MTU Aero Engines Aktie

Welcome to the conference call on MTU Aero Engines First Quarter 2026 Results. For your information, the management presentation, including the Q&A session, will be audio taped and streamed live or made available on demand on the internet. By attending the conference call, you grant permission for audio recordings intended for publication on the internet to be taken.

The speakers of today's conference call are Dr. Johannes Bussmann, Chief Executive Officer; and Mrs. Katja Garcia Vila, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words. Please go ahead.

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

Thank you, Thomas, and welcome to our earnings call for the first quarter 2026. We had a very successful start into the year. Group revenues increased by 7% to more than EUR 2.2 billion. Adjusted EBIT rose by 6% to EUR 320 million, translating into a margin of 14.2%. Free cash flow improved by 18% to EUR 177 million, resulting in a cash conversion rate of 77%. Despite the current situation in the Middle East, which I will touch a bit later, we confirm our full year guidance today strongly.

We fully support our customers and their operations and the safety of our employees in the region is, of course, our top priority. Before Katja takes you through the financials, let us first take a look at the market environment and our key highlights on the first quarter. I start with a view on the current macroeconomic and geopolitical environment and how MTU is positioned.

Geopolitical tensions have driven a sharp increase in jet fuel prices and possible physical supply chain constraints, putting pressure on airlines as we see. As a result, several airlines have announced moderate capacity reductions. Any traffic impact is expected to be absorbed mainly by the older, less fuel-efficient fleets, which demand for modern and fuel-efficient aircraft and engine remains largely unaffected.

Against that backdrop, we also maintain our MTU positions very well positioned with our resilient product portfolio, especially in fuel-efficient engine types and of course, our active and decisive management of supply chains and cost management. The ongoing capacity constraints in our end markets, in particular, in the MRO segment, provides protection from any significant impact on our business as we see today.

Our product portfolio is resilient with a strong focus on next-generation fuel-efficient engines driven by airline structural needs to reduce fuel burn and emissions. Just to name 2, the GTF and the V2500 platforms continue to see solid demand. The GTF backlog across OEM and MRO provides us with a high visibility of the market scenarios. The V2500 remains a key asset in our customers' fleet. Supply chain resilience remains our top priority.

We rely on multiple sourcing and long-term supplier contracts to manage these dependencies. Our approach results, as of now, in a stable, reliable supply chain. And for possible cost increases, we are in the comfortable situation of being able to pass price increases on rather easily. For the limited number of MTU suppliers located in the Middle East, appropriate measures have been implemented to ensure continued availability.

Staying on the cost topic, MTU continues to apply a highly disciplined cost management approach. Just 2 examples for that. We continuously validate our work distribution and are increasing workload volumes and repair activities at our best cost facilities as we speak. Other topics like energy costs are put under review very regularly. Even though energy costs have only a limited impact on our products, we manage our cost exposure here very diligently.

One of these examples is our geothermal plant here in Munich, which covers 80% of the heating demand of our Munich production site, which makes us independent from these effects. I would like to share some reasons to remain highly confident while navigating through this definitely dynamic environment. Our portfolio is resilient by design. Growth in the military business remains strong as guided for 2026. In the new engine business, demand continues to be driven by fleet renewals and the need for more efficient engine technologies is ongoing.

Airframe order books are basically sold out through the end of the decade. For the aftermarket, spare parts and MRO demand for shop visits remains strong and there are no signs of weakness. In our shops, we have not received a single cancellation or meaningful deferral as of now. From a regional perspective, our MRO exposure in the Middle East is low. While certain platforms such as the GP7000 and GEnx show higher regional concentration, this does not affect the overall robustness of our portfolio.

With the highly efficient GTF engines and the still very young V2500 fleet, we are certain to have the right products for almost any scenario. This confidence is further underpinned by our strong group order book of around EUR 32 billion, providing high medium- to long-term visibility. As you see, we are well protected by our resilient portfolio mix and our strong MRO positioning. At the same time, proactive risk analysis is firmly embedded and is part of our daily management in the business.

Looking beyond the near term, the long-term growth fundamentals of the aviation industry remain unchanged. Fleet renewal and structural growing demand for more fuel-efficient aircraft continue to support our business. Coming to a real highlight in the first quarter of 2026, we took an important strategic step to further expand our military business.

Unmanned aerial systems are becoming a key capability in modern defense, and propulsion is a critical enabler of their performance, reliability and mission effectiveness. And this is where we seized an opportunity to enter into another area of a rapidly evolving UAV market. With the acquisition of AeroDesignWorks, we gained immediate and substantial access to this fast-growing and attractive market, creating long-term value for MTU.

AeroDesignWorks already develops and produces propulsion solutions for lower thrust drones. The demand for military drones is clearly visible. The global market for military drones is expected to grow by around 12.5% per year for the next 5 years. And that has been -- what is missing so far is a European-made propulsion system that meets military requirements in terms of quality, reliability and especially industrial scalability. This is where we as MTU come into play.

Combining AeroDesignWorks' capability with our long-standing experience in the military segment, our technology, proven engine expertise, and global market access for production positions us very well to be a powerful and scalable propulsion platform for the European drones market over the coming years. In addition to that, we also stepped into the so-called conventional light market.

We see clear opportunities to further scale the business through organic growth, selective acquisitions and strategic partnerships with leading players across the defense ecosystem. With eMoSys, we are already in a position to offer electric propulsion solutions for drones, while on the upper end of the range, drones can be served with more conventional engines. This empowers us to power drones with our entire spectrum.

Given the strong market dynamics, the rapidly increasing relevance of drones, this step will support MTU's sustainable and profitable growth. Our clear ambition is to establish MTU as a core European supplier for UAV propulsion systems. Let me conclude the business review with a brief update on the geared turbofan program. The GTF fleet management plan remains on track. MRO outputs increased by 23% in the first quarter. Turnaround times continue to benefit from improved supply chain.

Airlines confirm easing aircraft on ground numbers. And based on this progress, we expect ongoing improvement on the AOG situation throughout 2026, which remaining -- with remaining compensation payments to be settled within the year. With the GTF A certification, an important milestone has been achieved this month. Entry into service is planned for the second half of this year.

So this is the most efficient narrow-body engine offering higher thrust, improved durability and full interchangeability with the base GTF engine, a great next step in the GTF evolution. GTF continues to ramp up across all 3 platforms supporting airlines around the globe. The GTF is already in service for more than 10 years, which we celebrated recently, and it has accumulated over 50 million flight hours and currently has a remaining order book of 8,000 engines. With that, let me hand on to Katja for the details on the financials.

Thank you very much, Johannes, and also a very warm welcome from my side. Let me begin with an overview of our key financial highlights. The Iran conflict had no impact on our first quarter results. Group revenues increased by 7% to EUR 2.244 billion. In U.S. dollar terms, revenues grew 18%. The main drivers were the military business and our commercial MRO activities.

Within the commercial OEM segment, the business mix remained favorable, supported by spare engine volume and strong spare parts business. Commercial MRO revenues were primarily driven by GTF MRO increases. Adjusted EBIT rose by 6% to EUR 320 million, resulting in an adjusted EBIT margin of 14.2%. Both segments, OEM and MRO contributed to the EBIT expansion. Adjusted net income increased by 3% to EUR 229 million.

Free cash flow had a very strong start into the year and grew by 18% to EUR 177 million, resulting in a cash conversion rate of 77%. This performance was fueled by dividend income and the seasonally lower cash flow from investing activities in the first quarter. GTF AOG payments of around USD 60 million are reflected in the numbers, a slightly lower impact than in the first quarter 2025.

Let's now dive more into the OEM segment. Total OEM revenues were stable at EUR 621 million. Within this, commercial OEM revenues declined 5% to EUR 479 million. On an organic U.S. dollar basis, commercial revenues increased by 5% Military revenues increased 25% year-on-year to EUR 142 million. Organic new engine sales in U.S. dollar terms remained stable, reflecting lower new engine deliveries with a higher total number of spare engines. We expect a sequential delivery ramp-up in the following quarters, in line with full year expectations of mid- to high teens percentage growth.

Organic spare parts revenues in U.S. dollar grew by 10%, driven primarily by narrow-body platforms, notably the V2500 and the GTF. Pratt & Whitney Canada engines also contributed, while mature wide-body and industrial gas turbine programs were broadly stable as expected. The military opened the year very strong with robust performance. Revenue growth was driven by higher EJ200 and TP400 volumes.

Additional support came from the new generation fighter engine, which remains fully contracted through September 2026. Results also benefited from catch-up effects following delivery delays in 2025, which pushed volumes into early 2026. Overall, the favorable business mix translated into EBIT growth of 7% to EUR 188 million resulting in a strong EBIT margin of 30.2%.

Also, the commercial MRO business entered the year with strong momentum. In Europe, commercial MRO revenues were up 8%, whereas U.S. dollar revenues increased 20% year-over-year in Q1 2026, clearly exceeding the full year guidance of low to mid-teens growth. This was mainly driven by GTF MRO revenues, which accounted for 44% of total commercial MRO revenues, up from 34% in Q1 '25. In absolute U.S. dollar terms, GTF engines delivered the strongest revenue growth.

In addition, our leasing and asset management business, MLS in Amsterdam, contributed nicely to U.S. dollar revenue growth as well as our IGT business. On profitability, adjusted EBIT increased by 5% to EUR 132 million, resulting in a margin of 8%. Headwinds from higher GTF MRO share and ramp-up costs at MTU Maintenance Fort Worth were partly offset by a strong EBIT contribution from MLS and our independent MRO business.

Let me provide you with a brief overview about the drivers in our free cash flow. Q1 2026 free cash flow was up 18% year-over-year. We benefited from lower PPE spending and received dividends. Additionally, GTF AOG compensation payments at USD 60 million were slightly lower than in Q1 2025. A headwind came from higher working capital. As Q1 2026 cash conversion rates being clearly above our full year expectations, let me bridge this to our free cash flow guidance for 2026.

Key tailwinds supporting the achievement of a cash conversion rate of 45% to 55% in 2026 are improved net income and lower GTF AOG payments compared to the previous year. The main headwind arises from the buildup of the facility in Fort Worth as well as the continued increase in receivables for prefinanced GTF MRO work. Our 2026 free cash flow target underpins our midterm financial ambition towards 2030 with a cash conversion rate targeted in the high double-digit percentage range.

Let's take a brief look at our U.S. dollar hedging position for which we have made again continuous progress. As shown on the chart, we have further worked on our hedge coverage over recent months following the release of our full year 2025 results. For 2026, benefiting also from improved natural hedging, we are now fully hedged at an average hedge rate of USD 1.13.

Looking further ahead, a comprehensive exposure review led to adjustments in our net U.S. dollar exposure, and we've continued to systematically build our hedge position. As a result of the currently weaker U.S. dollar, the average hedge rates for the subsequent years are higher than those secured for 2026. Before we switch to the guidance, let's have a look at our strong financial position.

Net debt of approximately EUR 1.1 billion and a net debt-to-EBITDA ratio clearly below 1 provides us with substantial financial headroom. In January 2026, the company proactively strengthened its capital structure through the successful issuance of a EUR 600 million convertible bond. The proceeds were used to early repurchase the EUR 500 million bond due in July 2027, effectively eliminating near-term refinancing needs.

Together with a EUR 500 million revolving credit facility maturing in 2029, this provides the company with a robust liquidity position and flexibility across market cycles. As already announced at the release of our full year results in February, we proposed a dividend of EUR 3.60 per share. This is an increase of EUR 1.40 or 64% compared to last year, corresponding to a payout ratio of 20%.

This will result in an expected cash outflow of around EUR 193 million in Q2. To wrap this up, our strong balance sheet and financial flexibility positions us well to support on our long-term growth strategy and to deliver sustainable value for our shareholders. With that, I hand back over to you, Johannes.

Thanks, Katja. Let me now turn to our outlook for 2026, which we confirm today. Based on our careful and proactive assessment, we do not expect any major adverse impact on our business at this point in time. Operations remain stable. Our supply chain is resilient and demand across OEM and MRO market continues to be robust.

On that basis, we expect group revenues to reach EUR 9.2 billion to EUR 9.7 billion, adjusted EBIT at EUR 1.35 billion to EUR 1.45 billion, net income to grow broadly in line with EBIT and a cash conversion rate of 45% to 55%. In a dynamic and uncertain environment, we very closely monitor developments, anticipate potential impacts and act. We proactively manage risks, seize opportunities and continuously strengthen the company's strategic and financial positioning, as you just heard.

Supported by a strong balance sheet, a resilient business model and a clear long-term vision, we are well equipped to navigate market cycles and to create sustainable value for our shareholders. Let me now summarize the key takeaways from our Q1 2026 results. We started the year with a very strong performance, which underpins our confidence in the 2026 guidance, which we reaffirm today.

The acquisition of AeroDesignWorks enables us to expand in the highly attractive and fast-growing drone market. The GTF management plan is well on track operationally and financially, and AOGs are trending down. We are strongly positioned with a growing order book and a very resilient business portfolio. Our management approach allows us to actively manage volatility and maintain stability in a dynamic environment.

In a nutshell, we are very well prepared for the challenges ahead and have full confidence in our structurally growing market, our product lineup and in our ability to continuously generate long-term value for our customers and our shareholders. With this, we close our presentation and are happy to take your questions.

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

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

Okay. First one, we have no cancellations of any slots so far from none of our customers. And we still have a backlog, of course, in front of our shops. So that means even if something comes up, we are able to compensate the work with other engines awaiting.

So in the long run, how the airlines behave if the fuel price stays high in the mid and long term, it is very likely that they, of course, want to optimize their direct operating costs, which would result in favoring lower fuel burn engines and aircraft, and that is the basis of our appointment. And we have a very, very low retirement rate that we see today. It's almost none. That's why there is no move that we see so far from the airlines reacting that is affecting us.

On AeroDesignWorks, we are in a couple of discussions with players in the market that are coming or that are waiting for the decisions of politicians, of course, because we need to see what the FCAS discussion comes out with and how the structures of the systems looks like. So that's why we are very confident that this is a growing market. Concrete numbers, we are not ready to share so far.

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

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

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

Okay. Yes, Chloe, I'll start with the cash conversion question first. You know that we don't guide for cash conversion rates on a quarterly basis for sure. Something like the dividend payment happens at the beginning of the year as it also did last year at the same period of time. Due to the development of the pricing, for example, on the lease business, we expected also a higher dividend in 2026 than what we had in Q1 2025.

So that was also part of the story when we provided the guidance. I think it's also clear when you look at normal cycles that on the PPE that there are stronger spendings in the second half of the year. So overall, all that brings us entirely into the guidance that we have put for this year.

So you should not take the 77% now already as the basis going forward. On the PW2000, CF6 revenues, I cannot definitely provide you with a detailed breakdown. But what I can say on the PW2000 is that the largest part of the revenues is rather for the military business. And the CF6 is rather largely for the freighters business.

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

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

And now we have a question from Benjamin Heelan from Bank of America.

I had a couple on MRO, just a follow-on from some of the comments you made there about not seeing any changes with regards to shop visit volumes. Have you seen anything in terms of lower scope? Have there been any requests for lower scope? And if there's any comments you can give there? And then in the quarter, the kind of independent MRO business, you say was broadly stable.

Do you have a breakdown of the independent MRO and then the MLS business so we can understand what was going on a little bit within the 2? And then a follow-on on spare engines. Clearly a big contributor in the first quarter. Should we assume that this is the high for the year in terms of absolute spare engines and mix given you've talked about an improving kind of quarterly trajectory in terms of deliveries?

And then a quick follow-on from your comments on FCAS. You mentioned in your prepared remarks, it was funded up until 2026, September. Obviously, we see in the press the program is not exactly going too well on the airframe side. So if -- what happens to the engine program if the airframers decide not to move ahead with the airframe side of it in its current form?

Okay. That's a lot of stuff. Let me start with the MRO side. No, we don't see any work scope requests so far in having lower work scopes, lower volumes there. So we didn't lose any shop load event so far. And I would turn that around even if customers would come up, we are with our independent MRO customer base and also experienced very well positioned to find very good solutions for our customers to help them out if that would come on the table, which would bring us in a favorable position in the competitive environment between MRO providers.

So from that perspective, even if that comes, we see that as a strong side and an upside and not as a threat. On the spare engine side, that is an ongoing demand, which we think will continue also because that's mainly driven, of course, by the new fleets and the growing fleets there. And that are the aircraft and engines that are very likely to be operated even more due to the high fuel prices.

On the FCAS side, of course, we are waiting for a decision. Everything we hear is also that the politicians are knowing that the industry requires an answer. And the -- you're right, of course, on the airframe side, there are discussions or that is the main point of disagreement. Our collaboration with our French colleagues is working very well, and we continue.

We still need to provide until the end of Q3 of this year results on the development phase, which we are performing well, and we are optimistic that by then, we have a solution. And we are also confident that the European governments come to the conclusion that they need a European defense system.

So that then is the question whether we need 1 engine or maybe even 2 for 2 different aircraft types, which is the likely scenario right now as we see it. There are others as well, but that's the likely one as we see it. And then, of course, we are part of this development in the European landscape. Third one was on the -- what was that independent?

If we do share a breakdown of independent and the MLS business.

No, we don't.

Yes. And what we can say is, just for you, Ben, maybe to clarify a little bit, the MLS business has grown in line with our growth expectations for the full year on the MRO business.

And it comes from the line of George Mcwhirter.

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

Thank you very much for the question, George. What we said is that also on the cash flow side, we will see continuous headwinds also for the year coming from the ramp-up. You know that in July, we expect to induct the first LEAP engine into the plant, which means we are currently in full ramp-up. When you look at the cost position, so there are a couple of positions to consider. For example, we need to train people.

At the moment, we need to hire, we need to ramp up, we need to certify, et cetera, et cetera. And we also do have PPA spending. Overall, we expect to invest around EUR 120 million in CapEx into the plant, not this year, but as an investment overall during the ramp-up phase. And we do expect a headwind of around -- sorry, EUR 100 million on our free cash flow. And this headwind will also continue to stay over the next coming years.

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

Could I ask a follow-up on the retirement rates, please? You mentioned that the retirement rates are still very low for V25 (sic) [ V2500 ] But could you share a ballpark number of where you expect them to go in 2027 and after that? And would it be fair to assume that they will be somewhat accelerated by the improvement on the GTF? And then second question, could you talk about the pace that you expect for the rollout of the GTF Advantage? How fast that will go, please?

Well, the retirement rate on a mid- and long-term perspective, I think that's too early to look through. That really depends on how long the conflict stays on and what the midterm effect on the fuel prices is. We analyze our portfolio, of course, that we are providing services for. And as I mentioned, it's very, very strongly dominated by the modern aircraft types, and we also consider the V2500 as being a very strong and also young fleet.

You know that more than half of the fleet has not even received more than the first shop visits. So our portfolio is on the upper side on almost every scenario that we think of in our simulations. And that's what we see right now. As I mentioned, there are no increase in retirements confirmed so far, and that's how we plan for it.

The deliveries on the Advantage, that's a very hard to judge picture because there is, of course, the Advantage going to be delivered new, but we also have the option with the Hot Section Plus where customers decide on what part of the new hardware they want to have built in, in their shop visits or not. And that is the basis of the assumptions that we still need to see what the customers decide. And so there is a rollout over the next 2 years, of course, planned, but concrete numbers is very hard to tell.

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

Ian Douglas at UBS. The first question, could you help me understand what was the increase in the imbalance payments within receivables that you saw year-over-year, please? It looks -- total receivables, I see increased about EUR 650 million, but I don't know what imbalance payments was within that, please.

Second question, could you help us within spare engines, what proportion of those engines are sold at the current market value versus sold in advance? Maybe if you could give us some kind of qualitative idea there. What I'm really trying to get at is what is your sensitivity to GTF fair values if they start to decline, which some lessors and appraisers are telling me may possibly be starting to happen already?

Okay. Let me first start with the receivables. You've seen quite some increase in the receivables now in the first quarter of the year. And if you look also at the growth in our sales or our revenue side, that follows more or less the normal business course going forward. There is no significant impact from the imbalance payments now in the first quarter to be seen. I think when you look at the pricing level of spare engines going forward, so far, we have not seen any weakening in demand.

And you also have to keep in mind that there is not the one spare engine pricing that we have. There are 2 ways to have spare engines entering into the market. The one is contractually agreed with the airline customers and the other ones are then the, let's say, open available spare engines that you can sell at a more flexible market pricing. So there is no significant overweight in that area at the moment. So overall, we do not expect or we do not see any weakening in those prices at the moment in the mix.

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

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

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

Two questions, please. One, just on your spares be up about 10%. It's quite a bit lower than we've seen from Pratt, Safran and GE. Just wonder if you want to comment on that, if you think there's anything particular in your mix that would make you have slower growth or whether it's just a temporary issue for the quarter? The second one is a bit more philosophical, but probably for Katja.

Just on your -- obviously, we're in an uncertain geopolitical situation. So we get a lot more questions from investors about cash flow. And if I take your guidance for cash conversion, I add back the GTF and I add back the number you just hopefully gave on Fort Worth. I think you get to -- if my math is correct, you've got about 70% free cash flow to net income.

It's still quite a lot lower than some of the peers. So I just -- you've been in the business for a while, Katja. If you can just maybe give 2 or 3 reasons why that is the case? What is it that has your free cash flow at the current level? And what are the specific things that will lead to an improvement going forward?

Okay. So let's first start with the spares mix. So just to frame that clearly. So there is no specific issue that we have compared to others, and it also always is a question of what's comprised in the spare parts growth in the respective references. Overall, for this year, David, we have guided a growth rate in the low to mid-teens area. And with 10% growth in the first quarter, we are fully in the ballpark of our guidance.

You know that for the second half of the year, there are price movements to be expected, which will then support a further expansion of the growth rate throughout the year. So no structural reason why that is of any greater concern for us. Regarding the cash conversion rate, I think if you look at the history of MTU, the cash conversion rate has always been a topic that people have discussed about a lot.

And I think if you look at what we are doing at the moment, so that we are continuously expanding our portfolio that we are continuously also investing into the profitable growth of our business moving forward. These are the parts that currently have an impact on our cash flow, plus we still have in the first place for this year, the GTF payments directly for the AOG compensation.

But also moving forward further until 2028, late or beginning of 2029, we still expect the buildup of the receivables for the prefinanced shop visits, which still provides a headwind to our cash conversion rate, but which will then turn into over proportional cash conversion contribution in the years to come. So from a structural perspective, David, let me reassure you that there is no reason why MTU should at any place be less able to create attractive cash conversions than anyone else in this business.

Okay. And just very quickly, and you have said it before. Can you just remind me the Fort Worth EUR 100 million a year, how many years is that for [indiscernible] weighing on free cash flow?

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

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

I have 2 questions, please. The first one is a follow-up on Chloe's. We see demand accelerating for the 777-300ER freight conversion. How do you see aftermarket demand evolving for your 757 and 767 powered fleet, especially at today's fuel price? And could you also remind us what's the share of the commercial spares that today, CF6 and PW2000 represents? And then my second question on the back of what you just replied to David, could you help us frame the scale of the GTF-related receivable headwind till 2028?

Okay. Maybe let me first talk about the receivables side in the first place. I think we have not provided a specific guidance on how this continues to ramp up. But what you can say is from today's perspective that there is still some quite significant increase over the next couple of years to come.

And there is currently no specific time line that I can give you for individual impacts, but we will always include that into the guidance that we provide for the next year. And as I said, it's also part of the guidance that we have provided for the midterm. And I have to say, I didn't get exactly the first part of your question. Was it about the freighters conversion?

Yes. So we see now a lot of 777-300ER being converted. I just wanted to see what could be the impact on the 757s and 767 powered fleet on which you actually power these 2 planes, especially given the fuel price today? And if you can also share how much the CF6 and the PW2000 commercial fleet represents today as a share of your commercial spare parts revenue?

Okay. So thank you very much. I'm sorry, I didn't get it in the first place. So in principle to say freight conversions do take time. So that's nothing that is going to happen overnight. I think that's the first important message I would like to send with regards to this portfolio. The second one is that the demand for freight is continuously growing, which also means that the freight -- that the flights are continuously growing, which will then again fuel demand going forward, yes.

So our expectation at the moment is that there is very limited impact for the coming years to be expected. And we don't disclose specific shares of individual spare parts on the overall portfolio. What we said is overall, the expectation for this year is that we will have a strong growth in the commercial spare parts business between 10% and 15%. And when you look at the outlook for 2026, also there, we do guide with a continued strong increase in our portfolio.

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

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

It's more or less flat. Sorry, I just want to add the big drivers for this year commercial spare parts are definitely V2500 and the A320. Also the GTF spare part is going to be increasing for the mature engine programs, we expect that to remain broadly stable.

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

It's Rory from Oxcap. I just wanted to talk a little bit more about this idea of a very strong order book, EUR 32 billion. You say technically sold out for 3 years. I guess technically is doing a lot of heavy lifting here. Maybe if you could just help us understand how that backlog falls between the 4 business areas.

And then really just how -- what kind of visibility do you actually have, particularly within commercial spare parts and within commercial MRO. Any kind of differentiating dynamics you can call out there? Anything qualitative that can help us think about as we travel from this year into next year, modeling this out would be really helpful.

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

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

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

Well, I mean, we have -- we still have a backlog of work. The situation of capacity available on the MRO side capacity available for shop load events is still below the market demand. So even if these developments come, we have -- then we swap one engine type with the other one, which we are able to do with the shop setup that we are running. So that's why we -- our target is not to lose any slot. That has then also a very positive impact of -- on the second part, on the spare parts of your question.

And this is something where the visibility that we are having in the system and the close customer contact, which allow us to say, juggling around is maybe a little bit too dynamic, but we are able to mitigate these topics in order not to lose any slot. We were very successful with that for the last 6 months, and we are also very optimistic that, that is going to continue for the rest of the year.

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

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

Two questions. First of all, on AeroDesignWorks, the numbers that you give there are terribly big. I recognize you'd like to talk about this more at the Capital Markets Day, but November feels a terribly long way away at the moment. Of that market size and growth, how much of that is in Europe as opposed to the rest of the world is the first question.

And then you talk about the business being optimized for military performance, but an awful lot of drones, clearly drone covers a huge number of things, are one shot throwaway systems effectively now. So does the market actually really need military specifications as opposed to turbojets that are cheap enough for a single mission? That's my first question. And then a different one on MRO. When do you think that customers have to specify or have to finalize the scope of a shop visit with you? How early is it in the process?

Okay. The market size, that's a very good question, of course, because that depends on the government. And you pointed out that, yes, of course, it's 1 cycle or 2 cycles once you test it, once you use it. And that's exactly the market where we want to enter and why we made the deal with AeroDesignWorks. And that is something where we are 100% sure that there will be growth.

The concrete numbers, of course, depend on the orders of governments in Europe, and that's hard to judge, but that it is a good potential and good business for us. We are very confident. On the work scope design for the engine shop visits, that's a normal routine process that runs with every customer and the shop that is performing then the engines couple of weeks, maybe 2 months, depends a little bit on what the engine type is that is decided then between the customer and us.

And of course, the requirements from the airworthiness perspective. And so that's a routine process. There is so far nobody that is doing this earlier or later. That's a very normal process. And there are also, of course, strong guidelines from the aviation authorities, what is possible and whatnot. But within these frames, we are discussing with our customers what is suiting best in their fleet as most of them operate a couple of engines and aircraft, we have all the flexibility to have good solutions for them together.

Dear speakers, there are no further questions for today. I would now like to hand the conference over to Thomas Franz for any closing remarks.

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

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

Welcome to the conference call on MTU Aero Engines Preliminary Full Year 2026 Results. For your information, the management presentation including the Q&A session will be audio taped and streamed live or made available on demand on the Internet. By attending the conference call, you grant permission for audio recordings intended for publication on the Internet to be taken.

The speakers of today's conference call are. Dr. Johannes Bussmann, Chief Executive Officer; and Mrs. Katja Vila, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words.

Thank you, Heidi. Good morning, and welcome to our conference call for MTU's Preliminary Full Year Results 2025. We'll begin today's session with Johannes sharing some thoughts on strategic priorities and the business review. Following that, Katja will walk you through the financials of the year 2025 as well as the guidance for 2026. To close the presentation, Johannes will summarize the key takeaways before we open the floor for your questions in the Q&A session.

With that, it's my pleasure to hand over to Johannes.

Thank you, Thomas, and a warm welcome to everybody. As already announced during the course of the Q3 call, I would like to share some key priorities of MTU's way forward with you. First of all, MTU has a communicative growth agenda, and I am completely committed to execute on that one. This means we will expand our footprint internationally and invest in even more technological capabilities. Through our expansion in Hannover, Berlin, China and especially our new LEAP facility in Fort Worth, Texas, we are leveraging our global presence.

With this, we support the growth of our MRO business and increase efficiency to serve our customers even better. With the latest development of the GTF, we have the most efficient engine in the narrow-body market. We developed this technology together with our partners and we will continue to enhance this technology even further to be perfectly prepared for the NGFE. My ambition is to provide an even larger share in the upcoming program. As in addition to the conventional engine, we have entered into an agreement with Airbus to develop the Flying Fuel Cell.

Due to this, we will be enabler for our client to emission-free flying in the future. Given the significant improved free cash flow generation in 2025 and our planning for the next years, we are committed to focus on shareholder value by increasing the dividend by 64% from EUR 2.20 to EUR 3.60 in 2025, representing a payout ratio of 20%. We are on our way to reach our 40% payout ratio target.

Let's have a look on the next slide. Let me walk you through our major achievements in 2025, starting with an overview of our key financial results. In 2025, we delivered on our financial guidance and are pleased to report that the strongest performance in MTU's history has been reached. Revenue reached EUR 8.7 billion. EBIT increased to EUR 1.35 billion, resulting in a very strong margin of 15.5%. Free cash flow rose to EUR 378 million, also a new all-time high despite the financial impact of the GTF fleet management plan. Based on this performance, we will propose a dividend of EUR 3.60 per share to the AGM, representing an increase of 64% year-on-year. In addition, we will present our 2026 guidance today and an important next step on our way to achieve our 2030 ambition.

Let's take a look at the market environment in general. In 2025, our industry continued to gain momentum. Demand again exceeded available capacity. And despite persistent supply chain challenges and a more uncertain macro environment, airlines were highly resilient. Passenger traffic grew by 5.2% and cargo volumes by 3.1%, reaffirming the sector's strong fundamentals. This performance came despite headwinds from U.S. tariffs and a weaker U.S. dollar factor we managed very successfully. The outlook remains positive.

For 2026, IATA expects RPK growth of 4.9% and the cargo traffic to rise by 2.6%, both consistent with long-term structural trends. Robust passenger demand, high-value cargo flows and expanding global e-commerce continue to support the industry, while limited aircraft availability keeps utilization and load factors at an elevated level. This environment plays directly to MTU's strength. Our supply chain is built to support customers on both OEM deliveries and the aftermarket, positioning us well to capture ongoing demand. Overall, the market indicators are fully in line with our plan 2030. Our current order book stands at USD 29.5 billion (sic) [ EUR 29.5 billion ] which technically means we are sold out for the next 3 years. To sum this up, MTU is exceptionally well positioned to benefit from market dynamics in 2026 and beyond.

Let's have a look at the commercial OEM side of our business. In 2025, demand from new commercial engine remained exceptionally strong. We recorded more than USD 2 billion in new orders, driven by the GTF, GENX and GE9X program. For the GTF alone, customers placed orders and committed for more than 1,500 engines. And 2026 also started on a solid note for the GTF. Vietjet selected the PW1100 to power 44 A320neo family aircraft. Customer confidence in the GTF remains high. With commitments for more than 13,000 GTF engines, the order book is now roughly twice the size of the active V2500 fleet. The strong position of the GTF is visible for the program after just 10 years in service. Since 2016, the GTF family has accumulated over 50 million flight hours on more than 2,600 aircraft, safely carrying more than 1.7 billion passengers. Its fuel efficiency has enabled airlines to save more than 2.8 billion gallon of fuel.

And the journey continues with the next major milestone, the entry into service of the GTF Advantage later this year, an engine that provides even better performance metrics and will carry the success even further. On the customer side of the GTF program, the fleet management plan continues to make solid progress in line with our expectations. Turnaround times are improving. Material availability is stabilizing. With RTX reporting significantly higher MRO output and airlines confirming an easing of the AOG cases, we expect the situation to continue to improve throughout 2026. Compensation payments remain on track. We contributed by roughly USD 360 million in 2025 and expect the remainder of the payments to be settled in the current year.

Looking ahead, we continue to invest in the future of propulsion. In November, we reaffirmed our commitment with our partners, Pratt & Whitney and JAEC to evolve the technologies for engines for the next generation of commercial aircraft. This partnership, which is now in place for more than 4 decades, will allow us to deliver even higher efficiency, lower emissions and long-term competitiveness in the future. In short, MTU is taking advantage of the strong demand and is ready to deliver on our customer needs and is set for a strong and successful future.

Let's have a look at the MRO of -- sorry, at the military OEM business. Over the past 2 years, we have seen strong order momentum for the Eurofighter engine program. The core nations, Spain, Italy and Germany, together with export customer, Turkey, placed engine orders for more than 80 Eurofighter aircraft. This clearly demonstrates the continued relevance of the program for Europe's defense capabilities. In the United States, demand for the heavy-lift helicopter remains high. The U.S. Marine Corps has ordered an additional 99 units. MTU holds an 18% share of the T408 engine program powering this platform, and we continue to benefit from the program's production ramp-up. At the same time, our OEM business for the TP400 is secured until 2029, with additional export opportunities offering meaningful upside as the A400M continues to attract international interest.

Looking ahead at the future of military propulsion in Europe, we have joined forces with Safran and Avio Aero to develop a potential next-generation helicopter engine. This partnership positions us well to support future European defense platforms with advanced propulsion technologies. And while recent headlines around the FCAS program have been mixed, we remain confident that the partner nations will find a constructive way forward. It is essential for Europe's long-term defense sovereignty to develop their own military products, and MTU is fully committed to do this. In short, through our programs, partnerships and long-standing expertise, MTU contributes meaningfully to Europe's long-term defense readiness.

Now we come to the commercial MRO side on the next page. And here, we are continuing to invest in both capacity and the scope of our product portfolio, strengthening our global footprint and supporting the ramp-up across all major engine programs. In Poland, EME Aero has added a second test cell, enabling the site to execute 500 GTF shop visits per year from 2028 onwards, an important expansion of our European GTF capabilities.

In China, we opened our second MRO shop, initially focused purely on GTF engines, and we delivered the first overhaul engines just a month after the inauguration. Together with this, our first shop in MTU maintenance Zhuhai, the site has now capacity for more than 700 shop visits annually, creating a major capacity hub in one of the world's fastest-growing aviation markets. In North America, we enlarged our Fort Worth portfolio to include the LEAP and the GEnx later on and we will invest further to transform the site from an on-site service center into a full disassembly, assembly and testing facility, significantly strengthening our market position in North America.

At MTU Maintenance in Berlin, we introduced full MRO capability for the PW800 and are about to increase our industrial gas turbine capacity by around 30%, supported by targeted investments, including the new IGT hall already under construction. In the broader IGT segment, we have deepened our collaboration with GE Aerospace to expand activities in the marine sector, opening even additional market opportunities. Taken together, these initiatives significantly enhance MTU's global MRO network and technical capabilities. As we execute this expansion, our focus remains clear, supporting the ramp-up and enabling sustainable profitable growth.

On the technology side, we reached important milestones in developing further propulsion concepts. First of all, we are proud that the GTF Advantage has received both FAA and EASA certification, positioning it for the market entry in 2026. Aircraft certification is expected soon. With higher thrust, improved fuel efficiency and enhanced durability, the engine is particularly well suited for the larger aircraft of the A320neo family. In addition, RTX announced the introduction of a Hot Section plus retrofit package, enabling to benefit from 90% to 95% of the durability improvements on the GTF advantage.

As announced earlier, our IAE consortium publicly reaffirmed its commitment to advancing the GTF architecture as a foundation for the next-generation engines. We are incorporating all learnings from the first generation of GTF engines design execution as well as fleet experience. From today's point of view, the design of future engines will definitely be geared. Building on these advancements in our current product portfolio, we are simultaneously accelerating in the development of next-generation propulsion technologies.

In June, we signed a memorandum of understanding with Airbus to jointly advance hydrogen fuel cell propulsion. Within our own technology program, the Flying Fuel Cell, we have made significant progress. The design has been finalized, early tests have been successfully passed, and we have commissioned a dedicated Flying Fuel Cell test bed in our Munich site. This marks a major step towards an extensive test campaign for this technology. All of this demonstrates one thing very clearly, we are not only advancing propulsion technology, we are actively shaping what comes next. MTU is preparing the future of aviation step-by-step and with a very clear long-term vision.

Over the past year, we have made strong progress in reducing CO2 emissions across our production sites. Here in Munich, for example, our new geothermal plant has been operating since December 2025 and will cover around 80% of our heating needs, entirely CO2-free. The 71-degree Celsius thermal water is sourced from a depth of more than 2,100 meters and will provide clean, reliable heat well into the future. Looking ahead, our ambition is clear: reduce CO2 emissions across all MTU sites by 63% by 2035 compared with 2024. Each location contributes through its own targeted measures. We are driving this ambition through 3 main levers: improving energy efficiency, expanding on-site renewable energy generation and, of course, purchasing renewable energy such as green gas and green electricity.

Together, these actions ensure that we are progressing credibly towards sustainable decarbonization. In addition to our operational success and progress, our sustainability performance is also externally recognized. MTU has once again received the silver medal in the EcoVadis sustainability rating. Taken together, these developments demonstrate that we are on a strong and credible path towards significantly decarbonization.

With that one, I will hand over to Katja, and she will walk you through the numbers.

Thank you, Johannes, and welcome from my side as well. Let me begin my part by briefly putting our results into perspective. For 2025, we achieved our several times upgraded guidance in all financial KPIs. These results are new record highs for MTU and marks the next milestone on our ongoing growth path. Revenues of EUR 8.7 billion were in line with our updated guidance, clearly exceeding our initial guidance despite a weaker U.S. dollar, a headwind we were able to offset through strong operational performance.

Adjusted EBIT increased 29% to EUR 1.35 billion, showing a strong margin of 15.5%. This represents a significant step-up compared to our expectations. Adjusted net income roughly followed the EBIT growth as expected and grew 27% to EUR 968 million. Free cash flow of EUR 378 million came in significantly better than originally anticipated and in line with the guidance from October 2025. This marks another record level in recent years, even while carrying the burden of the GTF fleet management program and it proves our progress in improving our cash conversion.

Let's now take a closer look at some details behind this outstanding performance. Group revenues increased by 16% to EUR 8.7 billion. In U.S. dollar terms, revenues were up 21%. This strong performance was driven by our commercial OEM business, which benefited from a favorable mix in engine deliveries, including a higher share of spare and lease engines as well as the expected growth in spare parts revenues. We also achieved strong sales growth in the MRO segment, supported by continued momentum across our activities there.

Adjusted EBIT rose over proportionally by 29% and to EUR 1.3 billion, resulting in a margin of 15.5%. The excellent result was driven by the above mentioned business mix effect. Adjusted net income grew by 27% to EUR 968 million. Growth was influenced by higher interest expenses associated with new financial instruments. The higher earnings translated into a strong free cash flow of EUR 378 million, an all-time high for MTU. This level exceeds the previous peaks of 2019 and 2023, even though the expected impact from the GTF fleet management plan were fully reflected. Airline compensation payments amounted to roughly USD 360 million.

Let's now move on to the business segment. Let me begin with the OEM segment. In Q4 2025, total OEM revenues increased by 11% to EUR 817 million. Therein, commercial OEM revenues were up 13%, reaching EUR 621 million. In Q4, organic growth in commercial OE and U.S. dollar sales increased by a low to mid-teens percentage. As anticipated, Q4 OE sales included a higher share of installed engines. Organic spare part sales in Q4 in U.S. dollars grew in the low to mid-teens range. Drivers were both narrow-body and wide-body engine platforms. Military revenues increased by 6% in Q4, marking the strongest quarter of the year. However, delays in the supply of parts and modules required for the plant delivery, limited the level of growth we anticipated, resulting in a stable revenue versus 2025.

Adjusted EBIT for the quarter improved by 39% to EUR 234 million, resulting in a margin of 28.6%. The margin development was as expected, reflecting the higher share of installed engines as well as lower-than-expected military revenues. For the full year, total OEM revenues increased by 14% to EUR 2.9 billion. Commercial OEM revenues grew by 18%, reaching EUR 2.3 billion. Organic commercial OE sales in U.S. dollars were up around 10% for the full year 2025, a bit below our mid-teens guidance as the delivery plans within our various partnerships does not materialize as expected.

Organic spare parts U.S. dollar sales for full year 2025 increased in the low teens range, drivers for both narrow-body and mature wide-body platforms. Overall, this performance drove adjusted EBIT up by 43% for the full year to EUR 873 million, delivering an excellent margin of 30.4%, clearly exceeding our expectations for the year.

Let us now move on to the commercial MRO business. Commercial MRO revenues in the fourth quarter of 2025 increased by 11% to EUR 1.7 billion, making it the strongest quarter of the year. In U.S. dollars, Q4 revenues were up 22%. Key revenue drivers in the fourth quarter were the GTF, the CF6 and the MLS leasing and asset management business. Revenues from CFM56, CF34 and CF6 platforms also increased compared to Q3 2025. The GTF MRO revenue share in the quarter was around 41%.

In Q4, adjusted EBIT decreased by 11% to EUR 123 million, resulting in a margin of 7.4%. The margin reflected the higher share of GTF MRO revenues as well as ramp-up costs at MTU Fort Worth. For the full year 2025, commercial revenues rose by 18% to EUR 5.96 billion. In U.S. dollar terms, revenues increased 23%, significantly exceeding our full year guidance of mid- to high-teens growth.

Revenue growth in 2025 was broadly spread. The GTF delivered strong performance, while the CF6-80, GE90, V2500 and our IGT business also recorded solid growth. In addition, MLS leasing and asset management delivered the expected operational performance, further supporting overall results. GTF MRO accounted for 40% of total MRO revenues in line with our full year expectations. Revenue recognition accelerated in the second half of the year, driven by broader work scopes, improved material availability and shorter turnaround time. Adjusted MRO EBIT increased by 9% to EUR 478 million, resulting in a margin of 8%. Margin development was mainly influenced by the GTF MRO mix, ramp-up costs for the LEAP MRO at MTU Fort Worth, partly compensated from an equity contribution, particularly from MTU Zhuhai. Overall, the MRO business delivered a strong performance in 2025.

Let me now give you an update on our hedge book. As you can see, we have further increased our hedge coverage over the past months since the release of our 9-month results. For 2026, we have now hedged around 80% of our net U.S. dollar exposure at an average hedge rate of 1.13. Looking further ahead, we continue to build our hedge position at higher average hedge rates, reflecting the currently weaker U.S. dollar.

Please keep in mind that the purpose of our hedging strategy is to reduce the impact of U.S. dollar exchange rate fluctuations on our EBIT. EUR 0.05 movement in the U.S. dollar exchange rate would translate into an EBIT effect of roughly EUR 20 million. Overall, our hedge book secures a high degree of visibility and stability for 2026, giving us a solid foundation for the year ahead.

Before moving to the guidance, let us have a look on our progress on the finance side. Our net debt currently stands at around EUR 1.1 billion, resulting in a net debt-to-EBITDA ratio of below 1. That is a very solid level, fully in line with our midterm guidance of a leverage ratio of 0.5 to 1.5, and gives us the financial headroom we need to execute on our priorities. Our strong balance sheet is also reflected in the credit ratings from Moody's and Fitch, both of which assigned an investment-grade rating to MTU. Moody's upgraded its rating from Baa3 to Baa2 with a stable outlook in August 2025, while Fitch confirmed its BBB rating with a stable outlook in September last year.

At the beginning of January, we issued a new convertible bond with a volume of EUR 600 million. We used the proceeds to repurchase our outstanding EUR 500 million convertible bond that would have been due in July 2027. This transaction allowed us to reduce the potential dilution for our shareholders by around 300,000 shares, a clear and tangible benefit. As already stated by Johannes earlier, we intend to propose a dividend of EUR 3.60 per share at our Annual General Meeting in May 2026. This represents an increase of EUR 1.40 or by 64% compared with last year and corresponds to a dividend payout ratio of 20%. This is a clear signal of our gradual return to our targeted long-term dividend payout ratio of 40%, a ratio we temporarily suspended due to the GTF fleet management plan. All in all, these measures strengthen the financial flexibility and solid balance sheet that underpin MTU's long-term growth strategy.

So let's now come to the key drivers for our guidance 2026. As Johannes already mentioned, the market environment remains highly favorable for the aviation industry, and MTU is well positioned to benefit from this momentum. Overall, we expect engine deliveries to increase in 2026 with a higher share of installed engines. For the GTF, we will support these deliveries in line with our market share, contributing to the production ramp-up while ensuring sufficient spare engine availability for our airline customers.

Following RTX announcement, demand for spare and lease engines remains strong. And on the GTF, we expect this to stay broadly flat in absolute terms compared with 2025. For the GEnx, we expect higher volumes driven by Boeing's plans to increase 787 production from currently 8 aircrafts per month to around 10 in 2026. Deliveries of the first GE9X are targeted for this year, although the official entry into service of the first B777X has been delayed to 2027. Putting this together, we expect organic U.S. dollar OE revenues to grow in the mid- to high teens range in 2026. This reflects the current expectations with respect to mix and pricing.

Commercial spare parts are expected to remain a strong revenue contributor. The V2500 should be up, supported by higher utilization of the A320ceo fleet and increased material demand in work scopes and shop visits. We expect continued growth in GTF spare parts, driven by the GTF fleet management plan as well as ongoing durability improvements. Mature engine programs are expected to remain broadly stable or show a slight decline. Overall, this points to low to mid-teens organic spare parts revenues growth in 2026.

The military business will benefit from the strong order momentum for the EJ200, leading to higher deliveries. In addition, we expect a continued ramp-up in T408 production, which powers the CH-53K heavy-lift helicopter used by the U.S. Marines. The development contract for the next-generation fighter engine runs until September this year, and we remain optimistic that the government will find a solution for the FCAS program. The phaseout of the German Tornado fleet will result in a gradual decline in RB199 revenue over the coming years. Due to some supply chain disruptions in 2025, we expect certain spillover effects into 2026. Altogether, this should result in an accelerated revenue growth in the mid-teens range.

Commercial MRO will continue to benefit from strong air traffic, which drives high demand for mature engine programs in our independent MRO business. We also expect rising GE90 MRO volumes from our freighter customers. Our MLS leasing and asset management business will continue its growth trajectory. In 2026 -- 2025, we generated roughly EUR 600 million in revenues, marking steady progress towards our EUR 1 billion revenue target for 2030.

For GTF MRO, we expect a revenue share of 40% to 45% in 2026. Key drivers will be the growing fleet and service, ongoing execution of the GTF fleet management plan and further durability improvements. Together, these factors should translate into low to mid-teens U.S. dollar revenue growth in MRO. Across all business segments, we expect continued growth in 2026, another important step towards achieving our midterm revenue target of EUR 13 million to EUR 14 billion.

The business drivers I've just outlined with growth across all our segments translate into expected total group revenues in the range of EUR 9.2 billion to EUR 9.7 billion based on a U.S. dollar exchange rate of 1.20. Adjusted EBIT is expected to come in between EUR 1.35 billion and EUR 1.45 billion above the 2025 level. Positive contributions will come from continued strong spare engine sales, partially offset by a higher share of installed engines. The spare parts business and the military segment will also contribute and support absolute EBIT expansion.

The 40% to 45% GTF MRO share will have some impact as will our investments in Fort Worth and the ramp-up of MTU maintenance Zhuhai. At the same time, the ongoing strength of our independent MRO business and further growth in our MLS leasing and asset management activities will drive the margin. Overall, the group margin guidance for 2026 remains well within the corridor of our midterm guidance.

For net income adjusted, we expect growth broadly in line with adjusted EBIT. With regards to our cash conversion rate, we expect further improvement to 45% to 55%, mainly driven by lower GTF AOG compensation payments and stronger earnings. As you can see, we are well on track to deliver our 2030 ambition across all key performance indicators. Our 2026 revenue outlook of EUR 9.2 billion to EUR 9.7 billion is broadly in line with the revenue CAGR implied by our 2030 ambition.

Our 2026 adjusted EBIT target of EUR 1.35 billion to EUR 1.45 billion also implies the margin within our guided 2030 corridor of 14.5% to 15.5%. Our cash conversion rate is set to improve significantly from 39% in 2025 to 45% to 55% in 2026, representing another step towards our 2030 ambition of reaching a high double-digit level.

As you know, our midterm 2030 ambition remains unchanged. Since the future development of the U.S. dollar exchange rate cannot be predicted, we have included our well-known U.S. dollar sensitivity, noting that our 2030 ambition is based on an exchange rate assumption of 1.10.

This concludes my presentation. And I would now like to hand over to Johannes for the closing remarks.

Thank you, Katja. Let me close our presentation with some key takeaways for you. MTU has delivered an excellent performance in 2025, despite all the headwinds that we were facing and have been reaching new record highs. The GTF fleet management plan is on track financially and technically, and the financial burden will start to ease. We continue to execute on our technology road map to support our customers worldwide on their ambitions. The market environment remains positive for the entire industry, and MTU is extremely well positioned to benefit from this growth all around the world.

We have provided a strong guidance for 2026, fully aligned with our growth plan towards our midterm target for 2030. This will translate also into improved free cash flow, allowing us to even further strengthen shareholder value. MTU continues to represent a highly attractive investment with exposure to long-term profitable growth.

So thank you for your attention so far. And now we are happy to take your questions.

[Operator Instructions]

Mr. David Perry from JPMorgan, may we have your question.

Johannes and Katja, can I ask one question on each of you, please? Johannes, I think you've been in the role now maybe 6 to 8 months, I think. So I'm just curious whether you see any real scope for operational improvement? I know MTU is a well-run company already. But in particular, I'm thinking about the FX headwind that the company could face and whether there's anything operationally you could do to offset that?

And then Katja, for you, thanks for the comments on the free cash flow bridge to '26, and you talked about lower GTF compensation payments. Just -- can you talk about some of the other moving parts, please? I think some of the feedback I've hoped from investors was they thought it could be a little bit better than your guidance in 2026. So maybe just some of the puts and takes on the cash flow would be helpful.

Yes, improvements of operations are, of course, a topic that we are dealing with every time. And I think the expansions that we talked about, especially in 2025 also showed already that we have a really steep learning curve on the existing facilities and building up new facilities with even better processes, combining what we have learned in other parts. And that our operational performance is in, at least some areas, second to none proves with the GTF, the moment we are best-in-class in the network with short turnaround times. And that's, of course, what we also want to provide as a service level for our customers in the other side.

And that is what we are working on. It's a lot of work, of course that is done in the different facilities. But I see progress there and strong willingness of our colleagues to improve that even further. And with the inductions coming in, of course, that also helps because if you have volume, the repetitiveness is increasing. And by that, the learning curve is even posted further.

Okay, David. And then I would take over here to talk about the cash flow topic. So overall, despite the fact that we do see less impact from the GTF fleet management plan on the AOG side with approximately expected [ USD 250 billion ] still impacting our free cash flow for 2026, we're also facing still an increase in the GTF receivables for the prefinance shop visits. As you remember, we also elaborated on that path during our 9-month call stating that we will see further increase in those prefinance shop visit receivables over the next couple of years before we start to see that turning rather later in the end of this decade.

Another topic that is a headwind, so to say, for our free cash flow is the ramp-up of our facility in Fort Worth in Texas, where we expect to see a high double digit impact on our free cash flow building up the inventory to operate the facility.

We will take our next question. Mr. Christophe Menard from Deutsche Bank.

Yes. I had actually two. The first one is on the OE commercial guidance in 2026. Your guidance, could you detail the -- in terms of volumes, what you intend to -- the growth in GEnx and in GTF because it seems to be a higher number than what Airbus has been guiding us to. And I would have been keen to -- I mean, you mentioned several times, IGT on this call. Could you tell us what is the conclusion both to OE and MRO at this point in time and where you see this going forward in terms of contributing to earnings and sales?

Yes, Christophe. So first of all, with regards to the OE commercial guidance, there are a couple of moving parts, so to say, in this OE commercial guidance, and it's not just the GTF. So we have the GTF. We have the GEnx that is growing. We do see first deliveries in the GE9X that is moving. So these are figures, but also some other smaller Pratt & Whitney Canada engines will contribute to the growth. And that's why our figure is more a blend and the mix of the different programs that we are in compared to what Pratt has communicated.

The IGT part is part of our MRO segment. So this is where you can find that. The expectation is that this is a very profitable business that is continuing to grow. We are investing in the Berlin plant to be able to support the growth and also the customer demand that is out there, which is partially driven by a law in Germany, for example. There, we do see more business coming around the corner, but also internationally due to the peaks in power supply, the increase in the -- how is that called, in the artificial intelligence area, there's more need for short-term peak power supply, and therefore, this is a business expansion that we do expect.

We will take our next question. Mr. Robert Stallard from Vertical Research, may we have your question.

I just wanted to follow up on the last question on your guidance versus Airbus. And in particular, those comments that Airbus made on the GTF. I was wondering if you could elaborate on this situation? And what is causing this disagreement between you and your customer here or at least Pratt & Whitney's customer?

And then secondly, on the V2500, I was wondering if you could give us your latest thoughts on the trajectory for shop visits on this engine and also work scope as you work through 2026.

Okay, thanks. Yes. I mean the discussions on the deliveries between Pratt & Whitney and Airbus are still ongoing. And all of you read that Guillaume commented on it. So obviously, we have not come to a conclusion so far, but the 2 partners are negotiating. And so that's what I think we will have to wait for, and I'm pretty sure that they will find a solution. So the orders, of course, have been placed. And we, in the consortium, have discussed what we can deliver as a total, and now Pratt is discussing with Airbus, how we deal with this in the relationship with Airbus and our other customers. That's from our side, all we can comment on that one.

On the V2500, I think the numbers speak for itself. We have around 15%, roughly 15% that have not even seen the first shop visit. We have another 35% in operation that has not seen the second shop visit. So that means half of the installed fleet is well into the lifespan of the engine itself. So from that perspective, we still planned with the induction of the MRO sites for the V2500 to be ongoing for quite a while. And this is something with the growth of the overall aviation market that we discussed earlier on. I think something that is shared by a lot of our colleagues and market participants. And that's why we are also in the MRO shops still preparing for further inductions of the V2500 for the coming years.

Did that answer the question?

Yes. Just on the work scope, sorry.

The work scope, of course, is -- that's with the -- the further you go down the road, the work scopes get heavier, of course. So that means the second work scope is normally heavier than the first one and so on. And that's, of course, something that is helpful for the MRO business, and that will drive our numbers and also the work scopes inside the shops. And that is, I think, the normal behavior that we have seen on engines also for many years.

We will take our next question. Mr. Ian Douglas-Pennant from UBS, may we have your question.

Ian Douglas-Pennant at UBS. So the first is on cash flow, please. So you mentioned prefinance shop visits, which I think is the balance payments line item on your balance sheet. Could you just help us size how you see that effect? I mean, first, just remind us for 2025 impact on cash flow from that? And then also, if you could you just help us think about sizing that in 2026, 2027 as well, please, either qualitatively or quantitatively is useful.

My second question is on the aero derivative or the IGT business. Are you worried or thinking about here the possibility of increased competition from aircraft engines being converted to be used as aero derivatives as we've seen one of your peers talking about. And have you looked at doing that yourself, given that you have, I mean, almost unrivaled expertise here?

One thing that -- I'll take the first part, Ian. So we don't specifically provide numbers on the growth of our aftermarket compensation payments. What I can say is that we expect that to continue to grow year-over-year and therefore, still have an impact on our cash flow development over the next couple of years. We expect that to turn rather later in the -- not in the century, farther late in the decade. And you can see the position itself under other financial assets in our balance sheet. And these are receivables and no compensation payments. So currently, we are still building up those receivables for the prefinance shop visits. But sorry, I cannot share any details on the coming year. Maybe, you take...

Yes, I'll take the second part. I'm pretty sure you relate to the FTAI Power announcement some time back. And of course, the conversion of aviation engines into power generation units could be an attractive adjacent business for MTU. So it's -- for the LM2500, the CF6 and the 6000 and the 6-80. That's a business we are in for already a long time and have deepened our collaboration with GE Aerospace. So that's something that we are, of course, seeing good market opportunities into.

That said, the attractiveness of the conversion into power generation ultimately also depends on the scale of the addressable market and availability of feedstock for these engines, of course. And we certainly have the potential that we are observing. And we have -- as we are active on both sides, I think we have also a good visibility of what is more attractive for us. And that part, we will then follow with the customer demand being on the side.

We will take our next question. Ms. Chloe Lemarie from Jefferies, may we have your question.

Yes. Johannes and Katja, if I could start with -- actually a follow-up on your comments on inventories. First, could you comment on the driver for the growth in 2025 and in particular, in Q4, where typically you actually unload a little bit of those inventories? And where should we assume this stabilizes going forward in terms of days of sales, please?

The second question is on OE sales. Could you share maybe what was the impact of mix on top of the 10% organic growth that you report?

And on your 2026 guide, did I understand well that your current guide for mid to high teen actually also includes the impact of a mix? Or does that come on top?

Okay. So let me start with the inventory question first. You remember that I said, for example, in the military business, we were not able fulfill all the deliveries that we originally anticipated for the quarter despite the fact that it was the strongest quarter in deliveries. So that also had a stay with more inventories than originally anticipated, let me say it like this. And I'm sorry, I didn't get the second question entirely about the mix in the guidance, Chloe. I'm sorry.

Yes. So in 2025, you talked about 10% organic growth in OE. But obviously, the spares and the -- yes, the spares mix and the overall pricing mix, I guess, is additive to that. So if you could maybe share just what kind of roughly -- if you could scale this and how it impacts 2026 as well?

So as you know, our organic growth rates does not account for any changes on pricing or on share between spare and installed engines overall. So what we've done now for 2026 is that 2026 reflects the current expectation with regards to mix and pricing, and this is what we've laid out.

Okay. If you can just follow up on the inventory question. So you said that in 2026, you expect a high double-digit headwind from working capital from the Fort Worth rent, I guess. But overall, for inventory, is that the total amount that we should assume? Or is it going to be like a higher headwind year-on-year?

That was a specific headwind that I would like to point out because we never quantified the amount that specifically before. So that was why I mentioned the MTU Fort Worth inventory step-up. Overall, as you know that with the growth of the business, we will also face some increase on the inventory side despite the fact that we do our very best to manage our inventories as efficiently as we can.

We will take our next question. Mr. Rory Smith from Oxcap Analytics, may we have your question?

It's Rory from Oxcap. I just wanted to come back to that point on spares. I was hoping you'd be able to give a number for spare engines actually shipped in Q4 and what that was in the first 9 months of 2025.

And then the second question in terms of the MRO segment and the guide for the GTF share there, 40% to 45% in 2026. Is it possible to get any sort of sensitivity on margins, whether it comes in at 40% versus 45%, what we can kind of get some guide rails around that?

And then my third and final question is just on the GE9X, you've obviously called that out, its delayed entry into service is 2027 now. How does that actually impact your financial statements? If you could just frame that for us financially, that would be really helpful.

Okay. So with regard to the split between spare and installed engines, you know that as those information are also not disclosed by our partners in the network, there is also no way that we will disclose those details. I think what is clear when you look at the fourth quarter of last year, we said that there was a higher share of installed engines and that, that has, for sure, an impact on the margin of the OEM segment.

The MRO guide for 2026, so there is no way we break down the 40% to 45%. But what you need to see is that the GTF, just from a pure construction of the contract is rather dilutive to the margin, the higher the share rate. So if we have a higher share on the GTF in our revenues, there is an impact on the margin side.

And for the GE9X, I think there are 2 important topics to keep in mind. The GE9X delivery was already postponed a couple of times and we had built up inventory in our facilities to support the original ramp-up, and that still is with us to the largest extent, yes.

We will take our next question. Mr. Samuel Burgess from Goldman Sachs, please, may we have your question?

Just a couple of questions for me, please. Just a follow-up on the Fort Worth point. I mean you talked about the impact of working capital from the inventory ramp up. I think the first induction of LEAP at Fort Worth is expected at the end of this year. As we go beyond that to '27, should we expect that to unwind to become a bit of a tailwind to cash rather than a headwind? So just thinking through how Fort Worth starts to contribute would be really helpful.

And then just secondly, on R&D, how do you see that evolving next year and beyond, that would be really helpful?

Okay. So with regards to Fort Worth, first of all, let me correct one assumption for the first induction of an engine is foreseen already for July of this year. And the induction -- like to ramp up the facility itself for the first induction already comes with the headwind, so with the buildup in inventory. As we will continue to ramp up that facility over the next couple of years until 2030, you can expect further impact coming from this ramp-up on the inventory side. So we expect a similar impact year-over-year, more or less. So that's a big topic.

And on the R&D side for 2026, that is a bit of a 2-answer question. So there is the R&D -- the capitalized R&D, we rather expect to decrease during the course of the next year compared to the 2025 level. And the self-financed R&D, we expect to maybe increase a little bit compared to prior year's level. But that is more or less what we do see. And I think it's clear as we continue to follow our technology agenda, there are small development works to be done in that area. Overall, I would say -- and if you look at the midterm ambition that we have, it's rather a decrease in R&D expected until 2030 overall.

We will take our next question Mr. Sash Tusa from Agency Partners, may we have your question?

Yes. You stated in the section on military OEM that a constructive way forward on the FCAS project is expected. I wonder if you could just elaborate a bit on that. What do you see as being a constructive way forward? And presumably, you are thinking about contingencies for -- if the program currently configured does not continue past the end of Q3. What would you do with all these engineers?

Okay. I'll take that one. As you mentioned, the Phase Ib is ongoing until end of September this year. And we are delivering together with our partners, Safran and ITP, there are according to the time plan and according to what the deliverables are. So that means in our Pillar, Pillar 2 in the entire FCAS program, we have a very stable and good working relationship that we are also willing to continue whatever the solution the politicians in Europe might take. So that's something where we have aligned.

And the question is now, what do the politicians decide? And that's not in our hands. I think we need guidance from politics, which direction they want to go, how the system should look like. And then we, as an industry, and then in our share with the engine, of course, can join forces. And depending on these decisions, the consortium stays as it is for Pillar 2 or it might need to be adjusted, but that's something for us only now to guess. So that's nothing that we can elaborate on in detail as we don't know these facts. And we are waiting for a decision.

What I'm really confident on that the -- at least the German politicians where I'm in contact with, they have understood that the decision has to be taken soon. And there is a strong will to do so. But of course, it's a European program, and that's why several governments need to come together and make a decision, and that's what we are waiting for.

We will take our next question. Benjamin Heelan from Bank of America, please, may we have your question?

Yes. So first question for me. So you've guided for EUR 1.35 billion to EUR 1.45 billion from an EBIT perspective. My interpretation of your comments is that the spare engine ratio, which is somewhat of the swing factor as to why you would be towards the bottom end or the upper end. Is that a fair assessment? Or is there something else going on that could move through the year, if there's any color of kind of what drives you to the top or the bottom of that range?

Secondly, obviously, spare engine ratio, I appreciate you're not going to give any numbers, but qualitatively, how should we be thinking about that into 2027 and potentially beyond? Is there any color that you can provide around that because I think in my view, in particular, it is clearly elevated right now. So understanding how long it's going to remain at an elevated level.

And then third question, obviously, Airbus are very unhappy based on the comments that they made on their conference call. Is there any -- can you talk a little bit through like what are the bottlenecks, like what has driven this shift over the past couple of months. Are there new bottlenecks in production that we need to be thinking of? Is it a stickier AOG situation? Just can you help frame a little bit what has driven the need to shift the deliveries from Airbus over the last couple of months?

Maybe I'll start with the financial questions, and then I hand over to Johannes for the Airbus comment. So overall, what we have pointed out on Page 20 of our presentation is that there are a couple of drivers that will influence our margin also on the commercial OE side. So the -- and we will an increase in new engine deliveries overall and the growing spares and installed engines. Just to really remind you once again, it's not only all about the GTF. So there are also a lot of other engines that we supply. And also in there, we do have spare and installed engines that we do supply.

The GTF definitely is a driver, but also the B787. So the GEnx engine or also the B777 that will start will happen in 2027. So it's not only the topic of the GTF spare engine ratio or total number that lifts that.

When you look at the overall development, I think it's clear that we are currently operating at an elevated level with regards to the spare and lease engines in the GTF program. But also there, I would like to make one comment. In the newer engine programs, we will -- we do expect to see an elevated level for a much longer time moving forward because of the fact that those engines overall are being operated under much harsher conditions than engines have been operated in the past.

And that's not only true for the PW11 or for the GTF, but it's also true for other engine programs. So overall, we do not expect to move back to a historic level of maybe 10% of spare and lease engines in the market. We rather expect that to remain elevated. Nevertheless, the current levels will not be sustainable for the longer future.

For this year, and this is also a comment that we have made in absolute terms, we expect the delivery of spare and lease engines to be pretty much in line with what we've seen in 2025. But due to the increase in installed, there will be a reduction in the overall ratio.

Maybe, Johannes, with that, I hand over to the Airbus part of the question.

Yes. Okay, of course. Yes. Of course, Guillaume, obviously, is not happy with the actual status of the negotiations. As a matter of fact, there is no new [indiscernible], nothing at all. We have, I think, proven that in the -- especially Q4 last year that we have made progress in the -- on the MRO side and the throughput turnaround times. So in order to decrease the situation for the airlines, and then all things come together, there is a mixture of requests from Airbus, what they want to get delivered.

As you know, the GTF is for A220, the sole engine. And for the A320, it's a mixture between LEAP and the GTF. And in that overall setup, of course, there needs to be a solution that Pratt is negotiating with Airbus. But we can't further comment on that one. We're also not familiar with all the details that are on the table there, but I'm very confident that they will find a solution, and think that Guillaume is not happy was clear message that he sent and we're aware of that one.

We will take our next question. Mr. Aymeric Poulain from Kepler Cheuvreux, please, may we have your question?

My questions must have been answered, but maybe a few more color, please, on the turnaround, the time you said there was some improvement in 2025 and you're now best in class. So what was what is the turnaround time now? And how much more room for improvement do you see in the years to come?

And then your competitor mentioned that given the low retirement rate, the number of shop visits should stay pretty flat up to 2028 before starting the descent. Do you see the same phenomenon for the V2500? Or do you see a higher retirement rate coming now?

So, okay. On the turnaround times, that's always a mixture of different numbers, of course. The work scopes are different depending on how long the engines have been run, in which environment they have been operated. So the average turn time has come down. Material availability, supply chain issues have been reduced or at least came down. And that's, of course, helpful for the turnaround time in the shops. And within the network, so the partners that are performing MRO, we are sharing this information. So that's nothing that we keep for us. Of course, we want to support our customers to the best possible. And MTU Hannover especially has contributed last year, a lot there because turnaround times and developments have developed in a very nice way to reduce that.

On the V2500, we still see quite a big portion of engines coming in, 15% are still waiting first shop visit, 35% second, and then, of course, the remaining 50% third or even further. And that's something, of course, that will go on for quite a while. So we have quite heavy workload in our shops with that. And with the increased work scopes/limited parts coming out of the engine, of course, due to the later shop visits, that's something that is positive for the development of our business, an engine that we know very well and where we have great capabilities also on the repair side. And that's why this will remain for the foreseeable time quite good and stable business for us.

We will take our final question. Mr. George Mcwhirter from Berenberg, please, may we have your questions?

In the military business, can you just provide a bit more detail around the supply chain issues that you are experiencing? And are you confident that this will be less of an issue this year?

And the second question is on your expectations for when the first in-service GTF engines will receive the GTF Hot Section Plus retrofit package? And when do you think you will be able to complete the retrofit of the whole fleet?

Okay. As you know, all military programs run into consortiums. And of course, that also has seen the difficulties that we are facing on the commercial side. Volumes are much smaller. So that means the impact of single disturbances is a bit bigger. And so that's something that is calming down as the overall supply chain is coming down, and we have seen a slight drag that led to the slightly reduced numbers, but we are also confident that we can compensate on that one this year and the years after. So we don't see any real problems that are remaining and are hindering us from increasing the military side now for the time to come.

The Hot Section Plus from Pratt & Whitney, of course, interesting for the installment in the already delivered engines on the GTF side. And it covers for around 90%, 95% of the durability issues for the existing fleet. And that is, of course, something that we will install during the course of the normal shop visits. So an assumption on how long that takes, it's a bit difficult, but all customers that opt for this Hot Section Plus thing, we can install it in the normal shop event. And then this comes in.

It's not mandatory, so the customer has a choice. And that's why any guess on any time line is difficult, but we are confident that customers will make use of it, to what extent remains to be seen. And maybe when we have a little more time down the road, then we can elaborate on these numbers.

This concludes today's question-and-answer session. I'll now hand the call back to Mr. Thomas Franz for closing remarks.

Yes. Thank you. This indeed marks the end of today's call. Thank you, Johannes, and thank you, Katja, for your presentation, and thank you all participants for the interest in the questions. As usual, for further information and details, reach out to the IR team. Beyond that, have a great day. And yes, see you soon.

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

Welcome to the conference call on MTU Aero Engines AG Q3 2025 Results. For your information, the management presentation, including the Q&A session, will be audio taped and streamed live or made available on demand on the Internet. By attending in the conference call, you grant permission for audio recordings intended for publication on the Internet to be taken. The speakers of today's conference call are Mr. Johannes Bussmann, Chief Executive Officer; and Mrs. Katja Garcia Vila, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words.

Thank you, Sarah. Good morning, and welcome to MTU's 9 Months 2025 Results Call. We'll begin today's session with our new CEO, Dr. Johannes Bussmann, who would like to introduce himself and share his first impressions. Following that, Katja will highlight the most important developments of the quarter and walk you through the financials, providing a detailed overview of our segment performance and underlying drivers. To close the presentation, Katja will summarize the key takeaways before we open the floor for your questions in the Q&A session. With that, it's my pleasure to hand over to Johannes.

Thank you, Thomas. Good morning to everyone, and welcome to our earnings call. I have been on the Board now since mid of July, so quite over 2 months already, and it was a great pleasure to meet already some of you in person. For those who don't know me yet, let me introduce myself briefly. I've spent nearly my entire career in aviation and hold a degree in aerospace engineering. And furthermore, I was part of Lufthansa Technik for over 20 years. During my first weeks at MTU, I was working closely and intensively with my predecessor, Lars Wagner, to ensure a smooth and collaborative handover and transition. Having been in my role as the new CEO of MTU, it has been really great to dive deeper into the company, our programs and find an inspiring set of people that is well positioned to capitalize on market opportunities.

It actually feels like much more than 2 months. I guess the reason is that I worked with MTU for many years as a business partner already and was previously a Supervisory Board member of MTU. My priority is now to get to know MTU really in depth. That is my current visits and journey from the production sites and of course, the shops and different products and people. And I'm truly inspired by the passion the entire MTU team shows on these visits. And you can feel that everyone is really innovative driving and has a great passion for shaping the future of this company.

I will be happy to share my insights and key priorities moving forward with you at the full year's release. But today, I also have the pleasure to welcome Dr. Ottmar Pfänder in the team, who will replace Michael Schreyögg as 1st of January 2026. And I would like to thank Michael for his great contribution for over 35 years with MTU, and he did a great piece of work here. Ottmar will take over his responsibilities as Chief Program Officer and has also more than 25 years of experience in the industry and with MTU. As the new Executive Board team, we will continue MTU's growth and transformation course, and I look forward to shaping MTU's future with my team from Katja, Silke and Ottmar and how we are progressing for the first month -- 9 month of this year, Katja will explain to you now. Thanks.

Thank you very much, Johannes, and a warm welcome also from my side. Let's briefly review our key financials before I move on to the business highlights of the quarter. Group revenues increased strongly by 19%, reaching nearly EUR 6.3 billion, in line with our full year 2025 target. Adjusted EBIT rose over proportionately by 34% to EUR 995 million, resulting in a strong EBIT margin of 15.9%. This performance was driven by a continued favorable mix in the commercial OEM segment and robust profitability in MRO.

Free cash flow came in at EUR 279 million, representing a better-than-expected cash conversion rate of 39%, a strong development despite ongoing headwinds from the GTF fleet management program. Additionally, we saw strong cash contribution in the MRO segment and effects from conscious cash flow management. Based on the strong 9-month performance, we expect to achieve 2025 sales guidance in all subsegments and raise our EBIT and free cash flow guidance. I'll walk you through the details in a few minutes.

Let us now move on to Page 5. The positive market trends remain intact. We see significant opportunities outweighing existing challenges. Passenger traffic rose by 5% year-to-date in August, reflecting sustained demand across global markets. Cargo traffic also showed a robust performance with a growth of 3.3% year-to-date. For the full year, YATA projects a 5.8% increase in passenger volume, a return to more normalized growth levels following the post-pandemic recovery surge.

Over the mid-to-long term, global passenger traffic is expected to grow steadily by 3% to 4%, driving sustained demand for new aircraft and aftermarket services. While the supply chain continues to recover, it still remains below pre-COVID stability. That is why the production ramp-up is slower than needed to meet rising market demand. Consequently, airlines are extending the service life of mature aircraft and engines, which in turn drives strong MRO demand and results in more extensive shop visits. This also keeps demand for spare and lease engines at elevated levels with prices remaining very attractive.

Global defense budgets are rising. For MTU, momentum in the Eurofighter program remains strong with new orders from core nations and international customers. Germany confirmed the procurement of 20 Eurofighter, 52 engines for deliveries between 2031 and 2034. In the U.S., demand for the CH-53K helicopter is rising. The Marines have ordered 99 units for delivery between 2029 and 2034. MTU contributes the power turbine to the T408 engine and holds an 18% program share. Recent news flows around aircraft has been somewhat sovereign.

Nevertheless, we remain optimistic that governments will find a solution to ensure the program continues, given its strategic importance for future European sovereignty. Additionally, the weaker U.S. dollar-euro exchange rate poses a challenge, particularly for European aerospace and defense companies. We are mitigating this effect through our active hedging activities. In this dynamic environment, MTU remains well positioned to capture growth opportunities across both commercial and military segments. Our diversified portfolio, strong customer relationships and continued investments in technology and capacity enable us to navigate current challenges while driving long-term value creation.

Let's now move on to another topic, an update on the current tariff situation. Since our last update on the topic, there has been progress between affected countries and an agreement has been reached. This agreement follows the spirit of previous arrangements in our industry and reinstates a general exception from tariffs for aviation products. This exception does not include other products such as industrial gas turbines. Furthermore, detailed rules for the application of the agreements are still in alignment between the EU and the United States. Beyond that, we are still waiting for tariff clarification for machineries, engine stands and other items.

To sum that up, significant progress has been made on the topic. To mitigate these challenges, we are continuously adapting our internal processes to meet all requirements. We analyze on an ongoing basis on how to optimize our part streams to reduce any impact. In addition to that, we are also working on contractual agreements to further reduce our exposure. With that, I will now move on to our key milestones of the third quarter.

Moving on to Page 7. Let me now share the key milestones of the quarter. To start with, as mentioned earlier, Germany has now confirmed the procurement of 20 additional Eurofighter aircraft. Including existing orders from the core partner nation, this brings the total firm order book to 160 new Eurofighter engines, which are scheduled for delivery over the coming years. Let's continue with the GTF fleet management plan. We made great progress in the ongoing execution of this program. Essential aspects include the improvement of parts availability, expanded MRO capacity and better turnaround times, all of which are progressing.

Additionally, we support customers and airlines by providing spare and lease engines. To summarize, we are on track. Further good news for the GTF program came just last week. In October 2025, the GTF Advantage received the EASA certification. This success is the next step in the process to allow deliveries to airline customers and an entry into service next year. Recent customer orders reflect continued strength in our commercial OEM business. LATAM Airlines and [ Avelo Airlines ] have placed orders for a total of 174 Embraer E195-E2 jets, including options. These aircraft are exclusively powered by the GTF engine, underscoring continued market confidence in our advanced propulsion technology.

And our partnership with GE, we also see new opportunities. Together, we are strengthening our industrial gas turbine portfolio with focus on naval propulsion, especially the LM2500 and LM6000. The LM2500 is set to play a central role in powering German Navy's next-generation F127 frigates with growing interest also from other European nations. Maintenance will be carried out at our MTU facility in Berlin, where we're currently investing in a new production center. Over the coming years, we aim to grow our MRO services for industrial gas turbines by around 30%.

A key milestone for MTU Maintenance Berlin-Brandenburg was receiving the EASA certification for full MRO services on PW800 engines, which power premium business jets such as the Gulfstream G500, G600 and Dassault Falcon 6X. This makes the site in Berlin the second certified MRO provider for PW800 engines worldwide. As part of Pratt & Whitney Canada's global service network, we are strengthening our position in the fast-growing business jet segment. MTU Maintenance Lease Services has opened a new parts supply warehouse in Zhuhai, China, complementing existing facilities in the Netherlands and the U.S. This expansion strengthens our global logistics footprint and ensures rapid access to serviceable material for CF6-80, CFM56, G90 and V2500 engines across the Asia Pacific region.

Now let's move on to the financial overview. Let's take a closer look at our financial performance for the first 9 months of the year. As expected, Q3 could not fully keep up with the extraordinary strong performance from the first half of the year. However, MTU reported record results for the first 9 months ahead of the expectations. Group revenues rose by 19% to EUR 6.3 billion, driven by strong growth in both commercial OEM and commercial MRO segments. In U.S. dollar, total group revenues were up 22%. Commercial OEM was supported by strong spare lease engine sales.

Adjusted group EBIT rose over proportionately by 34% to EUR 995 million, delivering a strong 15.9% margin above guidance and above our own expectations. Growth was driven by a higher share of spare and lease engines in commercial OEM and solid spare part sales. Commercial MRO also contributed significantly despite higher GTF MRO share and ramp-up costs at MTU Fort Worth. Net income adjusted grew in line with adjusted EBIT and reached EUR 720 million. Free cash flow came in at EUR 279 million, an improvement of 31% compared to 2024. This figure was impacted by compensation payments related to the GTF fleet management plan. These were partially offset by higher cash contribution from our MRO business and effects from conscious cash flow management. All in all, a great set of results.

Let's now take a closer look at our business segments, starting with the OEM business on Page 9. Total OEM revenues rose by 15% to EUR 2 billion, impacted by a weaker U.S. dollar. While commercial OEM revenues grew 20% to EUR 1.6 billion, military revenues declined by 2%, mainly due to delayed deliveries in new engines as well as back-end loaded repair activities. However, Q3 2025 saw a 3% increase. We expect a strong fourth quarter in revenues to achieve our full year guidance on growth in our military business. Adjusted EBIT increased over proportionally by 44% to EUR 640 million with a strong margin of 31.1%. This is higher than initially anticipated, driven by a favorable product mix in new engines and robust spare parts growth.

Let me now share with you the organic commercial growth rates. Organic commercial OE revenues in U.S. dollars increased by a high single-digit percentage, driven by GTF and GEnx engines with a strong share of spare and lease engines. Q3 2025 showed similar growth compared to the first quarter of the year, but with a higher share of installed engines. In Q4 2025, we expect a higher output of new engines supporting our full year guidance. Organic spare parts revenues rose by low teens, supported by narrow-body engines and mature platforms. In Q3 2025, growth was up mid-to-high teens, in line with expectations and our full year guidance.

Let's move on to the commercial MRO segment. Reported MRO revenues increased by 20% year-over-year to EUR 4.3 billion, while U.S. dollar revenues were up 24%. Major revenue drivers were narrowbody engine programs, mature widebody platforms and our MLS leasing and asset management business. The GTF MRO share reached 40%, in line with our full year expectations. In Q3 2025, we observed an increase in shop visits and higher material content, resulting in a GTF MRO share of 48% for the quarter. Adjusted EBIT increased by 18% to EUR 355 million with a stable margin of 8.3%. The margin was supported by a favorable independent business mix and strong contribution from equity accounted joint ventures and impacted by the higher GTF MRO share and ramp-up costs by MTU Maintenance Fort Worth.

So before heading to the guidance, let me share an update on our current hedge book. As you can see, we were quite active in the past quarter, further expanding our currency protection for the coming years. For 2025, we are now basically fully hedged, protecting our results from currency impacts. Also, looking at the following years, we have made progress in managing our exposure in line with our hedging policy. Looking ahead, we are following the targeted hedge coverage rates as set in our hedge policy. In addition to that, we are currently updating our exposure assumptions to have the latest developments incorporated into our hedging strategy.

After that, we are now coming to the outlook for the year 2025. We are upgrading our outlook based on the strong performance of the first 9 months. The Q3 results and the strong outlook for the current quarter allow us to lift our EBIT adjusted guidance. Coming from an estimate for EBIT adjusted growth in the low to mid-20 percentage range, we are now able to lift that to a mid-20s percentage number. Adjusted net income is expected to grow in line with EBIT. This substantial upgrade in EBIT also translates into a stronger cash flow. We now expect the free cash flow to reach a range between EUR 350 million and EUR 400 million, up from the previous range of EUR 300 million to EUR 350 million. We can reaffirm our revenue outlook with expected group sales between EUR 8.6 billion and EUR 8.8 billion based on an average U.S. dollar exchange rate of USD 1.13 per [ Euro ]. Within this, we anticipate growth in our military business in the mid- to high single-digit percentage range.

Commercial OE is projected to grow in the mid-teens. Within that, the share of spare and lease engines is higher than initially anticipated. Aftermarket demand remains in line with our latest expectations, resulting in a revenue growth outlook of up low to mid-teens. Lately, we also reaffirm commercial MRO revenue growth outlook to mid- to high teens, supported by heavier shop visits and rising demand for GE90 engines. The GTF MRO share should remain at around 40% of the segment revenues. This upgrade again highlights the strong underlying business and our ability to generate highly attractive margins as well as our progress in generating free cash flow.

Let me summarize our achievements in the third quarter 2025. The excellent first 9 months performance leads us to upgrade our guidance again. Revenues are expected to reach the previously communicated levels even in a weaker U.S. dollar environment. At the same time, we see profits and free cash flow generation well ahead of our previous expectations. The market environment for our industry and MTU remains very supportive and underpins our positive outlook. The impact of the tariff environment has been limited as described earlier, and we continue to adapt to the remaining challenges. Great business in a great industry.

And finally, already as a heads-up for next year. We are planning to release our first guidance for 2026 with our preliminary full year results in February 2026. With a couple of market decisions happening towards the end of the year, like the political discussions on FCAS as one example, it will take slightly longer than in previous years before sharing our view on the year in line with most of our competitors. Now this concludes our presentation. We are now happy to take your questions.

[Operator Instructions] Will go ahead with our first question. This is from Chloe Lemarie from Jefferies.

The first one would be on the OEM performance in Q3. So Katja, you mentioned that the OE mix has started to normalize in the quarter. But could you add further color on this? Like how much of the way are we towards a normalized OE mix in Q3? Second part of that question is we've obviously seen record margin in the division this quarter. So could you help us understand the key moving parts driving that? And in particular, because it looks like spare parts accelerated, but probably not enough to explain the 450 bps of sequential increase in margin. Second -- sorry, last question for me would be on the GTF compensation payment. Could you quantify how much was paid in the quarter?

Thank you, Chloe, for your questions. I will try to answer them exactly as you've posted them. First of all, as elaborated in the Q3, we saw an elevated level of installed engines coming in. We don't quantify exactly the numbers, how much spare and how much installed. Anyway, what I can also state is that we have still seen a reasonable share of spare and lease engines also in the quarter, and we expect that also to move on further. What we have, in addition, seen definitely during the course of this quarter is a strong increase in our spare parts business, and this has also helped and supported the guidance expansion, not the guidance, the revenue expansion and the returns expansion.

On the GTF, I can share the figure that we have paid this quarter. It was around USD 100 million for MTU, which has post, so to say, the headwind to our free cash flow generation, but which is in line with expectations. If you remember, we expect for this year in total, a compensation payment quite similar to what we have paid in 2024. That was around USD 390 million. In the first 2 quarters of the year, in total, we had paid EUR 150 million. So overall, we stand at USD 250 million right now, expecting further payments to take place in the first -- in the fourth quarter.

Can I actually follow up on this because on the payment last year, it was all in Q4. So you have a very easy comparison based on Q4 free cash flow. So how should we think of the conservatism based in the upgraded free cash flow guidance? Because on my math, you should be having a pretty significant year-on-year tailwind in that free cash flow performance?

So we also had some payments during the course of the third quarter last year. I would not consider that to be now a conservative approach. As I said, we will still need -- or we still expect around USD 140 million more or less to be paid in the fourth quarter. And this is what we have also baked in when we provided the upgrade of the guidance.

We will now take the next question. This is from David Perry from JPMorgan.

Yes. I guess my question was the same as Chloe, so I haven't thought of another one. But I think it is worth just repeating it. As Chloe said, the margin is just exceptional in OEM in Q3. And you seem to have said unlike in Q2, it's not because of the spare engines, but it's because of the spare parts, which is great. But just maybe if you have a bit of color about why the margin on the spares, the spare parts is just so strong in Q3? Or is there anything else at all that would explain the really good performance?

Thank you very much, David. And as you have stated correctly, the big driver of the margin in the third quarter are not over proportional spare and lease engines, but rather the strong performance on the spare parts. And driving the spare parts compared also to the first half of the year. In the first half of the year, we were at a high single-digit rate, growth rate, now that rate has definitely significantly expanded to a mid- to high double-digit range, which also means then strong impact on the margins. And in addition to that, we also saw pricing effects kicking into place now also in the third quarter.

I guess if I can just have one follow-up. The obvious question is, do we or don't we extrapolate this forward? I mean, is there some kind of -- is it about maturity of the mix? Is it you're taking more margin on GTF or something? Because clearly, we've never had a margin this high. I don't think you've ever had one that high in a quarter.

So if you're referring to the overall margin of the OEM segment, I would still not say that this is exactly the new normal that you should anticipate. You remember what we gave as guidance at the Paris Air Show, which is a little below what you've experienced now in the third quarter of this year. So the maturity definitely plays a role with regards to the mix on the spare parts. And what we will also see in the fourth quarter then on the OEM margin overall is that we will continue to see strong new deliveries.

Next question is from Ian Douglas-Pennant with UBS.

I've got a few, but let me prioritize. So about your OEM EBIT guidance, by my math, it implies something like a mid-single-digit growth rate implied for Q4. Can you help us understand any kind of seasonality patterns that we should be looking for in Q4 to explain why the growth rate is going to slow down?

Secondly, Pratt & Whitney on Tuesday gave a comments on the call that they revised down their expectation for how many GTF deliveries they're going to make this year. Can you help us understand why then your series growth guidance for this year is unchanged. I've got a few more, but I'll respect the 2-question rule.

Yes. So far, looking at the sales guidance that we have out, I cannot 100% record how you come to a limited growth guidance now on the OEM program. I think our expectation is that we will have on the OEM segment also a strong sales performance in the fourth quarter, supporting us in our full year's guidance expectations. Looking at the GTF, I think for the GTF itself, we do see better supply chain helping us also to ramp up further new output on new engines. And I think there, we are also making progress supporting also the ramp down of the situation in the market with regards to the GTFs. And also keep in mind, we do provide more than just the GTF engines in the OEM segment. We also have widebody engines where we do see good business moving forward.

I'll jump back in the queue and follow up with IR on the first question. Maybe I made a mistake somehow.

We'll take the next question. Next question is from Robert Stallard, Vertical Research.

I've got a couple for you. First of all, on engine leasing. This has clearly been doing very well at the moment, but these are particularly unusual circumstances. The market is very tight, very strong. How are you looking to manage this risk going forward when we do see a conditions returning to normal, particularly with regard to residual values? And then secondly, on the defense side of the business, you mentioned the strength in Eurofighter orders and backlog. How do you expect Eurofighter sales to progress and ramp from here?

Rob, it's Thomas. I'm taking these 2. So engine leasing on the one hand side, yes, the market is very strong at the moment. But as you know, we have not a remarketing risk like other companies in the place that we are having a direct correlation between our leasing business and our MRO business, where we can always move things back and forth supporting the one to the other. So we feel pretty good with the outlook we gave at the Paris Air Show as well as the current situation we're in. On the Eurofighter, that's a little bit of difficult question. Yes, the order momentum is accelerating. We see a high level of interest, and we also hear and discuss with our partners and also with the OEMs, the ramp-up of manufacturing. But at the end of the day, there are some lead times in the programs, and we need to see how we can -- we can develop there further. So this is nothing that accelerates significantly in the next 1, 2 years on a revenue perspective. So we need to see how that plays out in the years thereafter.

We'll take the next question. This is from Ross Law, Morgan Stanley.

So first, just coming back on the OEM margin. The implied Q4 step down is quite material. On my math, it's something around the high teens, which would probably be the lowest Q4 margin in OEM for about 5 years. So assuming spare parts don't fall off a cliff in the fourth quarter, is this implied sequential change all driven by this variance in mix? That's the first question. And then secondly, just on FCAS, if this does get canceled, what would be the potential impact to your 2030 guidance?

Okay. Let me first take the margin question on Q4. As we had said already during our H1 call, we do expect not an as strong spare in these engines business moving forward in the second half of the year. And if you do the pure math there, we do expect some impact also due to the fact that the installed engines are increasing. Now, so that is the reason for the lower expectation on the margin for the Q4. With regards to FCAS, I think we are very confident that there will be a solution found to move on with the program. The politicians at the moment are in talks. So maybe, Johannes, you've been to Berlin a couple of times. Maybe you want to say something about FCAS?

Yes. I think we are in phase IB, which is still lasting until September, so third quarter next year. And that's what we still need to work on and deliver. And that's what we also will do together with our partners in the Engine segment. And the decision time line that we hear from the political side in Berlin right now is still the end of the year. And that's, of course, something we are looking forward. And we as MTU and also with our partners, Safran and ITP are fully committed to extend and continue the program. And if the time line by the end of the year is met, we are in fine shape, and we are concentrating at the moment on delivering on the first parts that we are still working on.

Okay. Just a very quick follow-up. Can I just check in your 2030 guidance, is there a contribution from FCAS included in that?

Yes, there is a contribution of FCAS included in our 2030 guidance.

We'll now take the next question. This is from Sam Burgess, Goldman Sachs.

Firstly, just on the stable margin in commercial MRO. There's clearly been a shift to more GTF MRO. But can you just help us disaggregate the drivers there of that stable margin? What was work scope versus pricing versus the MLS contribution? Any color there would be really helpful. And the second one, just on the OEM side, you mentioned the pricing effects impacting in Q3, Katja. Can you just remind us in terms of in 2024, whether those pricing effects impacted at the same point?

Okay. Let's start with your question on the MRO business and the MRO margin. So as we have elaborated already, in the third quarter, we had really a significantly higher share of GTF MRO works compared to the first half of the year. We were short, so to say, with regards to MRO throughput in the first half of the year also due to missing parts. The supply chain has now stabilized on the GTF materials, and this is why we were able to ramp up the share of work in our shop, which then also will help to drive down the AOG situation during the course of the next coming months. With regards to pricing effect, pricing effect kicked in a little later last year in 2024. So some of the pricing was a little pre-pulled this year into the third quarter.

My question actually on commercial MRO was more about how you've maintained a stable margin given GTF is a significantly bigger share. Can you just help us think through what's been really strong there? Is it just more material intensity on widebody? Any color there would be very helpful.

Okay. Yes. Sorry, I didn't get that point with my first answer. Yes. So overall, what we do see is that the work scopes on the mature engines are increasing. That is one definite driver for margin expansion in our MRO shops. You know that the airplanes are flown longer. So we have more shop visits and with higher contents in the time. And on the MLS side, you know that we've provided a guidance moving forward to achieve EUR 1 billion in sales until 2030. And this business is continuously expanding also supporting our margin expansion on the MRO segment.

Next question is from Christophe Menard from Deutsche Bank.

I had two as well. Trying to understand the very strong OE margin in Q3 as well. The question is, is IGT also part of the strong performance? I mean you highlighted this in your presentation. So I was wondering whether that was a contributor to this. And the second question is on GTF Advantage. I mean, you will start delivering by the end of this year, if my memory is right. Has it any impact on the OE margin business first? And the side question is, there is also an upgrade program around GTF Advantage. Are you seeing some customer acceptance of this or interest? And when could it have an impact on your MRO revenues and profitability?

Okay. Let me take the first part. Let me take the IGT topic. IGT is part of the spare parts revenues. So there, we also do see a good business moving forward. And as I said, we will expand the business going forward in our facility, the MRO work going forward in our facility in Berlin-Brandenburg. With regards to the GTF Advantage, you want to take it Johannes?

Sure Katja. No problem. Entry into services next year, so 2026. We're, of course, happy that we have all the approvals now under our belt and the production is now expanded and entry into service, I mentioned next year and then ramping up over time to the full load that we think is required. And of course, there is interest from a customer side for a better performance and longer on wing time for the engines. So we are quite confident that we achieve the targets and the entry to service level then is increasing, of course, over the time.

Next question is from George Mcwhirter from Berenberg.

I've got two, please. The first one is just following up from Sam's question on pricing. How do you expect pricing of spare and lease engines to trend in 2026? And the second question is on the industrial gas turbines business. You mentioned that you plan to grow this business in the coming years. Can you just remind us of how big this business is in revenue terms, please?

Thank you, George, for your question. So the first question on the pricing, I'm sorry to say that we don't give guidance on these detailed levels and also not for 2026 now. So far, we've seen supportive pricing in the market, which has also helped us this year on the margin expansion. Depending on how the market overall will develop, pricing will be determined. With regards to the IGT, I don't -- I'm not fully aware of a share that was ever to communicated. So this is a business that we find very attractive, and this is also the reason why we are investing in our Berlin-Brandenburg facility to expand our IGT business now going forward.

We'll now take the next question. This is from Rory Smith from Oxcap Analytics.

It's Rory from Oxcap. I wanted to follow up on Sam's question on MRO profitability as well, please, but maybe asking it in a slightly different way, given that you've talked about USD 10 billion to USD 11 billion in MRO revenues to 2030 and then that doubling of the MLS to about EUR 1 billion to 2030. Maybe if you could help point us in the direction of the split in commercial MRO profits in 2030 or thereabouts between those buckets that you've called out today, the narrowbodies, the mature widebodies and the MLS, just to give a sense of direction of travel stepping back from the sort of the particulars of the quarterly movements, that would be really helpful.

Yes, Rory, thank you very much for the question. So I'm sorry to say that we don't break down individual profitabilities of subsegments like this. What I can say is that we do expect a positive development in all areas of our business. So with the GE90 and also the contracts that we have moving forward, also the GEnx, I think on the widebody side that we do see continuous demand for MRO services. The same accounts for the narrowbody fleet, which still continues to grow and will continue to grow during the course of the next couple of years. And we have provided you at least with an outlook on the revenue side for the MLS business saying that it doubles its contribution to our 2030 sales figures.

And just a follow-up on near term, the ramp-up impact of MTU Fort Worth. Apologies if you've given this already, but have you given a sort of guidance on the dollar impact of that and when that rolls off?

What we have provided you with was an outlook on the expected investments in PPE that we do see connected to this ramp-up, which was USD 120 million over the course of the next coming years. MTU Fort Worth will have a first induction of an engine by the end of next year. And this will be the LEAP engine where we've invested into the license. There will be another program starting by the end of the decade. But you need to take into consideration that this will not be a material impact, for example, in the near term for 2026 with regards to sales.

Next question is a follow-up from Ian Douglas-Pennant from UBS.

I have a couple of follow-ons, please. So we saw some headlines in the press, I think, from a call that you may have done earlier in the day saying that tariff costs are ahead of your initial expectations. Could you update us on what you think the number is that tariffs will cost you and whether that number has changed since earlier in the year?

And my second question is, so this year so far, we've seen 13 A320neos, at least with GTF engines and at least one A220 being retired. And obviously, they're being retired very young. How do we explain that it's A320s with GTF engines and not with LEAPs that are being retired? And secondly, how do we expect -- how do we explain that those aircraft are being retired quite so young at this point. Does this put a ceiling on your ability to increase price at some point?

Okay. Let me start with the tariff question first. I think this must be a misunderstanding. When we started to talk about tariffs, our original assessment was that we expected the gross impact of tariffs in the high double-digit million range. That was prior to any mitigation measures, which we said we would elaborate on. When we had our H1 call, we spoke about high single to low double-digits impact that we do expect on our EBIT after mitigations. And this is also the figure that we still confirm. So the low double-digit million impact on tariffs this year is what we have currently foreseen. So there is no change in our assumptions with regards to tariff implications.

With regards to the retirement rates in general, I would say that we still see very low retirement rates overall in the market. And what we also have is that we do have a very strong order book on the GTF still moving forward, which was also pointed out with the order wins that we had at the Paris Air Show. So I cannot give you a detailed explanation on specific aircraft, I have to admit. But overall, our order book on the GTF remains very healthy, also due to the fact that this engine really performs well with regards to, for example, fuel consumption, which is a significant improvement compared to prior generations.

We will now take the next question. This is from Olivier Brochet from Rothschild.

I have a couple of questions, please, for you. RTX indicates that on the GTF the shop visits are heavier in -- as we get closer to the year-end. Am I right in thinking that with the 18% share that you have on the A320 engine, it helps sales, but also profit rate in OE? The second question is on FCAS. Do you have any assets that are at risk if the program is dropped? And then the follow-up on the comment you made, Katja, on the new program in Texas by the end of the decade. Do you expect a material fee to be paid at some point between now and then on that, please?

Okay. Let me start with the RTX shop visits or heavier shop visits. You're totally right. Our share in the program is 18%. So there might be some impact coming from more heavy shop visits, but that is also what was expected in general during the course of the program that after a certain time, shop visits will become more heavy as we've also moved away now with better material availability from quick turns, which we had to do for a certain period of time now moving to more heavy shop visits with respective impact.

Assets with regards to the FCAS program. So what we have done so far in the FCAS program as we're -- and we are still doing as we deliver on the phase IB, which was ordered by the government. And this is what we're currently following on until late Q3 next year, waiting for clarification on the program to move on in the next -- in the next phase by the end of this year. And with regards to fee, Ian, what we have paid was, so to say, the entry fee into the program that was around USD 100 million that was late last year. So that has already been paid. What we have also done is we have put additional payments when the program runs that we have to do into our net debt figure in the second quarter of this year. This was EUR 100 million, but these payments are not due in the near term. They will come when the program will ramp up to certain levels. There will be some more payments.

If I may follow-up on the FCAS topic. You don't have any assets that are on the balance sheet and that would be at risk if the program is [ drop? ]

No, there is no relevant asset on the balance sheet.

We have no further questions at this time. So I will now hand back to the speakers for any closing remarks.

Yes. Thank you, Johannes. Thank you, Katja. Thank you all for the participation in this call. As usual, the IR team is online for further clarifications or questions for the coming days and weeks. Thank you. Have a great day, and see you next time.

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

Welcome to the conference call on the MTU Aero Engines First Half Year Results 2025. For your information, the management presentation, including the question-and-answer session will be audio taped and streamed live and made available on demand on the Internet. By attending the conference call, you grant permission for audio recordings intended for publication on the Internet to be taken.

The speakers of today's conference call are Mr. Lars Wagner, Chief Executive Officer; and Mrs. Katja Garcia Vila, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words.

Yes. Thank you, Ralph. Good morning, ladies and gentlemen. Welcome to MTU's H1 2025 Results Call. We will start this call with Lars walking you through some of the important headlines that were made in the past quarter. Katja will then give you the financial overview as well as a deeper look into the segment results. Following that, Lars will wrap the presentation up with some key takeaways before we head into Q&A. With that, I'll hand over to Lars.

All right. Thank you, Thomas. Good morning, everyone. Pleased to have you on board. This morning is a little bit different because Katja and myself were the first time that we're doing this conference call together. And obviously, next to me also sits Johannes, whom many of you met in Paris. So he's in listening mode to prepare himself for the next Q3 figures.

So let me start with a brief overview of what has been an exceptionally strong first half of the year. Group revenues reached over EUR 4.1 billion, driven by robust growth across both our commercial OEM and commercial MRO segments. Adjusted EBIT rose to EUR 657 million. This results from a favorable business mix in the OEM segment and improved profitability in our MRO operations, also supported by positive mix in customer and products. The free cash flow in H1 came in strong at EUR 212 million, in line with expectations for the full year.

These results once again highlight the strength and resilience of our core business performance that fully supports the upgrade to our 2025 guidance as announced at the Paris Air Show. Coming to that event in Paris, which was certainly the highlight in the second quarter. In short, it was indeed a very successful Paris Air Show 2025. One clear highlight was the record-breaking order intake for MTU, reaching USD 1.75 billion. The majority of these orders were the GTF engines powering the A320neo family. The largest single order came from Wizz Air, which selected PW1100 engines to power additional 177 A321neo aircraft for their fleet. This was followed by Frontier Airlines, which will equip 91 A321neo with GTF engines. And in addition, LOT, Polish airlines placed an order for 40 A220 aircraft, all of which will be exclusively powered by PW1500 engines. This outstanding result is a clear vote of confidence from the market in the GTF technology.

Another major milestone at the show was the upwards revision of our 2025 guidance alongside the announcement of our ambitious 2030 targets, both based on an exchange rate of $1.10. By 2030, we expect revenues to reach between EUR 13 billion and EUR 14 billion with an adjusted EBIT margin of 14.5% to 15.5%. Our cash conversion rate is projected to reach a high double-digit percentage.

All of this reflects MTU's strong market position. Demand across the industry remains high, and we are clearly benefiting from this with our well-balanced product mix in both the OEM and MRO segment. With our sharp focus on growth, operational excellence, innovation and sustainability, we are exceptionally well positioned to shape the future of aviation.

We also deepened our partnership with Airbus by signing a Memorandum of Understanding to jointly advance our hydrogen fuel cell concept. This collaboration covers the key technology building blocks required for the engine, the alignment of our respective research and technology road maps for hydrogen propulsion and ultimately, the development of a fuel cell engine for potential hydrogen-powered aircraft.

With Avio Aero, we entered another long-term partnership. They will join our collaboration with Safran to jointly develop the next-generation European helicopter engine, which is expected to enter service around 2040. The work share between all 3 partners will be equally distributed, ensuring a balanced and collaborative approach to this strategic program.

Support and manage our continued growth, it is essential that we invest in expanding our capacity. Our most recent announcement was the investment in our Fort Worth facility, where we've signed a 30-year lease agreement with the city of Fort Worth, a key step in strengthening our footprint in North America. As part of our long-term strategy, we will invest approximately USD 120 million to modernize and upgrade the site. With the maintenance of the CFM LEAP and GEnx engines, we will develop MTU in Fort Worth from an on-site service center into a fully dissembly, assembly and test facility.

In addition to that, EME Aero in Poland reached another important milestone on 30th of June 2025, the site officially opened its second engine test cell. With this expansion, EME Aero will be able to support the maintenance of up to 500 GTF engines annually from 2028 onwards, a significant boost to our overall MRO capacity.

Market environment remains positive over the long term. This is also reflected over the short term. In the first 5 months, passenger traffic grew nearly 6% and cargo traffic was up 3%.

Allow me to reiterate our guidance 2025 update, which we shared at the Paris Air Show. 2025 has been so far another year of robust market environment and MTU is well prepared to continue on our growth path. Let me just reiterate a few key drivers in our business segments for this year. In our military business, the underlying business remains strong with anticipated growth for the development work for the new generation fighter engines as well as an increase in T408 engine volumes. The EJ200 engine will remain the key revenue contributor in the coming years. EJ200 new engine production is about to grow driven by the German Quadriga and Spanish Halcon order. Further, we expect a significant increase in T408 engine revenues compared to 2024.

In the commercial OE business, we see growth across various engine programs. The PW1100G engine deliveries will be the key growth driver, while the output on the GEnx is also growing as Boeing is about to increase the output on the 787. Already very visible in Q1 as well in Q2, we see a higher share of spare and lease engines in 2025 compared to the expectation when we issued our first guidance for 2025. This is contributing to increased profitability as shown in our H1 numbers. The very first engine deliveries for GE9X are anticipated in the second half of the year, while entry into service of the Boeing 777X is expected for 2026.

Commercial spare parts growth is benefiting from the strong market environment. We see solid growth in narrow-body engines as well as on newer wide-bodies. The V25 engine, in particular, is well placed here with a high utilization. Spare parts on mature wide-body engines as well as business jet engines are projected to remain relatively stable.

In the commercial MRO business, we expect continued growth in GTF MRO work. The PW1100 engine will be a significant driver across all MTU network locations, particularly with the further ramp-up of EME Aero as well as MTU Zhuhai through the start of operations at our Jinwan site. The projected revenue share in our MRO business for GTF MRO is anticipated to be around 40%, with a higher share in the second half of the year compared to the first 6 months. Freighter engines such as the G90 and CF6-80C2 see robust demand from cargo operators.

And finally, our MLS engine leasing and asset management business is continuing on its profitable growth path.

Let's have a look how this translates into our financials. We raised the 2025 guidance at the Paris Air Show, and we can reaffirm that forecast today. Group revenues are expected to rise to between EUR 8.6 billion and EUR 8.8 billion based on a U.S. dollar exchange rate assumption of $1.10. Within this, we anticipate growth in our military business in the mid- to high single-digit percentage range. Commercial OE is projected to grow in the mid-teens. Within that, the share of spare and lease engines is higher than initially anticipated.

Aftermarket demand is exceeding previous expectations. Accordingly, we upgraded our revenue growth forecast to low [indiscernible] supported by heavier shop visits and rising demand for the G90 engines. Improved turnaround times are also expected to contribute to a higher number of shop visits. The GTF MRO share is anticipated to be around 40%. These trends translate into adjusted EBIT growth in the low to mid-20% range. Adjusted net income is expected to grow in line with EBIT. The substantial upgrade in EBIT also translates into a stronger cash flow. As announced, we expect the free cash flow to reach a range between EUR 300 million and EUR 350 million.

Rounding this up with a look at the tariff environment. Based on the knowledge at the time of the Air Show, we anticipated a growth impact from U.S. tariffs of approximately EUR 50 million to EUR 80 million. After applying mitigation measures, the net impact from that is included in our guidance.

Especially on this topic, we have to elaborate a bit more with a more detailed view on the tariff environment. As mentioned, we have worked through the previously announced information to assess the potential impacts. The confidence on the topic allowed us to integrate the initial assessment into the guidance for the year. Anyway, there are new announcements and threats around. The U.S. administration is very vocal on tariffs on imports to the U.S. On the other side, impacted countries are openly consulting on countermeasures. At present, our approach remains focused on closely monitoring developments, potential changes to U.S. tariffs on EU goods as well as any countermeasures are under continuous review. However, the extent of their impact is currently not possible to seriously quantify.

Before I hand over to Katja, allow me to reiterate what has been said many, many times in the last couple of months. Aviation is a global business with long-standing partnerships and a long history of working together to allow all parties involved to benefit. Not without reason, the sector was almost -- was mostly exempt from any tariff regimes as everybody acknowledge the benefits for all the companies involved, but also for the countries these industries are working in. With our partners, we are advocating a lot for [indiscernible] status to be reintroduced.

With that, Katja, I hand over to you.

Yes. Thank you very much, Lars, and also a warm welcome from my side on the phone. Now let's move on with a closer look at our financial performance in the first 6 months. Group revenues rose by 21% to EUR 4.1 billion, driven by strong growth in both commercial OEM. The commercial OEM business benefited primarily from high sales of lease and spare engines as well as a strong spare parts business. For the second half of the year, we anticipate a normalization in lease and spare engine sales with growing output in installed engines.

Commercial MRO continued to benefit from sustained high demand for narrow-body engines. Adjusted EBIT increased by 40% to EUR 655 million (sic) [EUR 657 million], resulting in a margin of 15.9%. As mentioned, this results from a favorable mix in the OEM segment and improved profitability in our MRO operations, also supported by positive mix in customer and products.

Adjusted net income grew in line with EBIT, reaching EUR 479 million. Free cash flow improved to EUR 212 million, as expected, impacted by GTF fleet management payments. This was offset by a strong cash contribution from the MRO segment in the first half of 2025 and improved EBIT performance.

Let's have a closer look at our business segments. Let me start with the OEM division. Total OEM revenues increased 20% to EUR 1,411 million. Military revenues were down 5% to EUR 260 million, mainly due to delays in repair business. Commercial business revenues in euro rose 27% to EUR 1,151 million. Organic OE revenues in U.S. dollar were up mid- to high single digit. Within that, we saw a higher share of spare and lease engine sales. Organic spare part sales in U.S. dollar were up high-single digit. Main driver were narrow-body engines and mature wide-body platforms. Nonorganic revenue effects came mainly from U.S. dollar revaluation and hedging effects. EBIT adjusted in absolute numbers increased 44% to EUR 415 million, resulting in an increase in margin to 29.4%. EBIT was supported by a more favorable business mix in new engine sales and increased spare part sales.

Let's move on to the Commercial MRO segment. Reported MRO revenues increased 22% to EUR 2.8 billion, while U.S. dollar revenues were up 23%. Main revenue drivers were the PW1100G, CF6-80, V2500 and GE90, GEnx and our lease engine business. GTF MRO share was at 35%, which is below our expectation for the full year, mainly due to the expected lower material intensity in the first half. EBIT adjusted increased 32% to EUR 241 million, resulting in a margin of 8.6%. The higher EBIT adjusted margin was the result of a better mix in independent business, while the share and material intensity of GTF MRO was lower. Additional support came from the at-equity joint ventures, especially MTU Zhuhai and EME Aero.

Last but not least, let me share an update on our current hedge book. For 2025, we have already hedged more than 90% of our net U.S. dollar exposure. As a result, the EBIT sensitivity to a $0.05 movement in the U.S. dollar exchange rate is limited to approximately EUR 8 million. Looking ahead, we have hedged 60% of our exposure for 2026, 25% for 2027 and 5% for 2028. Based on the exchange rate assumption of USD 1.10 per euro used in our guidance, a $0.05 shift in the exchange rate would impact the revenue line by approximately EUR 370 million.

Lars, would you like to give some additional remarks?

Yes. Thank you, Katja. Well done. Let me briefly wrap up what you've heard. We had a very strong first half of 2025 and made solid progress towards achieving the ambitious full year guidance we updated in June. We've also outlined our ambitious 2030 targets, revenues of EUR 13 billion to EUR 14 billion, a strong EBIT margin of 14.5% to 15.5% and a high double-digit cash conversion rate. This shows our confidence in the profitable growth in the years ahead.

In the short term, we're making further progress on the GTF fleet management plan. We expect the AOG situation to improve in the second half of the year. This is supported by ramping up the GTF MRO output in our shops. This positive momentum is reflected in securing very strong orders for both narrow-body and wide-body engines. In addition to the record $1.7 billion in orders primarily for the GTF engine fleet, we're also seeing continued strong demand for GEnx engines powering the Boeing 787. To execute the growth potential, we are focusing on increasing capacity, making profitable investments and driving continuous improvement to ensure competitive cost structures and reliable delivery, both of which are essential for managing the pace of growth.

That said, the current tariff environment is creating headwinds and uncertainty in the market. For now, we remain focused on closely assessing developments in that area and mitigate effects as effective as possible.

This wraps up our presentation, and I'm handing over to Thomas again. Thank you.

Yes. Thank you. So now Ralph, please go ahead with the Q&A.

[Operator Instructions] We are now going to proceed with the first question. The question comes from the line of Mr. Robert Stallard from Vertical Research.

All the best, Lars, for your future job. A couple of questions from me. First of all, I was wondering if you could give us an update on your latest prognosis on the supply chain and how that's going, particularly on the GTF engine. And then secondly, I was wondering if you could clarify what the net tariff impact has been so far in 2025 in the first half?

Okay, Robert, on the supply chain, generically, we say it's improving. What we have seen over the last couple of weeks and months maybe is some shortages of small parts, mainly due to the fire at the SPS facility in the U.S. But in generic terms, the supply chain runs well.

What's always at question and where we see a very good development is the structural castings and the isothermal forgings from Pratt & Whitney for the powdered metal parts. Here, we have seen a major increase over the past couple of months and years. So that remains on a good track. I'm -- in a nutshell, I'm positive seeing the development of the supply chain improving.

Maybe I do take the second question that you had regarding the net impact of tariffs. So far, for the year-to-date, we only have a very low impact for us. And looking at the full year, we do expect a net impact in the range of a high-single or a low double-digit impact on our EBIT.

We are now going to take our next question. The questions come from Chloe Lemarie from Jefferies.

So I just wanted to say congratulations on a good quarter, but I'll try my luck on a few technical questions and actually start with a suggestion. If you could provide in the future adjusted revenues and EBIT that strip out the impact of the FX balance sheet revaluation items, that would be very helpful.

And so my first question is on the impact of this revaluation in H1. So could you clarify just how you define organic growth in commercial OEMs and what was the hedging and the FX element impact on that revenue line? Because my understanding was these FX elements are recorded within other revenues that you provide in the report, but these went down as opposed to the implied 20% growth that is essentially implied on Slide 8.

The second question is on the impact on EBIT. Are there any offsets on the cost? Or is EBIT also boosted by these revaluation effects?

And the third question is on organic spares momentum in Q2. If you could just comment on the comparison base, which I think was pretty strong and how we should think about the momentum into H2, including on pricing, please?

So first of all, thank you, Chloe, for your questions. Regarding the first point, I think I will talk about that more in detail with Thomas. I don't think that we will break that down differently in the future, but we take that as a suggestion to review that.

Regarding the revaluation effects, I think so far, there is no specific change to the approach so far with regards to how to treat the revaluation effects in total in the slides. And regarding a potential EBIT boost, I definitely do not see that.

Regarding the development for the commercial spare parts in the second half, we have seen a little slow deliveries, especially on the PW2000 and the CF6-80 spare parts in the first half, which we do not expect for the second half, that would be an improvement, bringing us closer to the guidance. And in addition, you are right, we will see also positive impacts on the pricing for spare parts in the second half.

And just to add to that, on the organic growth rate, our guidance always embeds basically on new engine sales, a gross line, which basically is then a gross dollar growth, which imply that we have a higher spare engine mix in the bucket. The euro revenue is also higher as a lower level of discount's applied. And on the spare parts, the guidance is, as always, based on a net -- the organic growth rate as well as the guidance is based on a net revenue number.

Okay. So the OE is more volume than -- and doesn't necessarily reflect the mix. Is that correct?

That's why the reconciliation is a little bit tricky. But we are historically always guiding on a gross level because we are as a partner on GE and Pratt & Whitney, we are not necessarily distributing more information than the OEMs do. So we can't comment too much on the exact mix between new engines to Airframers compared to new engines to other customers.

We are now going to proceed with the next question from Ross Law from Morgan Stanley.

The first is just on MLS and how much revenues and profit that contributed in the first half? The second is just on the GTF share in MRO, which was 35% in the first half. That does imply quite a big step-up in the second half, close to half of revenues to meet that 40% share you're guiding to for the full year. So I just wanted to check, is that reality? Or is that just simply an element of conservatism?

And then lastly, if I can just ask on defense sales, which were slightly lower due to repair delays. Can you just explain a bit more about the timing impact there?

Let me tackle the GTF question, Ross. I'd say this is reality. As we always said, it's back-end loaded, the increase of the GTF and MRO output. And that's what we see with the growth we have seen in the first half of the year compared to 2025. We believe this is doable and possible and necessary to decrease the AOG significantly towards the end of the year.

And we see good turnaround times increase -- decrease -- improvement on the turnaround times. We see material availability going up. So yes, I'd say clearly positive, doable.

Okay. And then I do take the question on the MLS topic. So as you know, we don't disclose those figures in detail, but what I can give you is that the contribution of the MLS business was comparable to the previous year, so for the first half.

Any other question missed?

Just on defense, why sales were lower? Just a bit more details about the repair delays.

That is just a seasonality topic. So we don't expect that to be a continuous issue for the second half of the year.

Okay. And which programs was that on?

I think...

GE T408, J a little bit, but all this is going to be just fine in the second half of the year -- be limited.

We are now going to proceed with our next question. The questions come from Benjamin Heelan from Bank of America.

I wanted to ask another question on OEM. Given that the spares rate on spare parts hasn't grown a lot in the kind of low single-digit range, it feels as though the majority of the profitability improvement in the quarter came from the spare engine and leasing sales. Is that fair? And can you just help us understand like why has this been such a massive tailwind versus kind of any other quarter historically, both in Q1 and in Q2? I just can't remember a time it's ever been so big. And is there anything noncash in there? Is there any kind of noncash gains that have been recorded in that number?

Okay. So maybe what I can say, and this is also what we've commented on that we do have in the first half of the year an over proportional -- a stronger contribution from the sale of lease and spare engines, which we do not expect to continue in the second half to come. So we're expecting normalization during the course of the year. And there are no specific noncash issues included there.

Okay. And then in terms of net debt, it stepped up in the period despite the cash being relatively strong in the first half of the year. Can you talk a little bit about the dynamics about why that's happened?

Yes, sure, I can. So the increase in net debt is related to the previous announced acquisition of a license for maintaining the LEAP engine for the access to the program, we negotiated additional fees to secure the access over 30 years. And the additional net debt reflects these fixed payments from which none is due in the coming years.

We are now going to proceed with our next question. The question is from David Perry from JPMorgan.

Lars, can I also wish you all the best for the new role. I'm looking forward to seeing as Airbus delivery rates go up very quickly. So no pressure there. My -- just 2 questions, please. One, could you just give me an update on the GTF compensation? What was paid H1, what you expect this year, what you expect next year? Do you think there'll be any slippage into '27? Or are we still on track for finishing in '26?

And then just a much simpler question on the FX revaluation that you have. Can you just clarify, does it definitely not have any impact on profit and cash? It's purely a revenue item? Is that the correct understanding?

Okay. So let me start with the GTF compensation payments. So we do have -- we have had an impact on our cash flow in the first half of the year of approximately $150 million. $150 million, and we expect for the full year to have a similar impact as we had it in the last year, which was around USD 390 million. For 2026, we more or less expect around USD 200 million as an impact on our cash flow.

And with regards to the FX revaluation, I'm not 100% sure if I understood your question right. I think what we have given you is a sensitivity of a $0.05 difference to our basic $1.10 hedge rate, which would imply an EBIT impact of around EUR 8 million within this year.

Yes. Sorry, on the FX reval, Katja, I was just referring to Chloe's point just about this difference between the organic and reported growth in the quarter, which obviously was a big impact in Q2. I just wanted to check that it only impacts revenue, not EBIT or cash.

I think that is more -- the impact there is coming from the different -- not evaluation, on the spare and lease engines in the organic versus -- organic U.S. dollar growth versus the euro growth. So as Thomas pointed out, we treat the sales slightly different in the organic view compared to the euro view.

All right. But it's not impacting profit, is it? I just wanted to check that.

No.

We are now going to proceed with our next question. And the questions come from Aymeric Poulain from Kepler Cheuvreux.

The first is around the share of spare engine sales. You say you expect a normalization, but you didn't quantify the percentage in the first half and what you expect as a normalized level for the full year. So could you give us a bit more quantification on that, please?

And the second is on the move on the trade receivable. Obviously, the dollar spot rate can make quite an impact here, but there seem to be some costs associated to factoring. So do you use factoring? And if so, what was the level of factoring in the first half, please?

Okay. Let me start with your question on the share. As you know, we don't disclose the exact share of the spare and the lease engine sales to the overall. What I wanted to point out with saying more normalization is I wanted to reiterate that during the first half, we do have some support from the spare and lease engine sales, which we do not expect to have in the same way for the second half just to manage expectations.

And regarding the trade receivables and the factoring, I do not have any number in mind which would have had a significant impact here coming from factoring. But I would also ask Thomas to have a look at it in more detail. As I said, I don't have any information that we had something specific there. No.

We are now going to proceed with our next question. And the questions come from the line of Christophe Menard from Deutsche Bank.

I had 3. One is on the working cap. There was a big swing in Q2, around EUR 200 million. Can you give us a little bit more elements around this?

The second question was on the equity accounts contribution. They literally doubled or more or less doubled in -- versus last year H1 to H1. What is -- how should we be looking at this contribution for the full year?

And the last question is on the -- you mentioned spare parts, mature engines, CF6, PW2000. Why was there some sort of a delay on the procurement of those parts? Do you have any information you can share with us?

Okay. Let me start with the equity contribution, which -- where the increases contributed mostly to our -- to the LeaseCo business. On the mature narrow-body engine spare parts supplies, we did have some issues also with the supply chain in that area, and this is why there were some delays in the supply overall.

And with regards to the working capital swing, let me think about it. I think there are some changes between the accrual we had built for the -- there's a swing between the accrual we had built for the GTF program where we have continuously issued further credits, which are now part of the receivables of the working capital -- which are now part of the working capital. Yes.

Okay. And just on the equity account, you said it's the LeaseCo. Is it commercial? I mean, just to understand clearly, is it commercial and military? I mean, that part of the equity account or essentially the MRO part that contributes all of them?

It's the ERE LeaseCo, which is part of the OEM business.

[Operator Instructions] We are now going to proceed with our next question. And the questions come from the line of Milene Kerner from Barclays.

I have 3, please. Katja, sorry if you already answered the question. My line is very bad. Beyond the expected normalization in spare engine, could you elaborate the key drivers behind the expected moderation in your profit in the second half relative to the first half, if any?

My second question relates on -- to the GTF. So RTX guided to a meaningful reduction in the AOG in H2 attributable to the MRO output growth. As you're a key MRO partner, what gives you confidence that the AOG level will indeed decline? And what are the key risks that could derail the expected improvement in the second part?

And then Lars, I will echo all my colleague wishing you the very best at Airbus. As your successor is sitting next to you, what advice would you give him? And what are any specific lesson or insight from your time at MTU that you think you could -- I mean, pass on to him, anything that could be valuable?

So Milene, before I have Lars answer the last 2 questions, let me just reiterate. We do expect, let's say, a normalization or a change in the mix of the engines in the OE side and also a slight change in the mix of spare parts. This will be the influencing factors for the second half profitability.

And maybe, Lars, I can now hand over to the GTF topic.

Thank you for the questions, Milene. Maybe first, some rational GTF. The indicators that give us confidence and secureness is obviously the turnaround time going down. It's always -- once material is available, the turnaround time shrinks. And we can see that we share this knowledge with each and every shop in the world. I know that the colleagues at Pratt are working hard to increase material output. We are seeing a growth of the MRO output of 22% compared to last quarter to last year's quarter. 30% has been given at the [ Arctic ] call as a guidance to increase MRO output on a yearly baseline, and I'm confident to see that. The clear risk is always material, nothing else. But again, like I stressed, they are increasing their supply chain. So I'm confident we will see that.

And then on the emotional one. Johannes, first of all, it's a great team behind everything what we communicate today. So I'm confident everything what we have laid out, very confident for the 2025 figures, but also for 2030 is achievable. And look at the execution of the MRO output, but also OE ramp-up and be a major player in the technology advancements, both on military and civil, and that's the ingredients for a successful continuation of the story of MTU Aero Engines. I'm pretty happy, very happy to see both of my colleagues here, Katja and Johannes at the table, and I will comment that in my last sentence later on, Milene. Thank you for that question in capital market call.

We have no further questions at this time. I will now hand back to you for your closing remarks. Thank you.

Yes. Thank you. So this time, it's not on me to close the call. I hand over to Lars. More Lars time, I guess.

Milene, it was a perfect timing then. So guys, obviously, thank you very much for everything. I'd like to take this moment to say goodbye and sincerely thank you for that trust for the collaborations, the many valuable conversations over the past year. It's been a pleasure talking to you, seeing you working with you. I'm looking forward, obviously, to staying in touch and hope to reconnect with some of you in my new role.

Like addressed already, Johannes is here, Katja is here. Well done, Katja, for your first H1 figures here on MTU side. So I obviously hand over the Q3 call then to Johannes and Katja. Johannes, as you know from the communication, will take over as CEO of MTU on September 1. And I'm stepping down, leaving the company at the end of October. And in the meantime, I stay in the background, very, very background to support if any other question comes up.

Again, thank you very much. It has been a great pleasure working with you and seeing you in that industry again soon. Thank you very much.

Thank you. And now that's really the end for this call. For further questions, reach out to the IR team. And yes, enjoy the rest of the day.

We want to thank Mr. Lars Wagner and Ms. Katja Garcia Vila and all the participants of this conference. Goodbye.

Welcome to Paris. Welcome to MTU CMD 2025. After this exclusive and explosive intro we got from support from the French Air Force, we can start our Capital Markets Day. Maybe later on we will have another short pause because the F-35 will also join our party.

Anyway, just before we get started, please be aware that this session will be recorded and made available on our home page afterwards for download. So if you don't agree on being visible there or even after on the questions, please let us know.

With that, I hand over to Lars to walk you through the agenda.

Thank you, Thomas. Welcome, everyone, to our this year's Capital Market Day. And Thomas, we have organized this show according to our slogan, "Passion for engines," so this is a nicely event next door. I think we're going to see the F-35 in the meantime. So we try to arrange. I remember we had that 2 years ago as well. But see that as a accompanying program for our CMD.

So first of all, maybe to acknowledge, you all know that we have scheduled or rescheduled our CMD that was originally planned in the end of 2024, obviously, because of the management changes we have communicated back then, and that includes me.

But I'd like to take the opportunity to first welcome Katja onboard. Katja Garcia Vila is the incoming CFO. She's been with us since 3 months, 4 months -- 2.5 months, it feels longer. And she will transition with Peter at the end of this month.

And then also as a special guest today, I have my successor with me, Dr. Johannes Bussmann. And you might ask the first question, when is this happening? We don't have a date yet. But Johannes and myself, we are actively transitioning already, so you can assume it's not too much in the future. But we are thinking in the next 2 weeks, we have a date. We have a day to communicate, and we'll let you know and make that public.

It was obviously important for all of us and the Board, but for you as well that when we talk about the midterm guidance, that the new management team that has to bring home this guidance is fully onboard, is fully transitioned into all the figures, and that what we have established, that we have been -- go through in the last couple of weeks, and Johannes might take a comment later on.

So before we start into today's event, obviously, we cannot start without a humbleness to what happened last week in India, the Air India 171 incident. And this shows us again how important safety and quality is for our industry. So I'd like to think a second for all the victims that we have lost last week in India.

So safety is important for us. When you followed us through our AGM, we have a firm commitment to responsibility. And that responsibility spans over, obviously, safe aviation, but that also spans over European defense sovereignty, that spans over our ecological sustainability and that spans obviously with our -- over our employees. And all of that should lead to a very prosperous future. And that's why we're here, to talk about 2025 short term, but also our midterm guidance and for 2030.

And this is the agenda that we have prepared. I will start shortly with the market environment, as you know that from us. Also technology, I prepared a couple of slides for you. Then we transition into Michael's topic, the business segments, give an overview of what's happening short term, but also midterm. Silke is going to talk about the OEM operations.

Peter and Katja are sharing the financial part. Peter, obviously, doing the 2025 figures; Katja walking us through the 2030 figures. And then I'll try to wrap it up with a 1-pager. And then we open, all of us, we're open to a Q&A session.

I see nodding in the room. So this is the program. Let me first start with 1 slide, and hey, the slides are pretty loaded and we'll not go through all the points, but we wanted to give you kind of a reference because it has been a while since we did a CMD Day, CMD public. So please use that as a reference, but I'm going to focus and we're all going to focus on the main topics.

This is what you see in one chart, what we have done since we last came together in our Capital Market Day end of 2022 in London. That was my first day -- first Capital Market Day as the incoming CEO back then.

And you have seen in all the topics, we have showed a strong financial performance. You know we had the target [ 8/1/25 ] and we delivered on EUR 1 billion EBIT 1 year ahead of the time. We have advanced in our logical programs given the fact that the GTF Advantage is now certified, and we are en route to bring that into the service at the end of this year, beginning of next year, but also NGFE, so FCAS and the Flying Fuel Cell, have advanced big time, and we're going to talk about it in a second.

Sustainability as well, not only on our product side but also on our production and operational environment side. Operational excellence both in MRO and also in the OE section. Expansion. You have seen us and heard us talking about our MRO expansion that we continue to do in the last couple of years. And now we can earn the benefits because we have capacity, we have something to offer to our customers. And Martin here in the first row, he's the guy selling that capacity to our customers.

And last but not least, the portfolio expansion. I believe you have followed our news that the beginning of this year during the MRO Americas, we have published that we're now onboard as a CBSA Premium License holder for the LEAP engine. We have engaged with GE on the GEnx MRO license and we are starting to have the first engine in the shop for the PW800 in our facility in Berlin.

So remarkable progress as we believe it's resilient to what has happened in the last couple of years, because it was not only ups in our short-term history, we also had a couple of downs. But you see a clear focus on growth, operational excellence and innovation.

Let me guide you a little bit through the market. You see here the numbers of aircraft that we believe are going to be in service for the next 20 years, from 28,000 to 51,000. So that gives a strong momentum, including freighters, including wide-body obviously, including [ single-a ]. And you see on the text at the side, so the commercial pax and the freighter fleet is growing by 3% year-over-year, and led by, obviously, narrow-bodies with 3.5% year-over-year. So robust demand, robust air traffic growth.

But you can see also here in a couple of charts, you see the global RPK. So all the figures, all the KPIs are trending upwards. You see a good growth rate on the RPK. You see a nice and steady increase of the aircraft deliveries, both wide-body and narrow-body. And you see the aircraft retirement and park rate is going down. If we would put a column of 2024 next to it, that would be roughly 20% to 25% lower than we have seen that last year. This is obviously an effect because the air framers, Airbus and Boeing, are not fast enough of ramping up their deliveries. And that's why older aircraft, older engines are flying longer, which is very beneficial for our business model.

Also on the defense side. I mean it's obvious what's happening around us in the geopolitical environment that we are in. We see that MTU is well positioned. You know our portfolio. We are the service provider for the German Armed Forces, especially, obviously, on the Eurofighter, but all the other programs as well. But the Eurofighter, because of the geopolitical world we live in, has a second or maybe even a third momentum. There are a lot of customers, and Michael might talk about it a little bit -- a lot of customers are reordering or new-ordering the Eurofighter. And we are as well in the OE but also in the MRO business.

And then looking forward, and that spans more than 20 years, you all know the FCAS program, so Future Combat Aircraft -- Air System; and the ENGRT, which is a new helicopter -- European helicopter program. Both of them we are partnering with Safran. And we go forward to work on the technologies, which are sooner or later then fueled in and transferred into the commercial environment.

That's always a good benefit. So you know all the details around it, with a GDP 1% increase, NATO was even asking for 5%. So we try to have a meaningful share out of that budget increase, especially in Germany, but given the fact, worldwide.

So the key summary, robust long-term growth perspective. New engine deliveries and MRO is a double-digit growth actually as we've seen that, obviously, Silke will refer to that, supply chain is not ideal. But we can live with that. It's a challenge, but we can live with that. And the European push for defense of sovereignty is pushing into our hands.

So that -- given that, a small upgrade on technology, you always know our technologies are forward-looking, so 15, 20, 30 years ahead of that. And obviously, we are engaging in 2 different streams. One is the future of the Geared Turbofan and the other is a more revolutionary path towards zero emission where we are engaged with our Flying Fuel Cell. And the next-generation Geared Turbofan is something between evolutionary and revolutionary.

You see that here, we talk a lot about and also Pratt, our partner, talk a lot about GTF here on the air show, and we actually made some very good deals on existing customers, but also new customers. So the reputation is good. The sales pipeline is good as well.

And we see the GTF as a 3-step development. Number one is obviously after entering into service 2016, is the so-called GTF base, where you know all the facts, 16% less fuel consumption, and that means CO2 emissions as well, 70% noise footprint reduction. And we're building on that legacy now, and we are evolving and evolutionizing the Geared Turbofan into the Geared Turbofan advantage. That has been certified 2 months ago, 3 months ago, is now delivered to Airbus, and we're waiting for the first aircraft to start servicing -- start service in the end of '25, as I just said, and the beginning of '26.

It's a game changer for us. I'd like to [ dap ] the holy grail, because everything what we have learned in the development of the Geared Turbofan is now being put in into that engine. So it offers a little bit better fuel efficiency, it offers 4% to 8% more thrust. But what's mainly important also for our business model and for our profitability is it's twice the time under the wing. So durability has improved significantly.

And the beauty about that is that some of these upgrades we are able to retrofit into the base engine. And this has been named yesterday as a hot section plus event with Pratt & Whitney. So especially on the hot section, high-pressure turbine, the improvements here will be retrofitable during the MRO shop visits into the GTF base.

And then the next evolution, which is the number three, is obviously our preparation towards the next-generation Geared Turbofan for an entry into service 2035-plus, 2038, in that endeavor. But we really like -- we are working on that. And all the keywords you find there, we are, together with Pratt, we are working on the improvement, evolutionary, but also revolutionary elements. The focus for us here at the Air Show was really Geared Turbofan Advantage, which we made a lot of positive press lately.

This is the Geared Turbofan, and then the second element, the Flying Fuel Cell, also there has been a lot of communication, especially from Airbus on the 0E. But we wanted to target, still want to, we wanted and still want to target the technology readiness for this propulsion. We believe in the flying fuel cells as an interesting element for zero emission technology. We have made great progress, and we put it into the press the last couple of days and weeks. And you see here some effects. Design is finalized. The demonstrator engine is being produced as we speak. We have electric motor available, tested successfully. And we can confirm an efficiency rate of 96%.

Obviously, everything is currently targeted on the technology readiness to be -- to show and to demonstrate that this propulsion system is capable of powering an aircraft, let's say, 40, 50, 60, 70 passengers in the future.

In order to be more streamlined, we are looking and still looking for some more partners, and some of that news might evolve in the next day. So keep an eye on the potential partnerships in the future here at the Air Show. And like I mentioned, this is again a reference. We're not only focusing on our product sustainability, but also in our operational footprint.

We have had our targets, based on 2019, we wanted to reduce 60% of CO2 emission in our global ecosystem. We have achieved already above 40%. And with this tailwind, we have increased our target for CO2 emission to reduce it by another 60% based on 2024 going into 2035. This is Scope 1 and 2. And then also, we are working on, as we speak this year, on a target baseline for the Scope 3. So both goes hand in hand for us and in terms of our sustainability responsibility.

With that, I'd like to hand over to Michael for some business segment update. Michael, thank you.

Lars, I'm happy to do so. By the way, I'm not sure, after you're very energizing speech at the beginning, why you moved away from hot and fast spinning engines to rather static fixed-wing aircraft.

I know something is going to come. I know that, yes.

Welcome again to our Capital Market Day. I hope you enjoyed the show. We definitely enjoyed the last 24 hours here on the show. A lot of interactions with customers, with partners. And again, as Lars also said, it proves that we have got the right products at the right time and the right capacities. And that's a pretty comfortable position.

And this is what I would like to share with you in the next couple of slides. So we will have a look on the military market, then briefly have a look on our commercial footprint. And finally, I would like to spend some time on the MRO evolution. I mean there's a significant story, a positive story in the last 10 years, and it will continue like this in the next 10 years.

So military first. Fighter programs, Lars mentioned it. We have now our order book already of about 160 new engines from Spain, Italy. Germany is still to sign, but this is committed. The German government has for now committed for about 20 aircraft. Personally, if you ask me, I'm sure they will increase this number over the time of the next 24 months.

International, we get a lot of traction also on the Eurofighter. We have now international export potential identified of up to about 140 aircraft campaigns, which we are actively working.

And finally, also our latest product development, Europe needs a sixth-generation fighter. This is clear, together with our partner, Safran and ITP, we are on track with the development of the engine for the future combat aircraft, or here in France called FCAS. And now we are working actively on the phase two for FCAS, which is a demonstrator phase where we really cut metal, where we test engine components here.

So we are now today basically preparing the offer for the phase two. We will deliver this offer for phase two to our customers by end of June -- end of July, sorry. And then we expect basically to enter a new follow-on order for a couple of about 6 to 7 years in the second half of 2025. And Fighters, obviously, will remain a key revenue driver for our military business.

On the other side, let's have a look on transport. A400M has proven to be an operational aircraft customers are happy. And I'm happy because we could make a lot of deliveries already to our customers. Export potential is picking up with a lot of campaigns which are ongoing. And not to forget also the aftermarket is now picking up with more than 900,000 flight hours, a very well-performing engine and an agreement for a kind of a performance-based logistics concept together with [ OCA ], which we could sign also last year. So aftermarket revenues are increasing in this program now significantly as well.

On the helicopter side, you know that we have got an 18% participation on the Sikorsky CH-53K, so deliveries are on track to the U.S. Marine Corps. First export orders are also booked with Israel, I think, now. And then we have a look on the future, so this was basically the past. We have identified a potential of about 1,600 military helicopters coming up here. And the helicopter needs obviously 2 or 3 engines. And in order to have the latest technology and helicopter engines available, we teamed up last year together with Safran. And again, stay tuned also, maybe tomorrow also in the press, you will see some more announcement that we will also expand this team beyond Safran and MTU in order to prepare it for the next generation of helicopters.

So all in all, I think we are happy. We will increase our military revenues. We will grow also with the growth of the defense budget. I think very well positioned in this portfolio.

Then have a look on the commercial side. Lars mentioned the increase of aircraft of about 3%. We are proud that we even can outperform the market with our CAGR of 4% with all the engines and applications where we participate with MTU modules or parts. So today we see in the market about 19,000 engines actively. This number will increase in the next 10 years by about another 10 years -- 10,000 engines, which equals to a CAGR of 4%. So also this is not an option or opportunity. Most of these engines are already under contract or under options.

You also see a shift from 60% in the narrowbody engine market today by the obvious increase of PW1100 production rates to about 66%. So also our footprint on the narrowbody segment will increase compared to today.

And on the next page, we also have a look at what this means, so what is driving this increase. Today, our premium product, as you know, is the V2500 program with more than 300 million flight hours already, 8,000 engines delivered, 150 operators in the world and about 3,000 aircraft active today. So this was the history of the last 30 years.

Now we come to the next 30 years. We have achieved on the GTF already 40 million flight hours of safe operation. We will see in the market more than 15,000 Geared Turbofan. So the narrowbody exposure of MTU will just double in this next generation of program. We have already acquired 80 operators around the world. We were speaking, Martin, to a lot of them in the last 24 hours. Operators are happy with the performance of the engine. And we see in the market more than 2,000 active aircraft are flying. So the GTF will significantly surpass what we have achieved in the last 20 to 30 years with the V2500 program.

And then let's have a look on the aftermarket dynamics. It's a little bit different here. V2500 was driven by a certain coverage, 65% to 70% of aftermarket agreements by the OEM by our consortia IAE. So this will change to a more fully covered aftermarket range. Up to about 90% of all the operators choose the IAE solution via long-term support agreements. So it gives some stability for us to planning stability, and call it a certain revenue stability income. But it also gives us certainty for the customer. It's a kind of insurance solution for the customer to have a predictable maintenance cost. So it's actually a win-win.

The MRO market share remains about in the same percentage value. MTU performs about 38%, 35%, 36% of V2500 overhauls whether which way look on. And this will remain stable with about a 35% market share of MTU going forward. Actually, it's not so much driven by what we want here, it's really driven by the maximum capacity, what we can offer to the market and what we can offer and will offer to IAE.

The dynamics is a little bit changing. The profit driver in the past was more or less the pricing of the spare part sales, so the escalation of spare parts going forward now, and this is an activity which we have started together with our partners, we really have to focus on GTF Advantage, as Lars mentioned and a new technology of engine running much, much cooler than the latest generation. So running cooler means more life in the engine, means more -- I mean it's less material cost for us and also for the customer side.

We now have started since 2 years to really focus on MRO cost management, so what can we rescued on the engine. Where can we repair parts instead of replace parts. And obviously, also the dynamics will change in terms of pricing of the aftermarket contracts. There are no launch customer prices anymore out in the market. Now we move to the next generation. And obviously, we have an opportunity to increase and improve our pricing given the current conditions.

Moving to the next chart, please. Yes. Now we move away from the OEM side to our maintenance section. And I think it's quite helpful -- I thought it's quite helpful to have a look on the history and where we are targeting to. So 2015, when we were sitting together and speaking about MRO planning, we spoke about an MRO revenue in the MTU group of USD 1.7 billion. Last year we closed our books with $5.5 billion of consolidated revenue. So this does not include the revenue which we make in our joint venture with our friends from Lufthansa Technik in Poland, and it does not include the revenue which we make with our friends from China, Southern Airlines and Zhuhai, but $5.5 billion reported revenue.

So if we now look a bit more to the future, in the next 5 years, we target to double the MRO revenue to a number of about $10 million to $11 million. And going on with the investments, as Lars mentioned on the LEAP engine, on the GEnx engine in our new Fort Worth facility, we foresee a revenue potential of MTU maintenance of about $15 billion, $16 billion. So a significant increase. And I'll show you in a minute, a lot of this investment, which are necessary to make this revenue happening, have happened already now in this decade.

So why we are so successful in the market? First of all, we are committed to invest in MRO. We are committed to invest in maintenance. We are committed to invest in more capacity. We never stopped to do so. Even where other companies during COVID, they drove down their CapEx investment, we continued this path because we were convinced about the need for capacity in the market.

We have the largest and the most stable MRO portfolio in the industry, 30-plus engines. We constantly expand this portfolio. And I think we have an optimized footprint of optimized wins by capable high-cost location in combination with really upcoming our best cost location.

No, it's not yet this one. Okay. I was just waiting. So let's continue on the next chart, please. Yes.

Strategic investments in MRO programs. I mean a lot on -- when was it? April 8, I think, during the MRO Americas, we announced that we want to invest into the LEAP. So we negotiated in a record time. I have to say, together with [ CFMI and with GE ] licenses for the LEAP-1A for the 1B and for the GEnx engine. So all these engines, we will work in our Fort Worth facility.

So on the LEAPs, we are premier MRO providers. So we are fully integrated in the MRO network of CFMI. Same now on the GEnx engine. On the GEnx, we up to now were repairing the module, which we designed only with turbine center frame. And this will move now by 2030 to a full engine MRO. And if you just see the ramp of this wide-body engine, I think it's a very profitable place to be in the future.

GE90. We have been in GE90 since 2012. We thought we should target for capacity in the GE90 of roughly about 30, 40 engines. The markets told us difference. So this is why we decided last year to ramp up to a capacity of 75 engines. And just 2 weeks in the [indiscernible] we have decided to extend our Hannover facility in order to make about 100 engine shop visits per year happening.

So again, a steep ramp and a quite interesting market for us because the market participants for the maintenance of this engine is very much limited. This means, again, positive effect for pricing.

Now if you look on this program and this strategic investment program all in all, so 3 new programs. Yes, there are license cost, there's CapEx costs involved. But over the next year -- the next 30 years, there's also a revenue potential of more than USD 120 billion involved, which is resulting from over 6,000 shop visits.

Yes. And then we have to work all this and now this is a chart which I just was creating yesterday night, specifically for Milene because you like our leasing business so much and you're asking yesterday about our leasing business. So this is something which we started in 2015. Martin was the first managing director. We gave you a little pocket of money. I think it was USD 50 million, if I remember well. And you created a revenue of 30 million in 2015.

And then we changed the management. And your successor, and your successor, Patrick, he created a revenue of about EUR 500 million last year. But Martin, I can tell you is still in the Board, so he's driving all the success.

So if you now have a look on our strategic plan towards 2030. We will see that our lease and asset management business will continue to grow. We will continue to invest in this business. So EUR 1 billion is in our strategic plan for 2030. And then the journey will not end, so we will increase further to about EUR 1.5 billion of rather profitable -- very profitable MRO revenues, which will contribute also to our margin, obviously.

So what do we do today? We have about 80 people, maybe it's now about 100, I would say. We have about 250 lease transactions, which we are one of the bigger ones in the industry. We manage our own, roughly about 150. I think the number is today about 180, engines already. And we have access to 400-plus customers in the world. And what is obviously interesting is always a bundling of services and MRO contract, together with a lease contract, together with an end of lease or an asset management or asset sale. So I think we are quite good positioned there. So this journey will continue.

Next page, please. Yes, then we have to work this. We have to create capacity. And I told you that we started this expansion program in 2015. So we have finished the extension of Hannover, just that also that we want to now increase our widebody capacity. So this will be available by 2028, together with more piece parts repair capacity. We have increased the space, especially for industrial gas turbines in our Berlin facility. Together with Johannes, we have decided just before COVID in 2019, to increase our Kuala Lumpur joint venture. Over COVID we cooled this a little bit down. Now we can use our shop floor very nicely again.

And MTU-Zhuhai is a success story. So the base company in Zhuhai, we have now increased the shop floor 3 times. And in the board of MTU-Zhuhai, we decided 2 years ago to build another facility 25 kilometers away in Jinwan which is solely focused on the Pratt & Whitney 1100 engine. So this is a facility which we just have opened in March now, which is now fully operational.

Next page is then other locations here in Fort Worth. We have a new facility where we increased the staff now and implement the LEAP-1A, 1B and the GEnx, although the company in 2030s -- in the early 2030s, we will employ roughly about 1,000 people there, contributing to a significant revenue extension also in our MRO business.

Serbia is active since 2022. This year, we will deliver from Serbia about 150,000 repair hours, again, increasing to '27 to about 470,000 repair hours. And this will not be the end, I'm quite sure.

Canada is a very stable in operation for 2 engine types. Doing a fantastic job to deliver 80 engines back, mainly to Amazon Air, our prime customer there. And EME Poland is instrumental to support the entire PW1100, 1500 and 1900 fleets. Currently about 1,200 people are working there, delivering 350 engines back to the field every year. So a lot of investments are done, but necessarily in terms of increasing the capacity.

Yes, and there's a summary and the key takeaway. I think we are very well positioned on the military business with our prime product, the Eurofighter and our next-generation fighter engine program, the [ SCAF ], the FCAS is ongoing. And technology is really on track and providing obviously also material technology, engine architecture technology back to the commercial field.

The commercial MRO business, revenue increase has been proven over the last 10 years. And I think similar will happen now, as I showed you just a minute ago, also for the next 10 years. So all the investments are on track. And capacity is something where the demand is higher than the installed capacity, and this is a situation which will not change anytime soon. So again, a very nice spot for us to be.

Commercial OE business, the V2500 is still very, very strong. If you want to buy an engine today in the market, you will have a hard time to find someone. So this market is still hot, more than 800 shop visits every year. The GTF will outplace definitely the V2500 program significantly by a factor of 2. And the GTF Advantage is something which Lars said will be in operation in about 6 months from now, and also providing additional life and, therefore, also for us, cost benefits to the fleet.

Yes. And finally, MTU is nicely positioned with all our good performance in the past for the next generation of Geared Turbofans, which we will bring to the field in 2035 plus.

That leads to the end of my presentation. And now everyone has -- someone has to work on all this stuff, produce all this metal. And this is my charming colleague, Silke.

Thank you, Michael. And you're also leaving the F-35 to me, I think, right?

Well, anyhow, the only message I, as a COO, could make everybody happy is that we have stable supply chains, therefore, calm internal processes, flawless delivery, competitive cost levels and no issues at all. Unfortunately, as Lars said, that's not the case. And I believe, and we believe, in our industry, it will never be again. So we better prepare for that. And that's what we did in the last year.

Internally, we have a target that's called from white water to calm water, to make sure that even if the world is still stormy and the waves are high, we come from white water rafting to a very, very calm end-to-end process from the market to delivery, including our suppliers.

So what we did is accept all the task force work that we did to think about how to shape our footprint and our supply chain. You might be aware from presentations in the past that we have only about 30% of in-house value creation and 71 procurement, which means, in whatever we do, we need to talk to our supplier. We need to shape our supplier base as much as we're shaping our internal network.

It might sound simple if I have 2 locations to shape a footprint. But actually, what we did in the last year was in-depth simulations of the future growth to determine when, how and with what to establish additional locations. And of course, to optimize the grown current locations in their efficiency, in their cost level, in their capabilities.

So what we derived from that was a clear target picture for the current locations and also determine the necessity when and with what to decide a new location. And we came to the conclusion that our current structures, with all the investments that we did, like the new Blisk facility, we will have enough capacity at least until 2030. And the next decision for a new location is due earliest in 2030, which is good news. As regards investment, bad for me because nothing is nicer than creating a really nice and efficient greenfield.

So what we came up with was also the target picture from Munich to optimize there, obviously, by automization, not for the sake of automization but for the sake of efficiency, to keep the very, very high competencies that we have there to develop technologies and products and processes for the future. And obviously, to also improve the structures that we're having. I have a lot of buildings from 1973. And of course, we still have to invest in Munich, therefore.

Rzeszow has grown from the child to a very mature, very lean, very good production location. So we will put more complex product there and, of course, still allocate labor intense work there. What we're going to do in the third location when it's due, we will pull together high-volume production there with low-complexity products to allow a fast ramp-up and to allow there to be highly efficient and, obviously, very competitive.

Martin is always asking me, so how do you improve competitiveness with a new location? I said, no, not only with a new location. Key is that also in the current location we make significant progress.

And we need our suppliers. You're fully aware that we, as everybody else, has the same issues. When we think one topic is solved, topic like COVID, then another one arises, like wars. And you have to digest all those topics in how you manage your supplier base. Managing supplier base on MTU sounds quite arrogant because actually we are really, really, really small. And as you might be aware, we have quite a monopolistic supplier structures. So for us, it's all about having long-term, stable relationships based on mutual trust with our suppliers.

We also have still capacity constraints that everybody feels in the industry. But as Lars says, I think we're quite well set up. It's getting better every month. And I would say we cannot blame for long the supply chain anymore. We're going to get out of that. And of course, what makes the supply chain really difficult is all the regulations and bureaucracy that we see.

How do we meet the challenges? We continue with our procurement strategy. That is, long-term relationships, long-term price agreements, which for me coming from automotive is quite strange. No negotiations after 2 years, having contracts for 10 years to make sure that we keep the cost level, but also working together with our R&D colleagues to make products easier to be able to have more suppliers and to break up a little bit those monopolistic structures. And of course, on the other side, to continue with second or even third sources to make sure that we have a resilient supply chain whatever happens in the world.

So key takeaways, and I made it before the next one starts. OEM business is ramping up. We are ready for that. We're looking forward to that. It's a challenge we love. We're preparing also our supplier base for the growth, but also for more resilience and flexibility. And we have profitable investments that we're going to continue in our current locations, but also into new ones.

So I feel very well set up with a very competent team. And for me, the future is bright, even if currently we have some whitewater rafting still. And with that, I would hand over to the even brighter financials.

We have grounded the F-35 in order to finish our Capital Markets presentation.

As we've heard before, I mean we have split the presentation. So I'm going to talk about the 2025 third time update of our outlook for the full year, and Katja will take over and going to present the midterm outlook and the, let's say, target financials for 2030.

This time, obviously, the trigger for the guidance revision is not FX. I mean we still think that 2025 will be something like an average rate of $1.10. But a long story short, what we think is that our aftermarket footprint, aftermarket franchises develop better as we -- compared to what we thought, let's say, in April, so in Q1.

We think that we're going to ship more spare and lease engines, especially on the PW1100, but also on the GEnx. And as you know, I mean, spare and lease engines don't come with that large discounts, they are contributing positive EBIT to our P&L.

We have heard from Lars that airlines want to prolong life for, let's say, existing mature engines because they get less new equipment. So that's especially true for the V25 in our universe, also on the GEnx. So aftermarket is actively growing stronger than anticipated.

We see that in the MRO division where shop visits are heavier, also, in the V25, more LLP shop visits, heavier work scopes. And that all drives spare parts, spare parts, obviously, on the one hand side, and also MRO.

MRO, also GE90, Michael presented that before, we see a huge customer demand. And we were able to in our MRO division to increase turnaround times and even increase the number of shop visits we can bring through our shops. And that contributes also positively to our aftermarket sales.

So if you sum that all up, as I said before, $1.10 is still the assumption for the average FX rates. It might be $1.11 or whatever. But that is the right ballpark. Military is unchanged. Commercial OE organic growth is still unchanged, up mid-teens for the full year 2025. On the commercial spare parts side, we expect something between low to mid-teens. So that is an upgrade from the low teens number we gave you in April.

And on the commercial MRO, we expect up to -- mid- to high teens. So that was also increased from low to mid-teens. So a significant increase in our MRO revenues. So if you do the math and to use the $1.10, we come up with total group sales between EUR 8.6 billion and EUR 8.8 billion.

And on the EBIT that transfers to EBIT growth, up low to mid-20s, whereas before, somewhere in April, we said up 15% roughly. So a significant upgrade of EBIT expectation for the full year, and then drops through to free cash flow. So also free cash flow, we expect to be a bit stronger, so roughly EUR 50 million strong at the midpoint. So EUR 250 million to EUR 300 million was the guidance before, and now we expect something between EUR 300 million and EUR 350 million, depending on, let's say, year-end effects. It's always a little bit, let's say, volatile.

Net income adjusted obviously grows as EBIT adjusted [indiscernible] not discrepancy in growth rates. So financing costs, tax, that is all very stable.

So very positive outlook for 2025. We also finalized our assessment of the tariff. Let's say, a tariff environment, we said at Q1 that we have a gross impact, something like EUR 70 million, EUR 80 million. We're working on mitigation measures to reduce the net impact overall and we have done our homework and we think we can mitigate most of the tariff impact and have included the net tariff impact in our guidance for 2025. So if things don't change very much, that will be a very manageable number.

So having said that, I hand over to Katja to talk about the midterm outlook until 2030.

Until 2030. Yes. Thank you. Peter, I think these are great news. I'm looking at 2025. And I would like to take the chance to guide you now through the main drivers of our future business and also provide you with an update on our 2030 figures.

First, coming to the future drivers of our business. For the commercial OE business, we see increase in production volume for the GTF. We also see an increase in production for the GEnx business. We will see a ramp-up of the GE9X business. And also for our business jet business, we expect further growth. So overall, commercial OE growth in all areas.

Looking at the commercial spare parts business, also here, we do see continuous growth from our narrow-body programs. The share of our wide-body programs will be increasing. And we still continue to have stable support from our older engine programs.

Michael has told you about our expectations on the growing impact from our military business. And also here, you do see that we will continue to grow significantly. We will have increasing deliveries on the EJ200 and on the T408. We do expect more service for the existing fleet on the MRO side of the military business. We do expect increasing impact on the FCAS development to our top line. And last but not least, we also see stable deliveries and support for the TP400 program.

And what about the commercial MRO side? Also here, the narrow-body programs continue to grow. We see the GTF program predominantly growing in our best cost locations like Poland, for example, as we've pointed out, all the new Jinwan location. We have stronger freighter demands in the maintenance area. And we will also see the ramp-up of our LEAP program and the new site in Fort Worth, adding there at a later point in time also the GEnx business.

So overall, top line growth in all our business segments. So what does that do to our EBIT line? It's probably the next question to answer.

When you look at the growth rates in the businesses, you see our military business and our commercial OE business growing in the mid- to high single-digit percentage point over the time. And we do expect the commercial aftermarket to grow even stronger by a high single digit to a low double-digit rate -- low double-digit range.

And as you do see that the OE sales are outgrown by the commercial spare sales, this will end up in an expected EBIT margin in 2030 of about 28% to 30%, which is an increase overall.

And looking at the commercial MRO business, also here, we do expect a growth in the low teens area with an expected EBIT margin of 8.5% to 9.5%. And this expansion is definitely impacted by our investments into the business ramping up the site in Fort Worth.

So looking at this quite promising bottom and top line growth, what does that do to our cash conversion? Because this is probably one of the biggest asked questions that you have here in the room.

The cash conversion rate, we expect to develop during the course of the time from 24% in 2024 to a high double-digit cash conversion rate in 2030. What are the drivers of this development in the cash flow? On the one hand, it's the expansion of our EBIT. We do expect a contribution from better working capital management. For example, through reduced turnaround times and also an improvement in the supply chain, as Silke just pointed out. And we also see an ease in the CapEx and also in the capitalization for R&D.

But as you can also see on the curve on the chart, there are also some headwinds in the earlier years that we still have to manage, such as the GTF fleet management plan, which will still have an impact on us in 2025 and 2026. Thus, we also do see some increase in the receivables due to the prefinancing of the shop visits at the moment.

And on the MRO side, we already spoke about the great opportunities that are out there, but they also require some investments. You've seen the ramp-up of the Fort Worth facility, plus also the expansion and the profitable lease business in the MLS. They will also require some CapEx, which makes the whole development rather back-end loaded.

And then you might wonder, what are we going to use the cash for? How are we going to deploy the cash? Please let me assure to you that we are fully committed to the increase of our shareholder returns. We will keep a balanced leverage ratio between 0.5% and 1.5%, and we are fully committed to protect our investment grade.

So what are we going to use the cash for? In the first priority, we still want to invest into the organic growth of our business, as we've demonstrated and shown to you during the presentation so far. During the course of the development, we will return to our dividend policy, which is currently suspended, and we will then provide you with about 40% of our adjusted net income again.

Share buybacks might be opportunistic possibility during the course of the time, and we will continuously evaluate M&A opportunities even though we all know that the radar is quite limited at the moment.

So after what you've heard now, how will our MTU look like in 2030? In 2030, based on a dollar rate calculatory of $1.10, we expect our revenues to be between EUR 13 billion and EUR 14 billion. And we expect an EBIT margin between 14.5% and 15.5% for 2030. All this will come with a high double-digit cash conversion rate.

I think I'm very happy to say that MTU is positioned uniquely for future profitable growth. And I don't know, Lars, if you have something to add to that.

Thank you very much, Katja and all of the team. It's great to sit there and hear the story. And it's a unique story that, first of all, thank you to the team, the outgoing team, including myself, but also the incoming team. We have done a tremendous team effort...

What about the staying team?

Thank you as well. We have done a tremendous team effort with the Board, but also with the top management of the company, basically supported by the huge amount of work that every employee of the MTU puts into the story.

And it's my task then to summarize what we have seen over the last 1 hour. You have heard the next era of profitable growth that MTU is entering by first lifting the guidance for 2025, as you have seen, EUR 8.6 million to EUR 8.8 billion revenues, up low to mid-20 percentage of EBIT adjusted, in the range of EUR 300 million to EUR 350 million free cash flow. The KPIs and the tailwinds we have from our business is all supporting these significant growth, both top line and bottom line.

You've heard about the market environment in our industry, it's just phenomenal. I don't know any other industry that is growing with this CAGR going forward. Our product portfolio is well set up with the different ranges that we are covering. Technology, we're always at the forefront of technology, not only, like I said, in the product environment, but also in the automization in the MRO and the digitalization. So everything that we do is being thought of in terms of high technology. That's our reputation as our company.

And we are focusing in the next couple of years, as we did in the past on the operational excellence, but also in our financial strength. And we have our internal homework and we have created and started our, we call it, MTU growth transformation program. The name is Uplift. And with that Uplift program, we are preparing the company for this future growth to be easily scalable.

And the main work is we look at 14 or 15 core processes of the company and we are streamlining these processes so we have an identified and standardized and optimized, but also digitalized environment for MTU going into the end of -- towards the end of this decade, but also going further. This is our homework where we focus on operational excellence, but also on financial strength.

And with that being said, we come up to what we see -- what we think is a humble ambitious but realistic target picture that the incoming, the outgoing and the stable team has come up with, with EUR 13 billion to EUR 14 billion in revenues, 14.5% to 15% EBIT margin and high double-digit cash conversion rate.

This is the main presentation. And again, thank you, first, for listening to the team. And we are opening up the stage for question and answers. Thank you very much.

It's David Perry from JPMorgan. My first question is a bit long, so I hope it's not drowned out by an aircraft engine. So just to clarify, because a lot of investors who are not here have e-mailed me the same question. It's just about the guidance and FX. So I think you have no hedging at the moment for 2030. The spot rate is $1.15. The forward rate for 2030 is $1.25.

So just to be clear, when you say you assume $1.10, is that a $1.10 flat all the way through the 5 years? Or is it $1.10 today and the forward rate? So if I summarize, is the reality today for 2030, is it $0.05 worse than you assume or is it $0.15 worse than you assume? Sorry, it's a long question.

Well, the calculation base is $1.10 for 2030. So the achieved rate is assumed to be $1.10 in 2030. And everything what deviates, [ Stefan ], is you have to treat that with the sensitivity we just gave.

Yes. No, but I'm just clarifying the sensitivity, because your slide says the sensitivity is $0.05. But if you rang up Deutsche Bank, Citibank, whatever today, you'd get $1.25. So is the real sensitivity $0.15 or is it $0.05?

Well, we calculated 2030 with $1.10. There was no expectation that, because it's $1.10 today, we have a forward rate of $1.25 or so.

That was not -- so whatever happens in 2030, so we calculated it $1.10 because nobody really knows what the FX rate in 2030 will be, no?

Yes, agreed. And then one business question, please. You had your slides on almost all the GTFs today are on LTSAs. Do you expect that to stay the same? Or do you have any strategy to try and steer the customers to T&M?

I cannot display the strategy, which we have not agreed with our partners yet, but I can give you my personal expectation, that the older engine program gets also from the history, the more the customer would like to have an alternative solution. And I think alternative solution means that you will not just go with an LTSA with the OEM, but you'll look also on the free market.

And I'm also perfectly sure that the free market will develop on PW1100 anytime soon. Not now, not in this decade. I think you have to have a really stable configuration, a really trustful configuration. But in the 2030s, I could foresee such a situation easily.

Christophe Menard, Deutsche Bank. I had, well, 2 or 3 questions, let's say 2. The first one is the margin in OE, 28% to 30%, is very narrow. How can you justify it? Where is it coming from? Is it a mix of spare parts, military, lease? And why such a narrow range?

And the second question is still on commercial OE. You used to tell us, well, 1/3 is OE and 2/3 is spares. But you also say that spares will outgrow OE volumes. So what in 2030 will be the new mix between spare parts and OE?

I mean, what is the margin driver? It's clear. I mean you have seen that, I mean aftermarket activities grows stronger compared to OE, especially if you -- I mean, the one thing is you applied the average growth rate. But towards the end of the decade, obviously, OE growth will be very limited. Basically, the only platform which will be growing at the end of the decade will be the GE9X. Everything else is flat or flat or slightly going down.

And aftermarket continues to grow. And that implied, let's say, revenue mix shift in the commercial segment drives the margin in the OEM segment. There's not so much coming from, let's say, the military, military part of the business.

And if you, let's say, translate our 2025 guidance regarding, let's say, segmental margin, you see we are at the, more or less, at the lower end of that range already in 2025. I mean a little bit driven by especially the high share of spare and lease engine, that will fade away, obviously, in the next 1, 2 years and then, due to the revenue mix going forward, that will be a tailwind then, bringing us back to that range, 28% to 30%.

Well, we don't give a target -- target sales. That's not our KPI. That's a rough estimate.

So maybe, I mean starting for 2025, so you upgraded your spare part guidance, what has been -- which engine have been driven this? What surprised you on the upside compared to what you were expecting?

Well, I said it in my presentation, especially 2 engine platforms, the GEnx and the V2500. On the V2500, we are currently in a situation we have roughly a stable number of shop visits. I mean Pratt & Whitney gave the number of something like 800 shop visits annually currently, but the work scope gets richer and richer.

So we have more LLP shop visits, more content shoppers as airlines look to, let's say, prolong the life of the existing fleet. That drives not so much the number of shop visits, but the content that is good for the MRO revenues, but that also drives spare parts demand on OE side of things.

And the GEnx, obviously, high utilization of the fleet, heavier shop visits. We see that -- we see that in our MRO shops as well, the GEnx TCF models, which we do in Hannover, very -- they have a very heavy material content, and you see it also on the OEM side where we have almost 7% of the spare part sales.

These are the 2, I would say, major elements of the updated guidance.

I mean, Milene, to give you also a number on 2025, when in the past we were speaking about our shop visit price or cost, we were speaking about like EUR 8 million or something for a full overhaul. Today, we see shop visits up to EUR 12 million. So this is obviously creating more spare part revenues than on the OE side of the business.

Actually -- thank you, Michael, because then my second question was on V25, I mean, obviously, you're plateauing now at 800 shop visits. But how should we -- how should we think about the worst scope evolution? And obviously, now with the fleet staying for longer, how should we also think also about the third shop visit where we are seeing more material than what we used to?

Yes. I mean in the past, we said that the peak on the V2500 will be reached in 2023. So this has been shifted now significantly by, I would say, at least 4 years. So we see very, very high shop visits in all the locations.

And we see customers who are flying the A320 classics, not only for 22 years, but also extending now power by the hour arrangement or MRO arrangements also with us, to an age of the aircraft of 25 and 26 years. So I think this end of life period has shifted by, I would guess, about 3 to 4 years.

And again, the number is increasing and the customers are willing to pay more cash and more spare parts in lack of availability of new equipment at this stage.

Sorry. And then I had just a quick last one, not on your leasing. Sorry, Michael. But just going forward, could we actually expect that with the GTF, we're going to have a higher share of your delivery that will be spare engine compared to what we have seen historically on the V25? That's something we're hearing from CFM. Is it also true for you?

I think it's true today, but on the long term side, like 2030, obviously, we would like to come back to a spares ratio of what is, say, healthy for such at least 10%, 11%. Today, I think the new narrowbody engines, they are more like 25% plus to a certain extent. And I think therefore, over the period of the next 5, 6 years, this will normalize again.

Try your best.

Okay. I'm going to -- I will try my best. Sash Tusa from Agency Partners. A slightly different question, and it's about sovereignty, which you mentioned, I got, particularly with regard to defense. But an area where Europe does not have sovereignty is in civil aero engines. And I wondered whether you are either getting any queries or pressures from Brussels or other capitals to start thinking about doing for aero engines what Airbus did in terms of airframe sovereignty 25 years ago?

No. The short answer is no. We don't talk to Brussels on that one. It's mainly a duopoly, a triopoly with Rolls-Royce, obviously, GE and Pratt & Whitney. But these discussions are mainly focused on defense side or military side where we are, sovereign, with our engine technology, but not on the civil side.

But if U.S. presidents can effectively try to veto delivery of European civil aircraft, if they have American supplied engines, that's an enormous sovereignty gap, isn't it?

It's probably something to think about, but your question was, do we talk, and we don't talk.

Sash, I think there -- maybe to comment on this one. There's no pure American engine which is existing today in the world. So I think all these engines are built in international collaborations, always involving European partners. So I think this has been recognized now in the Oval office.

And the second comment is also -- and the second comment is also I think we don't have a guidance from Brussels now to stock parts or something like this. But we're in active discussion with our military customer that we need to have more spare parts, more material, and therefore, also be more sovereign from deliveries from the -- and therefore, we also [indiscernible] sovereign from the point of deliveries. I mean, today, when we produce a spare part for military aero engines like this one, this has a lead time of about 1.5 years all in all, raw material to finished parts. And now we learned, unfortunately, that work can also take 3 years or 4 years or 5 years.

And that's another active discussion. I think with our military customers, how do we pile up stocks of raw material or also finished parts in order to support their missions?

Hello. What would be the mix in 2030 between first visit and second, third visit? And what are the -- what are the unit profit and unit profit margin of the GTF first shop visit compared to the second shop visit, to the -- is there a difference?

I think, first of all, we don't declare profit margins of individual shoppers, obviously.

Rough estimate of the diifferences between the first and the...

In the GTF environment, if you have a fleet management plan, you have a certain assumption about the profitability of a contract and you apply the margin to every -- and you apply the margin to every shop visit. But it's a POC kind of accounting.

The margin is identical over the lifetime of the contract unless you change the assumption of the contract and say, well, the contract is more profitable because we develop repairs or reduce the, let's say, reduce the number of shop visits in the contract also. But as long as, let's say, the assumption of the contract is stable, the margin which I applied to a first -- or second shop is completely identical.

Chloe Lemarie from Jefferies. Just a long air show.

Just a question on military actually, because your growth rate is mid- to high single digits. I just wanted do you check, I mean, what are you assuming in terms of OE versus services in what you're doing in military? I mean are they going into different growth trajectory or not?

And the second question was actually -- I'll wait until the following. The second question was on free cash flow. So you're raising your free cash flow in 2025 by a lower amount that you're raising your EBIT. I just wanted to check what exactly you put into that raise in free cash flow generation?

I mean you have to pay taxes. That's, I mean you can deduct 30%, roughly 30% and you have to pay taxes, yes. That's in the cash flow, tax payment.

Military half. The military, I would say, by 2030, it should be about half year. I mean Eurofighter is increasing, [indiscernible] is increasing. The helicopters are increasing. And on the other side, I think we will have some development revenues on the FCAS still. So it will be, I think, between OE and aftermarket, half-half.

Actually, in terms of the Eurofighter production rates, what are you taking into account by 2030?

Sorry?

On the Eurofighter production rates, what are you taking into account on 2030?

Basically, we're introducing to schedule those engines and the aircraft which we have under contract, which is what I said here, roughly about the 60 for the coordinations plus an export potential. The overall production rate should be then in the range of about 15 to 20 aircraft a year.

It's on the ground now.

You gave a free cash flow target of high double digits. I'm just curious if you can expand on that. That could mean 65% to 99%. And if you could distinguish sort of what element of growth seeking CapEx is within that to kind of understand what like a maintenance free cash number would be?

I'm not 100% sure if I understood all the elements. So with regards, we will not narrow the bandwidth now. We said we'd come up with a high double-digit rate for 2030. And I think that is an ambition that we have. And looking where we're coming from 2024 with the 24%, I think that is a significant expansion of the cash conversion rate that we are targeting for at the moment.

And I think with regards to the drivers of the cash flow, I think we gave you some of the drivers like the EBIT expansion. An improvement from the working capital, so from working capital from the turnaround times topic. We spoke about a reduction of working capital through an improved supply chain. You also heard that we do have some stock at the moment due to the delay of the ramp-up of the GE9X, for example. So that is something that we have sitting in our books at the moment, that will turn around. Yes.

And a reduction, so we did have some heavy PP&E spendings, for example, during the course of the last years, that will ease down. And also the R&D capitalization quote is going to go down. I think these are the main drivers with regards to the positive side of the cash flow development. Also spoke about some headwinds in the earlier years. So I think if you take all that into consideration, it's a good picture to draw.

One additional question on next-gen GTF. We've heard from one of your partners or competitors that they are working on an ultrafan narrow-body.

I mean, what type of collaboration could you be thinking about? I mean to the extent of what you can say. And what specific parts also on the next-gen are you working on to improve the consumption on that engine -- on that evolution of the engine?

I think you should answer the question. No, we don't comment on potential partnerships. I mean the rumor is out, but maybe not the rumor is out. So the ultrafan has been in the game for quite some time and Rolls-Royce is public about it. So I don't comment on potential partnership scenarios on that one.

We are working -- obviously, MTU is working on our work share, meaning being the LPT and being the HPC, in order to evolutionize the development and make it suitable for higher temperatures, more pressure. So in overall, we can increase our efficiency above what we have seen on the GTF Advantage.

And then in general, for I think Pratt & Whitney and for the whole IAE, I mean, Pratt came public yesterday or 2 days ago that we are striving for at least a 20% increase in SFC for the next-gen. We will see on all cycles, on all modules, we will see an improvement, probably some mild hybridization.

And we still have some revolutionary ideas on how to increase that number even more. But this is tomorrow. This is the future. Today was really GTF Advantage, and this program takes us for the next 10, 15, maybe even 20 years, and then we'll see kind of technology will arise for...

But the future will not be open, I guess?

I don't comment.

There was another question, Milene [indiscernible]?

So I actually -- I don't have another question. But I just wanted to thank you, Lars. Looking forward to see you at Airbus. And I really want to thank Peter for all these years for traveling with you, replying to our question, has been a real pleasure, on behalf of everyone.

Yes, Peter, 1 second. Milene, Thank you for stealing my last pitch. I don't know if you noticed, I have ordered a specific song for one of the shows here, and it was Time To Say Goodbye. Unfortunately, they managed to fly earlier than expected.

But Peter, thank you very much for 26 years at MTU. Many of our guests today, investors know you still from your -- already from your Investor Relations time.

Yes, 2011.

2011. And I believe you're all with me, and I've seen that with your applause, that we all owe a lot of credit and thank you in respect to Peter's work over 26 years. There's a saying, the share price doesn't lie. And when Peter started in the Board together with me in 2018 and compared to today, our share price increased by 130%. So we owe that to Peter. We give the credit to Peter.

And I know you have lots of plans going forward with the different Board mandates. I don't believe you will be bored anytime soon. And he is always picking on us already as being a big shareholder. He will probably come to our AGMs. He will try to ask some tricky question. But Peter, again...

I will apply for one-on-one.

Peter, again, thank you very much. Thank you very much.

Thanks.

So with that, I'd like to ask Johannes on the stage as well. We are finishing our Capital Market Day. I think we have, as always, we have drinks and some flying [indiscernible]. Feel free to ask some questions to all of us.

And as I said in the beginning, Johannes, I'm really happy to start transitioning now with you. You have been instrumental as well, and looking through these figures and our strategy, you've been a Board member with us more than a year. So you're following us, you know what's behind the story. And I see you're nodding, so you're all there.

All right. Thank you very much for following us, and let's make it informal now.