Airbus SE

XETRA:AIR

Earnings Call Analysis

Airbus Q1 revenue grows but faces challenges

In Q1 2024, Airbus saw its revenue grow by 9% to €12.8 billion, driven by a higher number of commercial aircraft deliveries. However, the EBIT adjusted decreased from €0.8 billion to €0.6 billion due to increased R&D expenses and a deteriorating hedge rate. Helicopter deliveries dropped by 21%, reducing revenues by 9%. Despite these challenges, Airbus maintains its guidance for 2024, expecting around 800 commercial aircraft deliveries, EBIT adjusted between €6.5 billion and €7 billion, and free cash flow before customer financing of around €4 billion.

Overview of Q1 2024 Financial Performance

Airbus reported a 9% increase in its Q1 2024 revenues, reaching EUR 12.8 billion, mainly due to a higher number of commercial aircraft deliveries. However, the company's operating income (EBIT) decreased from EUR 0.8 billion in Q1 2023 to EUR 0.6 billion in Q1 2024. This decline was attributed to unfavorable hedge rates, increased R&D expenses, and costs associated with the employee share ownership plan. Despite this dip in EBIT, Airbus maintained strong financial health, with a net cash position of EUR 8.7 billion and liquidity above EUR 30 billion【4:0†source】【4:1†source】.

Commercial Aircraft Segment

In Q1 2024, Airbus delivered 142 aircraft to 45 customers, with significant deliveries in the A220 and A320 families. The company plans to ramp up production rates for the A220 to 14 aircraft per month by 2026 and for the A320 to 75 aircraft per month in the same timeframe. Airbus also decided to increase the production rate for the A350 to 12 aircraft per month by 2028. The strong delivery performance and order book, including 170 gross orders in Q1 2024, positioned Airbus well for future growth in the commercial segment【4:3†source】【4:6†source】.

Helicopter Segment Performance

The helicopter segment saw a 21% decline in deliveries to 50 units, compared to Q1 2023. Consequently, revenues in this segment fell by 9% to EUR 0.5 billion. Despite the lower volume, the company secured 63 net orders, a substantial increase from the previous year, reflecting strong market reception at events like HELI-EXPO. Airbus is focused on expanding its production capabilities, including a new final assembly line in India through a partnership with Tata Group【4:5†source】【4:6†source】.

Defence and Space Highlights

The Defence and Space segment started strong with a EUR 2 billion order intake in Q1 2024, primarily driven by its air power and Space Systems business lines. Notably, the C295 aircraft reached a total of 300 orders. Airbus is progressing with development activities for the A400M, focusing on enhancing capabilities and maintaining close alignment with customer requirements. The segment's revenue grew by 4% year-over-year, but profitability was still impacted by legacy issues【4:1†source】【4:6†source】.

Guidance and Strategic Priorities

Airbus maintained its full-year 2024 guidance, targeting around 800 commercial aircraft deliveries, an EBIT adjusted between EUR 6.5 billion and EUR 7 billion, and free cash flow before customer financing of roughly EUR 4 billion. The company continues to emphasize ramping up production across all programs and maintaining strong customer demand. Key strategic pillars such as safety, quality, and compliance remain central to Airbus's operations amidst ongoing geopolitical and supply chain challenges【4:15†source】.

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Airbus Q1 2024 Results Release Conference Call. I am [ Chairman ], the operator for this conference. [Operator Instructions] At this time, I would like to turn the conference over to your host, Guillaume Faury, Thomas Toepfer and Helene Le Gorgeu. Please go ahead.

[Helene Le Gorgeu, executive]

Thank you, Sharon, and good evening, ladies and gentlemen. This is the Airbus Q1 2024 Results Release Conference Call. Guillaume Faury, our CEO; and Thomas Toepfer, our CFO, will be presenting our results and answering your questions. This call is planned to last around an hour. This includes Q&A, which we will conduct after the presentation. This call is also webcast. It can be accessed via our home page by clicking on the dedicated banner. Playback of this call will be accessible on the website, but there is no dedicated from replay service. The supporting information package was published on our website earlier today. It includes the slides, which we will now take you through as well as the financial statements. Throughout this call, we will be making forward-looking statements. I invite you to refer to our safe harbor statement that appears in the presentation slides, which applies to this call as well. Please read it carefully. And now over to Guillaume.

[Guillaume Faury, executive]

Thank you, Helene. Hello, ladies and gentlemen, and thank you for joining us today for our Q1 2024 results call. We are here in Amsterdam with Thomas to run you through our results. Nearly 3 months have passed since we last met at the time of full year results. We highlighted that this occasion the persisting complex operating environment, which, in the meantime, has not shown any sign of improvement, notably the geopolitical tensions and supply chain challenges. In this context, the supply chain remains a pacing factor for the ramp-up, and we closely cooperate with our suppliers. We continue to invest into our production systems and remain vigilant to actively manage bottlenecks. And we devoted our efforts on quality and execution, notably with the critical onboarding and qualification of skilled workforce. The strong commercial momentum that we observed on wide-body aircraft underpins our decision to increase the production rate for the ACC to 12 aircraft a month in 2028. In Q1, we delivered 140 aircraft, a plus 12% increase year-on-year, roughly in line with our plan. Therefore, I'd like to recall that similarly to last year, we expect the delivery profile to be back-end loaded. Our EBIT adjusted stood at EUR 0.6 billion, reflecting, in particular, the commercial aircraft deliveries and also the investments to prepare the future and support our ramp-up. Our free cash flow before customer financing was minus EUR 1.8 billion, sorry, consistent with inventory buildup as we ramp up across programs. And our full year 2024 guidance remains unchanged. So, let's now look at our commercial environment. We booked 170 gross orders during this quarter. On the A320 family, we booked 96 gross orders, bringing our backlog to 7,177 aircraft, thereof around 2/3 are for the A321. Moving to the wide-bodies. We recorded 74 gross orders, including 33 from Korean Air. We're also pleased with the recent announcement from Vietjet and Japan Airline as well as just earlier today from Indigo, concerning the increasing commercial momentum of the wide-body segment and the airline's confidence in our modern and fuel-efficient aircraft. As a result and in the absence of cancellation in the quarter, our backlog in units amounted to 8,626 aircraft at the end of March 2024. Looking at helicopters. In Q1, we booked 63 net orders compared to 39% in Q1 last year, mainly in the light and medium segments. We are also very pleased with the trust placed by our customers in our products and services at this year's HELI-EXPO-- during this edition of HELI-EXPO, we announced 40 firm orders and 115 commitments for a variety of our multi-mission helicopters from customers worldwide, including the framework agreement signed with the helicopter company in Saudi Arabia. In the quarter, we also signed a contract with Sky [ coalescing ] in China for 6 H175 helicopters and a follow-on order placed by the Japan Coast Guard for [ 3 ] H225 helicopters. We continue to see positive momentum in the civil and military markets. And going forward, we are focused on securing new business opportunities in both our home countries and the export market. In line with this ambition, we have recently announced the partnership with the Tata Group to escalation H125 final assembly line in India. This new manufacturing facility will serve the Indian civil market and export to some of the neighboring countries. Finally, in Defence and Space, we started the year with a solid order intake of EUR 2 billion in the quarter. This includes the extension of previously signed contracts for reference and services. While on air power business line and following the latest order of the Republic of Kazakhstan, we are proud to highlight that the C295 has now reached a total of $300. Additional orders booked in the first quarter relate mainly to Space Systems. On the launch activity, we obviously look forward to the upcoming Insis maiden flight targeted between 15th of June and end of July 2024. So, this year, this is definitely an important milestone of the year, not only for us but for Europe and its independent access to space. [Indiscernible] Now Thomas will take you through our financials. Thomas?

[Thomas Toepfer, executive]

Well, thank you, Guillaume. Hello, ladies and gentlemen. Welcome to our call. I'm on Page 6 of the presentation, and I would like to take you through our financial performance -- as you can see, our Q1 2024 revenues increased. -- to EUR 12.8 billion. That is up 9% year-on-year, and it's mainly reflecting the higher number of commercial aircraft deliveries. And on R&D, we'll show on the upper right-hand side of the page, our expenses slightly increased versus the Q1 of 2023, and they stood at EUR 0.7 billion. And going forward, we continue to expect our full year R&D to slightly increase compared to last year. If you turn the page, you can see that our Q1 2024 EBIT adjusted decreased to EUR 0.6 billion from EUR 0.8 billion in Q1 2023, and that reflects the higher commercial aircraft deliveries, but also a $0.01 hedge rate deterioration. It also reflects investments to prepare the future and the decrease in helicopters from a particularly strong Q1, which we had last year. And it also includes the planned impact from the increased Airbus employee share ownership plan, whose rear participation outlines our employees' commitment to our ambition. And this ease plan resulted in a year-on-year expense increase of slightly above EUR 0.1 billion. You can see that the Q1 2024 EBIT reported was EUR 0.6 billion. And on the right-hand side, you see the total level of EBIT adjustments. They were broadly neutral and they included negative EUR 13 million. The impact is from the dollar working capital mismatch and balance sheet revaluation, a positive EUR 51 million related to the gain on the Airbus OneWeb satellite and that is linked to the recent acquisition of the remaining 50% of the joint venture, and it includes a negative EUR 6 million of other costs, including some compliance costs. The financial result was a positive EUR 229 million, and that mainly reflects a positive impact from the revaluation of certain equity investments and the tax rate on the core business continues to be around 27%. Now the effective tax rate in the quarter is 34%, and that is driven by a net deferred tax asset impairment. The resulting net income is EUR 0.6 billion, with earnings per share reported of EUR 0.76 per share. And our Q1 2024 EPS adjusted stood at $0.59 based on an average of 788 million shares. Now if you turn the page to Page 8, you can see our U.S. dollar exposure coverage in Q1 2024, $4.5 billion of forwards matured with associated EBIT impact and euro conversions realized at a blended rate of $1.23 versus $1.22 in Q1 2023. And in Q1 2024, we also implemented $4.2 billion of new coverage at a blended rate of $1.12. As a result, our total U.S. dollar coverage portfolio in U.S. dollar stands at EUR 91.4 billion with an average blended rate of $1.22 as compared to $91.7 billion at a rate of $1.23 at the end of 2023. Now as mentioned in the full year 2023 disclosure, we have adjusted our portfolio this quarter by implementing some rollovers to reflect the delivery target for 2024 and its delivery profile, which we expect to be back-end loaded. Now let's have a more detailed look at our free cash flow on Page 9. Our free cash flow before customer financing was minus EUR 1.8 billion in the first quarter, and this outflow, as you can see, was mainly driven by the change in working capital, including the planned inventory buildup resulting from the execution of our ramp-up plan. The A400M for information continued to weigh on our free cash flow and our Q1 2024 CapEx was minus EUR 0.5 billion, and that reflects the investment in enhancing and upgrading our industrial system. To support our ramp-up, we expect our CapEx to continue to increase in 2024, yet at a lower pace relative to previous year. The free cash flow was negative EUR 1.8 billion with nearly no impact from customer financing. And on that topic, I can say that the aircraft financing environment remains solid with currently sufficient liquidity in financial markets for our products. So that overall, as you can see on the page, our net cash position stood at EUR 8.7 billion at the end of March, and our liquidity remains above EUR 30 billion. Now let me conclude this financial part of the presentation before I hand back to Guillaume, and I would say that while Q1 was impacted by some elements that will not repeat in the quarters to come. For example, the expenses linked to the employee share ownership plan -- going forward, we focus on what matters most with a sense of priority and efficiencies, so that overall, its results as consistent with our objectives for the year. And with that, I would like to hand it back to Guillaume.

[Guillaume Faury, executive]

Thank you, Thomas, and let's start with a look at commercial aircraft. In Q1, we delivered 142 aircraft to 45 customers. And if we look at the situation by aircraft family on the 220, we delivered 12 aircraft, and we continue towards the monthly production rate of 14 aircraft in 2026, while still working on the programs industrial maturity and its financial performance. On the A320, we delivered 116 aircraft, of which 62 F21, representing 53% of deliveries for the family. We are making progress towards the rate of 75 aircraft per month in 2026, and we continue to expect the entry into service of the XLR in Q3 this year. We delivered 14 wide-bodies, of which 7 A330 and other 7 A350s and we have decided to increase the production rate for the A350 to 12 aircraft a month in 2028, as mentioned earlier, superseding the written in 2026. And on the A330, we continue to target rate 4 in 2024. Now let's look at the financials for our commercial aircraft business. Revenues increased plus 13% year-on-year, mainly reflecting the higher number of deliveries -- the EBIT adjusted decreased to EUR 0.5 billion from EUR 0.6 billion in Q1. So, the EUR 4.6 billion in Q1 2023 last year, with the increase in deliveries being offset by a slightly less favorable age rate, as Thomas explained, and investments to prepare the future, such as the increase in workforce and R&D expenses. It also includes the effects from the employee share ownership plan. Looking at helicopters. We delivered in Q1 50 helicopters, which is 21% less than in the first quarter of 2023. Revenues decreased 9% year-on-year to EUR 0.5 billion, reflecting the lower volume of deliveries, which was partially offset by services. This is reflected in our EBIT adjusted, which decreased to EUR 71 million. Here also, it includes the effects from the employee share ownership plan. And please let me recall that Q1 2023 performance was particularly strong across programs and services in helicopters, setting a high point of comparison to be noted. And let's complete our review of Q1 with Defence and Space, where revenues increased 4% year-on-year, mainly driven by air power business and partly offset by a less favorable phasing in Space Systems. The EBIT adjusted also reflects the lower profitability of Space Systems mentally linked to the so-called EACs estimate at completion update performed in the second half of last year. Q1 2024, including the aforementioned impact related to the employee share ownership plan, like for the 2 other divisions. And on the A400M, we delivered 1 aircraft so far in 2024. We continue with development activities towards achieving the revised capability [ Roma ]. Retrofit activities are progressing in close alignment with customers. No net material impact was recognized in the first quarter and risk remain on the qualification of technical capabilities and associated costs on aircraft operational reliability, on cost reduction and on securing overall volume as per the revised baseline. Now let me remind you of our guidance issued in February, which remains unchanged. As the basis for its guidance in 2024, the company assumes no additional disruptions to the world economy, air traffic, the supply chain, the company's internal operations and its ability to deliver products and services. So let me repeat the company's 2024 guidance. It's before M&A. On that basis, the company targets to achieve in 2024, around 800 commercial aircraft deliveries. EBIT adjusted between EUR 6.5 billion and EUR 7 billion and the free cash flow before customer financing of around EUR 4 billion. And to conclude on to our key priorities, well, they have not changed since the full year. In the meantime, we have the opportunity to address them more in details during the road shows and our recent interactions. Basically, we remain focused on ramping up across all our programs as we are fully committed to serving our customers and the strong demand for our products. As we do so, we'll continue to rely on our core pillars that underpin everything we do as a company and those pillars are safety, quality, integrity, compliance and security. I consider them as [ pariaments ] for our teams, our customers and all our stakeholders, and I cannot insist enough on how important it is for us to live up to this responsibility every tag. To support the ramp up, we'll continue to work closely with our global supply chain partners and to adapt and invest in our global industrial system. Here, I'd like to briefly address the situation concerning Spirit AeroSystems, which is an important supplier to us. We are working together to secure the sourcing of the Airbus work packages that they are responsible for today. This includes the support from our teams to define a more sustainable way forward, both operationally and financially. In light of the potential consequence of a takeover of Spirit by another party, namely Boeing, we confirm that we are in early stage discussions on a variety of options. These discussions are confidential, hence, we have actually no additional comments to share at this stage. And now looking to you, Helen, for the Q&A.

[Helene Le Gorgeu, executive]

Yes. We will now start our Q&A session. So please introduce yourself and your company when asking questions. Please limit yourself to 2 questions at the time. This includes sub-questions. Also, as usual, please remember to speak clearly and slowly in order to help all participants, particularly ourselves, to understand your question. So, Sharon, please go ahead and explain the procedure for the participants.

[Operator]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We will now go to your first question -- and your first question comes from the line of Ben Heelan from Bank of America.

[Benjamin Heelan, analyst]

Yes. The first one, I wanted to talk around the guidance. And how should we think about phasing of EBIT for the remainder of the year? And can you provide a little bit of color around your level of conviction for the guys for this year?

[Thomas Toepfer, executive]

Yes, let me take this one. So the way I would characterize this, Ben, is was certainly not a super strong quarter. However, it was really affected by some effects that will not repeat themselves in the rest of the year. And I think we gave you some hints mainly this employee share ownership plan, which had a negative effect of over EUR 100 million. That is certainly not repeating itself. But also, of course, some of the cost effect of the hiring that we did last year and also the impact from the hedge rate. So the way we look at it is for the rest of the year, last year, we essentially made EUR 5.1 billion in the remaining months of the year to come to the midpoint of the guidance, we would have to do roughly EUR 1 billion more. Where is that coming from? First of all, from, of course, higher deliveries that we're expecting for the full year. Again, if you take the midpoint of our guidance, this is roughly 50 aircraft, and you know how to translate that into an -- the second positive that will, of course, help us is the fact. Remember we had the negative charges that we took on space. It was EUR 600 million, but we always said only EUR 400 million of that related actually to 2023. So EUR 400 million would be the number to reverse. On the other hand, we have the leases of provisions last year of roughly EUR 100 million. So the net number of charges that will not repeat itself this year is roughly EUR 300 million that you should have in mind. And then, of course, we do expect that there is some performance improvement in the divisions, which is also to be taken into account. And on the slightly negative side, we always highlighted that R&D expenses would slightly increase relative to previous year. We said that we do expect a slight negative from the FX rate development, and we also do expect that there is inflation hitting us in 2024 at the same or maybe slightly lower level than what we had in 2023. Now if you take it all together and also with our focus on efficiency, namely to counteract some of the inflation that, of course, we do see, that should bring you to this roughly EUR 1 billion more in 2024 for the remaining 9 months of the year than what we had last year. And again, the big positives, of course, are the roughly 50 more deliveries, if you take the midpoint of the guidance and the nonrepeat of the one-off that we had last year.

[Benjamin Heelan, analyst]

Okay. Thomas. That was super clear. Can I have one follow-up as well around defense? And can you help me understand the loss in defense? Because I was under the impression based on the Q4 report that a lot of the bad contracts have already been provisioned for in 2023. So, have there been new charges in the quarter? Can you help us understand from an underlying performance perspective, what is continuing to drag on the Defense & Space business?

[Thomas Toepfer, executive]

Yes. Thank you for the question. I think to be very clear, when we say when we said in our call, it's linked to the EACs. We mean that the EAC corrections that we made in the second half of last year, of course, have a one-off effect, but they also put the contracts on a slightly lower trajectory relative to what we had in the first half of 2023 when these EACs were still unaffected. So essentially, when you have new assumptions with respect to time line, new assumptions with respect to cost, that continues to weigh slightly on the EAC. So, to be very clear, that is what we meant when we made the statement in the call. And the rest, I would say, is basically just phasing. Sometimes some contracts come in a little earlier, sometimes a little later. So, I would say no other major effect other than a slightly negative phasing that we saw in 2024 relative to last year.

[Benjamin Heelan, analyst]

Okay.

[Operator]

Will now go to our next question. And your next question comes from the line of Olivier Brochet from Redburn, Atlantic.

[Olivier Brochet, analyst]

Yes. Guillaume and Thomas. I would go for 2, please. The first one on the final assembly line in Toulouse and the extensions in Mobile and Tianjin, if you could update us on where we are, how is the ramp and so on? And the second one on the A220, the negotiations on the contracts in Canada, is the still does it have any impact on the full year guidance, deliveries, EBIT cash, please?

[Guillaume Faury, executive]

Yes. Thank you, Olivier. So, update on the funds for the A320 family production system moving forward at a good pace. Only good things to report. You might remember that we delivered from Telus, the first A321 slightly ahead of schedule, end of last year to [indiscernible] airlines. And so, we keep moving forward. We delivered 4, 5, 6 more now beginning of this year from that line. I'm not specific on the number, but it's moving forward quite fast now. We're in the ramp-up of the production -- the construction work of the U.S. and Chinese funds as well with readiness of the full production system by 2026 consistently with the rate 75 in 2026. So only good things to report, I would say, on that phone. And the second question was is linked to the 20, there is no impact expected on the guidance for this year of the recently shared well, tensions to come to an agreement on the salaries and the compensation for this year for our employees. It's being managed at this point, no impact expected on the full year guidance.

[Olivier Brochet, analyst]

Can I ask a follow-up on the Telus line? When do you think you're going to reach full rate?

[Guillaume Faury, executive]

I have to confess my ignorance at this very moment on this point. For the first A321 line, there's a big ramp up this year. So, we should not be far from reaching the cruise speed by mid or end of next year, I guess. And that the second line will enter into service as far as I remember top of my head, 26. So it will not be a full steam before '27, but good enough to contribute to the rate 75%, as I said earlier. So that's take it as a rough answer to your question, top of my head.

[Operator]

We will now take the next question. And your next question comes from the line of David Perry from JPMorgan.

[David Perry, analyst]

Thomas. I'll have 2 questions, please. The first is just your tone grim, I'm just trying to gauge what you're already seeing on the supply chain. You start with quite a conservative sentence in the release. I mean is it a little worse than maybe you thought a couple of months ago. And I'm just wondering if there are any new issues relative to the ones you discussed at [ LEM ] on the road show only a month or 2 back, in particular, whether you're seeing any resistance from the engine companies. And then also on the widebody environment, I mean you've had some very, very nice orders I think there are reports of more orders to come as well today. Are these coming at better pricing than you were thinking a couple of months ago?

[Thomas Toepfer, executive]

Yes. Thank you, David. -- on my tone, and I said on the supply chain, it is not improving. So, I'm suggesting it's not improving. Basically, we have a lot of issues and taken individually and separately they all are manageable, but the environment is a challenging one. So that's basically what we mean. Not necessarily coming from engines. I think the engine situation is probably rather stable, if not slightly improving, but we see that we have here and there, new cases to deal with and a number of difficult situations. So not of a nature to change our guidance. Our guidance is unchanged, but the environment is difficult, and we are pouring a lot of human resources of teams to deal with the situations with our suppliers and partners, as I said earlier in the call. On the widebody, well, actually, I'm happy to see the situation we're in. I think sort of 18 months ago, we shared with you that we were seeing a pickup of orders a large and quite good type of campaigns. We see that our products, especially the A350, but not only is really competitive in the marketplace. The product is very well in service, that the reputation of the [indiscernible] is significantly growing very positively. And this is indeed of a nature to progressively help on the pricing. But I would not consider that we are yet in a situation that I would find back to normal. We're still moving out of the situation that was a very tense and difficult one, and it's still a very competitive environment. But the fact that we are ramping up that we have decided to increase the rates by 2028 by 2 points in the case that we feel we can fill the pipe with good orders moving forward. So over time, I guess this will continue to improve but remains challenging at the moment, probably slightly improving step by step.

[Operator]

We will now go to our next question. And our next question comes from the line of Ross Law Morgan Stanley.

[Ross Law, analyst]

So first, just a quick one on the GTF engine. Just checking whether deliveries of that engine have met the contractual commitments so far this year? And secondly, on the A350 production rate hike, just to check on kind of where you're getting comfort that the supply chain can support this higher rate? And do you still expect to get 10 a month in 2026 even though this is no longer an official target?

[Guillaume Faury, executive]

Yes. Thank you, Ross, for the question. So, the very short answer on the GTF is yes, matching contractual commitments in 2024, and it was the case as well in 2023. So that's okay. Supply chain... The -- for the 350... Yes, sorry. Well, so when we -- before we announced and we formalized a supply -- a rate hike on the product, we do what we call supply chain readiness assessments. -- that goes quite deep into the supply chain to understand what the supply chain feels capable of and capable of committing to. And that's how we came to the rate 12 by 2028. And that's the way we have found to match additional demand and capacity -- sorry, expectation from our customers on A350, availability and quantities with the ability of the supply chain to do the ramp-up. So, the rate 12 has been assessed positively and that's why we are making it now an official new target. And obviously, we will cross the line of rate somewhere on the way to raise 12, but we really want to avoid any potential confusion or misunderstanding with the supply chain. The rate then is no longer what we're targeting. We are targeting rate 12, and they have to put all of them the right well into their systems and into their investment plans when they have to invest to go from R1 to rent 12. So, we really want to us, make sure that there is no misunderstanding, no room for ambiguity on the rates, it 12. And the rate 10 2026 is no longer a reference. Still, we will have to cross the line of return, as I said, at a point in time and probably not far from what it was before. But again, like what we did for the A320, we want to make sure that everybody is focusing on the new rate, which is the new reference.

[Operator]

Will now take the next question. And your next question comes from the line of Christoph Mana, Deutsche Bank.

[Christophe Menard, analyst]

I had 2 questions. The first one on the [ ESOP ]. Do you have the split division? I mean, should we assume it's basically a pro rata per the percentage of employee per division? And the touch this, should we consider [ ESOP ] as a recurring element in Q1 every year basically. So that's for the first question. The second question is defense and space. you launched some plans to, I would say, restructure the business or improve the profitability. We're not seeing the tangible signs yet. When would you expect those higher margins or this to materialize in the business?

[Thomas Toepfer, executive]

Christophe, this is Thomas speaking. Let me take your questions. So first of all, on [ ESOP ], yes, I think your assumption is correct. If you want to split it by division and you take the numbers of employees to split it, then I think that gives you a reasonably good result. So that should work. To your question, whether it is recurring, it's a little bit of a tricky one. Why is that? Because obviously, the company reserves its right to every year, take a new decision whether we do an employee share ownership plan. And therefore, we are very careful not to make a firm commitment that we don't want to make. However, I think employees would be quite disappointed if it wasn't the case also next year because there's certainly something like a tradition. And therefore, that's how I would position it. This year, it was, as I said, a very high participation combined with an extended scope and also very high share price. And this is why we mentioned the program simply because the difference relative to previous year was slightly over EUR 100 million and therefore, it was not completely insignificant in terms of how it drove our results. I think your second question on ADS profitability, yes, I mean, we do continue to think that we have taken the right steps and the good the transformation program, we will see an uplift of the profitability. I have to confess, if it was so easy that you do see the results in the next quarter, that will be probably too high of an expectation. But let me clearly say with the steps that we have taken, and I think they were quite significant. So, 12,000 employees transferred from central functions into the business lines, significant measures in terms of scrutiny in terms of the order intake and the margin, et cetera, et cetera. So, I think we do see clearly the signs that we're on the right way. However, this this mid- to high single-digit margin that we said we would achieve for ADS that certainly will take a couple of years before that will materialize. So, I think we're clearly in line with what we have announced and on track with the measures that we've implemented.

[Christophe Menard, analyst]

Thank you very much for the.

[Operator]

Thank you. We will now go to our next question -- and your next question from the line of Robert Stallard from Vertical Research...

[Robert Stallard, analyst]

Thanks much, and good evening...

[Guillaume Faury, executive]

Good evening, Robert.

[Robert Stallard, analyst]

I've got 2 questions, if I may, both probably for Guillaume. First of all, clearly, your competitor is having a few issues at the moment. I was wondering if the uncertainty that some of your suppliers are experiencing with Boeing is having any indirect knock-on impact on Airbus? And then secondly, given the scale of your Indian order book at the moment with the A350 addition today, do you think at some point, it makes sense to set up a foul or a final completion center in India?

[Guillaume Faury, executive]

Yes. Thank you, Robert. Yes, indeed, the uncertainty and the changes of assumption and rates coming from the competitor is putting additional stress and challenges onto the supply chain. And some of the suppliers are common to us. So we see this knock-on effect. And I mean the example of Spirit was mentioned earlier, that's obviously a typical or probably a big extreme example of what it means, and we have to deal with it. When it comes to India, well, we don't necessarily think that putting a commercial aircraft finally line is the way to deal with the situation. We are growing very significantly in India in terms of activity, in terms of sourcing, in terms of teams, in terms of headcount over there. We will be soon at 5,000 employees, Airbus employees in China, in India, sorry, I think it will be the case by 2025 roughly. So, you see that it's very significant. And actually, we're putting final assembly lines, but not of commercial aircraft. We have the C295 final assembly line, which is currently being put in place. The first C295 from the contracts with India has been delivered from Spain. And we have started the manufacturing process of part in for the future file of the C295 that will deliver tens of aircraft and probably more in the future from the year end, we have announced a few weeks or months ago now. a final assembly line for the H125 with our partner, Tata in India to serve the Indian market and some neighboring countries. So that's the plan we have in India. It's a very broad and deep plan when it comes to the diversity of the activities. We're also growing the relationship we have with some Indian partners as suppliers for our IT engineering production a bit across the board. And I would consider the teaming of India and Airbus on a large portfolio of activities has a very strong one as we move forward.

[Operator]

Thank you... We will now go to the next question. And your next question comes from the line of Tristan Sanson from BNP...

[Tristan Sanson, analyst]

It's Tristan from BNP... The first one is on the ramp-up of the A350 from 10 to 12 months, we reached 10 months in 2019. You never reached 12 months. Can you tell us what is the investment plan that is required in terms of footprint, tooling, staffing, to be able to move from 10 to 12. And the second is you [indiscernible] on defense space. It's a simple question, but can you give us an idea of what you expect the D&S margin to be for the full year? _

[Guillaume Faury, executive]

I will reserve the second question to Thomas, but I'm not sure he will answer that question. Now coming back to your first one. Well, I will not be specific on the numbers, but I can share with you, Cristal, that the original sizing of the A350 production system. So before COVID was roughly for a rate of 13%. And therefore, we are within the sort of envelope of what was sized 15 years ago when the production system was launched. Now there are differences compared to what was designed at that point in time in the sense that we have now more FCC-1000s and including the freighter, which is more of a 1000 than 900. So, this is sort of a marginal investment in terms of tooling, investment but it's an important one when it comes to the ability of the supply chain to serve at that rate, including for the mix that I discussed earlier and obviously also for the workforce, the headcount in an overall environment that is already stressed and stretched on hiring of resources. So, we think that makes a lot of sense for us as the original production system was sort of sized precise for these rates, and we don't need, for instance, to go for an additional final assembly line or additional plants for some of the major sections that will fit within the existing overall frame of the current production system.

[Thomas Toepfer, executive]

Well, on the second question, I mean, we do not give precise margin guidance and the trajectory of the transformation program. But you know the building blocks for the pension space this year, namely the nonrepeat of the negatives that we had last year. On the other hand, of course, they are hit by the same headwinds that we have in the group, namely the inflation topic. So therefore, I would say what you can expect for the full year is what I would call a solid mid-single-digit margin for defense space. I think that gives you guidance that is a clear improvement towards last year and it's on the trajectory to our ambition that we have given.

[Tristan Sanson, analyst]

That's very helpful.

[Operator]

Thank you. We will now take our final question for today. And the final question comes from the line of Chloe Lemarie from Jeffries.

[Chloe Lemarie, analyst]

I have 2 questions, if I may. The first one is a follow-on on Ben's question on the moving parts through the year in terms of EBIT momentum. Just on the head count growth, could you share just how much that weighed on Q1 performance and how you see this moving through the year? And the second question is on [ BDS ]. Could you tell us what was the driver for ending the discussion with [ Atos ] on your end? And how you think -- what you think you'll do with the cash you've set aside for this potential deal? Could this be potentially consumed by the discussions you're having around Spirit? Or could there be other opportunities?

[Guillaume Faury, executive]

Let me start with the last question. So -- and start by reminding, we have a liquidity position north of EUR 30 billion. And the net cash that at the end of last year was EUR 10.7 billion. So, against that, we did not put aside any cash for a potential acquisition of the size of BDS. So therefore, now that the transaction will not take place, it does not change at all our situation and plans because there was nothing specifically set aside. And why did the transaction not materialize, I would say we are looking into ways and options to strengthen our position when it comes to digital, when it comes to cyber, et cetera. And of course, BDS was something that we wanted to look at. We always said we are interested to do a due diligence, and that's what we did. In the end, we had to conclude that if we look at the risk and opportunities from an Airbus perspective, the risks were outweighing the opportunities that we perceive and that is why we took the decision not to pursue the transaction. And on the -- on your first question with the moving parts, as I said, there is, of course, a little bit of negative from the additional headcount increase. That was also flat. We said we built up 10,000 people last year of 13,000 if you take the face value, but operationally, it was more like 10,000 -- on the other hand, I said also, we will work against this with some efficiency measures for the end of -- for the rest of the year. And so therefore, I would say, it's, of course, a 3-digit number negative, but in the low range for 2024. Thank you. I will now hand the call back to Helene for closing remarks.

[Helene Le Gorgeu, executive]

Thank you. This closes our conference call for today. If you have any further questions, please send an e-mail to Philippe, Olivier or myself, and we will get back to you as soon as Postigo -- thank you. We are looking forward to seeing or speaking to you again very soon.

[Operator]

Thank you, Helene. Thank you, everyone. Thank you, Thomas. Thank you. Bye-bye. Thank you. Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant evening. Goodbye.