Welcome to the Safran Full Year 2020 Results. At this time, I would like to turn the conference over to your host, Olivier Andries, Safran's CEO; and Bernard Delpit, Deputy CEO and Group CFO. Mr. Andries, please go ahead.

Good morning, everyone. I'm delighted to welcome you to Safran's 2020 earnings call. I'm joined by Bernard Delpit, our CFO. Being my first call as a CEO, I would like to take the opportunity to thank Philippe Petitcolin for everything he has done for Safran. As most of you know, I have worked closely with Philippe as Head of Safran Aircraft Engines over the past few years, managing the ramp up of the LEAP engine, as well as its cost solution. Last year was particularly tough, as we all know. And we had to take some difficult decisions together with the whole management team. This has paid-off and it is thanks to this collective effort that we are able to post such a robust performance for 2020. I want to pay tribute to the teams, as we have been able to adapt swiftly and with no major disruption in deliveries to our clients. Whilst 2021 is set to remain highly uncertain and further efforts will be required, our Group has strong assets and a clear strategy. I am very confident in our long-term future. The air traffic data for 2020 on slide five show the impact of the pandemic on the sector, and the resurgence in the autumn have stalled the recovery. In terms of flight cycles for our two main engines, CFM56 and LEAP, it resulted in a positive upward trend being observed from the bottom in April through to July, but this did not last in H2. The situation varied in different parts of the world. In Europe, lockdowns and travel restriction in H2 caused a 75% decline in CFM56 cycles in early December compared to pre-crisis levels. In North America, CFM56 weekly cycles have been plateauing at around minus 40% since the beginning of autumn. In China, weekly CFM56 cycles were back to their 2019 level in September and help up well until the very last days of 2020. What we also see is that while everyone was expecting a gradual recovery during the whole year, global RPK and ASK in December were at the average of 2020. This stagnated at the level reached in October and November with even a slight decrease in domestic RPK in December. On Slide six, in such troubled times and uncertain times, Safran has proven to be agile and able to adapt swiftly. The engagement of our teams ensured production was able to continue, with no major disruption in deliveries to our clients. In 2020, the COVID crisis was not the only situation Safran had to tackle. We began the year facing together with Boeing and other suppliers 737 MAX grounding that started to impact Safran in 2019. Tough decisions were taken to deliver ambitious cost targets -- cost savings targets. Government support has also been strong, especially in terms of public funding for furlough schemes and research and technology subsidies. Safran has also played a key role alongside other French aerospace majors and the French government, in supporting the supply chain through the crisis. Looking at the financial results on slide seven. Safran has met its objectives for 2020 and delivered a resilient performance in the face of the worst downturn in the history of aviation. The drop in revenue was 33%, a very different quarterly evolution that Bernard will elaborate on. Despite this decrease in revenue, EBITDA margin remained positive each and every month since March. The recurring operating margin has been maintained above 10% for the whole year. This performance has been achieved thanks to the intensive and swift adaptation. Free cash flow generation exceeded €1 billion, thanks notably to a very strong Q1 and we generated a positive free cash flow of €172 million in H2. Our intensive effort to manage working capital, especially to reduce inventories by more than €1 billion and to manage airline receivables allowed us to post a 63.6% conversion rate of adjusting recurring operating margin to free cash flow. On slide eight to 10 now. A few key comments on each of our business divisions. For Propulsion, the LEAP engine remains the preferred choice of airlines. Our 61% market share on A320neo and our overall solid order book of 9,600 engines illustrates this well. It was also good news that toward the end of the year, we have seen the gradual return to service of the 737 MAX, with more than 12,000 hours flown by mid-Feb. For CFM56, we saw a very limited number of retirements in 2020. The fleet has remained active, and 80% of the aircraft were in service in December. This illustrates another one of our key strengths, which is that we have a young fleet of engines in operation. Narrowbody's ASK were down 51% compared to 2019, with our civil aftermarket revenue dropping 43% in U.S. dollars. The military side was not impacted by the crisis, with 33 M88 engines delivered as planned. Helicopter turbines were only marginally impacted by the crisis. Equipment, Defense and Aerosystems division now continued to reinforce its leadership position, with winning of promising new contracts despite the challenging context. The momentum to position Safran as a world leader in electric motors also continued in 2020. Within Electronics & Defense, defense activities held up well, cycling and navigation systems slightly grew, whereas avionics activities were the most hit. Safran has won a contract from China Southern Airlines to deploy Cassiopee Alpha, which is a new all-in-one flight data processing and analysis solution for the airline's entire fleet of more than 600 airplanes. For landing systems, in carbon brakes, new contracts were signed for more than 210 aircraft in 2020, strengthening our number one worldwide position. A contract has also been signed with a major airline for landing gear MRO. For nacelles, we continued to deliver our mainstream A32neo nacelles, whilst, of course, production for the A380 is now finished as expected. For electric motors, Safran ENGINeUS powers s VoltAero’s Cassio 1 aircraft, and a cooperation agreement has been signed with a U.S. company, Bye Aerospace to equip their eFlyer all-electric aircraft. With regards to our Aircraft Interior division. Had it not been for the pandemic, we would have continued to deliver on the turnaround in the operating performance. We have restored our underlying performance and customer confidence with on-time and quality deliveries. Given its widebody exposure, this division was the most severely impacted by the crisis. We have accelerated and widened our restructuring plan with four site closures, two for Seats in the U.S. and the U.K. and two for cabin in the U.S. We have accelerated the transfer of production to low-cost countries, such as Mexico and Thailand. Further actions are ongoing as we speak. Seats remain, of course, the key differentiating factor for airline companies and Safran recorded several successes during the year. Our product line has been renewed, and our new bespoke business class seats were chosen by major U.S. and Japanese airlines to equip their new Boeing 787. And for the first time, the business Skylounge Core seats have been selected by an Asian customer to equip eight new Airbus A380. On slide 11 now. Our main actions to reduce our cost exceeded the targets set for year-end. Purchasing programs were scaled down. We have decreased raw material and supply expenses by 43% and subcontracting expenses by 48%. Inventories were reduced by €1.2 billion in H2 2020. CapEx commitments, tangible assets were cut by 67%. It allowed to reduce cash outflows by €246 million. Research and development expenses have been reduced by 35%. Finally, OpEx has decreased by more than 25%. All-in-all, cost savings and impact of reduced activity resulted in around €2.3 billion of savings in 2020 compared to 2019. A significant part of those savings was derived from the reduction of human resources costs. A few details on what has been achieved on slide 12. What we have done to resize the workforce? First, we have reduced permanent workers by more than 16,500 people, and more than 21,000, including temporary workers. Second, on top of this reduction, further schemes allowed Safran to put an average of 21% of staff on short-time working between April and December 2020. In France, the Activity Transformation Agreement signed with all the unions is valid until the end of 2021 and renewable. It provides other sources of human resources cost decrease, notably relating to the cap of employee profit sharing and saving schemes. Around the Group's international operation, there were some major headcount reduction actions, with the largest reorganization taking place in cabin and seats, Aerosystems and Electrical and Power. I will now leave the floor to Bernard to take you through the full details of our financial results.

Thank you, Olivier. Good morning, ladies and gentlemen. I directly jump to slide 15, with a few words on exchange rates. Average spot rate was $1.14 in 2020. It was $1.12 average last year, creating a negative translation effect on revenues. Hedge rate was $1.16 or €1 in 2020, that is $0.02 better than in 2019, no surprise. Spot rate at close was $1.23, generating a negative €216 million impact due to the change in fair value of our options. Still on FX on slide 16. In 2020, the euro/dollar move from $1.07 to $1.23 has triggered a number of knockout barriers. All forfeited options have been replaced at prevalent market conditions. The hedge book totaled €28.2 billion as of February 5, up from €24.9 billion as of October 15, 2020, when we disclosed Q3 figures. In 2020, the hedge rate was $1.16, as expected. The exposure hedged was $7.2 billion, lower than previously anticipated as stated. For 2021, we expect a flat rate of $1.16. Given the recent upward trend in the euro/dollar rate and the risk of some options to be further knocked out in the future, we have revised the target hedge rate for 2022 and 2023 to reflect a more cautious view. As a reminder, KO barriers span from $1.23 to $1.31, representing a risk on the size of the book and on targeted rates, including in 2021. So, let's make it clear. When we say that the targeted hedge rate was -- is from $1.14 to $1.16 in 2022 and 2023, it does not mean that 2022 and 2023 are 100% covered at this rate. It means that at prevalent spot rate conditions, the options already put in place should deliver such targets. On slide 17 is the bridge between consolidated accounts and adjusted data. I draw your attention to usual restatements. First, PPA impacts of €340 million corresponds to the amortization of Zodiac Aerospace PPA and for €35 million for R&D [ph]. Second, the mark-to-market impact of hedging instruments in consolidated financial income of €216 million, like I just mentioned a few minutes ago. Let's move to the P&L on slide 18. As I will explain revenue and recurring operating income in the next slide, I will limit myself to few comments on other items. Share in profit from joint ventures decreased in 2020, mainly due to the lower contribution of ArianeGroup and joint ventures on engine activities, mainly leasing. One-offs were negative for €466 million. It includes restructuring cost of €131 million related to layoff compensations and site closure. We also booked an income charge of €286 million for several products. Net financial income was €7 million negative. It includes cost of debt of €58 million; the foreign exchange gain of €93 million, reflecting higher euro and provisions; and various other charges for €42 million, including discount rate on provisions. Income tax charge was €334 million, representing an apparent tax rate of 27.5%. So, adjusted net income group share was €844 million, driving EPS at €1.98 and diluted EPS at €1.92. On slide 19, adjusted revenue reached €16.498 billion in 2020, down 33%. It reflects limited currency and scope impacts, a 32.5% organic decrease coming from all divisions. Propulsion was down 36.2%; Equipment was down 25%; and Aircraft Interiors, down 40.4%. The organic decrease reduced quarter-after-quarter after a trough in Q2 at 47.5% negative. It was 30% negative in Q4, including one-off positives, representing 1.5% of growth. Let's spend some time on slide 20 that explains recurring operating income seasonality between H1 and H2. Operating margin in H1 stood at €947 million or 10.8% of sales. The impact of the Activity Transformation Agreement signed in July with French unions was booked in Q3, but related to H1 for €103 million as it is a full year impact on provisions. We do not restate H1, but one should consider this impact when looking at the underlying margin of H2 that stands at 8.2% against 12% underlying margin for H1. It's not a one-off, but it's the share of the ATA impact to be put at the right place. The lower margin in H2, in spite of growing savings comes from lower margin, mainly due to the decrease in volume, and especially in civil aftermarket. Slide 21, a few words on R&D. Total R&D was €1.213 billion, of which €864 million for self-funded R&D expenses before tax credit, which represents the 35% decrease mentioned by Olivier. Main differences with 2019 are on Silvercrest, R&T and some developments in landing gears and the helicopter programs. R&D expenses after tax credit stood at €715 million and capitalized R&D at €279 million. R&D impact on P&L stood at €756 million, almost stable as a percentage of sales. Slide 22 gives another view of business results. A quick word on corporate center. The recurring operating income is negative for €19 million. It was €62 million negative in 2019. For 2020, it has been driven by lower provisions, lower external expenses and lower personnel costs that have more than balanced the decrease in management fees collected from businesses. Let's now review different businesses. Slide 23 on Propulsion. Revenue was €7.663 billion, down 36.4% or down 36.2% organically. OE revenue is down by 42% organic, mainly driven by civil narrowbody engines with the impact of -- by MAX grounding on LEAP-1B deliveries, LEAP-1A production rate cuts and lower spare engine deliveries for both CFM56 and LEAP that decreased in the same proportion as installed engines. In 2020, 815 LEAP engines have been delivered, down 53% and 157 CFM56 engines have been delivered, down 60%. Military OE sales decreased as well, with 33 Rafale engine deliveries compared with 62 units in 2019, driven by lower export contracts. Services revenue in this division is down by 31.6% organic, driven by civil aftermarket revenue. Civil aftermarket is down 43.2% for the full year. It was negative 3.3% in Q1, 63% in Q2, 56.2% in Q3, and it's 47% negative in Q4. In Q4, high-thrust engines drove the improvement. Recurring operating income decreased. It reached €1.192 billion, still a healthy 15.6% operating margin. One-off items were €157 million, reflecting impairments of several products. On Slide 24 Equipment. Revenue was €6.893 billion, down 25.5%. It was driven by OE first. OE was down 23% on an organic basis with lower volumes in all businesses. Services were down 29.1% on organic basis, mostly landing gears, carbon brakes, nacelles, IO systems and electronics. Profitability decreased at €697 million or 10% of sales. The decrease is mainly driven by lower volumes. One-off items were booked for €233 million, reflecting the impairment of several programs and restructuring costs. Aircraft Interiors, slide 25. Full year 2020 revenue amounted to €1.922 million, down 42.1% or 40.4% organic. Aircraft Interiors were the most affected division every quarter. OE, which represents 75% of Aircraft Interiors sales, was down 38.5% organic, driven by lower volumes in all activities due to production rate cuts and the retrofit cancellations and deferrals. Services were down 45.8% organic, mainly driven by seat and cabin airlines stopped ordering in Q2. Recurring operating income was negative for €174 million. Operating margin turned negative 9.1%, strongly impacted by significant volume decrease despite the positive impact of the adaptation plan. One-off items were €72 million mainly represented to restructuring costs, layoff compensation and site charges. Slide 26 on cash generation. Free cash flow reached €1.73 billion despite a 50% decrease in EBITDA, driven by strong organic sales decrease. Free cash flow generation was driven by cash from operations reaching €1.9 billion, almost neutral cash impact from working capital, and capital expenditures at €793 million, down 35%. Slide 27, a few words on our liquidity position that has been reinforced during 2020. It is strong and sound. In 2020, we have been able to refinance 50% of the €3 billion bridge loan facility put in place at the beginning of the crisis, with the issuance of €1 billion seven-year convertible bonds and €564 million senior unsecured notes issued in the USPP market with maturity of 10 and 12 years. On top of that, we have a €2.5 billion RCF available. You may have noticed that Standard & Poors has assigned to Safran a triple B plus long-term credit rating with a stable outlook, which will enhance Safran's access to debt capital markets if and when needed. Talking debt on slide 28, the usual bridge about our net debt position. Net debt at the end of December reached €2.792 billion, a strong decrease versus the end of 2019. It reflected strong cash flow generation, mainly from operations. No dividend paid in 2020. And others, not having included the impact of the 2020 shareholding plan for employees, and the FX impact on debt instruments. At the end of December, the net debt to equity ratio was 21.9%, and net debt to EBITDA was 1.1. I will not comment on balance sheet on slide 29 and conclude with a few words on dividends, page 30. The Board will propose to the next AGM a dividend of €0.43 per share, our evidence of improved visibility and confidence in the future. And now I leave the floor to Olivier for the 2021 outlook.

Thank you, Bernard. Let's look at air traffic assumptions for 2021 on slide 32. As you can see on the left side of the slide, IATA just released two RPK scenarios. One is based on 11% growth in 2021 compared with 2020, the RPK 38% of 2019 level versus 34% in 2020. And the other, with a 3% decrease RPK at 33% of 2019 level. Uncertainty remains high. On the one hand, we have new COVID related risks, surge of variants, new lockdowns, quarantine measures together with border closures. And on the other hand, vaccination campaigns. The major uncertainty remains the opening of borders that will or not allow people to travel. On the right side of the slide, you see Safran's assumption in terms of narrowbody average fleet kilometers. In the very short-term, ASK in Q1 2021 is expected to be down compared to the last quarter of 2020. The key is the upcoming summer season, which will hopefully set the pace for the recovery in air traffic. Action by airlines to get ready will also be important. As of today, we expect the recovery to start to materialize in Q3. On slide 33, what are the key assumptions that we used to provide our 2021 outlook? I will let you read them. The main assumptions I would like to underline are the following: 800 plus LEAP deliveries; the lower OE rates, reflecting notably 787 production rate recently announced by Boeing; and the civil aftermarket revenue growth in the high single digits. Cost cutting efforts will continue. There is more to come in terms of manufacturing footprint optimization. We have already announced two additional site closures in the U.S., Ontario in California and Bellingham in Washington State. Investment on research and technology will increase in H2 to a level which is consistent with our ambition to meet the climate change challenges. Resumption of CapEx commitment will be crucial. This brings us to slide 34. The recent slowing of air traffic recovery in several regions of the world generates uncertainty, notably with the risk of delayed recovery of civil aftermarket. In this context, Safran expects for full year 2021 compared with full year 2020 figures a backend loaded activity and profitability; adjusted revenue to decrease in the low single digits in organic terms at an estimated spot rate of $1.22 to the euro; adjusted revenue to decrease in the high single digits; adjusted recurring operating margin to increase above 100 basis points, meaning at least a 300 basis point improvement versus H2 2020 based on a hedge rate of $1.16 to the euro and an adjusted revenue base on the spot rate of $1.20 to the euro, thanks to strict euro savings already achieved and additional measures to be implemented. Free cash flow generation to stay at least at the same level as in 2020, despite strong uncertainties regarding working capital evolution. Before jumping to concluding remarks, I want to have a word on Safran's ESG strategy on slide 35. I'll be brief, as you will find the slides in Section 5 of this presentation and a dedicated section on our press release covering Safran's ambitions and priorities to contribute to the transition towards carbon neutrality and the steps taken and to come towards full climate disclosure. First, as you can see on the left side of the slide, our ESG ratings are improving. Second, Safran's strategy regarding its activities as well as disclosures is clear. It is built on three strategic assets that are: sustainable innovation, operational excellence, responsible conduct. As I said in my comments on CapEx, in these challenging times, it is very important that Safran does not lose sight on the long-term and its commitment to meet the climate challenge -- climate change challenge, while maintaining our research and technology momentum. As a conclusion on slide 36, some key takeaways. In the very short-term, we are dealing with a very uncertain environment and a major lack of visibility. In these circumstances, Safran will continue to demonstrate strong operational execution, as in 2020. Whilst we start 2021 with sustainably lower breakeven points, additional measures are being implemented to reduce cost. For example, the global headcount has decreased by a further 1,500 people in the first six weeks of this year. I am very confident in Safran's future. We have all the building blocks to position us favorably when the market recovery comes. LEAP is a preferred engine choice of airlines. Our market share is strong with a large order backlog. The young CFM56 fleet will feed a large and growing aftermarket pipeline. We have a robust leadership position in Equipment. Our Defense and Helicopter businesses are resilient. Customer confidence has been restored and the breakeven point lowered for our interior business. We have a long track record of conservative and disciplined financial policy that will be maintained. We are continuing to invest in our future, with sustained efforts to ensure that Safran is at the forefront of the climate change challenge. Before taking your questions, I am pleased to announce that we will discuss in depth Safran's medium term outlook during our Capital Market Day that will take place in November this year. Thank you. Together with Bernard, we will now take your questions.

[Operator Instructions] And we have our first question from George Zhao from Bernstein. Go ahead.

So, first question is, your guidance is clearly more positive on Propulsion than the other segments. But if we take out the impacts of narrowbody versus widebody mix, I guess, how are you thinking about the aftermarket recovery for Propulsion versus Equipment? In other words, should the narrowbody portion of the Equipment aftermarket performed better or worse than Propulsion? And second question is you previously called out €2 billion of cost takeout this past year. But how are you thinking about how much of that was sustainable structural savings versus non-sustainable savings that could come back either this year or the next few years as demand recovers? Thanks.

So, George, if I understand well your question, it's about aftermarket narrowbody growth versus the other segment of Propulsion. Am I correct?

Yeah. So, I mean, we know the Equipment has more widebody exposure, which leads to some of the more challenged assumptions. So, if we take out the mix impact of that, how should we think about Propulsion versus Equipment on similar products for the aftermarket?

Okay. On Propulsion, in 2020, our high thrust engine aftermarket ended up better than the aftermarket for narrowbody, right? This does explain why was the ASK for narrowbody in 2020 decreased by 50%, our aftermarket revenue for Propulsion decreased 43%. The high thrust engines are better, because it's largely driven by the freight market. As a consequence, in 2021, the aftermarket revenues for narrowbody will grow slightly better than the high thrust aftermarket. On cost savings ...

Maybe some other comments on service. Just to say that, yes, indeed. Our guidance includes some negative organic growth for services, excluding civil aftermarket. Of course, it reflects the mix, as you've seen the widebody market quite depressed. And I will not give more details on the breakdown between narrowbody and the widebody for aftermarket. But the big message here is that we plan civil aftermarket for civil engines to grow, but we think it will be more difficult, a tough situation for civil for the services outside civil aftermarket. Now coming, George, to your question about what part of our €2.3 billion savings is structural. I think that's a big debate. And we know that part of those savings in 2020 was due to lower activity. Okay? And for sure, when activity recovers, part of those costs will come back. But in 2021, as the activity will not fully recover, you can expect that the vast majority of those €2.3 billion will stay not exactly the same, but new savings will be implemented as well. For example, part of the savings that were achieved in 2020 due to the agreement signed in France with unions will not be exactly the same in 2021, as we do not expect short-time working and the support from the government received in 2021 to be exactly at the same level as 2020. So, this part of the savings might not be the same, could be lower in 2021 versus 2020, right? Same thing for R&D. There are some projects that have been delayed, but they will start again in 2021. We might be very cautious when launching new investments and new R&D expenses, but there are some projects that have been delayed and that cannot be delayed anymore. So, those kinds of expenses, you will find them. But also we have new savings. We have the full year impact of all savings and labor costs that have been achieved in 2020 that you will find in 2021. And there are new restructuring that we are also implementing. So, I would say to conclude that the majority of the €2.3 billion will still be there in 2021, and I expect that a large chunk of that will still be there for the next years.

Great. Thank you.

So, we have another question from Mr. Ian Heelan from Bank of America. Please go ahead.

Yes. Morning. It's Ben from Bank of America. Thanks for taking my question. I had two. The first one, Olivier, at the beginning of the year, you announced and posted a video on the website highlighting your top three strategic priorities for the group. And defense and space -- and growing in defense and space was a key priority. Could you expand on this a little bit? And is this organic growth, or are you looking at inorganic growth opportunities as well? And then a second question for Bernard on working capital. Flat for the year for 2020. Clearly, a great result. Can you talk about some of the moving pieces we should be thinking about for 2021? Thank you.

Okay, Ben. On sovereignty, defense and space, first of all, as an aerospace company, we have dual activity. We are involved in both commercial and military activities, be it for Propulsion or for Aircraft Equipment. And the military business held up very well in 2020. It was resilient, so that it has weighted about 25% of our revenues in 2020 simply because it held up well. It has proven to be resilient. So, what I mean by this sovereignty message is that our -- being part of the military ecosystem and being onboard big sovereignty defense program at European level feeds our technology pipeline. So, this is important for us, because it feeds our technology pipeline. So, these programs are key factors for us to excel in future technologies and not lagging behind, if you wish. So we -- it's important to be significant players in those programs, such as the one that is being in discussion on the next European combat aircraft, as an example. The overall margin performance of our military business is on par with the overall Group average and is one of the pillar of our resilience. Now you asked a question on growth. I mean mainly organic growth through our participation to this program -- organic growth, primarily. If some opportunities do arise in this defense segment, we will look at them, but with a strict financial discipline and provided they feed our technology pipeline, if they makes sense.

Okay. Ben, I will take the other question on working capital. As you said, in 2020, we were -- I think, we achieved a very strong performance by just having a stable working capital vision versus 2019, and that was the result of strong actions on inventories that were down and were down in H2. In 2021, what we target -- and that's what is embedded in our guidance, is stable working capital with some moving parts. We expect inventories to continue to decrease in order to mitigate other impacts. The other impacts will come from the other usual moving parts from receivables and payables. And it gives me the opportunity to say here that what will change between 2020 and 2021 is the contribution from LEAP-1B. Because in 2020, with the agreement that we reached between CFM and Boeing at the beginning of the year, yeah, I'm sure you remember it. It was a clear positive tailwind to cash flow in 2020 and we won't have that in 2021. So, you can book that as a working capital evolution of part of the cash from operations, but it's clearly a big difference. When you look at 2021 against 2020, LEAP-1B cash in will be headwind, and that will be a material headwind.

Okay. Very clear. Thank you.

So, next question from Robert Stallard from Vertical Research. Please go ahead.

Thanks so much. Good morning. I have a couple of questions, actually both follow-up on Ben's questions. First of all, on the inventory side of things, you made very big cuts in the second half of 2020, continuing in 2021. How comfortable are you that you will have enough inventory if the aftermarket does come back strongly in the second half of 2021? And of course, Airbus is also raising the A320 rate. And then secondly, on your comments on the LEAP-1B, I was wondering if you could elaborate on how this turns into a headwind in 2021. And if possible, can you give a number for the cash impact? Thank you.

Okay. Rob, so for inventories, you mean -- you put on the table the right dilemma for us, continuing to be very tough on inventories, but still having all necessary means to meet the demand in terms of recovery and of aftermarket and in terms of ramp up for the OE side, especially for the Airbus LEAP-1A. We think that we have room for further cuts in inventories. I mean, when we look at our sales, total inventories are more than 130 in terms of DSO in -- at the end of 2020. So, we have room for cutting yet again inventories in H1 and to still be in a position to face the recovery. So, we have built our budget based on that. We will adapt if necessary, but that's what's clearly the budget and the guidance. Now on LEAP-1B, it's difficult for me to put a number. Let's say that it's in the region of €300 million headwind in 2021. And it is explained by the fact that in 2020, we have been paid for engines delivered in 2019 that were not paid because of the lack of deliveries by Boeing. So, at the beginning of 2020, we made the decision to disconnect cash from aircraft deliveries. That's why we received a lot of cash together with CFM from 2019 engines. And now those 2019 engines, I would say, 80% already paid. Okay? And it won't come back in 2021. That's a big part of that. And the second part is that in 2020 with our agreement with Boeing, we continued to deliver some number of new engines. And new engines for LEAP-1B will be down, in fact, in 2021 versus 2020, because Boeing has to manage a lot of aircraft and engines before resuming a high rate of new production. These are the two reasons why the cash that we will get from LEAP-1B in 2021 will be less than the one that -- the cash that we received in 2020. Does that answer your question, Rob?

Yes. That's very helpful. Thank you, Bernard.

Okay. So, we have another question from Celine Fornaro from UBS.

Yes. Good morning, gentlemen.

Good morning.

We can't hear you.

We lost the question. So, we have a question from Tristan Sanson. Please go ahead.

Yes. Good morning, gentlemen. Sorry for Celine. Hope, she will be able to get back in the like to ask her questions. So, two questions on my side. The first one, I'm sorry, is a bit of a technical question for Bernard on the provisions booked on the Transformation Agreement signed in France. Can you explain to us a bit -- give a bit more detail, like when was the initial provision booked? Was it in H1, or earlier than this? And you said that there's a very attractive adjustment that should be made to put the €103 million in H1. Is there also a provision -- an amount of provision release on top of this that should consider H2? Or should we consider that the total for the full year is €103 million? That's the first question. And the second is since your mid-December update, the situation or your trading environment has changed a bit and IATA has especially materially slashed its outlook for this year. You explained your trajectory as you see it for 2021. Can you tell us whether you still see -- do you still reiterate your ambition to return to progress this number of shop visits by 2023 and previous level of spare parts flows in 2024? Do you see, I don't know, standard deviation on that estimate? Thank you.

Thank you, Tristan. So, on the provisions and for the agreement reached with the French unions in the summer, there are two different impacts booked in our 2020 accounts. First, this is not the bulk of it, but just as a reminder, because of ATA, the agreement, we have booked some early retirement charges as one-offs for €51 million. You can see that in our financial statement and it has nothing to do with the €103 million you mentioned. So, just to say in our one-off, so it's not in the recurring operating margin. We have some restructuring costs, including the ones that have been agreed with the unions to have early retirement. But I get that the one that you mentioned is the big chunk of the impact, that is that we have kept profit sharing schemes within Safran. Okay? It's called [Foreign Language]. And the agreement was signed in Q3, and it covers the full year of 2020. It covers provisions made in 2020 for profit sharing cash out in 2021. So, it's a full year impact in 2020. And when we book the whole impact for the full year in Q3, we say that in this impact of lower provisions, €103 million relate, in fact, to lower provisions in H1. So, let's call it a kind of write-up, even if it has not -- from an accounting point of view, been not a write-up, okay? But it's €103 million positive booked in Q3, but that relates to Q1. Okay? So -- and -- but we have other impacts of the ATA agreement for the full year. So, including in Q3 that relates to provisions normally that has to be booked in Q3. Okay? Now as you said, the -- regarding the recovery. The situation is slightly different from the one that I -- we discussed in December. The big difference is on the Boeing 787 rate. That has been reduced since we spoke -- we talked, right? Civil aftermarket, we rather see the actual situation as a timing issue. The recovery in terms of aftermarket is going to be delayed versus what we had in mind when we talked in December. Okay? So, it does not mean that we have reconsidered our view that in terms of shop visits, we should come back to 2019 record level something in 2023. And we still consider that in terms of revenue, it should be in 2024, as we might have some impact of fuse box and other scope impact on shop visits. So, we have not reviewed our long-term view on aftermarket recovery, Tristan.

That's very clear. If I may add a very quick follow-up on the first point on the provision. So, in H2 there was no provision release associated to H2 performance, because the provision was actually never booked, because it was after the signing of the agreement, but it's still a saving as in a normal environment. You should have booked that provision, if you didn't have the year.

Yeah. Yeah.

Many thanks.

You are welcome. Do we have Celine?

Not for the moment. Before that we have Harry Breach from Stifel. Please go ahead.

Yes. Thank you very much. Good morning, Olivier. Good morning, Bernard. Can I possibly just ask you maybe a couple of questions? Firstly, as Tristan and Bernard observed, the world looks a little bit more difficult now than it looked at the time of the fireside chat in December. Can you possibly give us an idea of whether customers for shop visits, both -- I guess, across the CFM network, has there been significant deferral activity of shop visits booked for 2021? And can you possibly give us an idea of the volume of shop visits that you expect in 2021 compared with 2020? And then the second question, if I can, was just to ask really on LEAP. Now, we have maybe a more stable production plan from Boeing looking out in coming years and you can plan a little bit better. Are you able, perhaps, Bernard, to give us an idea of -- maybe a more precise idea of when LEAP should go through a breakeven point at a gross margin level or at EBIT level? And then maybe, finally, Interiors. Clearly, it's been a really, really difficult place last year, discretionary spending down heavily. Can you give us an idea? Maybe update your view, Olivier, you gave about the timing of when we would get to breakeven in aircraft interior and when we would get to a good level of profitability, please?

Okay. Harry, Olivier speaking. I will take your questions. First of all, there has been a very good surprise in 2020 as basically the work scope of shop visits did not change versus the preceding years. So, the work scope remains stable. Meaning that the revenue per shop visit remains stable in 2020, and we view the same in 2021. We view the same stable work scope per shop visit. There has been indeed less deferral than what we expected. The impact of green time was not so heavy. And the impact of green time will be roughly the same, we believe, in 2021, as it has been in 2020. So, what does it mean for the volume of shop visits that we forecast in 2021 versus 2020? We see it growing around mid-teens in terms of volume. On your second question, LEAP. Yes, we had communicated before crisis on the fact that we were targeting a breakeven by 2022. That was before the crisis and this was relating also to reaching a volume of 2,000 LEAP engines to be delivered. Now with the impact of crisis, of course, we'll get back to this level of volume -- to this volume, but probably in 2024, 2025. This is why we see the breakeven slipping by two to three years compared to what we had in mind before the crisis. Interiors, as Bernard has explained, the Interior was the most severely impacted business. But as I said, we have restored customer confidence and we see now customers coming back to us. But the fact is that the business -- the top line has been significantly impacted. We will see this year every quarter a steady improvement in our operating performance in Aircraft Interiors, a steady improvement quarter-after-quarter. We are still aiming to reach breakeven by the last quarter of 2021, but it is also depending on, let's say, the aftermarket recovery. So, all-in-all, for full year 2021, the Interior business will still be negative.

Harry, it's Bernard speaking. If I may just a follow-up on the breakeven question. Just from an accounting point of view, we don't book the under-absorption of fixed costs due to activity in cost of production. The reason why is that we don't want to capitalize that through inventory. So, it means that in order to recover the roadmap to breakeven in 2024, 2025, the very deteriorated situation in terms of activity in 2020, 2021, I guess, also maybe 2022, that will not have to be recovered in 2023 and 2025. So, the road is not as steep as you can imagine. If we have to keep under-absorption in the fixed cost in production costs. Those costs, all under-activity, goes directly to the P&L, okay, at the start of the year. That's one of the reasons why we don't anymore give you a transition impact because production costs does not -- do not fully explain how it evolves from a year to another year. Okay? We will come back with this kind -- with the kind of indication of breakeven, but when it becomes more relevant.

Thank you. Thank you very much.

So, our next question is from Celine Fornaro from UBS. Please go ahead.

Yes. Good morning, gentlemen. I hope you can hear me. And thank you very much for being patient with my questions. So, my first one would be if maybe you could characterize a little bit, Olivier, on the orders or the activity that you may have seen in terms of civil aftermarket and for the engine businesses in Q1? And maybe more in particular on the narrowbody, which seems to have been so depressed until the very end of last year. Is there any sign of airlines starting to move a bit on the activity ahead of a happy summer or half year summer fly? And my second question would be regarding the R&D, and in particular the R&T comments that were made from Bernard. And if we could just have a little bit of color on how much of growth are you thinking or extra expense you should put into that, assuming also some of the government contribution and also what technologies are we mostly focusing on? Is it open rotor technology or any other ones that you are thinking of accelerating?

I will take the first question, to let Olivier then answer the R&T roadmap question maybe. In fact, we have seen -- I mean Q1 is not over, so I will just only comment on the CFM56 figures for aftermarket at the beginning of the very -- it answers your question. We have seen a low level of sales, spare parts, in January 2021. It is steadily recovering and February is better than January. But we think that, as a big message, we're going to see for the Q1 in aftermarket and especially for CFM56 parts, something very similar to what we had in Q4 2020, right? So, it's just as if we had a fifth quarter in 2020 in terms of trend.

Okay. Celine, on your R&T question, the big chunk of our R&T expenses in the years to come will be dedicated to climate change. I would say 75% of our R&T expenses. And we don't want to lie. We want, as I said, to be at the forefront of it. So what is it about? First, propulsion. And together with our partner, GE, we are already preparing the -- and maturing the technologies for a next-gen engine that could fit for next-gen aircraft at around mid-next decade, 2035 also. And in order to reach, let's say, a significant level of gas emission reduction and fuel burn reduction, we are going to work on disruptive technologies and disruptive architecture. So, I won't be too specific on what it is, but we will certainly capitalize on the demonstrator that we had developed, which is the open rotor that you mentioned. So we have learned a lot through this open rotor demonstrator and we will capitalize on that. This next-gen propulsion that we want to be developing and get ready for mid-next decade, we are shooting for a fuel burn improvement of over 20%. Now the second point is that this next-gen engine, we want it to be able to operate with 100% sustainable fuels, 100% sustainable fuels. The second line of development will be on electric motors. Electric propulsion and hybrid propulsion is also part of it and we want to -- here to be one of the world leaders in that segment, which is, let's say, the lower segment of aircraft capability, but it is an important segment. And in order to move also ahead in terms of climate change challenge, we are working on all our equipment businesses in terms of weight alleviation and all that. So, this is basically our R&T effort.

Just in terms of figures, Celine -- in terms of R&T, the level of expenses will be much higher in 2021 versus 2020. But a large part of that will be funded thanks to French government support. So, the impact on our P&L is much less than what we will do, in fact, to fuel the roadmap from a technical point of view.

Thank you. And your R&D overall guidance for 2021 then includes this R&T?

Absolutely.

Yes.

Yeah.

Thank you.

Okay. So, our next question is from Chris Hallam from Goldman Sachs. Go ahead.

Good morning, everyone. So, I just wanted to come back to your earlier comment that within the civil aftermarket for this year, you expect mid-teens shop visit growth and stable scope. And I don't think pricing has deteriorated. So, I just was wondering how we get to high single digit growth in the guidance for the aftermarket this year, because I assume that's too large of a gap to be explained just by the High Thrust segment. And then secondly, on the long run savings, you mentioned quite a lot of the moving parts earlier in the Q&A. That's very helpful. You've previously said that you expect the savings efforts to drive a margin tailwind of around 200 basis points in 2024. Is that still the right level to think about? I mean that would imply about €400 million to €500 million of structural savings and I think you mentioned earlier that a good portion of the €2 billion would be retained. So that's just a clarification on that savings point. Thanks.

Hi, Chris. So yes, indeed. I mean, the 200 basis points that I mentioned for 2024, I think it's a minimum. I was, again, conservative. So, yes. It should be higher than that. Now on civil aftermarket, just to remind you that we have spares, but we have also long-term contracts. And the assumption that how you can do the math is that for our contracts, we have taken the assumption that it should be stable in 2021 versus 2020.

Remember, Chris, in 2020, the services side held up well, and that explains why, at the end of the day, our civil aftermarket revenues dropped by 43. So, this is the other side of it and it's going to be flattish in 2021 on services side.

And coming back on the breakdown of our civil aftermarket assumptions for 2021, we think that CFM56 spare parts will be in line with the number of single digit increase. And we think that pricing will more or less be offset by some used part impact and those kinds of impact. We think that our spare parts businesses for high thrust engines will grow, let's say, mid single digits. And we think that our contract services, the thing that just -- Olivier just mentioned, will be stable. That's why you end up with a high single digit growth for the total civil aftermarket.

That’s very helpful. Thank you.

So, our next question is from Jeremy Bragg from Redburn. Please go ahead.

Good morning, guys. Two questions, please. Firstly, could you talk about the pace of recovery in Equipment, please, for margins and profit there? And when you might get back to 2019 levels? Understandably, we all focus a lot on the aftermarket, but wanted to ask on that too, please. And then secondly, Olivier, what's your view on a potential new Boeing aircraft to counter the A321neo? And how do you think about how you could be positioned on that and what it might mean for R&D? When you gave the medium term guidance at the last Capital Markets Day, you were factoring it in, but just wanted to get an updated view on that, please? Thank you.

Okay. Maybe Bernard will take the first one and I will take the second one.

Okay. On Equipment margins, it will depend a lot on rates. For OE -- as you know that the proportion of OE vessel services is much bigger for the Equipment than for the Propulsion. So, it will heavily depend on rates and especially widebody rate recovery. That's why we think that the recovery of our previous margins in Equipment will be delayed, let's say, next year, something like that or maybe even the year after. But please, Jeremy, I mean, CMD 2019, 2018, that were all -- good all days. So, we will refresh that at the end of the year, but we are in a different environment, of course.

Understood. Thank you.

Okay. Jeremy, with regard to your second question, you will understand it's not up to me to speculate on what our customers, in that case Boeing, could do or not do. All what I can say is should Boeing decide to launch a new aircraft project in this segment, certainly, together with GE as CFM, we would offer an engine for that potential project. So, we would compete to get onboard.

And I guess, the question is what does it mean in terms of figures? We have nothing else to say than we explained that in engine. I mean, our share is in the region of €1 billion for our share. It will depend, of course, on the kind of engines, that potentially a new client would look for, but that's the ballpark and you still have to consider that.

I guess, what is going to be an important driver for any kind of decision is to -- the commercial dynamic of the MAX. And, of course, we will do what you have to do in order to accompany Boeing in getting commercial momentum for the MAX again.

Thank you. And can I just ask a follow-up one, please, on MAX and commercial momentum for it? Because at the last set of results, I think you -- I can't remember the exact phrase you used, but you talked about being a partner on the MAX program. So, I wondered if you could maybe comment a little bit on LEAP-1B pricing, please.

Well, as you know, we are a resharing partner to Boeing on the MAX program. So, on -- looking forward and going forward on the next campaigns, we'll do what we have to do as a resharing partner to Boeing on new campaigns.

But it's not bleeding into existing orders? You are clear that this is on new orders and the competition thereof?

On new orders and competition, yes, indeed. The engine has nothing to do with the grounding. We have no responsibility at all with the grounding.

Of course. Of course. Thank you very much both.

Thank you.

So, we have another question from Milene Kerner from Barclays. Please go ahead.

Yes. Hello. Thank you for taking my question. The first question is on Equipment. On your guidance of low single digit decline for other service, can you provide some color on the trends you're expecting for the different businesses of your Aircraft Equipment division? And then my second question is on Propulsion. With the PMA rounds that have recently been authorized by the FAA, Fortress Transportation & Infrastructure Investor with -- they target 5% to 10% market share on the CFM56. So, I just wanted to see how could this be a threat on your spare parts? Thank you.

I will take say the first one and you'll need to say again the second one because the sound was terrible.

The sound was terrible.

So, on the -- I will be short on the first one. The low single digit decrease for services in Equipment and Interior -- Aircraft Interior division, we don't break down this decrease. But I think that the -- all divisions will be impacted, because it has to do with the fact that the aircraft are not flying that much, including for widebody aircraft. And there is no need to replace parts until they fly. But we don't provide a guidance and a breakdown of this decrease for 2021, Milene.

Okay. Understood. So, yeah, I mean -- so we had Fortress Transportation & Infrastructure Investor, this engine lessor, that they're becoming very aggressive on the CFM56 aftermarket. And they just had the PMA parts that had recently been authorized by the FAA. So, I just wanted to see what could be the threat of this part on your spare pricing?

We don't see a threat on PMA. This has not changed since the last years. We don't see a big threat on that.

I think by the way, Milene...

The lessors are very keen to be able to remarket their engines and their aircraft. So, we don't see a big threat on PMA.

And I think this is something that you share, because in the research paper that you just issued, that was the same conclusion. That's not a big threat. No. I think we share that.

No. No. It was, but I was just wanted to make sure that you were sharing the same view.

Yes. We do.

Your words, but we share that. Maybe last question.

Yeah. We have another question from Andrew Gollan from Berenberg. Please go ahead.

Hi. Good morning, everyone. Thank you for me squeezing me in. It's just a follow-up question to Celine's R&T point. Olivier, I think you said the next-generation engine you want to operate with 100% sustainable fuels and gave a sort of 2035 timeframe. Boeing's committed that all of its current fleet will fly -- all of its fleet will fly at 100% in 2030. So, what does that mean in terms of Safran's current engine programs? What needs to be done in terms of adaptation or investment for LEAP, for example, because you suggested LEAP next-generation won't be around until the middle of the next decade? So, how do we align with Boeing?

Okay. Thank you, Andrew. Our existing engine, be it CFM56 or LEAP, are able to operate with up to 50% of sustainable fuels without any modification. So, it does not happen today just because the price of sustainable fuel is quite high compared to the kerosene. And so airlines, they don't choose drop-in sustainable fuel today, but it's not a technical problem. It's a sort of supply question. That's why we are pushing -- I can say it, we are pushing the idea at the European level to have a rule imposing to the airlines, any airlines operating in Europe, imposing a certain percentage of drop-in sustainable fuels. And the European Commission is thinking of it. We believe it's a good way to start to address climate change without waiting for 2035.

So, to be clear, there's no meaningful investment requirements to go from 50% to 100% on the current--?

No. Yeah. When I say 100%, this is for the next-gen of the aircraft. This is for the next-gen of aircraft and engines, not for -- with today's engine, we can make it with 50%, which is already a big step forward, because should everybody do that, we would significantly improve the gas emission of the air traffic in Europe. So, 50% today, easy. Technically feasible, no modification. 100% is next-gen.

Understood. Thank you. Very clear.

Thank you.

Okay. I think we are concluding this conference now. Thank you very much. And I hope that we can continue to talk in the next days on one-on-one bases. And we hope that we can travel to have meetings next time. Thank you very much.

Thank you.

Ladies and gentlemen, this concludes today's conference. So, thank you for your participation. You may now disconnect.