and they include in June 2021 after a 2-year preparatory phase. RISE is a joint Safran GE Aerospace technology program to capture disruptive performance in engine. With as much as 20% fuel consumption reduction just at engine level, it is really instrumental to achieve the target with 30% reduction at aircraft level. And this is done especially with the very high bypass ratio allowed by this breakthrough open fund architecture, much higher than what is permitted by adaptive engine configuration. In the past 3 years, RISE has really left the drawing board and have become reality. First, with an impressive series of tests. Already confirmed at component, module and even engine level under representative conditions. The [ wind tunnel ] test campaign, especially at scale 1/5 called the eco engine test campaign has been a great achievement of year 2023, 2024. With more than 200 test hours performed, we have today the higher dynamics and acoustics tested up to aircraft through speed, the cross-correlation of modeling and test results is now in place and that this campaign also has been specifically performed with the engine attached onto a wing delivered by Airbus and representative of installation effect. With this way, we have been in a position to capture the performance on wing of such a disruptive configuration for the engines. After the test, the hardware as well, the lessons learned during the test program have nurtured the design of the full -- first, full-scale specimen of RISE. And the major part for granted demonstrator have been produced like the fan blades, the compressors, the gearbox or the fan drum here on the right. We are now on track for the first engine to test and the flight test demonstrator in the second half of the decade. So the RISE program is now moving forward as planned and especially the test run to date confirm the potential of this very disruptive architecture. Beyond engine efficiency, lightweighting everywhere in the aircraft is a major contributor to emission reduction in flight because the lighter aircraft calls for smaller thrust of the engine reduced list of the wing, thus smaller engines, smaller wings, and this becomes a virtuous cycle. Our advanced research across materials and processes in all categories is not just an enabler for the most severe environment. It's really an asset to reduce the weight of our products, serving all businesses of Safran, engines, but also nacelles, electrical wiring, landing gears and even aircraft interiors. Our levers for this are our additive manufacturing excellence center, with complex integral several parts, the application of organic composites to large structural parts, like fan blades for sure, but also brake roads for a landing gear or even armrest for passenger seat and the ceramic composites for the most demanding thermal environment as a much lighter alternative to metallic solutions like engine exhaust here in blue -- or in white, sorry, and turbine shroud sector for instance. About fuels now. The deployment of sustainable aviation fuels is already technically approved, as you know, for a field of fuel pathways in blending with kerosene up to a maximum of 50%. What is key now is to accelerate the uptake of SAF by removing this limitation of 50%. Our test plan is well underway to pronounce the compatibility of our engines and equipment with 100% SAF. This is in line with the selection next year by the aviation sector of grades of SAF that will be certified by the regulator. And together with the blending mandates voted by the European Commission last year as an obligation. This is giving a very clear signal to the SAF market on the demand side. On the supply side, Safran is not and is not going to become a SAF producer for sure. But we have decided to actively support the emergence of a SAF production in 2 ways: first, through select investments in promising SAF technologies pushed by start-ups with the purpose to unlock technology issues and by the Safran leadership of the European Union Industrial Alliance for renewable low-carbon fuels in Brussels. And in close connection with the future fuels, we are also a technology stream about the non-CO2 effect of aviation, like the contrail, the nitrogen oxide, the [ suits ] and so on. Because unlike CO2, these effects lack the scientific certainty with the appropriate level to be in a position for us to implement no regret technological choices inside our products. So we have performed a series of comparative tests both on the ground and in flight with the various grades of SAF to better capture the potential benefit of certain SAF for these non-CO2 effects and in parallel and together with our peers, Safran, we have called the scientific community and the public institutions for improved science on these very important matter. So after disruption in propulsion efficiency, lightweighting everywhere and the adoption of SAF, we are also making the most of our portfolio of aviation proven electrical technologies not only to equip the latest aircraft of today, but also to equip the aviation of tomorrow. Because in the last 10 years, as you can remember, with the acquisition of electrical businesses from Goodrich, from Zodiac, from Thales, Safran has built up the full set of capabilities in electrical engineering and manufacturing and enjoys a unique position to capture the opportunities of more electrical aircraft concept. The novelty is really the potential of electricity for propulsive function and not just non-propulsive energy on board, be it hybrid electric or even fully electric for certain modules. The RISE demonstrator itself is a hybrid electric system with the engine operation is boosted with electrical machines, providing supplemental power. Our end-to-end high-voltage electrical architecture is also the backbone of the EcoPulse demonstrator flown in 2024 with 6 engineers electric motors distributed on the wings, and we are especially proud of the full-fledge certification of our ENGINeUS 100 to be pronounced soon by EASA, the European agency for airs safety. This will be world premier for an air wealthy electric motor to power an aircraft. This is really paving the way for extended applications of electrical machines in commercial aviation for mission-critical functions. And this with the highest standards of flight safety. So in a nutshell, at the CNG 2021, we shared with you a plan. Today, the plan is being executed. It is fully supportive of aircraft concept studies, and this is in line with the target to be ready by the end of the decade when aircraft manufacturer will have to make a decision for the launch of the next generation of disruptive aircraft. So thank you very much, and back to you, Nathalie.

As you can see, our innovation and sustainability road maps are fully derived from our core purpose. And that concludes our joint presentation, Eric and myself, and I back to Olivier.

So now we'll start the second part of our presentation and safety and mission critical equipment. Safran is not just an engine company. We are also proud to be a leader in safety, and mission-critical equipment. Why is this important to us? First and foremost, safety and mission critical equipments are aligning perfectly with our DNA, defining our core businesses, leadership positions, high barriers of entry, very strong aftermarket content. 40% is about the share of aftermarket revenues in these activities and profitable growth. Second, these businesses are bringing indeed a well-balanced exposure across narrowbodies and widebodies from airport platform and military platforms. Original equipment and aftermarket, and for seat specifically for seats, retrofit and line fit. So all in all, those activities do reinforce our resilience. Synergies with our propulsion business are meaningful. First, on materials and processes, which are largely common to engines and mission-critical equipment. One example, composite additive manufacturing applies to both. The path to the more electric aircraft electrification will apply to both all equipments as well as the engine. Last, scale brings value and helps us develop key relationships with the Airframers and the airline customers. A picture is worth thousands of words to describe the breadth and the depth of our portfolio of aircraft equipment. In all those segments, we have leadership position, all of them landing gears, wheels and brakes, nacelle, electrical systems, to name a few. And we are well positioned on multiple platforms. There are runners, I mentioned earlier, A320neo, 737 MAX. A350, 787, but also military platform and bizjets platform. Some of those businesses do measure up nicely with our propulsion business in terms of profitability. Let us now come back and focus on this significant opportunity that we have announced in July 2023 and that we expect to close by H1 2025 the acquisition of Collins actuation and flight control business. These activities do align perfectly with our DNA. Obviously, flight control are indeed a statistical equipment and systems. It has a significant aftermarket content, about 40% of the total revenues. And the activity is well balanced between again, narrowbody, widebody, civil, military. This acquisition will enable us to shortcut research and develop an effort, and will indeed provide incumbency as a stepping stone and a prerequisite to get on board the next-generation aircraft because of the same wing that the next-generation aircraft we have, there is going to be an opportunity for more actuators and more site on force because of the thin wing. The combination of Collins Aerospace, hydraulic and mechanical capabilities with our own electrical capabilities will further strengthen our position for the next gen. Ladies and gentlemen, we have decided to focus on 3 specific businesses today: Landing gear, Aerosystems and seats which will be presented, respectively, by Francois Bastin, Sébastien Weber and Victoria Foy. Special mention to Safran Aerosystems, which is the hidden jewel of the [ Exo ] portfolio that we have not so far publicized too much. Francois, the floor is yours.

Good afternoon. Good morning. I'd like to use the next few minutes to invite you in and share who we are in Safran Systems. First, what do we do? Landing gear, which are typically single sourced by the Airframer for a given aircraft type, carbon brakes, which are usually dual-sourced and systems that are related to this, including the expansion retraction system for the gear and the most complex system of all, which is a braking control system, and these systems are usually single sourced. Per Safran DNA, these are all complex and critical systems, which we manage through their full life cycle from design to manufacturing, and maintenance and services. Our position on the market is broad and strong. We cover a wide variety of aircraft types and sizes, and this represents today an installed fleet of 34,000 aircraft. And we have a large presence in the fleet. Our position on commercial aircraft above 100 passengers is that we are #1. This includes both narrow-bodies and wide-bodies, and wide-bodies account for 30% of our sales. We are also present on the military market, French, European, U.K., including Dassault's Rafale, Airbus' defense and space, A400M, Eurofighter. We are also present on the U.S. military market. And Olivier referred to our proud selection last year by Textron for their FLRRA V-280 program. Our position on the market is related to the fact that we master leading-edge technologies, which represent a high barrier to entry. As an iconic example, we pioneered the carbon brake technologies, which is now fully replacing the previous generation of steel brakes. And we are continuously sharpening the edge by reinvesting 5% of our revenues continuously in research and technology, design, manufacturing, and pushing always further what I would call the [ black art ] really of carbon braking. Aftermarket. Our position on the aftermarket is based on the pillar of the installed fleet. This fleet generates close to 100,000 landings per day, this is more than 1 per second, which induces a continuous stream of aftermarket revenues. And aftermarket revenues account for 35% -- 65%, I'm sorry, of our sales. And some of it is generated continuously on a per landing basis. This is typically the case of carbon brakes. And some of it is triggered at regular inspection and maintenance intervals, and that will be the case of landing gears. We are present on all 4 high runners mentioned by Olivier. We are providing landing gear for 3 of these programs. We are providing carbon brakes for all of them, which provides revenue today and which is the basis of their growth. And we have developed a maintenance, repair and overhaul activity which provides profitable business, but also access an intimacy with our airline customers and detailed understanding of the behavior of our product in the fleet, which are 2 key assets for aftermarket performance. Now where do we go? First, the basics. We keep ramping up and strengthening our supply chain, which covers such key commodities as raw material, forging, but also machining, high-end surface treatment. We are pursuing and enhancing our competitiveness every day, reduce our costs. We are leveraging for this our engineering and manufacturing capabilities. We are also leveraging our global footprint, which includes major plants in cost competitive countries. Three and four is decarbonization. In-house, so talking Scope 1 and 2, we are developing breakthrough technologies for our future carbon plant, which will be carbon neutral when it operates at the end of the decade. And Scope 3, so the usage of our product in the fleet. So we are talking here weight reduction, innovative material, metallic composites, innovative manufacturing processes, including additive, smart system rethinking, such as electric taxiing. As a conclusion and in a nutshell, a strong basis, high technology, a global footprint, a large installed fleet, which provides opportunity for further competitiveness, opportunities for further aftermarket revenue growth and we are actively gearing up for the future. Thanks for listening. And I will now hand it over to my partner in providing critical systems. Sébastien, the floor is yours.

Good afternoon. I'm Sébastien Weber. I'm the CEO for Safran Aerosystems. Today, I want to start by a story. And I'm sure you all remember, 15 years ago, an airplane dipped into the Hudson River near New York City. On that day, 155 people were saved and evacuated. Earlier this year, at Tokyo Haneda Airport, 379 people were safely evacuated from a burning airplane. Do you know who's making those slides? We do. Safran Aerosystems does. We do operate a solid portfolio of products with high barrier to entries. They can be technological or regulatory. This allows us to build market positions. For instance, on escape slides, we have more than 50% market share. On crew oxygen systems, most jetliner cockpits, they are fitted with our components. Earlier this year, we have complemented this business on the defense side with an acquisition of an onboard oxygen generation business. We're also making helicopter flotation devices, life raft, life vest. And for each of those components, we're the market leader. Last but not the least, we're also the market leader for fuel systems on business jets. We make everything upstream the engine, including measuring the fuel consumption. We're also involved in air management system and in hydraulics, for instance. We have a well-balanced portfolio of products. On one hand, we have buyer-furnished equipment. And on the other hand, we have a larger set of seller-furnished equipment. Over the years, we have built a growing installed base. And today, we're very proud to say that we have at least 1 component on 70,000 airplanes. Now this installed base supports our aftermarket. Our aftermarket for us represents more than 50% of our total revenue. We're addressing our installed base through our network of 7 support and service centers that are strategically located around the world. Our aftermarket is largely comprised of time-sensitive components like escape slides, oxygen systems that require regular maintenance every 3 to 5 years. We also have more traditional components that are on condition that are being maintained as they fail or as they're being removed from an airplane. The revenue stream from that installed base for us supports a vision for growth and profitability. It also allows us to focus on our priorities. First and foremost, we prepare the future. And central to this is carbon neutrality. We're heavily involved in bringing on board sustainable aviation fuels and ensuring that our systems are compatible. We develop new components for the future engine. We work on lighter materials like lighter fabrics that will save hundreds of pounds on tomorrow's airplane. As we grow and prepare the future, we're scaling our production system. We're growing in cost-competitive countries, like Mexico and Morocco, that will see the majority of our headcount growth going into the future. We also work with our suppliers, partners to build a more resilient supply chain, a supply chain that will be able to support us as we grow. Last, we're becoming digital. We started as a set of businesses that we integrated to leverage synergies. We're now at the point where we're building that end-to-end digital continuity starting from engineering to manufacturing, supporting business operations all the way to our support activities. I'd like to close this one up with the key takeaways. We're market leaders for most of our products. We do benefit from strong tailwinds. We're profitable, and we have a vision for sustained growth. Last, we do save lives. This is who we are. This is Safran Aerosystems. Thank you very much. I'd like to welcome on the stage, Victoria Foy. Thank you.

Hello, good afternoon, everyone. It's my pleasure today to talk to you about Safran Seats recovery. Now unlike Sébastien's evacuation slides, which I hope you never have to test, it is highly likely that you have traveled in one of Safran Seats and possibly even to be here with us today. Can you imagine these days that as a passenger, you may have chosen your airline or even your route because of your preferred seat. This is the power of the product. This is the power of our seat, a key differentiator to the airlines today. Now the aircraft seating market is strong. You will know passenger travel has returned to 2019 levels. And as such, the airlines' financial positions are improving, and this is leading them to look at their longer-term investments in their fleets and cabins. Our 2024 to 2029 market outlook anticipates growth of around 17% per annum. This is fueled by deliveries of wide-body aircraft, by a very dynamic retrofit market. That's about 35% to 45% of the total market today, but also by the resilience of the high-end element of the market. So by that, I mean space being allocated to first class and business class is definitely there. And in some cases, it's even improving. And last, the ambitions of the airline to continue to raise the envelope in passenger experience is again fueling growth. So this is all really great news for Safran Seats because our vision is to deliver innovative and desirable seats to our customers. So speaking of innovation, we at Safran Seats are focusing on 3 areas primarily. The first is passenger comfort, the second is sustainability and the third is technology. And you will see, and I hope you've tried it, our award-winning Euphony headset-free technology developed with an acoustic specialist, and which is flying today on Japan Airlines' A350-1000 program and receiving really positive feedback. So last but not least in this market that's really important is the customer relationship. And we are really proud that we accompany the airline throughout the whole life cycle of the aircraft. So to recap, the market for aircraft seating is really strong. Premium allocation is definitely there. And the airlines are really pushing the envelope for business travel and increasing customer and passenger experience. So now let's go to the next slide, which is aftermarket. So aftermarket in Safran Seats represents about 40% of the total revenues. And again, as I said for the Line Fit, the original equipment, the airlines today are really asking for, demanding, high standards of the cabin. And this, coupled with the rebound, the recovery post-pandemic, has led to incredible order intake levels, 33% higher than 2019. But it's not just about spare parts. We are also offering, for example, cabin upgrade kits. This is where the airline wants to enhance their cabin, but for a lower cost and a reduced lead time. We are also accompanying them on other services, such as cabin walks, such as their inventory management and also for repair and maintenance facilities in one of our geographical locations. So again, to repeat, the growth in the aftermarket is there. It's driven by high customer expectations, passenger expectations and continued fleet in service. So now I'd like to talk to you a little bit about the inside of Safran seats. And to do this, I want to talk to you about some of the complexity in certifying and -- designing and certifying a seat today. It should be pretty straightforward, right? I mean a seat is just a seat. But it may surprise you to know that when developing a seat, our designers have to manage from several stakeholders' requirements of several thousand. And you may say, okay, so what? Well, that's equivalent to, for example, Francois' landing gears or equivalent even to an engine. But as you will know, it's over a much more reduced development cycle. In addition, recently, the environment for certification is a little bit evolving. And as I've said, technology is evolving. All of these things are contributing to high barriers of entry, which is great. But on the other side, and this is where we have a core strength in Safran, it's important to master this system, this complex seat as a system. And as I say, I repeat, a core strength of Safran is systems engineering, and we are taking that systems engineering and deploying it within Safran Seats. And this, coupled with the right balance between customization and standardization, we think is a real game changer. So this level of complexity, which we see, and has been there while we have been renewing and redeveloping our product portfolio, is one of the reasons why it's taking us longer to reach a point of breakeven. But I can say that we are on track to reach breakeven for the full year in 2024. So how will we have achieved that? Well, first of all, it's down to the really hard work and resilience of all the teams in Safran Seats. But then let's take a look more specifically at supply chain and Industrial and our operations, where we have been responding to a rebound in the market. Our sales growth has doubled over the last couple of years. And that's been usually contributed to by the aftermarket performance. In addition, we've done that on a reduced footprint, with a more optimized logistics footprint and with 65% of our industrial capacity in best cost country. And through the use of our in-house production training schools, we have ensured that all of our staff are properly given the right training in safety and quality. So what about in development and in engineering? What have we been doing there? Well, first of all, we've been getting some of those bespoke projects -- products over the line. We've completed, certified and now they are in service. Now some of those were started before COVID, they were paused and then restarted in a more challenging context. At the same time, we have now completed our domestic business class product line, our premium economy class, our economy class seats. And we're in the process of certifying and completing our business class products Vue and Unity, which I hope you've enjoyed and experienced today. So by doing so, that's enabled us to really learn the deep lessons of how to master developing these complex systems. And because of that, we've been able to put in place a new product policy, new robust development processes and, using digital tools, we have been piloting artificial intelligence to inform us better about how to best certify dynamically and the flammability testing of our seats. So what does this mean for the future? So these are our ongoing initiatives to reach double-digit profitability in 2028. Well, first of all, we have to build on what we've already been doing in 2024 in our ramp-up. But now I like the teams to focus on efficiency, especially in supply chain and operations. And what I mean by that is simply, we need to come back on time, on full delivery. Secondly, we want to further strengthen program and engineering. by really embedding systems engineering, our product policy and our development processes, but also by further building one single entity in engineering. So that means people situated locally, but also accessing our pool of people around the globe, drawing on those experts. And because we recognize those experts are so vital to our success, we are really building on the success we've seen in our production training schools, and we're copy pasting that to our development training schools so that we can attract, retrain -- retain and upskill the best engineering talent. Thirdly, now that we are close to completing our product portfolio, this will be a huge lever for our future top line sales. It also releases valuable engineering resource for the next projects. And that, coupled with other ramp-up projects in our industrial arena, is really helping us to grow. And then finally, and importantly, we want to ensure that we receive a fair price for the value of our products and the innovations within our product and that through a tri-party change board, with both our customer and the airframer, that we manage and control change. So to conclude, I know that you have been disappointed by the pace at which Safran Seats has been recovering, but we have turned the corner. We reached a point of breakeven in Q4 2023, and we will be full year breakeven in 2024. We have understood what it takes to develop products in this market. We have a plan, and we are now executing that plan. Thank you for listening. And I will be now joined by Olivier and the rest of the team to take your questions. Thank you.

We have a 20-minute session for questions. Please, yes.

Yes, it's Rob Stallard from Vertical Research. One for Olivier. You mentioned and detailed the actions you've taken to improve supply chain resilience so far. But do you think there is more that needs to be done, particularly as we look forward to the next-generation aircraft? And would you be prepared to trade margin for reduced risk?

We have taken action, as you've seen. And basically, resilient means making sure we can build, we can avoid single point of failures. And resilience has a cost, indeed. It's not about optimizing the costs everywhere. This is what we do, but making sure we have double or triple sourcing, requires to industrialize and requires also to have a balance. So would be, for us, dangerous, for example, in a situation we have 2 suppliers, just to focus and to give 100% of the share on the best performing supplier, that would -- we would feel good about that cost-wise, instantly, but the fact is we would lose in terms of resiliency. So yes, indeed, resiliency has a cost, but we consider that we've been facing in the last 4 years external shocks. We don't know what could happen. There could be additional shocks coming in. And so we have to be prepared. And the only answer to risk management, be it geopolitical risk, be it oligopolistic risk, because in some areas of the supply chain there's an oligopoly, we need to be prepared and build up resilience. Please.

Herve Drouet from CIC Market Solutions. I mean in your strategy, you are moving clearly more towards services and to have more localized point of business unit. And I was wondering how do you see, for instance, your M&A, are we going to see more bolt-on M&A in service rather than product or extending product range? And in terms of investment on CapEx looking forward, should we expect an increase significantly as, let's say, percentage of sales of the investment looking forward to expand your footprint internationally?

You've seen aftermarket services and MRO is a full part of our overall strategy. It brings us resilience and it brings us value. So this is what we've been doing. And we've decided to go indeed one step beyond. We are going to elaborate on what we do on the engine side for the LEAP, where we have decided to invest EUR 1 billion to increase significantly the scale of our MRO activities on the engine side. Nicolas Potier is going to elaborate on that later on. We -- one of our acquisition lately announced is a company named CRT, Component Repair Technologies, in the U.S. where basically we've decided to invest in a company which has a state-of-the-art repair solution for engine components. So yes, indeed, it is part of the path. It's one of the key priorities I have mentioned, was ensuring a smooth transition between CFM56 and LEAP aftermarket. As you will see, the LEAP aftermarket activity will be significantly above what we have experienced on the CFM56 and basically requires up -- to significantly ramp up, and we will multiply our activity by 5 on the engine side. Francois has mentioned what we do on the MRO, but this is true for all our activities. This is true for Aerosystems and this is true for Seats. This is true for each and every of our activity. So yes, it is part of the strategy. And you may see more in that respect. Please.

Ken Herbert with RBC. Just following up on that, maybe it's for later today, but can you comment on your expectations for aftermarket growth across these businesses in '25 or through the '28 period?

We will come back on that when Pascal will detail the financials in the second part of this Capital Market Day. We will come back on that. You'll see.

Yes. Are you seeing anything from an inventory standpoint, either in the aftermarket or in the original equipment channel across these businesses that's a cause for concern now or might be higher than expected, which could lead to some destocking risk?

We -- today, because the supply chain is not, let's say, on a totally healthy state yet, the fact is that a lot of stakeholders have built up inventories. And as soon as the supply chain will normalize, the inventories will probably decrease. But today, the fact is that a lot of players have high level of inventories. Yes.

Yes, Nick Cunningham, Agency Partners. I wanted to ask a question about the fuel aspect of the path to net zero. Because if I understood it properly, you only talked about SAF's, about synthetic aviation fuels or sustainable aviation fuel, rather than hydrogen even out to 2050. So am I right in thinking that hydrogen has effectively been dropped as a practical solution? And then as a follow-on question from that, if I ask it straight away, is there enough feedstock to create the biofuel for aviation and also for everybody else who's going to want biofuel as well? And as an alternative, can you make synthetic hydrocarbons for a reasonable price? Or would it be cheaper to design a new airplane than just flew on hydrogen?

Okay. Many questions in your question. First, about hydrogen. Hydrogen will have definitely a key role to play in the future of aviation, either as a component to manufacture the synfuels you're referring to, or as a fuel to be either burned or used in fuel cells for energy generation and even maybe propulsion of modules. But as you all know, hydrogen poorly compares with liquid fuels as far as the volumic (sic) [ volumetric ] density of power is concerned. This is de facto limiting the size of the type of aircraft that are candidates for full hydrogen propulsion or energy generation and so on. Second, about hydrogen. If we compare it from a technological standpoint and maturity standpoint, the maturity level of hydrogen-related technologies for aviation today is 2 to 3 steps below the maturity level of the most advanced technologies for liquid fuel-related technologies. This means that we have a dedicated plan for hydrogen, taking into account the fact that it will have to play a role, but we have to take into account the fact that we are not tackling the topic of hydrogen in the same manner as we are tackling it for technology that relate to liquid fuel, hydrocarbon fuel and so on. And as a consequence, you're right, the horizon where we see the potential of hydrogen to be used as such on board an aircraft is much later than what we are building on and especially for the key transition of 2035, this milestone where we have to be ready much before that to make it possible for our product to be onboard the next generation of aircraft, it's not based on hydrogen technologies. That's for hydrogen as a fuel, let's say. Then the role of hydrogen for synfuels, for sure, it will be instrumental to manufacture synfuels in quantities that will take the lead after the maximum volume that can be produced with the biofuel solutions. Why? Because actually, the [ entrants ], the biomass available to rely on just biofuel, will not make it possible to substitute the current kerosene volumes. That's true as well. So to make it simple, the guess we are making today is that the mandates, for instance, for the European Union as for 2030 are accessible with the biomass without creating detrimental effect to other sectors. Whereas for the next step in 2035, and all the most 2040 and beyond, it's not possible to close the loop with this. Thus, the priority also to encourage the SAF supply industry to invest as early as today on the manufacturing units that will be ready so that in 2035 and beyond, there will be a significant fraction of the alternative fuel being synfuels and not just biofuels.

Can I ask a question on A350 landing gear? Airbus has talked about getting to 12 a month in 2028. Is that feasible for you from a supply chain perspective?

I'm sorry, you're talking of the rate, Rob?

Yes. Yes, the rate. And maybe talk about some of the supply chain challenges that you're facing on the landing gear in particular.

So supply chain challenges, as I mentioned, range across the board, starting with raw material forging and then the supplier downstream. We are managing them and it's getting better and better, but it will take some time. In terms of the A350, we are powering the A350-900 version of the aircraft, and we have no concern to support Airbus rates.

Christophe Menard from Deutsche Bank. Two questions, please. One is on supply chain and your -- the supply coming from Mexico. Can you actually identify or quote us what is the percentage of sales that you are manufacturing in Mexico and how you are looking at the imposition of potential tariffs next year? Can dual sourcing in that case be a solution to tariffs? And the second question is on R&D. You mentioned sustainability, your investment in this. In military, I mean, is there a need for more R&D that is not funded by the government, typically new engine or an evolution of the M88? Will there be investment over the period you've just described, in 2024 to 2028?

So yes, we have a significant manufacturing hub in Mexico, where we are positioned in Chihuahua and Querétaro. And from there, we are delivering products to the U.S. and our U.S. customers. So we'll see what happens in terms of tariff. The only thing I can say is that should that happen, it would serve nobody. Because at the end of the day, the end customers will pay the cost. So I hope that everybody will be, let's say, reasonable in that respect. So I understand the other question on the M88 engine, on the Rafale. And what's your question precisely?

The question is do you need to invest more R&D in an evolution of that engine or not?

Okay. On that, I will not give you a too detailed question -- a too detailed answer, as you will understand. But we have a road map. We stand ready for accompanying our customers for any evolution of the M88. So we have growth potential. We know what to do to grow the -- first the power of this engine should the need of the air forces arise. So we have a road map, and we stand ready, okay? Just -- yes.

Yes. Chloe Lemarie from Jefferies. Olivier, I think you mentioned the geopolitical impact on the supply chain. So I just wanted to ask on titanium. Have you been able to certify all the parts outside of Russia that you wanted to do on titanium? And if not, what's kind of the road map to fully derisk your supply chain from that specific risk?

I'm not sure -- can you repeat? I'm not sure I understood the question.

It was on titanium. Have you been able to fully derisk your exposure to Russia? Have you been able to certify all the parts?

Understood. So since spring 2022, we are fully engaged on a plan to find alternatives to the Russian titanium. It takes time because we are talking about very critical parts that need to be qualified. And that takes 2 to 3 years because we are talking about forgings typically. So this applies to both landing gear and engine components. As we speak, we are almost at the end of the road, meaning that, yes, we have largely desensitivized ourselves and we have built up alternative sources. So we are there, almost there. George, and then there's someone else. Yes.

George Zhao from Bernstein. So I wanted to ask about the argument of the synergistic relationship between equipment and propulsion. So you talked about strengthening the relationship with OEMs and airline customers. Now if we take recent acquisitions from Seat and Aerosystems, could you tell us how much commercial opportunities that these businesses have that they didn't have previously on the Zodiac but have since been opened up, thanks to Safran's commercial network? And conversely, has there been businesses that have been lost following the acquisition and integration?

I would not say there are per se, commercial synergies per se, that you could rationalize. But the fact is that it gives you a much wider access to, let's say, the airlines management, and it gives you the ability to discuss a broad range of topics. And so it provides some opportunities indeed. And it helps us also to understand much better also what is at stake at each and every airline. So this is just about strengthening the relationship with each and every airlines rather than saying that there's commercial synergies per se. I would not say that because we are providing a landing gear to an airline, we are much better positioned to provide the seat or whatever. I mean I would not enter into that. But it provides a better intimacy with the airlines, that's where the benefit is. Yes, please.

Tristan Sanson from BNP Paribas. A couple of quick questions. The first is also on the topic of the lasting vulnerability of the supply chain that you mentioned. We got a helpful focus on the situation in landing gear. Can we have a bit more detail on how you manage the issue in Aerosystems and in Seats, where are the vulnerabilities that you see and how you address them? And in landing gear, if we can get a bit more detail on how you address the raw material situation together with the industry, that will be useful. And second is a quick question for Victoria on the pricing power in Seats. Can you explain to us what are the dynamics? What makes you win an order today? Is it -- are orders driven by technology, by on-time delivery, by pricing? How all these factors balance?

So maybe, Victoria, you start, then Sébastien and Francois on how you manage supply chain.

So I'll talk, first of all, about the vulnerabilities in the supply chain, if I may. From a Seats point of view, in fact, I would say it's not quite normal, but we don't have so many challenges today with the supply chain. Our challenges are more upstream in the development, as I shared in my presentation to you today. In terms of your second question on pricing power, of course, you can understand I won't go into the detail about our pricing policy. But for sure, I'm confident that the innovation and the value of the products themselves are differentiated product to product. And in terms of how customers decide, for some customers, clearly the product is key and hence, may be prepared to pay more. For others, maybe it's less so. And our pricing reflects that.

On the supply chain side, I would say it's -- the way we address it is multilayered. First, we work with our corporate office and we have supplier management people that are boots on the ground, as we say, at the supplier's place to help them. Obviously, in there, there is a coordination to be made to make sure that they fully understand what our demand is and that they have the capacity to actually produce it because sometimes they don't. And so we have to be creative. And part of the story there is we in-source or we find new suppliers. So there is no one-size-fits-all kind of solution. And sometimes we have distressed suppliers. We have to be transparent on that where we have to help them financially. And not on the rare occasions, we do that actually fairly often. So -- but I would say, overall, if I look at the bigger picture, raw material is not so much our issue. It's more the supplier strength and maturity. And if you look at the bigger picture at the end, when I look today versus last year or the prior year, we're improving and we're moving forward.

Francois?

So supply chain process-wise, this is exactly as Sébastien described. So I will focus on what is specific for landing gear. Landing gear are massive mechanical system, so we are particularly sensitive to raw material and forging, which is upstream of the supply chain. The real solution is qualifying alternate sources. This is what we've been doing. Olivier has mentioned it for titanium, we do the exact same for steel and for forging. I want, by the way, to mention the fact that Aubert & Duval, in which Safran has heavily invested, is a key contributor in this solution, but there are others. And that it takes time from the cure, meaning having new sources qualified, and the full solution at the final assembly line delivery. But we are well on track and the plan to qualify alternate sources has very well progressed.

Good afternoon, everyone. Today, it's an honor to be here with you. I am VP, Commercial Engines. And my lead priorities are about delivering the ramp-up and focusing on cost reduction to reach breakeven and, of course, ensuring our customer satisfaction. This is what I'm going to share with you in a few minutes in my presentation. Let me start with telling you why LEAP is the engine of choice. Next slide. Thank you. LEAP is the engine of choice on the narrow-body platforms, thanks to its performances and its reliability. We have received over 20,400 firm orders since the start. And there are currently more than 11,600 engines in our backlog. LEAP-powered aircraft have accumulated over 60 million flight hours, a record in the commercial aviation history, just 8 years since the entry into service. Our success spans across the 3 major airframers in the narrow-body market. With a 60% life of program win rate on the A320neo, and as a unique and exclusive engine on the 737 MAX and the C919, the LEAP engine enjoys a unique market position. And we are proud that the LEAP-1A has recently entered into service to power, first, the new Airbus A321 XLR with Iberia, underscoring our commitment to power the future of air travel. And as you can see on the right side of this chart, our recent wins underscore our market leadership and customer confidence across the 3 major platforms. LEAP's advanced technology has, therefore, positioned it as the prime engine on the fastest-growing narrow-body platforms. And this is just the beginning of a long and successful journey. And what amazing journey. The LEAP success is surpassing the one of the CFM56. Let's have a look to this graph. It shows the fast pace of LEAP deliveries compared to the CFM56. 10,000 engines will be delivered in less than 10 years, when it took more than 20 years to achieve similar volumes for the CFM56. In other words, LEAP fleet is growing twice as fast as the CFM56. And the strong momentum and the strong backlog I mentioned earlier will continue driving this remarkable momentum. But what drives LEAP success? First, our commitment on delivering on promises. Simply put, it's about a unique blend of exceptional efficiency and reliability, achieved in just 8 years after entering into service. When it comes to fuel efficiency, LEAP customers have achieved 15% to 20% improvement compared to its predecessor, the CFM56. When it comes to operational flight hours, the LEAP engine sets the benchmark on the narrow-body market with a remarkable average over 3,000 flight hours per year. This equates to exceptional value to our customers, enabling them to optimize their operation and expand their services. When it comes to reliability, the LEAP has a proven on-time departure rate above 99.95%. LEAP even match or even surpass that of the CFM56 at similar life stages. We also remain steadfast to our commitment on safety and quality. This is the reason why we have launched 4 years ago on transformation plan quality for trust, focusing on eradicating non-quality events, ensuring right first time, and fostering a safety first and quality culture across our operations and supply chain. Our commitment is clear: To keep our airline customers flying. Thanks to our over 60 million flight hours, we have been able to leverage the wealth of experience accumulated. We have listened to our customers. We have addressed their maintenance challenges, enabling us to make continuous improvement in both engine design and services. We have identified key areas of improvement, in particular, for our customers in severe conditions. As you can see on the left side of this chart, we have already implemented crucial improvement, including HPT Stage 1 shrouds new design, radial drive shaft upgrade and fleet retrofit is nearly complete. More recently, we introduced the reverse bleed system, targeting fuel nozzle cooking. And here again, fleet retrofit is underway. Additionally, high-pressure turbine blade new design have been successfully tested over 4,100 cycles in simulated harsh environment. This new HPT blade design will be certified by the end of this year. This new HPT blade will double the durability, in particular, in harsh environment. Once these upgrades are complete, the LEAP engine will match the CFM maturity at comparable life stages. As you can see on the right side of this chart, these enhancements are not just upgrades, they truly benefit our customers in significant ways. By the end of the year, LEAP-1A configuration will be able to reach its target time on wing and on track to follow on LEAP-1B. This is set to happen 7 years earlier than the CFM56. And the journey does not stop here. CFM will continue listening to customers and refining the LEAP, leveraging advanced technologies and operational efficiencies to optimize value to our customers. So what does this imply in terms of production volumes? Let's first come back on 2024. Ramp-up was slowed down by some supply chain hurdles. But as we speak, we do see improvement on critical component production rates. We are confident in our capacity to deliver between 15% to 20% additional engines in 2025 compared to 2024. To meet our customer expectation, a significant ramp-up is required. We plan to reach a key delivery milestone of 2,000 engines in 2026 and around 2,500 engines in 2028. With these production forecasts, we -- our delivery rates are aligned with our customers' demand, in particular, air framers. And you will be hearing more about MRO demand later on with Nicolas. Alongside ramping up the production, we are focused on cutting LEAP production costs. Since 2021, we have successfully reduced our cost by 15%. This is in line with what we announced back in our last Capital Market Day on the basis of 2021 expected inflation rate. And we will continue to drive actions to further reduce costs on the LEAP in the coming years. Our journey towards greater LEAP profitability relies on multiple levers, such as design-to- cost opportunities, double sourcing or best cost country strategies, but a critical component of that journey is our ongoing focus on digitalization, automation and process innovation. First, on process, automatization and digitalization. Across our facilities, we are implementing advanced digital and robotic systems, integrating Industry 4.0 tools like data analytics or AI-driven automation. These upgrades are transforming our productivity. For example, transitioning to digital inspection for our LEAP fan blades will reduce inspection time by more than half, significantly accelerating throughput with improved quality robustness. Secondly, on process optimization, our engineering and manufacturing team are focused on refining mature processes to streamline production. For example, in 2025, we will deploy a high-speed weaving room technology for 3D-woven LEAP fan blades, reducing weaving time by a factor of 8. This improvement will be instrumental to support higher production rates while lowering the cost. With these combined efforts in cost management and process optimization, alongside LEAP enhanced reliability, we remain on track to operationally breakeven in 2025. Ladies and gentlemen, as we bring our LEAP discussion to a close, I would like to share with you key takeaways. The LEAP engine is on its way to repeat the unparalleled success of the CFM56. With its commercial success and its unmatched efficiency and reliability, the LEAP is fortifying our leadership on the fast-growing platforms. We are focused on meeting our customer expectation and keep them flying. Our commitment to LEAP ramp-up is really to support the growing demand, but also our focus on cost reduction aligns with Safran's goal of delivering sustainable profitability. Now I would like to hand over to Nicolas, who is going to give you some more color about the aftermarket perspectives. Thank you.

Thank you, Florence. Good afternoon, everyone. I'm really excited to be here today to share our aftermarket perspectives, and I will walk you through the transition from the CFM56 to the LEAP and share our aftermarket strategy. First, let me highlight the very favorable general context in which our product operates. We are today at a narrow-body traffic, which is more than 10% above pre-COVID levels. And as Olivier shared earlier, we project a long-term sustained growth for narrow-body traffic with a 3.7% yearly increase. This growth benefits, firstly, to the CFM56. As of today, the CFM56 powers more than 50% of the total narrow-body flights. And as we are in a capacity-constrained environment, additional traffic leads to a sustained and increased utilization of the CFM56. So we see very positive trends on 3 key operational parameters. The first one is the number of aircraft which are being retired, which is still very limited, and we do not see any increasing trend on that matter before 2026. The second parameter is the aircraft which are parked, which has steadily decreased. And the third parameter is the actual utilization of the fleet, which is at high levels. So overall, we see that operators are planning on continuing to utilize their CFM56 powered fleet more for longer. The narrow-body traffic increase also benefits to the LEAP engine family. Today, operators are utilizing their LEAP fleet intensively, putting them on a longer route to benefit the most from the reduced fuel consumption. Thanks to the delivery of additional aircraft to the market, the number of LEAP flights will rapidly increase. Between 2025 and 2030, the number of LEAP flights will more than double. So globally, a very positive market environment that is supporting both our products, the CFM56 with an increased utilization and the successful LEAP engine with the rapid growth of the fleet and number of cycles. Let's focus first on the CFM56. The CFM56 fleet is still very significant with around 23,000 engines in service. The increased utilization of the fleet will drive a high level of CFM56 aftermarket activity. And we are expecting a volume of more than 2,300 shop visits in 2025. And we forecast a high plateau of shop visits until 2027. Beyond, we anticipate a gradual smooth decrease as newer generation aircraft enter the market. In 2030, we do still forecast a solid level, north of 1,700 shop visits. The fleet remains young. Close to 70% of the engines have seen 0 or 1 shop visits, meaning that they still have the bulk of their life in front of them. And you know that shop visits of rank 1 and 2 are generally heavier in terms of work scope and spare part consumption. We therefore anticipate a favorable mix in the shop visits in the coming years. And this outlook exceeds what we had forecasted back in the 2021 Capital Markets Day. The low level of retirements also leads to limited used material availability. So the strong fundamentals of the CFM56 market favors both the volume of shop visits as well as the revenue per shop visit. All in all, we see a very positive trend on the CFM56 spare parts stream going forward. Let's move on now to the LEAP fleet. 8 years after [ EIS ], we've delivered more than 8,800 LEAPs engine with over 2/3 of them being less than 4 years old. The fleet is set to grow rapidly. By 2030, it will more than double in size. This expansion will drive significant growth in terms of LEAP shop visits. Let me walk you through the graph on the right side of this chart. It represents the LEAP shops visits, all LEAP shop visits from maintenance events to full-performance restoration shop visits. The number of shop visits were more than double between 2025 and 2030, reaching around 3,500 events. And beyond the volume increase, we also see an evolution in the workscope with an acceleration of the performance restoration shop visits, which currently represents a minimal volume. Shop visits will continue to grow beyond 2030. They are likely to peak around 2040 at over 5,000 shop visits. This is more than twice the size of the CFM56 MRO market. Overall, we anticipate LEAP operation and aftermarket activities to grow rapidly in the years to come. To address this market, we have a very clear strategy based on 3 key pillars: the strategy aims at creating a profitable and balanced model, reducing risks and replicating the success of the CFM56. With the implementation of an open MRO market, we will progressively reach the balanced model between services contracts and spare part sales. The scale-up of our maintenance and repair capacity is essential in fulfilling efficiently our share of LEAP MRO. And our comprehensive maintenance cost reduction plan is key for the profitability of our services contracts. But before I walk through these 3 pillars in more detail, let me take you to our second hand shop in Paris to discover together the reality of LEAP engine maintenance video. [Presentation]

I hope you enjoy this video as much as I did. What a nice illustration of the technologies and expertise involved in LEAP engine maintenance. So coming back to our LEAP aftermarket strategy. The first pillar is to establish an open MRO market, replicating the success of the CFM56 MRO market. As you know, on the CFM56, there is today 40 active players and our customers greatly value the ability to choose the service provider because choice [indiscernible] of competitiveness and innovation. This is why we are very keen on replicating this model on the LEAP. Currently, the LEAP market comprises around 40 active players, [ 70 ] to be more precise, which can provide MRO services to airlines. Among these players, 5 hold a specific license which were used to call CBSA and now just recently rebranded as LEAP Premier MRO. You can see their logo on the chart. These providers were chosen for their technical expertise and proven experience. They received the highest level of CFM support, including access to advanced repair solutions, enabling them to offer comprehensive services. It is crucial for CFM that these third-party players are both active and successful on the market. Therefore, we are very pleased to report that 2024 has seen significant commercial momentum for these providers. Numerous agreements were signed throughout the year, and [ Willa ] highlighted here on this chart recent deal signed in October between Akasa Air from India and ST Engineering from Singapore. This is a prime example of the strong dynamism of the LEAP MRO market. We expect third party MROs to rapidly increase their share of maintenance activity. They have already inducted close to 100 engines this year. By 2030, we anticipate they will account for 30% of LEAP maintenance activity. And our goal is to achieve a balanced market in 2040 with third-party players representing 50% or more of the LEAP markets. The second pillar of our LEAP aftermarket strategy is about ramping up in-house maintenance capacity. So for the LEAP, we have extended our partnership with GE Aerospace to the services and each partner will be performing 50% of the MRO activities covered by CFM contracts. Given the nonmaintenance events I shared earlier with you, we are targeting for Safran, an installed capacity of around 1,200 LEAP shop visits per year. This is a change of scale for Safran engine maintenance activities. Our lead capacity will be close to 5x our historical capacity on CFM56. To perform this massive ramp up, we have made very significant investment decisions to both expand all our existing shops, as well as to create new ones. These decisions have been taken since 2021, when we announced a greenfield facility in Hyderabad, India, up to very recently with the announcement late October of a new LEAP in Casablanca, Morocco. And among these many projects, sits the creation of a new building for LEAP maintenance activity in Brussels, which some of you have visited yesterday. I hope you enjoyed the tour. This global plan represents a total invest of EUR 1 billion. And we will be hiring 4,000 people worldwide, more than doubling our current staff. Beyond hiring, training, of course, is a key priority, and we are taking partnerships and training school worldwide to industrialize our curriculums. All of these projects are progressing very well and will enter in service before by 2026. And our plan has already enabled us to increase significantly our engine output quarter-after-quarter. I am very proud to say that from the beginning of this year until the end of Q3, we already output 50% more LEAP engines than in the same 3 first quarters of '23. But beyond capacity, we are also very much engaged into continuing to improve our performance. The performance is about safety and quality first. Here, we are leveraging on our safety management system, but also our quality for transformation plan, similarly to what Florent described earlier on [ EoE ]. Performance is, of course, also about TAT or turnaround time. The plan is to go rapidly down the learning curve on LEAP in order to reach mature TAT targets, which we have set at CFM to be around 90 days. One of the key tools we are using here is LEAN with what we call kaizen events, which are bringing together expert teams from the global CFM network to do problem-solving and implementing best practices. More than a dozen such events have occurred this year. The third and last pillar of our LEAP aftermarket strategy is about reducing maintenance costs. Reducing maintenance cost is critical for our customers, but it's also critical for the profitability of our services contracts. It starts with the products. As Florent has shown improvements are identified for the main maintenance burden drivers and are either already implemented or will be very shortly. This is notably the case for the new LEAP-1A HPT blade, which will be introduced in the MRO by the end of the year. We also use analytical tools, thanks to the collection of in-flight, real-time data, analytics or use to predict engine distress and optimize maintenance schedule. Maintenance cost reduction is also about developing repair to ensure we replace a part only when necessary. This philosophy of maximizing repair is key to our LEAP strategy. So the first step is to develop the repair. On an engine like the CFM56 orderly, there is an order of magnitude of 1,000 repair to cover the different parts of the engine. While it took many years to develop the repairs on the CFM56, underly we are currently developing around 200 repairs every year at CFM level. And we are executing the plan to be ready for when the volumes of the performance restoration shop visits will start to grow. We are then setting up the industrial capacities to perform the repair. Here, we are leveraging on our existing repair shops as well as partnerships, but we are also leveraging on our OE capabilities particularly for the new technologies that are introduced on LEAP, such as the composite fan blade. It is then about ramping up repair capacity worldwide, and we are looking at different projects that will be announced -- launched sequentially between now and 2030. And we have already announced 2 main projects. One is the creation of an additional HPT repair center in [indiscernible] on the same campus and the new OE casting facility that Olivier mentioned earlier. And the second is the contemplated acquisition of component repair technology, which we expect to close by the end of the year. As Olivier mentioned, CRT is an independent expert provider on repair. We are also implementing 4.0 industry standards to boost performance and competitiveness on all our repair plants with tools such as artificial intelligence, automation and adaptative machining. To summarize the key messages of this presentation. the sustained Narrow-body traffic is providing clear tailwinds to both our CFM products, the CFM56 and the LEAP. The increased and prolonged utilization of the CFM56 will sustain its aftermarket dynamics in terms of shop visit volume as well as in terms of revenue per shop visit, contributing to a smooth transition with the LEAP. The LEAP MRO market is rapidly growing and will represent more than twice the size of the CFM56 market. Third-party MROs will play a key role and have already secured their first significant deal. The 3 pillars of our LEAP aftermarket strategy, which I described, are well engaged and will enable us to replicate the CFM56 success by creating a profitable and balanced model. Pascal will come back to that in just a minute. Thank you very much for your attention.

Good afternoon. It's very good to see you all in Paris today. So my colleagues have done a good job to explain how Safran intends to take advantage of the favorable market environment. They have outlined our unique positions, capabilities, as well as our challenges in terms of technology and climate change. My role is to present the financial framework of this ambition. So I will be first presenting the financial outlook for the next 4 years and provide some color on aftermarket trends up to 2040. I guess we are the first to venture into a 15-year vision, thanks to CFM56 and LEAP, providing unprecedented visibility. Before we discuss the next 15 years, let me reflect on past 15 years. Also, the scope of activities has changed since 2012, Safran has been able to grow its revenue base at a growth rate of more than twice the GDP over the period. We've been able to improve productivity, drive efficiency and deliver more than 5 points of improvement in operating margins. We have delivered consistent free cash flow generation. We have deleveraged our balance sheet since the end of 2022. All in all, I would say that we have navigated successfully through the sequence of challenges that Olivier has described. The total shareholder return on an annual basis since 2010, stands at 20%, quite impressive. With less than a month to go before year-end, I do confirm our latest forecast for 2024, EUR 27.1 billion of revenue with an operating income of EUR 4.1 billion, which calls for 15% operating margin. This is in line with the significant improvement in margin growth that we have outlined back at the Capital Markets Day in December '21. EBIT would translate into 70% of free cash flow at EUR 3 billion for 2024. We do provide today a preliminary forecast for 2025 with revenue growth up 10% next year. This is at constant scope, meaning it excludes the contemplated acquisition of the Collins assets. We view our operating income being in the EUR 4.7 billion to EUR 4.8 billion range. And on this chart, you see free cash flow expectations of EUR 2.8 billion to EUR 3 billion. It was valid until yesterday night. Now that the finance bill in France has been rejected, that forecast included EUR 330 million of estimated impact of the surtax in French corporate tax. This may not happen year-end, but by [ certiousness ], this is still in our forecast and we will, anyway, provide a final outlook for 2025 in February, once we release our 2024 results. For the 2025 outlook, we also provide the under-lying business assumption. One of them has already been discussed by Florent, which is plus 15% to 20% growth in LEAP engine deliveries, and I will come back on the aftermarket assumptions. Based on this preliminary outlook for 2025, I can confirm that we are on track to meet and even exceed all the key metrics we had at the Capital Market Day '21, starting with revenues. And yes, the market environment has been quite different. Olivier mentioned it, supply chain constraints was not on the radar screen in 2021. Inflation in energy, raw materials was not on the radar screen back in 2021, a stronger dollar as well. So starting with the revenue. We would expect CAGR over [ '21,'25 ] of 18%, well above the 10% plus we were expecting at that time, notably driven by rapidly recovery in air traffic. Operating income, the CAGR should be even at a higher pace, 28%, outpacing the revenue CAGR. It does highlight the regular and significant margin improvement that we have seen from '21 and expect for 2025. In euro terms now, EBIT in 2025 should exceed by 20% the initial expectation, EUR 700 million to EUR 800 million above the initial expectation or the implicit EBIT targets that we have set out. This operating margin in 2025 should be in the range of 16% or slightly above 16%, which is to be fair at the low end of the target range we had highlighted of 16% to 18%. And to be fair as well, the margin mix by division has been quite different as well with production well above what we had in mind, a bit lagging in Equipment and Defense. And as you know, we did face some other difficulties in Aircraft Interiors being at breakeven on full year this year. If I was to restate next operating margin at the same exchange rates we had set at the Capital Market Day in '21, it will be closer to 17%. So in the middle of the range we had in mind at that time. Free cash flow benefited from favorable changes in working cap, and we now expect to overcome by 30%, the cumulative cash flows over that period of time, reaching more than EUR 13 billion free cash where the initial expectation was calling for EUR 10 billion. Moving to the ambition through 2028. Again, this excludes the contemplated acquisition of the Collins assets. On the revenue side, total revenue CAGR is set at high single digit. That growth momentum should diminish over time as first, we reach a plateau on the OE production. And as we start to see the gradual easing of CFM56 after market. In euros, operating income is set between EUR 6 billion to EUR 6.5 billion, representing a low double-digit CAGR over the same period of time. Again, higher rate than we have on revenues being margin improvement as well. By division, I guess this comes as no surprise to you. Propulsion should be in the low 20s. Equipment and Defense to reach mid-teens by 2028 and Aircraft Interiors from breakeven this year to 10% by 2028. For each Euro EBIT that should translate into EUR 0.65 to EUR 0.70 of cash. On accumulative basis, we would expect to generate at least EUR 15 billion, up to EUR 17 billion from 2024 to 2028. This is driven by EBITDA growth, but also by the improvement in inventory turns. This outlook includes about EUR 0.5 billion of the estimated impact of the French surtax and corporate tax. And as I said before, we will have to confirm that going forward. Our capital allocation framework is based on 3 pillars: organic investments, return to shareholders and M&A. We are allocating significant resources to prepare for the future, as outlined by Eric, there is no compromise on this matter and this is our priority #1. Still, our cash balance should continue to grow, and we believe it is time to accelerate the return to shareholders in the form of dividends or share buybacks. Third, there are other cash uses typically M&A. Olivier has already mentioned a couple of them as long as it fits our strategy, as long as we are disciplined in terms of financial criteria, we'll continue to add some bolt-on activities to our portfolio. At the same time, we expect and Olivier already mentioned it to divest noncore activities from the former Zodiac Aerospace company. Our leverage target remains unchanged from the last Capital Market Day, meaning 0 to 1x EBITDA, and we aim to retain a very strong investment-grade profile. So we are committed to significant organic investments in CapEx, tangible CapEx, intangible CapEx, mainly capitalized R&D. Tangible CapEx was nearly double from '23 to '25. '25 will be up-tick at 5% of sales, but on average, it should be 4% of sales. Couple of examples we are -- and we have said that many times today, investing EUR 1 billion to build up our MRO capacity for [ civil ] engines. But another example is that we are expanding our carbon production footprint in the -- in Malaysia and in the U.S. today. So these are 2 examples of CapEx that we are spending today. Together with R&D, we would expect to spend nearly EUR 10 billion over '24 to '28. As already outlined by Eric, the R&T road map is directed towards sustainable aviation, self-funded R&T should represent 2.5% of sales. And in the absence of any large development programs in this time frame, we would expect development expenses to represent between EUR 600 million to EUR 700 million each year of the plan. To give you now a quantified idea of our capital deployment focus, let's start from the free cash flow generation of [ EUR 15 billion to EUR 17 billion ]. We now intend to reserve 70% of that free cash flow to shareholders in the form of dividends with a 40% payout but as well through share buyback. First, out of the EUR 1 billion share buyback that we did announce in July 2023, we have now executed EUR 350 million. I'm very pleased to announce that the Board of Directors authorized a new share buyback program to reduce share count of EUR 5 billion. That program represented about 5% to 6% of equity start in 2025 and it will include the unexecuted portion of the previous plan, meaning EUR 250 million. At the end of the day, we are still left with a portion of net cash that will be either used for organic investments or inorganic investments if needed. We are not included in this diagram, the proceeds we could have from potential disposal that will only provide further capital deployment optionality. Now that we have discussed the financial framework, let me go through the CFM aftermarket. CFM International is a joint company with GE, has been is and will remain the cornerstone of financial success. This business model is remarkably simple and efficient. It shares activities, revenues equally between the 2 partners, while preserving the ability to optimize the cost and then maximize profit for each of the 2 partners. Why CFM56 business model is primarily based on the sale of spare parts? Airlines operating the LEAP engine are predominantly chosen long-term service agreements, what we call RPFH contracts. Today, we have a portfolio together with GE of 66 contracts, which do represent $65 billion of revenue long term. Most of these contracts are what we call ESPO contracts, meaning that the cash is mostly received at the time of the shop visit. Only 20% of these contracts are ESPH, meaning the cash received along the years. We are gradually shifting the needle to alternatives to RPFH. It was addressed by Nicolas as well. There is a variety of contracts, but they are all comparable to the sale of spare parts. We have signed 17 contracts for a total of $20 billion of revenue. When projecting to 2040, I will first note that the LEAP fleet should reach nearly 40,000 engines, almost twice the size of the current CFM56 fleet. As we said earlier, we are aiming to target a balanced model between RPFH and sale of spare parts in the aftermarket for LEAP at the end of the day, just reducing the risk of CFM. We will then perform about 1,200 shop visits, 5x the current capacity. Given the mix of contracts, it is important to better understand how we will account for the LEAP RPFH. First, all LEAP RPFH contracts are CFM services contracts. The airline pays a fix amount as there is an inflation-linked escalation mechanism included in our contracts. And in return, we do service the engine 200 grid standards. The average duration per engine of any contract is out 12 years. Accounting-wise, we will recognize and we do recognize revenues up to the cost incurred, regardless of the cash received. As you know, we have not yet recognized any margin, any profit on LEAP RPFH to date, and we will start in 2025 on LEAP-1A and likely in 2026 on LEAP-1B. So we now have sufficient shop visit experience. And the trigger we are using is the introduction of the mature engine, meaning including the new HPT blade. Contract by contract, Safran will recognize profits based on the individual contract margin while keeping a fixed contingency up to the point where we reach 80% of the total expected cost of the program, and then we will fully release the full margin of that contract. Also, the accounting rules are different for each partner within CFM, provided that we have the same cost at the end of the day, the margin at completion should be comparable for each partner. This slide is the reason why I was maybe a bit excited when I answered the question from David Perry back at the Q3 call. It shows aftermarket revenue up to 2040 and aftermarket profit. First comment, we expect LEAP aftermarket revenue to reach parity with CFM56 in 2028. Looking at 2040, we are looking at revenues more than 2x bigger what we had in 2024 and even 4x bigger what we had in 2010. So it's a huge euro improvement in terms of revenue. Same on profits. I'm very pleased to notice that the margin at completion across our LEAP RPFH portfolio has improved by 5 points over the past 3 to 4 years, thanks to the signing of new attractive contracts and thanks to the restructuring of existing contracts when the opportunity arises. The profit that we will be recognizing by '28 or 2030 are related to the initial contract we have signed either before the entry into service of the program or add the entry into service. These contracts are low margin. And given the methodology we are using to gradually release our contingency, you would expect more, if not much more of 80% of the margin to be recognized after 2030. So by 2030, CFM56 will be dominant, again, more for longer. And then from 2030, we will expect LEAP to provide significant earnings going forward. We do today reshape our civil aftermarket indicator. That indicator was put in place in 2010, and we have been very consistent to disclose on a quarterly basis, the civil aftermarket index. We are adapting our disclosure to the new reality. The new reality is that services are becoming a more meaningful portion of our total aftermarket revenues. In '24, I would assume it's about 40% of the total aftermarket revenues. So you have here a table with historical data since 2019. We will now separate Services from Spares. And on the far right of the table, you have the underlying assumption of our preliminary 2025 guidance. So it calls for mid- to high single-digit growth on spare parts. Here, it covers CFM56, LEAP and [indiscernible] engines. And for services, we're expecting revenue growth in the mid-teens. To conclude, our teams have established track record of solid execution, even through the cycles or all the challenges that we have faced. Among all the challenges we have to face by 2030, properly managing the transition of the aftermarket between CFM56 and LEAP is essential. Finally, we are confident to deliver sustainable and growing earnings and cash flows. We are committed to return 70% of our free cash flow to shareholders in the form of dividends or share buyback, while investing into future capabilities. Thank you for your attention. And now we will have the second Q&A session with Nicolas, Florent and Olivier.

Well, there are many questions. So on the right side, maybe, David first fill.

If I'm allowed, I've got 3. Just on the Slide 80, with the aftermarket mix LEAP and CFM56, it looks roughly to me like the similar revenue buckets in '28, but I think you've told us there are 2,000 shop visits on the CFM56 and 3,000 shop visits on LEAP. So can you just talk a little bit about the price per shop visit. Is this just an accounting issue about how you recognize the revenue? So that would be helpful. The second one, please, Pascal. Is there a slide you had last time, but you don't have this time. And I thought it was quite important, which is the deferred income. So just how much deferred income are you going to get in the coming years? What could we expect to see on the balance sheet? And then maybe one for you, Olivier, if I may. The presentation on [ RISE ] earlier was interesting. You've made a huge investment in that. But you showed EUR 5 billion, presumably, there's a lot more money going into that program. So just how much will it cost to fully industrialize that program? And what if Airbus and Boeing don't go that way? What's the Plan B?

Maybe I'll answer first the deferred income question. Back at the Capital Market Day in 2021, we mentioned that we had about EUR 400 million in 2021 in deferred income, and we were expecting to growth number to, let's say, EUR 1.5 billion by '27. So we are still in the same ballpark. Again, remember that 80% of our contracts are ESPO, meaning that cash is mostly received at the time of the shop visit, contrary to the ESPH model. On your first question, there is a variety of shelf visits, notably for the LEAP engine, and not today for the CFM56 and it drives different kind of revenue mix depending if we perform what we call quick turns or full performance restoration [ chevy ]. So this is why maybe you don't find the right balance between the graph between CFM56 and the number of shop visits for LEAP compared to the CFM56.

So on RISE, let me first say that RISE is not an engine development. RISE is a technology program with a demonstrator. So the aim is to have a ground demonstrator and a flight demonstrator. As you know, we have an agreement with Airbus and this open-fan architecture will fly on [indiscernible] engines. This being said, once -- one of the [indiscernible] will decide to launch a new aircraft and therefore, select its propulsive solution and if let's say, the open fan is selected, then we will enter into a full engine development and industrialization program as we did at the time with the LEAP engine. If I look back what we spent on LEAP, combining development and industrialization has been roughly EUR 5 billion for Safran. So if you consider that, basically, we are in a partnership, 50-50 partnership. I don't know for sure what our partner's numbers are but if you say double, I would say that our vision is, typically would take about EUR 10 billion of development and digitalization costs for a brand new engine development, all combined, everything combined. Now RISE is, as I said, the technology program, meaning that we are working on the disruptive architecture, which is very specific and for which we need to go to a demonstration, but through RISE, we are also working on the broad portfolio of technologies development on each and every of the modules. So we are working the light materials, we are working the iridization of the engine because RISE is aimed at being [indiscernible] combining with our electrical capabilities. So [indiscernible], materials, aerodynamics, there's a lot of technologies development in niche and every of the module. And those -- this portfolio of technology could apply to any architecture that at the end of the day, will be selected. So of course, with RISE, we are very confident that we bring the best propulsive solution to the [indiscernible]. But at the end of the day, we have also to acknowledge that the [indiscernible] is going to select its solution for the next aircraft they are going to launch. And so we have to be prepared. And indeed, with the RISE technology program, we are prepared to any kind of outcome.

Next question. Today, this is mainly the right side, please or whatever, next.

Tristan, from BNP. I would like to follow up first on the question of David on the evolution of the mix of shop visits and aftermarkets CMF56 to the LEAP. If I compare the slides on evolution of the mix of shop visits versus 2021, there's been quite an evolution. Today, you say that you're going to get 1,700 shop visits on the CMF56 in 2030 and about 3,500 on the LEAP. A few years ago, you had a bit more on the CFM56, but you only had the 1,500 on the LEAP. So the number has more than doubled. And the mix of aftermarket revenues was 60% in favor of CFM56, 40% LEAP and now it's the opposite. And as the road to recognition on the LEAP is on by cost, it gives the impression that the cost of the LEAP are more [indiscernible] than expected, while the buildup of the fleet is slower. But maybe that's a misinterpretation. So if you could elaborate a bit on that and tell us how you see the cash cost evolving compared to '21, that would be useful. That's the first question. The second one is, you say that the evolution of shop visits on CFM56 should be roughly a plateau until '27 and then a small pullback. The flight cycles on the other hand, on the CFM56 are expected to half between 2024 and 2030. So obviously, there's a lot of mix effect. But what I wanted to understand is whether your view is that at about 2030 or shortly after, you will have a very significant acceleration of LEAP after profit recognition coming from the release of the margin on all the contracts where 80% were booked in the end and a very fast contraction of CFM56 to realign shop visit with the trend of price cycle.

Long question. So Nicolas, you start on shop visit volume and maybe you will complement, Pascal.

Maybe I will start with your second question and can come back to the first regarding the shop visit volume. So indeed, as you say, we are forecasting a very high utilization of the CFM56 on the coming year, leading to a high plateau of the shop visits up until '27. And after that, there will be a decrease. The exact profile, both of the plateau and then of the decrease will be linked to different factors, notably the traffic increase as well as the rate of deliveries of next-generation aircraft. But to your point, as the fleet ages, the number of shop visits, let's say, there is an acceleration in terms of the frequency of the shop visit within a given utilization of the fleet. So that's why even if you see a stronger decrease in terms of flight cycles, the decrease in terms of shop visits is lower than what you see on the number of cycles. So that's for the dynamic on the CFM56. If we look on the dynamic of the LEAP maintenance events for sure, the LEAP maintenance event has been revised upward, notably to take into account the increased deliveries and market share that the LEAP has in OE. So this has led us to revise both at the 2030 horizon and beyond what we see as LEAP maintenance events.

I guess Nicolas said it all, we are adapting our model to the changing market dynamics. 3 years ago, we did not anticipate such a high plateau for CFM56. It will take a couple of years before we see a gradual easing off of the CFM56 aftermarket. We were also expecting maybe more external shop visits on the LEAP than we are currently seeing. So we are adapting our model, the mix between revenues, shop visits and profits according to the new market dynamics, as Nicolas just explained.

Yes, there was a lot of question there. Yes.

A couple of quick questions on the 2025 guidance. First of all, in terms of the LEAP delivery growth, I think it's 15% to 20%. Could you give us some more clarity on the LEAP-1A versus 1B and spare engines within that? And then secondly, on the aftermarket guidance, I think it's 5% to 9%. Why would you be at 5% spares growth next year?

I will answer the first one because we -- in fact, we never give the detail and the breakdown between LEAP-1A and LEAP-1B. So we don't. Thank you. Sorry for that. Pascal?

To answer your second part of the question, the ratio of spare engines to install engines should be slightly above the average versus program cycle, which is 70%. So we should still be slightly above that number. On the spare parts growth rate for next year, we call for mid- to high single digits. I will translate that into 6% to 8%. This is low single-digit growth in volume and low to mid-single-digit growth in net pricing. This is the way we have built our assumption.

Okay. Next question. On the left side.

Victor Allard, Goldman Sachs. To follow on the same topic, actually, a question on the cost per shop visit on the LEAP. I think in the CMD 2018, Olivier, you had shared color and view in terms of how you were seeing at the time the cost per shop visit evolving on the engine. You had said that you had designed and seen that engine to be roughly the same as the CFM56, at least what was the view at the time. You had mentioned that some innovations also like the fan, which in terms of lifetime has been brought in line with the shop visit to were giving you some flexibility. So my question is, is that still the case? And is your view still that you're tracking on that ballpark? And the second question is also linked to that one, but you could provide an order of magnitude or factor in terms of what we should assume heavy shop visit versus quick terms? Is that a factor of 2, 3x in terms of cost?

Nicolas?

Okay. So when you compare today the cost of a shop visit for the LEAP and the cost for shop visit of the CFM56, obviously, you're comparing 2 different products, and you're comparing 2 different products at different stage, of course, of their maturity. So the LEAP has more parts, has cutting-edge technology. And as Florence described, it's going down rapidly. It's going down its learning curve. And we are comparing that to the cost of a CFM56 shop visit, which is at the end of its long maturity road and also, by the way, on a very, very competitive MRO market with many players that are present today. So if you look at the snapshot today, there is a gap. But with the maintenance cost reduction plan that I have described, which works on repairs, on criteria, et cetera, this gap will decrease. To your second point regarding the order of magnitude, I would say it's very difficult to have a number because behind this concept of, I would say, quick turn of shop visits, there is, in fact, a very high variety of work scope between what is a quick turn, what is a shop visit. So it's very difficult to answer, I would say, with one single figure.

Ken Herbert with RBC. Two questions. First, can you quantify for us what's been the impact of spare part delays in turnaround times or shop visit efficiency for the CFM56 or the LEAP this year in 2024 and how much improvement you're assuming in that in 2025? And then with your comment on longer term, ideally getting below 90 days in turnaround time for LEAP engine for a full restoration shop visit, when do you expect to get there? And sort of where are you today?

Again, for you, Nicolas.

Okay. So today, I mean, if we look at the CFM56 market, which is, as you know, a mature market, I would say the best-in-class players on the market. I'm not talking specifically about our shop. I'm talking about the worldwide MRO performance. I think when everything is going right, we can see a best-in-class shop performing between 60 to more likely 70 to 80 days. I would say that is the best-in-class target in an environment where everything is going well. Today, on the CFM56, there is a limited number of supply chain hurdles, mostly linked because, as I mentioned, the demand is very high. And on specific part, the demand is very high, and therefore, there has been a lag in the ability of the supply chain to fulfill this demand. So today, the majority of what we are seeing in the different shop, and it is the case, for example, in our own shop that are still performing CFM56 are more in the range of 120 days, let's say, majorly linked to such issues. So it gives you an order of idea. On the LEAP, as I mentioned, today, the CFM, so we work, as I said, in the LEAP, we work within the CFM network, both with GE Aerospace and ourselves. And within the CFM network for the LEAP, the today's average of CAT is around 130 days. It has improved from the past year. But obviously, behind this reality of this number of 130 days, there is very significant variability. There is variability in terms of work scope with lighter work scope being performed with a shorter TAT. And there is also variability in terms of shop performance because, as I said, it's all about going down the learning curve and each shop has to go down its learning curve and some of the shops in the network have already reached their peak capacity, et cetera. So now they're in the trend where they can reach the mature TAT targets, while other shops are newer in terms of performing LEAP activity and are therefore, higher in the learning curve. But we are confident with what we have seen in some of the shops in the network that all shops will be able to go down to the maturity target to 90 days.

Sam Burgess at Citi. At the 2021 CMD, your expectation was being 60% to 70% of RPFH by 20 -- on RPFH by 2030. Clearly, there has been some change to this expectation. Can you just talk us through the drivers for why this expectation has changed? Is it about derisking maybe higher-than-expected costs on LEAP. And can you help us think through the positive and negatives of a more even mix?

At that time, we were expecting the portion of LEAP RPFH to move from 45%, 50% up to 75%. If you remember the chart I was commenting, we have signed today 66 RPFH contracts, representing $65 billion of revenue. And the non-RPFH contracts, $20 billion of revenue, 17 contracts. So when you look to the share, the non-RPFH is 25% of the total engines who have either a time and material or an RPFH contract, all the other engines have not yet decided they go for T&M or RPFH and it's true that we are gradually shifting the needle to alternatives to RPFH. We want to reduce the risk on CFM, reduce the risk on Safran. So we need to move RPFH towards non-RPFH or undecided customers to non-RPFH in order to have a much more balanced mix between RPFH and set of spare parts as we do today on the CFM56.

Coming back to the -- sorry, it's Ian Douglas-Pennant at UBS. Coming back to the 2025 guidance, you said you're expecting low single-digit volumes then. Could you help me understand why your expectation would be so low there? Are you expecting a reduction in work scopes? Do I link it to your recent comments that you're diverting capacity to the OEMs in any way? And the second question is on the free cash flow conversion guidance for the longer term. Could you help me understand what the assumptions are on a couple of major points. So if you're pushing profit recognition to the right, does that not mean that your free cash flow conversion should be better? And secondly, what is your assumption on Rafale deposits, please?

On spare parts for 2025, yes, we said basically that the guidance was high single digit. This is a combination of volume and pricing. We expect the work scope to be stable in 2025 versus 2024. In terms of shop visits, in 2024, we have already almost reached the peak. So basically, between 2024 and 2025, we expect -- today, this is our view, we expect a low single-digit increase in terms of number of shop visits in '25 versus '24. Then you add to that the pricing effect, which is typically mid-single digit, mid-single digit plus. This is a growth impact of the pricing, but then we have some discounts, et cetera. So you combine both sides, you get to a high single-digit forecast for spare parts. Then I -- Pascal will answer to the second one.

Your question on free cash flow. So first, looking back to the past 5 years, we had a conversion rate well above 70% EBIT to free cash flow because we benefited mostly from very high advanced payments on all the Rafale export contracts that we've won in the EU, in Serbia, in Egypt, in Indonesia. In our plan, we don't expect that to repeat. It could be an upside risk to our plan, but we have not included any new export contracts in our plan. Looking forward now up to 2028, a conversion ratio of 65% to 70% EBIT to free cash flow seems quite high. Look back at what we've said in the initial Capital Market Days in 2011, 2013, '16, '18, '21, we were more in the range of 50% to 60%. So we have upped our expectation there. So we would expect first the Rafale bond payments to come down over '24, 2028. We have included the estimated impact of the surtax in French corporate tax, EUR 0.5 billion. We discussed the deferred income. Deferred income, you would expect it to grow. But as you've seen, we are now expecting a lot of shop visits/quick turns to occur in the coming years, meaning that even though we continue to receive cash from the airlines per flying hour, we will start to deplete the deferred income because we incur a lot of costs performing the shop visits and quick turns. So for all these reasons, we believe that the 65% to 70% conversion rate is adequate. It's much higher again than what we had historically within Safran.

Just have the time for one last question.

Herve Drouet from CIC Market Solutions. It looks like your recognition for LEAP profit is very backloaded. I understand you are waiting for 80% of the cost to start to book really your profit. But at the same time, you are saying the maturity of the engine compared with the CFM56 is almost at par now. So I'm wondering what prevents you to have a more linear or less contingency in what you are booking at the moment? And is it linked as well with the retrofit potentially of the blade, high-pressure blade? You mentioned in one of your slides, only 70% have been retrofitted, if I'm correct. I was wondering, is there potentially a link with what has been retrofitted and not retrofitted in terms of blades?

So you all claim to be long-term shareholders. So I guess it doesn't matter if you do recognize profits today or tomorrow. It's true that the LAP recognition margin profile is more back-end loaded. The decision is discretionary. So it is our decision with the team to decide what is the right level of contingency to include in the margin recognition. We want to prevent any margin catch down in the future. We've seen other engine makers having to face margin catch down over time. We don't want to be in that situation. So you could view our approach as conservative, overly conservative. I don't know, but it took us 15 years to build a reputation to under-commit and over-deliver. So hopefully, we can stick with that.

By the way we have applied in the few RPFH contract that we had on CFM56. We have applied the same methodology of progressive release of contingencies. Last question, Tristan is insisting. So it's a very last question, and that's it.

Mr. Pascal, last time in 2021, you gave a very useful graph showing with red lights and orange lights, the tailwinds and headwinds to profits midterm and within 2 years. Can you give us a feel of what will be the big tailwinds and headwinds in 2 years and 5 years?

Okay. This is a traffic light chart I was showing back at the Capital Market Day '21. I didn't repeat the exercise, but I could have done it. If we step back a bit in December '21, we didn't see the supply chain constraints. We didn't see coming -- COVID coming. So supply chain constraint, again, was not on the radar, as I said. Inflation as a result of the invasion of Ukraine by Russia was not on the radar screen. A stronger dollar as it is today, 105, remember, our assumption was 120 was not on the radar screen. So whatever I'm telling you now as a downside or upside risk, I mean, anything else could happen. There is a factor of uncertainty, which is linked to us and market upside and downside risk. Are we going to see the level of traffic we are expecting? It will directly translate into more or less utilization in CFM56 or LEAP. Are we going to inject as many LEAP engines or the competitive engine into the market and then lower the number of second-gen CFM56 engines into the market. So there are a lot of uncertainties about the aftermarket. So it will be on the upside and the downside. I mentioned Rafale. Should we win more contracts, this will be an upside in terms of cash, but also in terms of activity going forward. Florence mentioned that we will achieve OE breakeven for LEAP in 2025. Can we further reduce the cost going forward? We will see this is not in our plan today. So you see there are variety, and I'm sure I can name a few others, but there are a variety of factors that is on the map, some are out of the map because we don't know. And as you know, the context, at least from the geopolitical point of view is quite tense. So I won't mention all of them.

So thank you. Time has come to close this Q&A session and go to closing remarks.

So closing remarks and key takeaways, if you wish. Since 2021, we have navigated through many challenges, and we have demonstrated -- our teams have demonstrated agility and resilience to face all the shocks that basically we did not predict back in 2021. With our leadership position on fast-growing markets and leveraging on our portfolio of products and technologies, we are extremely well positioned to deliver a further period of profitable growth. Through CFM, we are the largest civil propulsion fleet in the industry. And as we've told you during this Capital Market Day, the combination of the extended utilization of the CFM56 on one side with a very rapid expansion of the LEAP engine as the engine of choice for the new generation aircraft provides us and shares us for a very smooth aftermarket transition from CFM56 to LEAP, which is a key point for this period between 2025 and 2030. We are strategically equipped to prepare for the next-generation aircraft and to be at the forefront of decarbonization. Our 2028 financial ambition reflects our confidence to deliver a sustained value creation and a sustained trajectory of profit growth. And we are fully committed to increase shareholder value. Ladies and gentlemen, this concludes our Capital Market Day. We -- on behalf of all the Safran team, I would like to thank you for your attention. I would like to tell you also that I have a safe trip back home. And I would like also to thank the Investor Relations and the Communication team for having organized this Capital Market Day. Thank you.