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Welcome to the Safran First Quarter 2026 Revenue. At this time, I would like to turn the conference over to your host, Olivier Andries, Safran CEO, and Pascal Bantegnie, Group CFO. Mr. Andries, please go ahead.

Thank you. Good morning, everyone, and thank you for joining us. We had a very strong first quarter with revenue reaching EUR 8.6 billion, up 23% organically. We continue to benefit from a solid momentum in both aerospace and defense with little to no impact from the Middle East conflict so far. Once again, our main growth driver is aftermarket. We saw vigorous demand across the board, especially for commercial engines and nacelle.

Sales of spare parts for civil aircraft engines were up 29%, mostly thanks to the CFM56. Services for civil aircraft engines increased by 43% with LEAP rate per flight hour contracts leading the way. At the same time, building on our excellent industrial performance in the second half of 2025, we continued the LEAP ramp-up with more than 500 deliveries this quarter, up 63% year-on-year and marking the third consecutive quarter with deliveries above this level. Overall, the strength of our Q1 performance reinforces our confidence in reaching the high end of our full year 2026 guidance.

That said, we remain cautious for the coming months given the uncertainty around the scale, duration and potential impact of the Middle East conflict, notably on air traffic. A few words on our portfolio management. In January, we completed the divestment of Safran Passenger Innovations. And more recently, we announced the acquisition of a partner Syntony, the leader in resilient navigation technologies for complex and denied environments.

Turning to Slide 4. We continue to raise our industrial capacity for the ramp-up in both civil and defense activities. We recently announced 2 new facilities to support Airbus and Boeing ramp-up, one in Morocco dedicated to the A320 landing gear and another one in Belgium for compressor components, which will equip the LEAP, the GEnx and the GE9X engines. In addition, we just announced a EUR150 million investment in Gennevilliers for our -- for a new 30,000 ton forging press. This will support the LEAP ramp-up as well as our military program, further reinforcing our resilience in forged parts.

In defense, we signed an MoU with EDGE Group in the UAE for the development, the production and the commercialization of advanced air-to-ground weapon system. This is yet another example of the momentum in our defense activities and our ability to forge meaningful partnerships. On the commercial side, we were pleased to see our Arrius 2D helicopter turbine selected to power Guimbal's new GrandCabri G5 helicopter. We are also keeping a strong focus on innovation and future technologies. The ENGINeUS electric motor was recently honored at the 2026 Aviation Week Laureate, marking a significant achievement as the first electric motor to be certified for hybrid and electric aircraft. It was also selected to power the fully electric Bristell B23 Energic aircraft. With that, I will now hand over to Pascal to walk you through the Q1 revenue in more detail.

Thank you, Olivier. Good morning, everyone. Let me give you a quick update on FX. Earlier in the quarter, we saw the euro to dollar rate jump up to almost $1.21, but it then settled back down into a more favorable range between $1.14 and $1.16 in March before stabilizing around $1.17 this week, largely in the context of the Middle East crisis. We use this environment to keep building out our hedging positions for 2029, and I'm pleased to say we are now 80% hedged for that year. In this context, we are confirming our 2026 hedge rate at $1.12 per euro. As of March 2026, our hedge book stood at $59 billion, which continues to give us strong visibility and protection against currency movements. Looking further ahead for '27 and '28, we are still targeting a hedge rate of $1.12. And for 2029, we are aiming for a range between $1.12 and $1.14 based on the market is today.

Now moving on to Slide 7. In Q1 2026, our revenue reached EUR 8.6 billion, which is a 19% increase year-over-year or 23% organic. Organically, that's almost EUR 1.7 billion more than last year, driven by both our services and original equipment businesses. On the currency front, we did see a negative impact of 8.5%, mainly because the average euro-dollar rate was less favorable, $1.17 in Q1 '26 compared to $1.05 a year ago. In concrete terms, that meant a hit of about EUR 600 million on our revenue. Lastly, scope effects added around 4%, mainly thanks to the acquisition of Collins actuation and flight control business last July, which contributed nearly EUR 400 million, and this was partly offset by the divestment of Safran Passenger Innovations for nearly EUR 100 million.

Turning to Slide 8. Let me give you a quick overview of our revenue by activity. Starting with Propulsion. Revenue reached EUR 4.6 billion, which is a 33% organic increase. The civil engine aftermarket delivered a particularly strong performance. Spare parts were up 29% and the main driver here was again the CFM56, which benefited from a favorable comparison against Q1 2025. The strong results also build on the momentum we saw in the second half of last year where we experienced a significant increase in workscope. In addition, the LEAP third-party network kept growing. Also its revenues are still modest compared to the CFM56. Looking now at services, we saw a 43% increase, mainly driven by the LEAP rate per flight hour contracts with volume, workscope and also a favorable comparison base since margin recognition for the LEAP-1A only started in the second quarter of last year. On the OE side, we delivered 520 LEAP engines this quarter, up 63% year-over-year. This substantial increase reflects both the ramp-up, marking quarters in a row with more than 500 deliveries and again, a favorable comparison base.

Moving on to equipment and defense. Revenue grew by 13.5% organically year-over-year or 11.9% if we exclude the transfer of the Safran Ventilation System from Aircraft Interiors. We continue to support the ramp-up at Airbus and Boeing with deliveries of critical equipment such as the nacelles for the A320neo or electrical systems and wiring for the 737MAX, landing gear for the A330neo and the 787. In defense, we benefited once again from strong global demand, especially for optronics, inertial navigation system and guidance systems. Aftermarket services also grew across the board, particularly in nacelle for the A320 and A380 and also for electrical system and wiring on the A380.

Turning to Aircraft Interiors. We saw a 9.2% organic growth or 14.8% before the transfer of Safran Ventilation System. Growth in original equipment was led by very strong cabin deliveries and favorable pricing in business class seats despite lower volumes. Aftermarket services also increased, mainly driven by cabin activities for airlines in North America, Asia and the Middle East.

Turning to Slide 9. We are continuing to deliver on our EUR 5 billion share buyback program. In the first quarter of 2026, we repurchased 1.6 million shares totaling EUR 500 million. These shares are set to be canceled by the end of the year. And I would like to highlight that a new tranche of EUR 375 million of the buyback will be launched in the coming days. On the debt side, we redeemed the EUR 700 million bond issued back in March 2021 as it reached maturity this March. This redemption has no impact on our net debt position. And our long-term debt profile, as shown on the graph, is long dated and now primarily made up of bonds and USPP. Finally, just as a reminder, Safran will propose to its shareholders a dividend of EUR 3.35 per share for the 2025 fiscal year. This represents a total payout of EUR 1.4 billion scheduled to be paid on May 28. Olivier, back to you.

Thank you, Pascal. Our Q1 performance and the strong momentum we continue to see across both civil aerospace and defense gives us strong confidence in our ability to reach the high end of our full year 2026 target guidance. Nevertheless, we remain cautious as the situation in the Middle East remains fluid and its potential effects, notably on air traffic are still uncertain. In any case, the first half of the year should remain largely unaffected. Thank you, and we will now be happy to take your questions.

[Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Olivier Brochet from Rothschild & Co.

I wanted to discuss the potential difficulties that airlines might see later in the year. And if they decide to defer shop visits, do you have signals that other might step in actually to take over the slots that would have been freed up? That would be the first question. The second one is on spare engines. If there is traffic slowdown, do you think that airlines will effectively reduce their spare engine purchase? And the last one is, you discussed in the press release missile propulsion. Can you maybe tell us how significant it is, sort of, growth that we should expect to the end of the decade and these sort of things, please?

Airlines, interestingly, I spent 2 days last week in Hamburg at what we call the Aircraft Interiors Expo. And that's interesting because this is an opportunity to meet many, many airlines. And during those 2 days, I met about 20 of them coming from everywhere, Americas, Europe, Middle East, Asia, India, China. And what's interesting is that I got no indication at all that there is any potential acceleration in the pace of retirements of aircraft. As of today, if we look at Q1, there has been 44 CFM56 powered aircraft being retired, which is less than 2%. It's about 1.5%. And in the last 3, 4 years, most of the airlines are many complain about the shortage of capacity of aircraft capacity. So I mean, there is no -- even nobody envisions to -- as we speak, to accelerate the pace of retirement. So I'm confident that the pace of retirement will remain low, lowest ever, by the way, lower than before COVID in 2026. And I don't expect that to pick up in 2027. That's one.

Now when we look at shop visits in Q1, we've seen removals of the wing of engines in line with our expectations in Q1, meaning that in Q2, we will see induction into the shop in line with our expectation. And this will feed engine output considering the turnaround time in the shop. This will feed the engine output in Q3 in line with our expectation. So all in all, we are quite confident that, let's say, the volume of shop visits this year will be in line with our expectation. And we have been positively surprised in Q1 by the high number of shop visit with a workscope. In fact, higher than what we anticipated. And this is why, as we speak and as you've seen, we are indeed ahead of our trajectory in Q1. And so we still expect to be ahead of our trajectory end of H1. And this is why this is fueling high confidence to meet the high end of our target.

Spare engines. On the contrary, the appetite for spare engine is very, very significant, in fact. And we -- I mean, we would be able to produce even more engine than what we have planned for in 2026. There would be an appetite for the airframers to take them, but there would be a strong appetite as well from the airlines to take them. So no slowdown for spare engines. You had a question on missile propulsion. As I think I mentioned it, we have decided 18 months ago to invest EUR 100 million in our missile propulsion business to increase the capacity by [ 5 ]. So we see today on our missile propulsion business, we see an increase. We forecast an increase of 20% in 2026 versus 2025. And we think -- I mean, we think this is what we see because we have a backlog of orders, we think that our production is going to be multiplied between now and 2030 by a factor of 4 to 5. There's a big appetite for what we call munition. And this indeed is feeding a strong backlog for missiles and also propulsion, but also seekers and guidance kits.

Could you give us a sense of how significant that business is in the missile for you?

Olivier, we won't provide such a detail, but the kind of growth rate we enjoy in '26 is clearly in the [indiscernible].

But I can at least give you just an indication, not a detail, but we are talking about a few hundred millions.

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

I wanted to come back initially on the situation in the Middle East and Olivier, your comments about being confident to reach the high end of the guide because there is clearly a scenario where this situation drags on, and it does become quite difficult for a lot of airlines across the world. So you're confident on reaching the high end of the guidance. But can you help us understand from a conflict scenario, like how long are you anticipating within that guide that this situation drags on for? That will be the first question.

The second question is you mentioned little to no impact so far. So in terms of both March and April, have you seen requests for small reductions in scope or delays to some deliveries of spare parts? I'd just be interested over the kind of the last 6, 7 weeks, what you've actually kind of seen on the ground in terms of scope of shop visits and spare parts requests. And then on the LEAP, obviously, a very strong improvement in deliveries. Can you talk a little bit about what you're seeing from a supply chain perspective? Have you seen any incremental tightness given what's going on in the Middle East on the LEAP supply chain in particular? And are you still on track with the LEAP-1B Maverick blade introduction in the first half?

Ben, a lot of questions. On the Middle East, frankly speaking, it's really early to comment or speculate on how long the Gulf crisis will last and how this will unfold. I mean, I don't have a crystal ball on that. Of course, it has lasted for now almost 1.5 months. Probably it will last more. So a few months, I hope, no more. But we'll see. We've not seen any indication yet of any slowdown. It's very clear. We've not seen any indication of any slowdown of engine removals or engine induction. We have not seen any indication of reduction of workscope. And as I said, we've been very positively surprised, in fact, by the higher number in the global mix of shop visit in the higher number of shop visit with a heavy workscope. So in terms of volume of shop visit, we are in line with our expectation.

In terms of price, we could anticipate so we are in line. The positive surprise has come from, let's say, a heavier workscope in average than anticipated. So no indication of any slowdown. And again, in Q1. And again, we don't expect anything in Q2 as well. So we expect to have a strong H1. Supply chain, what we anticipate and what we've seen is, let's say, significant price increase in some specific raw materials, which basically has a cost impact for us indeed. And so we see that as potentially a consequence of a conflict or whatever. But I can give you 2 or 3 examples. cobalt, tungsten are typical examples where the prices have hiked quite significantly. So we -- I mean, we manage that, of course, and we had the buffer and the room to absorb that cost increase on specific raw materials.

Ben, if I may add, I know that you sit in Dubai, so I hope all is well for you and your family. Interestingly, a year ago, it was all about the tariff. If I may discuss a tailwind that we will have in 2026 that may absorb any headwinds that could come up from the Middle East conflict is about tariff. For example, in Feb, I mentioned that the impact or the expected impact of tariff in 2026 should be in the range of EUR 100 million. Given the Supreme Court decision months ago, now our expectation is much less than that, below EUR 50 million, okay? So that's a tailwind. And in addition to that, since the 2 days now, CBP has opened a platform to reclaim the paid tariff for 2025, and we are claiming up to $100 million. So this is typically a tailwind that we could enjoy in 2026 to offset any impact, if any, during the second half of the year or in 2027.

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

I have 2 questions, one on aftermarket and the other one on defense. On aftermarket, you mentioned CFM56 workscope. What about GE90? Is it also strong? Or where do you see workscope evolving in -- well, in the rest of the year? And on defense, can you comment on the LPM boost that we saw and the impact on your midterm guidance?

Christophe, yes, on what we call high-thrust engine, especially GE90, we've seen a significant growth, and this has contributed as well to our spare parts revenue growth in Q1. We've seen quite also an increase of workscope as well on the GE90. So it has contributed to the growth, which, again, is a good news because, as you know, when we look at the Gulf share of the global air traffic, it accounts for about 5% of narrow-body, but 20% of the wide-body. So it's been a good news. And we don't see -- we see that continuing in Q2.

On defense, yes, the LPM, as you call it in France, loi de programmation militaire, basically is going to be, let's say, augmented with a decision to increase the spending between now and 2030 by EUR 36 billion on top of the already decided EUR 400 billion spending in this period. And announcement has been made that a part of it would be dedicated to what is called munition. So munition means missiles I mean, missiles and other ingredients for missiles. So as I said, guidance kits, seekers, missile propulsion. So yes, it's a boost, indeed. And on top of that, just as a reminder, about 80% of our revenues in defense are related to export, so not France. And we see a big boost here as well, especially in Europe.

Okay. So the LPM boost is probably not enough for you to reconsider your midterm guidance just on the back of that EUR 36 billion boost.

It's a good tailwind and a good contributor, which -- but it reinforces our confidence, I would say, to meet the high end of our guidance.

We are now going to proceed with our next question. And the questions come from the line of Robert Stallard from Vertical Research.

A couple of questions from me. First of all, earlier this week, GE gave a new basis on airline activity for its forecast and its 2026 guidance. And I was wondering if you've done anything similar in your guidance? And then secondly, on Interiors, Boeing highlighting continued seat certification issues on the 787 yesterday. I was wondering if that had any impact on you in the first quarter?

Airline activity we have not gone through a detailed, let's say, exercise of forecasting airline activities. We -- of course, we are studying various scenarios depending on how long the crisis will last. Again, it's very early to -- it's -- I mean, I don't want to speculate. So it's too early to comment on that. Again, we believe that the widebody is the fact -- the wide-body is more impacted than the narrow-body by this crisis in terms of overall number of cycles for the full year 2026. So impact could be, let's say, higher on wide-bodies than on narrow-bodies.

About seats certification, yes, this is an industry-wide, let's say, issue. As we have already commented, the certification, the authorities have significantly tightened their interpretation of certification rules. And therefore, I mean, we are in a situation sometimes where we have delivered the seats to the airframer. And the aircraft is ready to be delivered, but we still wait for the green light of seat certification. So it happens. And again, it is one of the issue that as an industry, and it's really something that we work on with the airframers, we need to find a way to unlock and to ease because it does have an impact on aircraft deliveries.

Now interestingly, and again, I refer to my 2 days in Hamburg last week, I have been again surprised by the level of the demand for new premium seats, new business class seats and first-class seats, which largely exceeds the supply. I mean we are in a situation where seat suppliers are quite often in a position to no bid to request for proposal just simply because the demand is largely exceeding the supply. We -- the reason for that is that many airlines have launched big retrofit program, and they are investing tens of millions for retrofitting their fleet of A380s, 777, 787, A350s. And this comes on top of, let's say, the line fit ramp-up, especially on A350, 787 and 777. So we are in an interesting situation where we still need to unlock those certification issues, but the demand is incredibly strong.

We are now going to proceed with our next question. And the questions come from the line of Ian Douglas-Pennant from UBS.

Yes, I have a few, please. So the first, just on -- going back to the guidance this year. So Q1 has been, as you said, significantly ahead of your expectations. You sound extremely clear that we're not going to see an impact from the Middle East at least this year by the sounds of things. And even if we look back at past cycles, there's been a lag of 12 to 18 months between airline financials and your financials. So could you just help me understand why it is that you haven't increased your guidance on any metric, this quarter, please?

Secondly, on LEAP, just looking at the production rates that we've seen in Q1, am I correct in thinking that you're tracking ahead of your production targets for the year? Or am I overreading into one quarter's numbers? And then just finally on workscopes, can you just help us understand in absolute terms how to think about where workscopes are today? I mean this has been a driver of kind of upgrades to your expectations, I think, over at least the last 18 months, if not longer. But can you help us understand in absolute terms how high they are and what scope, therefore, this has to increase further from here or decrease, if these normalize, how should we think about that? I'm just struggling to size the absolute workscope effects.

Ian, this is Pascal. Okay. On your first question, as we only disclose the revenue for the first quarter as we do as well for the third quarter, you do not have -- the market has no reference for the EBIT at the end of March or the cash at the end of March. So this is why -- and given the uncertainty we have, this is why we decided just to reaffirm the current guidance and reaffirm as well the assumptions behind this guidance in terms of LEAP deliveries, spare parts revenue growth, mid-teens and services revenue growth about 20%. As we clearly said, Q1 is well ahead of these numbers. We are -- we strongly believe that at the end of June, we will be largely ahead of these numbers. So there is clearly an upside opportunity when we will publish our half year results in July that we will revise upwards at least the underlying assumptions behind the guidance. And then we'll see how it does translate in terms of numbers, in EBIT or in cash. So it's not the right timing, and we usually never upgrade our guidance or revise our guidance when we only publish a revenue number.

Ian, on LEAP production, I can say we have guided cautiously at 15%. And we are in line with our production plan. We are in line with our guidance, we will be -- we would be above 2,000 engines being produced this year. So this quarter, we are above 500. So we are in line. So it may well be that we do a little bit better. As again, we have guided cautiously at 15%.

And on the workscope?

Workscope, yes. We -- in fact, there's quite a high number of shop visits with a full scope of work addressing not only the core engine, as we say, the core engine being the hot section plus the HP compressor, but also the fan and the low-pressure turbine. So basically, what we see is that we have an unprecedented number, I mean, proportion of shop visits with a full scope of work. And so we should not expect the workscope to continue to increase. We should expect at least this year, let's say, we've reached this peak in terms of workscope, and we expect that to continue along the year.

If I put that in different words, if I split between shop visit growth, pricing and workscope, when you look to the plus 29% revenue growth in Q1, there was no -- at least for the CFM56, there was no shop visit growth Q1 -- over Q1 last year. Pricing effects, which we had in August last year was mid- to high single digit, meaning that the rest of the performance is coming from the workscope. So it gives you an order of magnitude how huge is the impact coming from the workscope.

Could I just ask a follow-up there, and I hope it's quick. I mean, in the scenario that fuel prices stay structurally elevated and so airlines are forced to reevaluate their maintenance plans going forward, is there any reason why that workscope cannot decline by a similar magnitude?

Again, as a matter of fact, we don't have any indication of that following our discussion with many airlines as of today, we don't see any indication of that. Again, I mean, I don't have a crystal ball. So I don't know what's going to happen in 2027 or so. But the fact is that airlines have learned from the past years that it's wise for them to make sure they have aircraft capacity. And this is why, again, we don't see any, let's say, airline envisioning accelerating pace of retirements or, let's say, today, trending towards telling us that they are going to review the workscope. We don't see that today.

And if we look at the CFM56 utilization pre and post the conflict, it has remained stable so far. So we have no indication at all that there will be a reduction in scope or number of shop visits for the months to come.

We are now going to proceed with our next question. And the questions come from the line of Chloe Lemarie from Jefferies.

Thank you Olivier and Pascal, for the detailed view on shop visit volume and workscope. If I could follow up actually on pricing and how this works from your end. So obviously, I guess, the list pricing increase, you probably already set them and kind of known to airlines. But in terms of the discounts that you grant them, when does this discussion happen? Have you already done that throughout the end of the year? Does that happen at the time of the shop visits? If you could help us understand how things could move versus your initial view on this? And my second question is on services. So we're obviously seeing a very, very strong quarter again. I'm assuming LEAP contracts as the main driver. How should we think about the margin evolution there given that you're now recording profitability on the 1B as well, please?

On pricing, we have not yet finalized and completed the discussion with GE for what we will do on the 1st of August. As you know, on our side, the intent is always to have a couple of points above inflation. So inflation may be the uncertain or the unknown parameter so far. So we will have to think twice about what we do the next 1st of August for the catalog list price for CFM56 spare part and for the LEAP as well. Do we grant discount today to airlines? First, we have not received any demand for that. So the discount that airlines are benefiting from are the one that are very usual depending on the size of their fleet, the importance they have for CFM. So there is nothing new, at least related to the Middle East conflict.

On services, we did enjoy a very strong 43% year-over-year growth, which is well above our underlying assumption of 20% for the full year. So it bodes well for the rest of the year. In terms of margin, we started to recognize LEAP-1A, LEAP RPFH margin last year. And our partner confirmed that they will introduce the Maverick HPT blades on the LEAP-1B during the summer months, June, July. So it will trigger the recognition of margin on those contracts. So you will expect, let's say, in H2 that Safran will recognize not only the 2026 LEAP-1B RPFH margin, but the past margin, which was unrecognized so far. So there will be, as we had last year, a one-off onetime effect lower than what we had on the LEAP-1A, but still a onetime effect coming from this new margin recognition on the LEAP RPFH contracts.

And that's on H2 that you recognized it versus H1 for the 1A last year, right?

Last year, it started in Q2. Yes, in Q2. We started to recognize margins in Q2.

It will not happen in H1.

We are now going to proceed with our next question. And the question comes from the line of Ken Herbert from RBC Capital Markets.

Two questions. First, investors are very focused today on the uncertainty into 2027. I can appreciate services this year, you've got relatively good visibility and conversations with airlines remain very constructive. But is there anything you can provide around visibility into 2027, either in terms of backlog on the services side, any other indicators there? Because I think the primary risk today that's getting reflected or priced into the stock isn't so much the 2026, but it's the potential downside or deceleration of growth in '27. So I know it's a ways out, but any comments on that would be appreciated. And then second, anything you can refine in terms of your assumptions on CFM56 retirements this year. You called out 1.5% of the fleet in the first quarter. Just remind us again the assumptions into the remainder of '26 and '27 on retirements on that engine?

Ken, yes, again, I'm not able to comment or speculate on how this crisis in the Gulf will unfold. And therefore, on 2027, what I can say is we've -- as explained, we've been positively surprised what we've seen and that started in H2 2025, indeed, and it continued in Q1 2026, and it will continue in Q2 2026. We've been positively surprised by the heavy workscope, which basically is the driver for us being significantly ahead of our planned trajectory. So we are ahead of plan.

And again, this basically fuel our confidence to meet this year, the high end of our target. But basically, this trajectory is the one that we had used for even our 2028 expectation. And so we were ahead of plan. We are ahead of plan. And so we have some room to absorb, let's say, some potential headwinds. And we have demonstrated in the past our ability to navigate through headwinds. That's what I can say. On CFM56 retirements, we firmly believe that we will be below 2% this year. And that we don't see today that the number of retirements should be significantly different than what we saw in 2025. In 2025, it was 143 aircraft, and it was 1.5% of the fleet. Q1 44. So we believe we should be around 1.5% to 2%.

And keep in mind that the narrow-body fleet is owned 50% by lessors. They can redeploy aircraft from one area to another, if needed. So we don't see the retirement to pick up even in '27.

Yes, I should have mentioned, I met last week also with the big lessor companies. And none of them today is seeing any impact on the dynamic of the leasing aircraft business, none of them. That's what I can say, factually.

Maybe last question.

We are now going to proceed with one last question. And the questions come from the line of Ross Law from Morgan Stanley.

So just one final one on workscope. And the question is really just around how much flexibility airlines actually have here. So if we obviously baseline the current activity, let's say, at 100, how far down, I guess, could this be dialed? And how much lead time do you actually need to provide you? So if I've got a shop visit in the future, at what point do I need to give you some sort of anticipation or request for that scope? And just lastly, would you agree that this is the one variable most at risk going forward over, let's say, volumes or price?

Flexibility on the workscope. The key point is basically what the airlines have to indicate to us when the engine is removed from the wing. What they have to indicate to us is basically do they want to focus on just the core engine or do they want to extend the workscope also to the fan and to the LP turbine. So this comes basically typically when the engine is removed from the wing. This is why we have some visibility, let's say, 2 or 3 months ahead of induction, I would say. The turnaround time today on CFM56, and this is related to some tension on parts and also on the global MRO capacity, which basically is in line with our anticipation in terms of volume of shop visit, but is also a constraint. We have a turnaround time around 100 days now on CFM56 typically. And so we -- this is why we have some visibility in what's going to happen in Q2 and Q3. No surprise on price. There should not be any surprise. We don't expect any surprise on the volume of shop visit and workscope, again, we have some anticipation. Does it answer your question?

Yes, I appreciate it.

If I may, because I understand that your concern, all of you is more '27 and beyond. We have updated our 2028 ambition for -- it was last Feb. As you know, we always guide cautiously. It was built with the appropriate buffer to overcome some risk. We have not factored in some opportunities as well. We do enjoy strong visibility. And frankly, we strongly believe in the durability of the earnings growth profile of the company. Now we have no crystal ball for the Middle East conflict, and we'll discuss that at the end of July when we can provide numbers for the end of April. But so far, so good. We are running ahead of plan. Thank you for your questions.

So that concludes the question-and-answer session. So I hand back to you for closing remarks. We have no further questions now. Please go ahead for the closing remarks. Thank you. This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines. Thank you.

Welcome to the Safran Full Year 2025 Results. At this time, I would like to turn the conference over to your host, Olivier Andries, Safran CEO; and Pascal Bantegnie, Group CFO. Mr. Andries, please go ahead.

Good morning, everyone. Thank you for joining us. Today, we will review our 2025 results, share our 2026 outlook and briefly walk you through some of our updated 2028 assumptions.

2025 was an outstanding year for Safran. Airlines carried more than 5 billion passengers and against that backdrop of strong demand and still low retirement levels, our aftermarket activities clearly outperformed expectation across both spare parts and services. We have also reached an all-time high in LEAP production, delivering more than 1,800 engines, up 28% versus 2024.

Defense and Space had a particularly strong year as well. In military propulsion, we accelerated M88 production, and we have secured a new Rafale export contract with the Indian Navy. In defense electronics, order intake reached a record level with 1.6 book-to-bill ratio, reflecting very strong market demand.

We have also signed several strategic partnerships, expanded capacity across multiple product lines, and we have achieved the first major export success for Safran.AI, which is a new name we have given to the Preligens company we had acquired 18 months ago. In Aircraft Interiors, [ recent ] seats, commercial wins and improved pricing conditions confirmed that the strategic shift presented at our last Capital Market Day is being executed.

Overall, we outperformed our initial expectation in 2025, delivering record financial results across all metrics. This, despite tariffs. Margin improved by 150 basis points and cash generation approached EUR 4 billion. Reflecting this performance, we are proposing a EUR 3.35 dividend per share, up 16% year-on-year.

Finally, on portfolio management, the integration of Collins actuation activities is progressing well. At the same time, we are moving ahead with the divestment of 2 non-core activities, the sale of Safran passenger innovation was completed last month, and the easier transaction where we are going to sell our share of the joint venture to our partner Embraer is expected to close by midyear.

Turning to Slide 4. Civil business highlights. We invest to secure [indiscernible] and you can see that clearly in our recent industrial announcement with the new LEAP-1A assembly line in Morocco. At the same time, we are continuing to expand our MRO footprint following the groundbreaking of our LEAP MRO shop in Morocco. We have recently inaugurated Safran's largest LEAP engine MRO center worldwide in India.

We are also pleased to mark another important milestone in CFM's long-standing partnership with Ryanair. We announced that 3 days ago, of a new material service agreement that covers the entire fleet of around 2,000 engines, CFM56 and LEAP, and that will support 2 new Ryanair future maintenance, repair and overall shops that they have decided to launch in Europe. This is a compelling illustration of our open MRO market strategy we presented at our last Capital Market Day.

Commercial momentum remains very strong. LEAP continues to be the engine of choice, as illustrated by the recent agreement with Pegasus in Turkey, for 300 LEAP-1B engines, which also includes long-term maintenance services.

Finally, at the Dubai Airshow, Riyadh Air ordered 120 LEAP-1A engines to launch its FA21 neo fleet and selected our wheels and electric carbon brakes for its 787 fleet, ultimately more than 70 aircraft. We have also announced a joint cooperation with Emirates to manufacture and assemble seats in Dubai. And Safran Seats was selected to supply new business and economy class seats to retrofit more than 100 additional aircraft across both the 777 and A380 fleets.

Turning to Slide 5. Momentum remains extraordinary strong in defense. We announced the groundbreaking of the first M88 MRO shop outside of France in Hyderabad, India. At the same time, as we continue to ramp up M88 production. We have also announced a significant investment at our Le Creusot site in France, adding new production lines for complex rotating parts for the M88 engine. We have also signed an agreement with Bharat Electronics in India to create a joint venture to manufacture our HAMMER guided bombs.

Overall, in 2025, we have approved around EUR 1.4 billion of industrial investment, mainly to expand massively capacity across both Civil Aerospace and Defense. With that, I will now hand over to Pascal to walk you through the 2025 results in more detail.

Thank you, Olivier. Good morning, everyone. Today, I'll walk you through the adjusted accounts, and you'll find a bridge to the consolidated statements in the appendix. Let's start with FX trends, which are shown on Slide 7. In 2025, our trading floor faced a really volatile environment. The dollar weakened against the euro, the whole year, which wasn't easy to manage. Still, our team did a great job protecting the portfolio, and we managed not to trigger any KO barriers.

That said, at the end of Jan, the euro-dollar shot up past 120, and that caused us to lose less than $1 billion in hedging volume, so less than 2% of the whole portfolio. We reinstated the same hedge volume afterwards so that did not impact our goal of reaching $112 in 2026. Based on the actual figures for 2025 and to reflect our revenue profile now that we include the actuation and flight control business, we have increased our expected exposure to $16 billion in 2026 and $17 billion from 2027 onwards.

As always, these number should not be seen as a medium-term business outlook. We are confirming the $112 hedge rate for 2026, and we'll do our best to secure that rate for '27 and '28. We've also started hedging for 2029. And as a first indication, we are targeting a hedge rate between $1.12 and $1.14 based on current market conditions.

Now if we look at Slide 8, our 2025 revenue came in at EUR 31.3 billion. It's EUR 4 billion higher than last year, which is up 14.7%. That's actually 14.8% organic growth, and we saw steady growth quarter-after-quarter throughout the year. OE sales went up by 11.3%, thanks to both higher volumes and better pricing. Services revenue was up 18%, showing just how strong airline demand was for MRO and spare parts.

Changes in scope added a positive 3%, mainly because we brought in the actuation and flight control business, but the boost from this acquisition was completely offset by a weaker dollar, which dragged things down by 3.2%. Our recurring operating income reached EUR 5.2 billion, so that's more than EUR 1 billion higher than last year. The operating margin was also up by 150 basis points, hitting 16.6% of sales.

The solid performance was mainly driven by strong results in the aftermarket, volume growth and our continued focus on operational excellence and keeping Safran competitive even in such a sweet environment.

If we move to Slide 9, you'll see a summary of the income statement. Apart from sales and EBIT, which I'll get into in more detail later on, let's look at some of the other key P&L items. We had one-off items totaling EUR 479 million, which is a pretty big number. So most of that is in cash. About half comes from the EUR 244 million pretax capital loss tied to the divestment of Safran Passenger Innovations.

There's also EUR 178 million in impairment charges on some programs and then a few other cash costs like restructuring and M&A expenses, especially from the actuation and flight control acquisition.

Looking at financial income, our returns on cash investments actually topped our cost of debt, bringing in a net EUR 116 million in financial interest. Our apparent tax rate was 32.3%, which was heavily influenced by the French corporate surtax, EUR 370 million, which cut around EUR 0.90 per share of our EPS. All in all, net income attributable to the parent was EUR 3.2 billion, up 3% year-over-year, and that works out to EUR 7.6 per share.

Let's dive into our businesses, starting with Slide 10 on Propulsion. Revenue here reached EUR 15.7 billion, which is a 17.6% organic increase. When we look at Propulsion services, revenue was up 21% organically. For the Civil aftermarket, spare parts sales climbed 18%, mainly thanks to the CFM56. That drove more shop visits, mid-single-digit growth and a higher proportion of full work scope shop visits.

High thrust engines also did well, helped by growing wide-body traffic. LEAP engines contributed too, with third-party shop visits making up about 15% of total shop visits in 2025. We saw a 30% jump in services overall, mostly because LEAP aftermarket activities expanded under rate per flight hour contracts. Both helicopter turbines and military engines also helped drive propulsion services growth.

On the OE side, revenue grew by 12% organically. We delivered a record 1,802 LEAP engines. So that's 28% growth compared to 2024 and well above our initial target. In Q4 alone, we delivered 562 engines, up 49% from Q4 last year. So we have surpassed 500 deliveries for 2 straight quarters now, which looks good for our 2026 goals. While M88 fighter engine deliveries were down year-over-year, production actually ramped up a lot in 2025, just as we had planned to keep up with a strong backlog, especially for export customers.

Recurring operating income was EUR 3.6 billion, 28% organic growth. The operating margin stood at 23% of revenue, up 2.4 points, which is a strong result and almost aligned with our initial guidance earlier in the year, even with some lingering tariff impact. This improvement was mainly driven by strong civil aftermarket activity and really robust performance from CFM56, both in volume and work scope. The LEAP program also contributed with us starting to recognize profits on LEAP-1A RPFH contract and a still high ratio of spare engines.

Let's now move to Slide 11 and talk about Equipment & Defense. Sales here is EUR 12.3 billion, which is up 11% organically and 16% overall. That includes about EUR 618 million from the Collins actuation and flight control business, which we consolidated for 5 months in 2025. OE revenue was up 11% organically with growth pretty much across the board. The strong performance in 2025 was mainly driven by higher volumes in defense, especially for things like the HAMMER-guided bomb, missile seekers and navigation and timing systems.

We also saw good momentum in primary electrical system and wiring as well as nacelles and landing gears, especially for the A320. Aftermarket services benefited from the uptick in air traffic, going up by 12% organically with growth everywhere, but especially in landing gears, nacelles and evacuation slide systems. Recurring operating income came in at EUR 1.6 billion, and our operating margin improved by 50 basis points or 90 basis points if you exclude Collins, showing that we are making steady progress toward our 15% margin goal for 2028.

The strong performance was driven by a favorable business mix and our efforts to stay competitive. OE volume growth was especially robust for narrow-body platforms as well as in avionics, defense and space. Services also did well with strong demand for carbon brakes, landing gear, nacelles and aero systems.

One quick side note. As of Jan 1, 2026, Safran Ventilation System will move from Aircraft Interiors to Equipment & Defense, so we can create more synergies with our power electrical business. SVS is a profitable business. It brings in a double-digit operating margin with revenue slightly under EUR 200 million.

Finally, looking at Slide 12. Aircraft Interiors continued to make real progress on its turnaround. Sales reached EUR 3.3 billion, including Safran Passenger Innovations, our IFE business, which is a 14% increase and actually bring us back to 2019 levels. OE sales went up by 15%, mostly thanks to higher deliveries in cabin, especially galleys, inserts and water and waste system for A320 and 737.

Revenue also got a boost from our IFE activity as well as from higher volumes and better pricing on business class seats. Services were up 13%, mainly on the back of demand for Cabin spare parts, especially from customers in the Middle East, Asia and the Americas as well as from SVS, which I mentioned earlier, will transfer over to Equipment and Defense in 2026.

Seats also did well, both with spare parts and services and passenger innovations helped out on spare parts and repairs. Recurring operating income crossed EUR 100 million with operating margin up 2.3 points. Cabin kept capitalizing on shifting production to best cost countries like Mexico, the Czech Republic and Tunisia and also on renegotiating prices for the lower-margin programs.

IFE activities helped lift profits overall and seats kept improving, thanks to ongoing work on pricing and operational excellence. The strong performance really shows our focus on pass-through and price increases, which helped offset the impact of tariff. The very good news is that Aircraft Interiors has now reached cash breakeven with a noticeable EUR 140 million improvement just over last year.

Now if we look at Slide 13, we generated EUR 3.9 billion in free cash flow, which is up 23%. That gives us an EBIT to cash conversion ratio of 75%. The strong result came from a 17% increase in EBITDA, so higher earnings less an impact from one-off items, along with a positive impact from working capital changes. For the first time since COVID, we managed to reduce inventory DSOs by 9 days.

Also, we did increase inventories in dollar to support the ramp-up that was more than made up for by a strong inflow of advanced payments, which were higher than last year, especially thanks to the Rafale orders and other defense programs. We also paid an extra EUR 1 billion in income tax, reflecting our higher taxable income and including the EUR 377 million French corporate surtax.

At the same time, we're still investing to support our growth and prepare for the future. Tangible CapEx was just under EUR 1.2 billion, focusing mainly on expanding engine MRO capacity and increasing production, especially for landing gears, smart weapons and resilient P&T systems.

On Slide 14, you'll see that Safran ended 2025 net cash positive at pretty much exactly the same level as in 2024, right down to the nearest million. That's actually just a coincidence. This puts us at about 0.3x EBITDA. In line with the capital allocation framework highlighted at our last Capital Market Day, we made organic investment to sustain our growth and prepare for the future for about EUR 1.8 billion in R&D and CapEx as well as inorganic investment for EUR 1.6 billion, the main cash outflow this year being the Collins flight control and actuation system.

We also returned EUR 2.6 billion to shareholders with the balance between dividends and buybacks. We also redeemed our OCEANE 2028 bonds early using shares repurchased in 2023 and 2024, which helped cut out on net debt by EUR 0.7 billion. Bottom line, Safran is still completely deleveraged, and we are in a really solid position with a strong balance sheet.

For 2025, we are proposing a dividend of EUR 3.35 per share. That's a 16% increase compared to last year, and it does represent a 40% payout based on the adjusted net income, mainly restated from the capital loss from the SPI divestment. This year, as part of the EUR 5 billion share buyback program, we also bought back 5.1 million shares for cancellation, which cost a total EUR 1.3 billion. In December, we went ahead and canceled all shares that were being held for that purpose, so 5.3 million shares in total, resulting in capital ownership accretion of 1.6%.

Also, between '24 and '25, we canceled 8.9 million shares, which amounted to EUR 2.1 billion and led to a 2.13% capital ownership accretion. Looking ahead to 2026, we'll keep moving forward with our share buyback program. The first tranche actually started early in mid-Jan.

Just before we wrap up this section, let's quickly look at Slide 16. It's a quick reminder of the goals we set for 2025 back in December '21. I'm happy to say that we met or even exceeded all our key targets for 2025, which really shows our commitment to operational excellence and our focus on delivering strong 2-digit profitable growth.

Over this period, both our revenue and free cash flow more than doubled, well ahead of our original outlook and EBIT grew even faster, nearly tripling what -- starting from a 10.2% operating margin in 2020 and landing at 16.6% in 2025, close to the middle of our 16% to 18% target. We achieved all this despite facing plenty of challenges, things like inflation, supply chain disruptions, tariff and even the French corporate surtax. So it really highlights how robust our business model is.

Now let's take a look at our outlook for 2026 and our ambitions for 2028 to see what's coming next. Olivier, over to you.

Thank you, Pascal. I'm now turning to Slide 18 and our 2026 outlook. We expect to continue the LEAP delivery ramp-up with a further 15% increase. Operating in a still favorable environment, Civil aftermarket should continue to expand with spare parts up mid-teens and services up around 20%. In particular, Q1 should see a strong start in spare parts, helped by an easier comparison base. As a reminder, this outlook excludes Safran Passenger Innovation, which was divested on January 30.

In more detail, for 2026, Safran expects revenue up low to mid-teens, recurring operating income between EUR 6.1 billion and EUR 6.2 billion and free cash flow between EUR 4.4 billion and EUR 4.6 billion, including an estimated EUR 470 million impact from the French corporate surtax.

Let me now revisit some of the assumptions we shared at our Capital Market Day '24. Starting with LEAP OE on Slide 19. Our Q3 and Q4 delivery performance, more than 500 engines per quarter reinforces our confidence in delivering another 15% increase in 2026 and in reaching around 2,600 engines by 2028. This ramp-up is supported by continued supply chain improvements and the ongoing execution of our resiliency plan. On the performance side, LEAP continues to mature faster than the CFM56. For LEAP-1A, more than 1,450 kits of the new HPT blade have now been produced. This upgrade can more than double time-on-wing in harsh environment, bringing shop visit intervals in line with the CFM56.

In parallel, around half of the LEAP-1A fleet is now equipped with the reverse bleed system highlighted at the Capital Market Day 2024, which reduces on-wing fuel nozzle maintenance. And for LEAP-1B, both the reverse bleed system and the HPT blade upgrades are expected to be certified in H1 2026 delivering the same durability improvements to the 737 MAX operators.

Continuing with civil aftermarket on Slide 20. We are revising our CFM56 assumptions upward. In line with our partners' comments last July, sustained maintenance, repair and overhaul demand from operators and as a result, very low retirement levels supports a stronger outlook for CFM56 shop visits through 2028. We now expect a plateau of around 2,300 to 2,400 shop visits per year from 2025 to 2028.

Compared with our Capital Market Day '24 assumptions, this represents more than 750 additional shop visits over the '25, '28 period. Beyond that, while shop visits are expected to start declining from 2029, we continue to see pricing and work scopes supporting CFM56 revenues through the end of the decade. On LEAP, our assumptions remain largely unchanged. We continue to see strong growth in shop visits with work scopes expanding. And we still expect the share of external shop visits to double from around 15% in 2025 to about 30% by 2030.

Moving to Slide 21. The updated assumptions we've just discussed translates into around 15% additional revenue over the period compared with Capital Markets Day '24. As a result, the revenue annual growth between '24 and '25 is now expected to be in the low teens, up from mid- to high single digits at the time of our Capital Market Day '24. Profit growth is expected to follow a similar trajectory.

Turning to margin at completion across the LEAP Red per Flight Hour portfolio. Progress has accelerated since our last update. Compared with CMD '24, we have delivered a further 2 points improvement, bringing the total margin increase to around 7 points between 2021 and 2025. This reflects both more favorable terms on new contracts and our continued focus on optimizing existing agreements whenever possible. And just as a reminder, the majority of the profit from the Red per Flight Hour contract portfolio will be recognized after 2030.

As a result, on Slide 22, you can see that we are raising our 2028 targets. On revenue, both additional aftermarket activities and the consolidation of actuation support higher growth. We are, therefore, increasing our outlook with 2024 to 2028 revenue compared annual growth now expected to be around 10%. On EBIT, we are raising our 2028 guidance by EUR 1 billion. In propulsion, we are increasing our margin target from the low 20s to 22% to 24% despite tariff and an accelerated OE ramp-up.

In Equipment & Defense, we confirm a mid-teens margin in 2028, now including the actuation and flight control activities. In Aircraft Interiors, we now target a high single-digit margin in 2028, which only reflects the divestment of Passenger Innovation and the transfer of Safran Ventilation Systems from Aircraft Interiors to Equipment & Defense. On free cash flow, we now expect an additional EUR 4 billion to EUR 6 billion over '24 to 2028. Despite the higher impact of 2 years of French corporate surtax around EUR 850 million compared to roughly EUR 500 million at Capital Market Day '24 and despite tariff.

To conclude, let me briefly highlight a few key priorities. First, we remain fully focused on meeting customer demand while managing the OE ramp-up. We will continue to improve competitiveness and strengthen our industrial resiliency. We will also keep customers flying by providing spare engines, spare parts and by expanding our internal maintenance repair and overhaul network.

In parallel, we expect to complete several divestments in 2026 in line with our portfolio pruning strategy. We will pursue our ambitious research and technology road map to prepare for the next single-aisle generation and to drive decarbonization. And finally, we remain firmly focused on our growth trajectory with the objective of increasing operating profit, expanding margin, strengthening cash generation. Thank you for your attention. We are now happy to take your questions.

[Operator Instructions] We will now take our first question, and this is from Christophe Menard from Deutsche Bank.

Congratulations for the results. I had 3 questions. The first one on the cash conversion in 2028. And this is over clearly the '24 to '28 period, the 70% conversion. If I do a back of the envelope calculation, I'm getting the sense that you're probably targeting more conversion of 65% in later years. So is there a phasing on your cash? And is it linked to, for instance, prepayment outflows that we may have in the coming years? I will follow up with the next 2 questions afterwards, if you want.

So we upgraded our 2024-2028 cumulative free cash flow guidance to EUR 21 billion. As you rightly said, it could be an EBIT to cash conversion slightly below 70% in the outer years. What I could say is that we have not included yet any impact for 2027 and 2028 from a potential continuation of the French corporate sale tax. It could be EUR 0.5 billion for each year. It's not included in our guidance. At the same time, we have not included any new Rafale advance payments that may come from new contracts, and you can see quite a large one coming in from Asia.

So the free cash flow upgrade guidance is coming from upward revision from aftermarket, the upward revision of LEAP engines deliveries as well. When you try to figure out what your EBIT to free cash flow conversion will be, it's all about the working capital expectations. Here, we have put some decrease in our inventory DSOs, as I said during the call, starting in 2025, continuing in 2026 and going forward. Should we deliver more equipment, LEAP or other stuff, then we could be able to have more favorable working cap changes. So we'll see with time. And we have included advanced payments, which are already booked in terms of orders, notably on Rafale.

Thank you very much for this. So I understand there is a degree of conservatism as well on this. The 2 other questions. I think you said on the call earlier that you were getting ready for rate 75. You mentioned Morocco. This is all for 2027? Or can you share the time line for rate 75 on your [ end for your ] and the capacity you're putting online. And one quick question on the margin '26 per division. My understanding from what we're seeing on your guidance propulsion maybe -- can we assume that propulsion is more at the high end of the range you gave on your Slide 22?

Christophe, I'm going to answer on rate 75. I'm just saying that we take decision to invest to get prepared for rate 75. It's not up to me to comment when Airbus is going to be ready to reach rate 75 full year. But basically, what I'm telling you is that we are investing for that because we acknowledge that the demand is there for some time. So it's worth investing. That's why we have announced our LEAP assembly line in Morocco. It will help us meet rate 75. This assembly line is going to be ready by '28. And you may see in the future, we may announce future investment also in line with our objective is to meet rate 75 on other equipment as well. So we are just getting prepared. We have to be realistic. It does not happen overnight, but we are getting prepared. We are investing.

On your third question about margin per division, when you compute our guidance, you'll see that we continue to expect some margin expansion at group level. We also expect margin expansion at all 3 branches, including propulsion with a starting point, which is 23%. By the way, it's a 2.4% improvement from last year. And a year ago, I told you that we were about to grow our margin by 250 basis points, which we almost did despite tariff.

So right, in 2026, we expect to continue to grow our margin in propulsion. The same in Equipment & Defense. It will be a slight improvement in Equipment & Defense because we will have a full year impact of the Collins actuation and Flight Control business, which, as you know, for the time being, is dilutive to our margin. And in Aircraft Interiors, despite the divestment of SPI, Safran Passenger Innovations and the transfer of a profitable business from Aircraft Interiors to Equipment & Defense.

And despite that, we will see a decrease in revenues, we still expect to maintain or slightly increase our operating margin in Aircraft Interiors. So all in all, at group level and all branches, we should see some margin expansion in 2026.

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

I've got a couple, if I may. Firstly, just on your free cash flow guidance. I mean, given the strength of the upgrade, sort of 30% on previous, can you see yourself accelerating the existing buyback? And just help us think through how you're thinking about capital allocation with that additional cash? And just secondly, in terms of the LEAP orders that you're signing today, can you just help us have some color on how many are going at the moment proportionately to long-term service agreement contracts versus T&M? That would be really helpful.

I'll take the first question on the free cash flow upgrade. On capital allocation, there is no need to change our philosophy or policy today because we have a 40% dividend policy -- sorry, 40% payout dividend policy that will remain unchanged for the next years. And as you know, we are executing a EUR 5 billion share buyback program. In 2025, we only executed 1/4 of that. So I would expect to execute another quarter of that program in 2026. We can always decide to speed up or slow down the execution of such a program. But as long as we still have the program into force, there is no reason to change that.

Hello, Sam. On LEAP, especially on support and services contract, we see now a good mix of what we call rate per flight driver contracts and material service agreement where we just provide spare parts and repair solution. And by the way, as I mentioned, the announcement we made 3 days ago with Ryanair is a perfect illustration of that. Ryanair has decided to invest in their own MRO shop, and we have decided to support them to do so in their own ramp-up.

And also, we have concluded an agreement whereby for all this period, 15 years or more, we are going to provide spare parts and repair solution to them at negotiated conditions. So you see this is really an illustration of our long-term strategy where we see, let's say, a 50-50 share between flight contracts and, let's say, typical time and material or MSA contracts.

It's interesting because in the past, usually only the legacy airlines have their own MRO shop, the Air France-KLM, the Lufthansa, the Delta Airlines. And we see now with this first mover, Ryanair has been -- is the first mover. We see a low-cost carrier investing in their own MRO shop, that's interesting. And for me, this is a trend, an interesting trend. I'm not saying that all of them will do that, but I'm sure we'll see more airlines coming into that kind of play.

I mean just a very quick follow-on from that, if I may. If you in terms of your MRO capacity expansion ambitions on LEAP, does that change at all with that kind of dynamic? And I guess, as a follow-on implications for propulsion margin over the midterm.

No. We -- there is no change. The compass is still the same, meaning that together between both partners, GE and us, basically, we aim at basically having internal LEAP shop visit representing about 50% of the global work. And we incentivize, we make sure basically and we -- yes, we want to favor those airlines and third parties that are jumping in the LEAP MRO.

We want it to be an open MRO market. So external shop visits should long term represent 50% of the overall. So we are executing our MRO plan to increase capacity. As we have already said, it's about a EUR 1 billion investment just for maintenance shop, excluding, by the way, repair shop. This is only engine maintenance shop, EUR 1 billion. And basically, the plan is executed as planned. Morocco, India, Mexico, further investment in France and Belgium as well. And I know our partner is on the same path.

Okay. So no change to previous guidance on that.

We'll now take the next question. This is from Milene Kerner from Barclays.

I have 2, please. Olivier, you mentioned that 1,450 durability kits have been produced on the LEAP-1A so far. How do you expect a proportion of Light scope event to involve as the durability kit continues to grow across the rest of your LEAP 1A fleet and then the LEAP-1B. And what does that mean for the medium-term free cash flow trajectory? And then my second question is, as you're exiting now noncore cabin and interior and you're adding targeted defense assets, how should we think about your portfolio in the long term in terms of the mix between commercial and defense?

Milene, I'm not sure I got fully your question on the blades. The fact that part of the fleet is already equipped with those blades basically will just increase the intervals between shop visits. So this will push out for those LEAP engines that are equipped with the new blades, the shop visits are going to be pushed out, which in rate per flight hour contract is a positive for us, in fact, because it increases the maturity of the engines.

So when are we going to have a full fleet of LEAP-1A equipped? I don't have a precise answer to that question. We'll start with the LEAP-1B as well. What are the consequences in terms of free cash flow? To be very clear, it's a positive as well because as today, most of our contracts are RPFH contract. Basically, any shop visit, any early shop visit is a spend for us. So maybe, Pascal, you can add comment on that?

Yes, I'll give it a try. With time, what matters is the mix between what we call quick turn and full performance restoration shop visit. And the more new HPC blades we have in the fleet, the less quick turns we need in the maintenance shops, meaning that the mix will evolve in a favorable manner in the years to come, which will benefit both EBIT and free cash flow going forward. But it is already in the plan and in our 2028 guidance.

On portfolio management, without entering into detail, I'll just give a tendency that should not surprise you. The tendency is that our Aircraft Interiors exposure should, with time, basically decrease as we are still executing our plan to divest some noncore activities inherited from the ex Zodiac acquisition and a significant part of them being in the Aircraft Interiors activity.

So our aircraft interior exposure should reduce should be reduced. And I would say, as we stand ready to seize opportunities and as defense is a strong booster for everybody, if there are some, let's say, opportunities that are just passing by, that could be of interest for us in terms of technology because it's a good complement to what we do. And if it makes sense economically, we are ready and we can be agile and we are ready to jump in. So I would say in terms of tendency, directionally, our defense activity should grow and our Aircraft Interiors activity should be reduced long term.

We'll now take the next question. This is from Benjamin Heelan, Bank of America.

And I wanted to ask my first question on supply chain. We haven't actually touched on it a lot on this call yet. Can you talk about what you're seeing across the business? What are you seeing in LEAP? What are you seeing in the equipment business? Where are the challenges? Where are things improving? If you could just provide a bit of an overview in terms of what you're seeing from a supply chain situation, that would be great.

Second question is on the propulsion margin, sort of '22 to '24. Could you provide a couple of swing factors within that, right? What's going to cause you to get to '22? What's going to cause you to get to '24? And how should we be thinking about R&D within that as well? I keen to hear that.

And then thirdly for me, interesting on the presentation at the back, you've obviously given us guidance on the number of CFM56 shop visits, but you haven't given us any numbers yet on the LEAP. Could you provide a bit of a range in terms of heavy work scopes for LEAP that you're expecting in 2030. And then associated with that, obviously, you talked about the margin at completion of the LEAP improving 7 percentage points. When should we be assuming that the margin that you're booking on LEAP shop visits is going to be comparable to CFM56? How should we think about that?

Ben, many questions. I'll take the supply chain one. Just to say, directionally, we see an improvement of the supply chain. I'm not telling you this is blue sky yet. But we've seen in the course of 2025, let's say, noticeable improvements all across the board, not only on the engine side, but also let's say, the equipment side as well. What are the remaining challenges? They are mostly always more or less the same. It's upstream, I would say. It's about raw materials. It's about forging and casting.

And by the way, this is why we have taken the decision at Safran to unlock, let's say, the situation on forging and casting. This is why we've decided to invest in our own casting facility, turbine blade casting facility of our own. We have decided to invest and we are investing in forging. We are the only -- I'm not sure that whether you know that, but we are the only engine manufacturer in the world having forging capacity internally. We are the only one. And we have decided to invest more in forging as well. So we -- basically, we have a strategy to, let's say, unlock the situation and to, how could I say, decrease our dependency or exposure to some big guys that could potentially have a [indiscernible] strategy. Then I would say the one that we are looking at very carefully and for which we have a resiliency plan is relating to rare earth, which is typically one of the areas that has been weaponized by some countries in the frame of those geopolitical tensions.

And so on rare earth Basically, we are building stocks. We are also working on some alternative supply chains. I'm not saying that we are going to do that ourselves because this is not it's not our own activity, but we want to make sure that we can find alternative. Again, our compass is not only to continue to work on our competitiveness, but it's also to continue to work on our resiliency.

Okay. On your second question about the main drivers for profit margin expansion or decrease in propulsion. So there are many drivers. First, on civil engines, it's all about the number of installed engines and the ramp-up that we have in front of us. You know that the more installed engines we deliver, we have a loss per engine, even though it is reducing per unit, but still it is a loss. Then the spare engines, what we are looking at is the number of spare engines or the ratio between spare engines and the total number of engines being delivered.

Today, it's pretty high at low double digits, and it tends towards 10%, 12% for the coming years. So it will be a negative if it goes down. Then it's all about aftermarket. As long as we continue to enjoy from very strong spare part momentum, not only on CFM56, but on the LEAP and IRS engines, it will be a positive. Then it's all about our policy to release profit margin on the LEAP RPFH contracts. As you know, we started to release margin on LEAP-1A RPFH contracts last year. As soon as we introduce the LEAP-1B new HPT blade in H1 this year, we will start to release margin on LEAP-1B contracts as well. As you know, it is capped by construction. We don't intend to release much of the margin before 2030. The good news, as Olivier highlighted in his concluding remarks is that the margin or the expected margin at completion of our book has increased by 7 points from 2021 to 2025.

So we have more potential in terms of profit into our books that will be mostly released after 2030. So the name of the game, as you know, for us, is to avoid any dip in margin anytime in a year. This is clearly the target we have together with Olivier. And then one item which is not under our control is tariff. Tariff is given today. We know that we are in a fluid environment to say the least. So that may change one way or the other. Then on your sub question, I'm not sure I got all, but I'll try to answer it.

I guess it was related to the long-term propulsion margin. And at some point in time, we are expecting a sunset of our CFM56 spare part business, likely starting in 2029 or 2030. We will have to start to release more profits coming from the LEAP RPFH contracts, but also from the LEAP spare parts activity as well. Olivier commented that we are diverting part of the customers from RPFH to time and material, more conventional spare part sales. Again, the name of the game is to avoid any dip in margin. So today, we have a fixed formula to release our profit. By the way, we have made little progress. I would say the progress rate of our LEAP RPFH contract is very low. It's about 5% today. So the potential is huge in terms of dollar profit for the next decade. So I'm not worried that we will be able to have no dilutive impact in the years to come. I hope it answers your question, Ben. Otherwise, please.

Yes. No, it does.

We now take our next question. This is from Chloe Lemarie from Jefferies.

I have 2, if I may. The first 1 is coming back on the 7 points of improvement in the lead portfolio margin I think, Olivier, you said that the assumption from the CMD were actually largely unchanged in LEAP. So should we assume that it's because that change in portfolio margin will mainly flow through the P&L beyond 2028. The second 1 is on the hedge book. In Q1 last year, Pascal, you commented that you were working on firming up the rate to avoid the knockout activation. Could you maybe share how this has evolved and if we should consider that 2028 is now almost fully firmed up. And on the comments you made on 2029. If spot remains where it currently is, should you be able to build a full coverage for that year within 1.12 to 1.14. Is that how we should understand the comments you made?

Yes, as we said, between '21 and '25, we've been able to improve our expected margin at completion of our RPFH book by 7 points. Most of the profits will be released in the next decade. So it has no impact on the short-term '25, '26, '27 profit recognition methodology as we do cap our profit release by construction. So no change. But what I'm saying is that the overall expected profits within our books is even bigger than what it was a year ago.

On hedging, FX hedging, as I say, we had faced a weakening of the dollar against the euro across the year. It now stands at $1.18, $1.19 per euro. all our KO barriers are within 121 to 130 or so. So if there is any peak in euro-dollar at any time as we did face at the end of Jan, then there is a risk that we may lose part of our hedging volume.

Nevertheless, I'm really confident that we can deliver $112 in '26, in '27 and '28. For 2029, we are starting to hedge our year at $17 billion exposure. Given the current market conditions, the 1.12, $1.14 range seems achievable. Now the risk is that should the euro-dollar moves up again and stands at 125 or 130, there is no magic in what we do with our trading room. It means that with time, we'll see the hedge rate going up and converge to the spot rate. But there is a lag to that phenomenon. So as long as it stays within the current range, below 120, I'm comfortable we will maintain 112 up to 2028.

We'll now move to the next question. This is from Olivier Brochet from Rothschild.

Two questions from my side, please. Could you elaborate a little bit on the growth that you've experienced in defense in 2025. If you could share numbers on that in equipment. And the second 1 is on wide-body programs. Do you see some risk on volumes there coming from seats or the rest of the cabin in terms of your capacity and the ramp-up point of view, please?

Olivier, Growth in defense, the dynamic has been extremely strong in some key munitions especially we have what we call a guided bomb, which is named Hanwha, which is extremely successful in export markets and is highly demanded at the moment. You may have seen that -- I can confirm you may have seen yesterday that Norway has decided to order hundreds of them, basically that they want to deliver to Ukraine. So these are what we are talking about. So are guided weapons that we manufacture.

We have multiplied by 4 our production in the last 3 years. And I believe we will continue to scale up. Another example is our inertial navigation systems where that do equate mainly military equipment, aircraft, helicopters, tanks, ships, submarines, but also artillery.

And here as well, the demand is extremely strong, and we believe we are going to multiply our production by probably 3 to 4 as well. Last example I'd like to mention is missile propulsion. We -- we are a missile propulsion designer and producer. And I think we are the only one in Europe to do what we call turbo reactor for missile. We are equipping the Scalp/Storm Shadow cruise missile or the exocet missile, but we are also equipping missiles that are designed and produced by Saab in Sweden or Kongsberg in Norway. And here as well, the demand has grown very massively. So we've just -- we have decided 18 months ago to invest that's EUR 100 million in our facility to multiply our production by 5. So those are examples of the very significant scale-up that we see in defense. On top of that, the demand is high also on optronics.

We are a player in portable optronics or onboarded optronics for UAVs, for helicopters, for maritime patrol aircraft. And here as well, the demand is very strong. So all in all, on Defense Electronics it's 1.6 book-to-bill ratio, and I can promise that the book-to-bill ratio in 2026 will be far above 1 again. On seats and widebody, indeed, the demand for -- especially business class seats is extremely strong. And I think it's unprecedented again. And interestingly, it's not only a demand for line fit aircraft, but it's also a strong demand for retrofit aircraft.

So basically, we've delivered this year, I think if I remember well, it's 2,600 business class seats, significantly above what we've delivered last year. And the growth is very, very, very strong. So we are going to invest to increase our capacity in business class seats. And this is what we are talking about with Emirates. We are going to build a new assembly line in Dubai for that because -- just to meet the demand. Now we still face -- I mean, we have significantly improved our development process. So today, we deliver on time. We deliver on quality to the airframers and to the airlines. But we are still facing rising expectation on the certification side. We are experiencing also a tighter interpretation of pre-existing rules. So all in all, this -- and this is an industry-wide situation. It's not specific to Safran. But the consequence of that is that, yes, indeed, seats could potentially be a pacing item for the ramp-up of the wide-body aircraft just because of, let's say, the tighter tightening of interpretation of pre-existing certification rules. Is it clear?

Extremely.

We will now take the next question. This is from Adrien Rabier from Bernstein.

Just 1 follow-up, if you may, on the CFM56, please. Could you explain a little bit on what you expect to happen after 2028, the trajectory for shop visits? And then you mentioned pricing and scope of potentially in time. So any detail you can provide would be very helpful.

Well, I know that the dynamic has evolved in the latter years because, as you know, we were expecting, let's say, the start of what we call the sunset earlier than what we do see today. And this is a consequence of the so-called flying more for longer situation. So it's a dynamic situation. Today, we are very, very confident that the volume of shop visit will remain at this peak of 2,300, 2,400 up to 2028. So how will the dynamic unfold after that is still to be seen. So this is why basically we take a cautious approach there. It's going to be, let's say, it's going to be a combination of how quickly Airbus and Boeing are going to reach their peak rate for, respectively, the A320s and the 737.

And they are on a trajectory to, let's say, to go up by then. It's going also to be -- one of the other elements in play is going to be the level of aircraft retirement. And I have to say, in 2025, there has been a very low level of aircraft retirement. We've been -- it's been about 150 aircraft, so more or less the same as in 2024, no change. And therefore, this is not feeling any used part market. So really, it's going to be a combination of traffic growth.

The traffic growth in 2025 for the narrowbody has been more than 5% compared to 2024. So is it going to continue at this pace? So this is one entrant. The other entrant is going to be how many new gen aircraft are going to get into the fleet. So how fast are Airbus and Boeing going to be able to reach their peak rate. And the third element is going to be the level of aircraft retirement. So it may well continue for 1 or 2 additional years. It's too early to say. It's really today a question of how this dynamic will unfold.

And the next question is from Ross Law Morgan Stanley.

So the first one is just a follow-up on portfolio. You've previously spoken about an ambition to divest about 30% of the legacy Zodiac assets. Can you maybe just give us a progress update here? And how much of this target is covered by the recent deals? And when should we expect you to achieve this target? Second question is just a quick one on your 2026 FX assumption for the spot rate at $1.15.

And it's been tracking around the 118, 119 mark year-to-date and at present. I'm just wondering why you are assuming $115 and not higher? And then lastly, just on the media article yesterday suggesting you're working on advanced ducted engine as a possible more traditional alternative to RISE for next-gen narrow-body. Are you able to confirm this? And also what it means for RISE and also your R&D outlook?

On portfolio, how do we progress? Let's put it that way. Between Safran Passenger Innovation and EasyAir, we are talking about a revenue of roughly EUR 0.5 billion, more or less, roughly. It's an indication. So how -- what does it mean in terms of percentage of the ex Zodiac portfolio progress? It's a few points, I would say. When we met at the Capital Market Day, basically, we had executed 10% for a target of 30% of the portfolio. I guess I should not -- we should not be far from 15%, but it's indicative. We may come back on that, but it's an indicative number. So there's more to come. We hopefully will progress in 2026. But I will say the obvious. Before launching a process of divesting an asset, we need to make sure that this asset has some kind of appeal to the market. And so this is why we are focused on the performance and economic recovery first. But we are planning to continue to divest, especially in the course of 2026.

On your second question about FX, true, we took the assumption of $1.15 per euro on the spot rate just because we built up our 2026 budget at the time, it was at $1.15. So now it's $1.18. So that means a slight negative. It will only impact negatively our revenue base. You know the sensitivity, it's about EUR 100 million, EUR 150 million of sales per cent spot rate.

So we'll see with time, we could have chosen 1.20. It would be as long as 115. We'll see at year-end. And then your last question is about the RISE program. RISE is a technology program. We are developing technology bricks, new materials, gearbox, an open fan architecture, hybridization that we leave all options open. So there is nothing new in what you may have seen in some press reports about a ducted engine or an open fan engine.

Yes. I'll say the obvious as well. We are getting prepared to any scenario because at the end of the day, it's going to be an airframer decision to select a given engine architecture. So basically, RISE, as just Pascal has reminded, is a technology program. There's a lot of common bricks that basically we develop whatever the architecture is. And yes, indeed, we are working on an open fan architecture. But again, we need to be prepared to any scenario. We are still very confident that the open fan is, let's say, the most, let's say, rewarding, let's say, configuration in terms of fuel burn. There's, of course, a lot of challenges that we need to meet and need to tick boxes, if you wish, on this technology plan. But again, we need to be prepared to any scenario. So no surprise.

We'll take 2 more questions.

Next question is from the line of Rory Smith, Oxcap.

You've given lots of color on the call so far about narrow-body engines. So that's very helpful. I just had a question on wide-body. Is it fair to assume that there's a similar sort of margin differential between, let's say, timing materials or spare parts versus services under wide-body service contracts, as you mentioned for under LEAP? That's my first question.

To the wide-body, I would say yes, Rory? Yes, indeed. similar.

Brilliant. And then just as a follow-up to that, is there anything you can tell us this morning just about this sort of engine durability issue. I'm not saying it's your component, but anything that you're hearing from your partner there that Boeing talked about on their 4Q call that may be impacting the flight test program for 777X.

Well, I cannot comment on that, Rory. Sorry for that. That is the last question?

Yes, of course. Last question today is from Ken Herbert RBC CM.

Two questions, if I could. First, you grew spare parts in civil engines about 18% in '25. The guide is for mid-teens growth this year with looks like basically flattish CFM56 shop visits and some growth on the LEAP. Can you just help dissect that a bit and why the slower growth? Is it anything in underlying assumptions on price or work scope or maybe wide-body versus narrow-body as a first question. And then second, we are starting to hear some concern -- not concerned questions from some of the larger CFM56-7B fleets about maybe lowering engine inventory levels this year as we go through the year. And I'm just curious if you can comment on that, if that's anything you've seen and how we should think about that?

Okay. I'll take the first one on spare parts for 2026. So we are guiding to a mid-teens revenue growth. It's driven by the 3 engine families. First one, CFM56, we should see more or less a flattish number of shop visits. So volume is flat. Price will be up. It's still to be agreed with our partner. It will be applicable from 1st of August. We will benefit from last year price increase in the catalog list price, which was mid- to high single digits.

And then work scope. W scope should be a positive because as we saw in 2025, we're expecting a higher proportion of full work scope within the total of shop visits. So CFM56 will continue to be a driver. On the IRS engines, as you know, we have a minority stake on the GE engines. And here, we see good positive drivers as well in terms of pricing and volume and work scope on all 3 components.

And then on LEAP, we'll continue to grow the number of shop visits for the LEAP, as we say globally from about 15% shop visit per formed by third parties to 30% by 2030 and with a favorable mix over time, meaning less quick turns and more full performance restoration shop visits. So that should benefit as well our guidance for spare parts in 2026. I would like to say right now, then what we will discuss in April, we should have a very strong start in spare parts in Q1 only because we have favorable comparison base. So you should expect a higher number than the mid-teens when we publish our Q1 numbers.

Ken, on your second question, I'm not sure what you are referring to. But what I can say is even if our overall performance has been extremely good on spare parts, especially CFM56 spare parts in the course of 2025. We have been a little bit constrained by some supply chain issues that are getting unlocked. And that's also what is going to be a component to feed 2026. So we see, let's say, supply chain, let's say, some supply chain bottlenecks getting unlocked on CFM56 spare parts as well, and that's going to help us in 2026.

Thank you all. Have a good day, and happy Valentine for tomorrow.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.

Welcome to the Safran Third Quarter 2025 revenue.

At this time, I would like to turn the conference over to your host, Olivier Andries, Safran's CEO; and Pascal Bantegnie, Group CFO. Mr. Andries, please go ahead.

Good morning, everyone. Thank you for joining us for Safran's Third Quarter 2025 call. I'm here with Pascal. Let us start with the key highlights of the quarter. Safran delivered another strong performance in Q3 with high teens growth driven by increased volume and services. Adjusted sales reached EUR 7.9 billion. Civil aftermarket remained robust, reflecting continued demand from airlines. Spare parts for civil engines were up 16%, largely thanks to CFM56, while services grew by 24%, supported by LEAP rate per flight hour contract.

Regarding LEAP engine deliveries, output has improved quarter after quarter this year. After a slow start, we have been able to catch up on delays. And in Q3, we reached a new record with over 500 LEAP engines delivered, up 40% year-on-year and 25% from the previous quarter. Over the first 9 months of the year, we have delivered a total of 1,240 LEAP engines, a 21% increase compared to last year. These strong results also reflect continued improvements across our supply chain.

In addition to the strong operational results, we are excited about our recent acquisition of the actuation and flight control activities from Collins finalized at the end of July. The strategic move has already contributed to our Q3 performance. Integration is off to a great start and our teams are fully engaged and focused on unlocking cost synergies and new commercial opportunities. We are confident that this acquisition will be a strong driver for Safran's future performance.

Looking at the year-to-date picture, adjusted revenue for the first 9 months amounted to EUR 22.6 billion, up 15% organically, confirming a strong growth trajectory across all divisions. Based on this performance, we are upgrading our full year 2025 outlook on all metrics.

Turning to Slide 4. Let me highlight some of our key business achievements this quarter. Last week in Morocco, we broke ground on the new LEAP MRO facility and announced the launch of a new LEAP-1A assembly line in Casablanca. This expansion strengthens our global industrial footprint and will support the sustained ramp-up of the LEAP engine deliveries in the years ahead with a capacity to assemble up to 350 engines per year.

In Defense, Safran and Rheinmetall signed a framework agreement to jointly develop advanced Defense solutions, combining our expertise in electronics, navigation system environment, and atomic clocks, time servers with Rheinmetall's land defense capabilities.

At the 2025 Defense Security Equipment International Show in London, Safran unveiled its next-generation infrared binoculars, setting new standards for technical observation and situation awareness. Lastly, in Poland, Safran and PGZ entered in a strategic defense partnership to foster local industrial cooperation and innovation. The agreement covers industrial cooperation on the HAMMER Precision Munition and the local production of GEONYX Navigation System with PGZ.

Let me now hand over to Pascal for more details on Q3 sales.

Thank you, Olivier. Good morning all. A few words to start with on FX as usual. After a sharp rise in the first part of the year, the euro-dollar stabilized around $1.15 to $1.17 since early July. Our hedging portfolio has remained fully protected so far with no deactivations to date. The team is continuing to hedge our 2029 exposure at very good rates. Our 2025 hedge rate is confirmed at $1.12 per euro, and the hedge book now totals $54 billion as of end September, unchanged from the end of June. Overall, our approach to FX risk has kept us well protected, ensuring attractive hedge rates and supporting Safran's competitiveness in a challenging market environment.

Turning to Slide 7. Q3 revenue reached EUR 7.9 billion, up 18% year-over-year. The currency impact was a negative EUR 300 million, mainly reflecting the euro appreciation against the U.S. dollar with an average spot rate of $1.17 in Q3 compared to $1.10 last year. Scope largely offset the negative currency impact, contributing EUR 300 million, primarily driven by 2 months consolidation of the actuation and flight control activities acquired from Collins. In total, the group generated over EUR 1.2 billion in additional organic revenue versus last year, fueled by growth in every division with Propulsion leading the way.

And on Slide 8, let me now provide a few details per activity. Propulsion revenue reached EUR 4 billion, up 26%. Civil OE grew strongly. Q3 was a record quarter with 511 LEAP engines delivered, up 40% year-over-year and up 25% sequentially. Civil aftermarket remained very dynamic with spare parts up 16%, mainly driven by CFM56 and high-thrust engines, both of them benefiting from sustained volumes and higher work scope. CFM56 gross prices were up mid- to high single-digits in August. LEAP also contributed positively over the period.

In the first 9 months, spare part sales were up 19.5% at the top end of our guidance. Services were up 24%, mainly driven by LEAP RPFH contracts, but also high-thrust engines service contracts. Over 9 months, services increased by 22.2% beyond our guidance. But as you know, it has no additional EBIT impact given our profit recognition methodology.

Military engine revenue declined year-over-year, notably due to a softer level of aftermarket activity and slightly fewer M88 deliveries to end customers. Equipment & Defense revenue increased by 12% to EUR 3 billion with both OE and aftermarket growing at a similar pace. Higher OE sales were fueled by aircraft ramp-up, driving increased demand for landing gear, electrical and power system, nacelles and avionics. Defense also continued to benefit from strong momentum, especially in the guided-bond HAMMER, missile seekers, navigation and timing systems.

Services continued to perform well, supported by strong air traffic levels, which resulted into ongoing demand, in particular for landing system, electrical system and nacelles. Aircraft Interiors posted revenue of EUR 800 million, up 10%. OE sales increased by 12%, supported by steady growth in the Cabin business, benefiting from aircraft ramp-up. Business class seat deliveries, however, faced headwinds from certification, which remains a key challenge in the sector. Services were up 7%, driven by Cabin activities with very good momentum in Middle East and Asia.

A few additional points on Slide 9. First, on the share buyback program. As of October 17, we hold approximately 5.1 million treasury shares designated for cancellation, and we are currently finalizing the ongoing EUR 500 million tranche, which will be completed by December 5. All these shares representing a total of EUR 1.4 billion will be canceled by the end of 2025.

Some update on the tariff environment. Now that bilateral agreements have been negotiated, we are better positioned to assess and manage the risk associated with tariff. The agreement between the U.S. and the EU as well as the eligibility of our products under the USMCA regime have significantly reduced the amount at stake. In this fluid environment, Safran remains agile and actively continues to implement mitigation measures and commercial actions. Nonetheless, a residual impact remains primarily related to flows between China and the U.S., what we call Section 232 on aluminum, steel, copper, or products which are not eligible under bilateral agreements.

So the net impact on the recurring operating income, which is now included in the full year 2025 outlook, is expected to be a negative EUR 100 million to EUR 150 million in 2025.

Olivier, back to you.

Thank you, Pascal. So based on the strong performance over the first 9 months, we are upgrading our full year 2025 outlook on all metrics. Revenue should increase by 11% to 13%. Recurring operating income guidance is improved by EUR 100 million at midpoint and now includes the expected net tariff impact, as Pascal just commented. Free cash flow guidance is improved by EUR 100 million at midpoint, reflecting the improved business performance.

Two of our main assumptions are updated. LEAP engine deliveries are now expected to increase by more than 20% versus 2024. And with increased activity in LEAP, maintenance services are now expected to grow by low to mid-20s with no additional EBIT associated due to our specific profit recognition methodology. In addition to this outlook, the Collins flight control and actuation activity should contribute at around EUR 650 million of revenue with a mid-single-digit recurring operating margin before separation and integration costs.

Overall, Safran remains on track to deliver another year of profitable growth and robust cash generation supported by healthy demand, solid execution and the resilience of our portfolio.

Thank you. We will now answer your questions.

[Operator Instructions] We will now take our first question. This is from Christophe Menard from Deutsche Bank.

I had 2 actually. The first one is on the guidance upgrade on the EBIT. Now that you include the tariffs, it means we have the equivalent of a EUR 200 million incremental improvement. Where is this coming from? Is it essentially spares? Can you elaborate?

The second one is on Morocco. You're talking about an increase in production capacity. Is it enough for you to reach rate 75 in 2027? Or do you need further investment?

Christophe, I'll take the first one. Indeed, we raised our guidance by EUR 100 million. But as it takes now into account the EUR 100 million to EUR 150 million impact from tariffs, the underlying performance is a raise of EUR 200 million to EUR 250 million. It's coming primarily from the spare sales. You can see that at the end of the first 9 months, we are at the high end of our guidance, which is mid- to high 20s for spare part sales at 19.5%. To be frank, we could have been more positive at the end of July. But at that time, we didn't have such clarity on tariff. So now that the dust has settled, it's easier for us to mitigate the impact and quantify the impact. So this is the 2 reasons why we can raise today the guidance.

Christophe, for your second question relating to Morocco, this investment is allowing us to meet the high rates requested by our Airframer customers relating to the assembly of the engines. So we have to look at it holistically between the assembly capacity, let's say, from our partner, GE, and our own assembly capacity. But indeed, this new investment allows us to meet, let's say, the rate increase -- the high rate increase for the assembly.

But the assembly is just the tip of the iceberg, because in order to meet rates whatever, 75 or so, if you speak about Airbus, but Boeing has also high rates increase as well and also COMAC is willing to increase. So we have to look at the global picture, which is encompassing forging, casting, machining, special processes. So once again, the assembly is just the tip of the iceberg.

We'll now take the next question. And this is from Benjamin Heelan, Bank of America.

The first question is on aftermarket. And clearly, very strong trends through the year. And your partner, GE, gave some building blocks for 2026 on their call earlier this week. I was just wondering, are there any building blocks that you can provide that the mix is obviously very similar, but there's also some differences how we can think about aftermarket growth and any building blocks you can provide at this point into next year?

My second question is free cash flow. You've obviously had guidance upgrades pretty much all through the year. They have been quite material. And I think when I look at what you've done in '24, I look at what you've done in '25, it's clearly extremely difficult for you to be as low as what you guided at your Capital Markets Day for your 2024 to 2028 sort of cumulative free cash flow. So how are you thinking about the medium-term guidance here. You're clearly running well ahead of it. And when can we expect an update there?

And then my final question is, obviously, you've owned Collins for a couple of months now. Just any comments in terms of how it's performing, what you see? And now that Collins is done, where is next from an M&A perspective? Or are you broadly happy with the portfolio as it is today?

Okay. So I guess your first 2 questions relate to either the 2026 outlook or the 2028 ambition. At this point in time, now our midterm plan is ready. What we need to do is to compile our midterm plan with the Collins contribution. We acquired this company late July. August, as you know, is not a busy month at least here in France. So we need some more time to compile all this data. So we'll come back in Feb, obviously, with the '25 results with the guidance for 2026, notably on aftermarket. And we'll discuss our first EBIT target for 2028 and our accumulated free cash flow.

I would again agree with the comments you made that we are clearly on the upside, notably on aftermarket. And I guess we can now say that we share a similar view with GE on the CFM spare parts momentum -- CFM56 spare parts momentum that they disclosed mid of July. But we need to quantify the impact at Safran level and come back to you next Feb.

Ben, on Collins, I can tell you that the teams are enthusiastic. The ex-Collins teams, now Safran, in the U.K., in France and Italy are enthusiastic to join Safran. They are on board our strategy. They are very pleased to see that we have a strategy going forward with respect to flight controls and the preparation for the next single aisle. Our integration team is fully engaged to get in the time line that we've committed to, the cost synergies that we can draw from the various activities. And we have engaged in that.

Typically, our team from the nacelles business have started to connect with our new actuation and flight control teams, same for our landing system teams, same for our aero system teams. So basically, we are fully engaged.

What is next? As we have always said, M&A is opportunistic. But to be very clear on the equipment side, I think we have made most of our moves. We have quietened our spectrum of activities in safety critical equipment. So I don't expect that there is going to be a significant further move on the equipment side. As we said, we stay ready for, let's say, some bolt-on acquisitions, especially in defense, which is a strong area of growth.

Next question is from Chloe Lemarie from Jefferies.

I have the first one on the LEAP assembly line in Morocco. I was wondering how quickly it would ramp because I was under the impression it would start operation in 2028. So wondering how long it would take to reach the 350 engine per year mentioned in the press release. Also with this announcement, does that mean that you have finalized discussions with Airbus on the ramp-up to rate 75.

My second question was actually on Seats. We've obviously seen challenges in certification for a while in the industry now. So I was wondering if it affected in any way what you see as the potential margin for the business? And in turn, if it affected your view of how core this business is for Safran?

Chloe, on the LEAP assembly line, we've said that the first assembled engine would be beginning of 2028, if I remember well. So it's 2028, and we will ramp up, let's say, we are not going to reach 350 in a matter of months for sure. But I expect that the 350 can be reached by 2030 or so. So this is for Morocco.

Typically, here, our assembly line in Villaroche in France will account for about 65% of our, let's say, global assembly capacity. And Morocco, plus we have a tiny small assembly capacity in Mexico as well to deliver engines to Mobile, Alabama. So Morocco plus Mexico would account for 35%, roughly.

At 75, we have, let's say, an aligned view with Airbus on basically 2026 and 2027. We have engaged in discussion for the rate 75. And so the discussions are ongoing at the moment.

On Seats, this is an area where we had many, many challenges. We have tackled the development challenges. So now the development process is really under control. We have addressed the supply chain issues. Here as well, it has improved significantly. This is an area where we probably were a little bit too shy, if I may say, on extracting the value of our seat business. And so we've significantly improved our price on the, let's say, most recent wins that we have obtained. This will materialize in the EBIT in 2 years from now. But the pricing is obviously a key element of the, let's say, financial recovery of the seat business. And we are still facing some certification challenges, which is an industry-wide challenge on certification. That's where we are.

Chloe, part of your question, is it still a core business? It is. We have not changed our mind compared to the view we shared at the Capital Market Day in 2021. We said that 30% of the former Zodiac activities were noncore. We have already divested some of them. We may divest more in the future, but Seats is not part of our divestment process.

Next question is from Ross Law, Morgan Stanley.

Just to come back on LEAP rates. You just mentioned that you're aligned with Airbus for rates for 2026 and '27, but still in discussions for rate 75. Does that mean that rate 75 could only be achieved beyond 2027 from a Safran perspective?

Second one on LEAP again, just in terms of the engine catch-up, you previously said you aim to fully catch up by the end of October, so a few days' time. Given this obviously strong delivery numbers in the third quarter, is that still on track?

And then last one, if I may, just on tariffs. So you've quantified the number or the impact for 2025 at EUR 100 million to EUR 150 million. But this, of course, only applies to a portion of the year. So should we extrapolate this run rate into 2026 until the trade deal is finalized?

Ross, on your first question, what can I say? Rate 75 is under discussion. But it's not -- I have not -- to my knowledge, I mean, Airbus has not said that rate 75 would be fully reached full year in 2027, to be very clear. So there should be no misunderstanding here. So yes, we have, let's say, a joint vision on the number of engines we need for 2026, 2027, and we are discussing now 2028 and going forward. Are we going to catch up this year? I'm confident we will. We had a very strong Q3. I don't see any reason why Q4 should be different than Q3. This is why we have raised our guidance of deliveries of LEAP for the full year. And so if we continue on this rate of weekly deliveries to Airbus, we will catch up by end of October, beginning of November, as we said. So I am confident in that respect. I will let Pascal answer on the tariff.

Ross, as you said in 2025, the tariff story was a bit strange, because we had no tariff paid in Q1. Then starting from April, we had different rates between EU and U.S., China and U.S., Mexico, Canada and U.S. So before we have the bilateral agreements being announced and now signed, we were lacking clarity. So to answer your question, going forward for '26 up to 2030, if I may, I would expect, given what we know today, because this may change, this is still a fluid environment, the net impact to be no more than EUR 100 million per year on EBIT, okay? So I would say, again, EUR 80 million, EUR 100 million could be the right range to think of.

Next question is from Ken Herbert from RBCCM.

Yes, I wanted to first ask on the CFM56. Can you comment on, across the network, how much improvement you've seen this year in turnaround times for that engine and specifically on the aftermarket? And specifically, when you think you might get back to 2018, 2019 pre-pandemic levels in terms of turnaround time?

And then my second question is for the spare parts guidance this year, can you just remind us how much of that is price versus volume versus work scope for the guide on the parts?

Ken, most of the shops today are dealing with CFM56 and LEAP. What is mainly driving the turnaround time are the 2 following elements. One is the overall maintenance capacity. And in fact, on a worldwide basis, especially in the CFM network, we were short of capacity. So this is why we are on a significant ramp-up of our maintenance capacity and the same for our partner, GE. So this is one.

And the second key element is basically the availability of parts. So those are the key drivers of the turnaround time. So because the pressure is very high, both on the maintenance capacity and on spare parts -- on parts globally, because we have to feed the OE side as well as the aftermarket side, the turnaround time is not the same as the one we enjoyed pre-COVID. So on the CFM56, talking about Safran at least, our current turnaround time is around 100 days, which is above, let's say, the typical turnaround time we had before COVID, which was more closer to 70 days. So that's where we are today on CFM56.

On LEAP, the turnaround time is higher, but as always, this is the beginning of the journey on the LEAP. But we are on a strong trajectory to decrease the turnaround time on LEAP globally this year compared to last year, and we'll make more progress even next year. Today, the turnaround time on LEAP is, let's say, our target is 130 days. And basically, we are on trajectory to go down to 100 days in the next 1 or 2 years.

Okay. On your second question on the spare parts momentum. You know there are 3 components within our spare parts index, high-thrust engines, LEAP engine and CFM56. The largest positive surprise we had so far this year is coming from the high-thrust engines. You know that we have a minority stake on all GE engines. And we do benefit from strong volume and heavier work scope that we initially anticipated. So that was the first good news so far this year. On LEAP, I would say, slightly better than we had expected, but not far from our initial expectation. And then on CFM56, if I break down volume, it's mid-single-digit growth, as we've said since early this year.

On pricing, we both benefit from the price increase we had in August 2024 in the high single-digit range. And we also benefit now from the mid- to high single-digit range price increase that we had in August 2025. And the good news is coming as well from the work scope, which is higher than what we had expected. So altogether, this is why we have consistently and continuously increased our assumption for spare parts starting the year with high single-digit plus. Now the guidance is mid- to high teens. And as I said, we are at the end of the first 9 months at 19.5%.

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

Clearly, very strong growth in services over the quarter. I know you can't quantify this exactly, but can you just give us a sense of the overall proportion of LEAP RPFH within the services revenue mix? And broadly, how should we think about margin there across services relative to spare parts? Is lower but improving the right way to frame it? And a second question, if I may, is there anything we should be aware of that may put pressure on the implied exit rate margin going into 2026?

On your first question, LEAP RPFH is the vast majority of our services revenues. Growth is coming from -- as we recognize revenues as per the cost, it means that we have more cost on these contracts, which is no good news. In fact, the reason behind that is that we have a different mix within our LEAP RPFH contracts today. We were performing a lot of what we call quick turns. So low-value shop visits. And now there are more shop visits in the mix, so performance restoration shop visits in the mix than quick turns compared to what we had anticipated, meaning more cost, meaning more revenue. So this is why we upped our assumption to low to mid-20s.

But by construction, it has no EBIT benefit, because we know from the beginning of the year, the value of EBIT we will recognize under our LEAP RPFH contracts, because as we have disclosed and discussed at the Capital Markets Day, we have a profit recognition methodology, which is fixed, whatever the revenue level is. So no EBIT contribution from this upgrade in our assumption. And what was, sorry, your second question, again?

Yes, sorry, the second question was, just going into 2026, is there anything we should be aware of that may put pressure on the implied exit rate margin given your new EBIT guide?

Sorry, I'm not sure I got your question, Sam.

Is there anything we should be aware of for...

Is your question on FX or not?

No, on margin, whether there's anything that could put pressure on margin going into '26 that we should be aware of?

Okay. You mean globally or on Propulsion?

No, in terms of group.

Well, we will guide in Feb for 2026. But our view is that if I take businesses by businesses, starting maybe with Aircraft Interiors, our intent is to improve the operating margin by more or less 200 basis points each and every year if we want to be at 10% by 2028, which was what we discussed at the Capital Markets Day. Then in Equipment & Defense, I would say before Collins, because we have still to evaluate the Collins impact. As you know, it will be dilutive in the first year. But before the Collins contribution, our target is to be at 15% in 2028. And we were last year at 12.2%. This year, we expect to improve by at least 50 basis points our margin in Equipment & Defense, and we should continue to grow next year.

And in Propulsion, we posted a very strong H1 at, I guess, was north of 23%. I remember that we said that the margin should improve by more or less 250 basis points this year. I would maybe revise slightly down this expectation given that we have higher services. As you see, we are up our assumption, and it comes with no EBIT, as I just said. And we will also increase LEAP deliveries, meaning more revenues, but all that is coming at a loss. So in Propulsion, I would say, 200 to 250 basis points, but maybe on the low side of that range. So going forward, the key point will be on Propulsion, and we will discuss that in 2026. It's a bit early to tell.

We'll now take the next question. And this is from Olivier Brochet from Rothschild.

I would ask 2 questions, please. In the newspapers a few weeks ago, there were discussions about potential disposals that you could be doing in Interiors. I don't know if you can comment about that. But if you're doing these disposals, what will you be doing with the cash, please? And the second question is on the tariff impact on free cash flow. If you could give us a sense of how this would play out in 2025, 2026 compared to the impact that you give for operating income, please?

Olivier, we will not comment specifically on basically those articles and those disposals. I will only reiterate what we've said back in 2021 and again at our Capital Markets Day in 2024, we intend to sell and dispose about 30% of the Zodiac -- ex-Zodiac portfolio. The majority of this perimeter is going to relate to Interiors, the majority. Now we've also said that we wish, we want to recover, let's say, the performance, the operational and financial performance of those activities before starting the process of disposal. And we are on that path.

Olivier, on your question, it's a good question on the free cash associated with tariffs. On the EBIT side, so as I said, there's a net impact of negative EUR 100 million to EUR 150 million in '25. The cash impact is higher than that for 2 very simple reasons. First, we have put in place what we call a duty drawback mechanism, by which if you apply, you can get your cash back in some circumstances, but it will take time from the CBP to reimburse you. So part of what we see in EBIT in '25 will be cash back only in '26 and so on.

And then as you know, we are -- part of the mitigation actions is to take commercial actions with customers, meaning invoicing customers for the tariff surplus. And here, again, there is a cycle for cash collection from our customers. So you would assume that the cash impact in 2025 is higher than the EBIT impact that we have disclosed.

That's helpful. If I can go back on the disposals. My point was not so much whether you will do them or not. It was more on the use of the cash. Is this something that shareholders should think of as reinvested in the business, reinvested in external growth, or effectively as shareholder distribution?

Well, it depends on the size of the disposal. If we are talking of a few hundred million euros, or if we are talking of more than EUR 1 billion, depending of what we can achieve or not. At this point in time, I guess we have a friendly approach to shareholders in terms of dividend and share buyback. So we need to execute on that. Now on M&A, as Olivier said before, it is always opportunistic because we don't know what kind of companies will come for sale. So we'll see with time. So we will consider what will be the cash use once we have finalized the divestments.

We have one more question. This is from Ian Douglas-Pennant from UBS.

Ian at UBS. Firstly, just a quick one on currency. Could you just remind us of the translational impact here? So your guidance assumes 110 and we're obviously a little off that point today. So just -- I know you hedge, but what's the translation impact, please?

And then secondly, could you help us understand, are you still expecting a kind of fade in the market environment that you're seeing in Q4, which results in weaker revenue growth and weaker profit growth in Q4 as implied in your guidance. Can you just help us understand what the kind of offsets are there, please?

On your first question, to provide clarity on the translation effect. First, in terms of sensitivity, $0.01 of FX change has more or less EUR 150 million of impact on revenues either way. We built our initial guidance at $1.10. What matters is the average spot rate over the full year. Year-to-date, despite the fact that we went up to $1.17, even $1.18 at some point in time, on average, year-to-date, it's $1.12. If we assume that Q4 will remain at $1.16 for the full quarter, then you would assume that the full year average spot rate will be more or less at $1.13, okay? So $0.03 difference from our initial expectation, which means no more than EUR 0.5 billion of a negative impact on the full year sales, okay?

Then on your Q4 question, yes, lower growth than what we had in the first 9 months, but it's simply because of the comparison base, which was quite high last year. I don't see anything specific other than that.

We have no further questions. So I would hand back to the speakers for any closing comments.

Okay. Thank you for your attention.

And have a good day.

Have a good day. Bye-bye.

Bye-bye.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.

Welcome to the Safran Half Year 2025 Results. At this time, I would like to turn the conference over to your host, Olivier Andries, Safran's CEO; and Pascal Bantegnie, Group CFO. Mr. Andries, please go ahead.

Good morning, everyone, and thank you for joining us for Safran First Half 2025 Results Call. I will go through the presentation together with Pascal.

First of all, we are pretty excited with the current trends in our markets. Those of you who attended the Paris Air Show were able to witness the renewed dynamism of our commercial and defense customers and their appetite for our new technologies. At the same time, NATO members have agreed on planned increase in defense spending, which will translate ultimately into new market opportunities for Safran.

We are also pleased to report some improvements in the supply chain for the first time in a long time. We welcome the progress made on the transatlantic agreement to remove tariffs on aerospace products, which is a positive step for the industry. In parallel, we continue to implement targeted mitigation measures to manage any potential impact. Once again, Safran delivered a record performance this semester with double-digit growth across all key metrics.

Note that we delivered a 17% operating margin, which exactly represents the midpoint of our 16% to 18% guidance provided back in December 2021. Civil aftermarket continues to perform very well across the board. In light of this momentum, we raised once again our full year guidance.

Two additional information from July news flow. First, on July 21, we succeeded to close the acquisition of Collins actuation and flight control activities after a long journey. This is a key milestone in strengthening our flight control offering. The teams are now focused to deliver the expected cost synergies by 2028 and grow the commercial momentum. And at last, as you have seen this morning, we have announced the location of our fourth carbon brake factory. It will sustain the strong demand both in original equipment and MRO on this segment.

Turning to Slide 4. Safran enjoyed a strong commercial momentum across its businesses. Ryanair ordered 30 LEAP-1B spare engines, to reinforce operational resilience and support its expanding 737 MAX fleet. This marks another step in CFM long-standing partnership with Ryanair. We unveiled THE Room FX with All Nippon Airways, a new business class seat for the 787-9. It combines privacy, comfort and sustainability, setting a new benchmark in premium cabin design.

In line with our decarbonization road map to support aviation electrification and hybrid-electric propulsion, we set up a major partnership with Saft to develop a high voltage battery system for aviation, and we launched a technology program together with Daher, Collins and Ascendance to design a hybrid-electric propulsion architecture for light aircraft.

On the defense side now, there is a clear commitment to increase investments with global military expenditure reaching levels not seen since the end of the cold war, particularly in Europe. As an example, members of the NATO Alliance have agreed committed on a significant defense budget increase.

We are significantly raising our production capacity to meet the new demand and serve our backlog. The export momentum for the Rafale remains very strong. We signed a new contract for 26 Rafale for the India Navy. In the meantime, we decided to engage into the development of a more powerful evolution of our M88 engine powering the Rafale and design for the future F5 standard. This should help to grab new customers.

We also build our strategy on external growth and key partnerships. We have announced several new partnerships at the Paris Air Show with key players, such as Bombardier from Canada, Diehl, Germany, Babcock in the U.K. Kongsberg in Norway, to name a few, this collaboration span air-to-ground munitions compact optronic systems for UAVs, multisensor artificial intelligence for persistent geospatial intelligence and Naval Strike Missile propulsion, for which we received an order of several hundreds of turbojet from Kongsberg in Norway.

We expanded our partnership with Avio Aero and MTU to jointly develop Europe next-generation engine for military helicopters. Recent acquisitions include Orolia in positioning, navigation and timing. At the Paris Air Show, we have launched BlackNaute and Skylight, 2 cutting-edge systems delivering resilient PNT, resilient positioning, navigation and timing designed to operate in GPS-denied environment.

Preligens, now Safran AI, our AI factory is expanding quickly. In the end, we aim to double our revenue base in defense and space activities by 2030. We have the right technologies. We have a clear road map to access new markets, we are building on partnership and external growth, and we are expanding our production capacities.

Pascal, I'll leave you the floor to discuss H1 performance.

Thank you, Olivier. Good morning, everyone. As usual, I'll be commenting on the adjusted accounts, for which a bridge from the consolidated statement is presented on Page 7.

The adjustments relate to FX or PPA. The EUR 4.8 billion change in mark-to-market of instruments hedging future cash flows has been adjusted in financial income in H1 2025. This is purely an accounting entry, no cash impact as our derivative instruments, hedging future USD cash inflows.

On FX, Slide 8. In Q2, we have faced the fastest move in the euro-dollar since the '70s with more than 0.15 euro-dollar appreciation in a few weeks' time. Despite this, our team successfully managed to protect our hedging portfolio. As you all know, our strategy is notably based on options with knockout barriers. None of them have been triggered to date.

As we speak, the dollar has returned to 1.14 a more comfortable level. I can confirm our target hedge rate of 1.12 for 2025 in the coming years. We strive to maintain an attractive hedge rate for as long as possible in a constantly evolving environment. Once we have a better view on the recently acquired business of Collins, we will factor in the hedging needs for USD and British pound.

Turning to Slide 9. Revenue for the first half of 2025 reached EUR 14.8 billion, up 13% on an organic basis. The impacts of currency and scope are fully balanced out over the semester. Currency reflects a marginal appreciation of the euro versus the dollar and scope reflects the contribution of CRT, the engine repair business we acquired early 2025.

Overall, Safran continues to deliver consistent, broad-based growth supported by favorable momentum in both services and OE across commercial aerospace and defense. The profits increased twice as fast as revenue at a rate of 27%.

Recurring operating income reached EUR 2.5 billion. It is worth noting that the historically high margin level achieved in H1 at 17%, exactly at the midpoint of the range provided during the CMD '21. This is an improvement of over 7 points compared to 2021. I'll come back on the main drivers per division.

Looking at the summary of the income statement beyond sales and EBIT, let me comment on other P&L items. One-off items amounted to a negative EUR 37 million, which includes an impairment charge on 1 program within Aircraft Interiors, restructuring costs, and I would say, the usual M&A expenses.

Financial income is a positive EUR 32 million. The return on cash investment exceeded the cost of debt and translated into EUR 77 million in net financial interest. The apparent tax rate is 34%. This includes a onetime contribution of EUR 261 million, resulting from the 2025 finance bill in France. You must expect EUR 380 million to EUR 400 million impact on a full year basis, meaning an additional EUR 140 million in H2. Net income to the parent stands at EUR 1.6 billion, representing EUR 3.8 per share, up 11% from last year.

Let's now take a closer look at our businesses, starting with propulsion. Revenue reached EUR 7.5 billion in H1, up 17% year-over-year. This performance was primarily driven by civil aftermarket with spare parts revenues up 21.6% in dollars, driven by strong demand for all engine families, CFM56, wide-body engines and LEAP. Services were up 21.1%, led by the ramp-up in LEAP RPFH contract revenue.

On the OE side, LEAP deliveries were up 10% versus last year, after a drop of 13% in Q1, production accelerated sharply in the second quarter. Q2 was up 38% year-over-year and 29% sequentially. We also enjoy revenue growth in helicopter turbines, mostly in services and military engines with a favorable customer mix.

Recurring operating income came at EUR 1.8 billion, representing a record 23.3% of sales, a margin improvement of 340 basis points. This is a lot to get excited with. This strong performance was driven by civil aftermarket both spares and services, the start of margin recognition of LEAP-1A RPFH contracts, including a onetime margin catch-up from previous years. And third, a significant number of LEAP spare engines in H1, and that ratio is due to decrease in H2.

Moving on to Equipment & Defense on Slide 12. Revenue reached EUR 5.6 billion in H1, 8% organic growth. The growth rate of this division is lower than in propulsion due to its exposure to programs with a slower ramp-up at this time. The defense business growth was led by guidance systems, including Hammer and strong demand for resilient PNT solutions. We see more opportunities along the road.

On the Aircraft Equipment side, aftermarket services increased across the board, especially in landing system, nacelles, avionics and electrical systems. OE volumes slightly grew notably on the A320neo and 787 landing gear year.

Recurring operating income came in at EUR 703 million, up 7% with a margin of 12.5%, almost stable compared to 2024. This reflects a high comp base. Indeed, in H1 2024, we saw a onetime profit recognition when the Gulfstream 700 nacelle entered into service.

On a full year basis, we still expect margin expansion by at least 50 basis points in that division. That says, the solid level of margin was supported by aftermarket growth, notably in landing gear, carbon brakes and aero safety system.

Finally, turning on Slide 13, Aircraft Interiors. We are staying on track with our road map for continuous margin improvement year after year. We posted a profit of EUR 27 million in the first half, up EUR 17 million, lifting the margin by 100 basis points. While this remains modest, it reflects a solid level of services particularly in Cabin and continued progress in OE, notably business class seats, galleys and IFE.

Revenue reached EUR 1.6 billion, organic growth of 15%. Both OE and services contributed to this performance. In Cabin, OE growth was notably supported by higher deliveries of 737MAX galleys, while services increased across the board. In Seats, OE volumes saw a strong increase with business class seat deliveries up 65% and aftermarket sales also contributing to growth. We did burn some cash in H1, also much less than a year ago, and we continue to strive to reach cash breakeven at some point.

Turning to cash. Free cash flow generation reached a record level of EUR 1.8 billion, up 25% year-over-year. This strong performance was driven by a 25% increase in EBITDA, which reached EUR 3.2 billion. Change in working cap remained stable. The rise in inventories was partly offset by higher customer advance payments, notably on Rafale.

We continue to invest to support growth and prepare for the future. CapEx totaled nearly EUR 800 million, with spending focused on expanding engine and MRO capacity as well as production capacity on landing gears, smart weapons, resilient PNT systems and low-carbon projects. This result reflects Safran's ongoing focus on operational excellence and cash discipline.

Safran's net cash position remained almost unchanged with a balance of EUR 1.9 billion. The cash generation in the semester was used to pay the EUR 2.8 per share dividend and to finance the share buyback program. In the first 6 months, we bought back 2.9 million shares for cancellation purpose for a total of EUR 713 million. We also proceeded with the early redemption of the convertible bond, name is OCEANE 2028, resulting in a decrease of the net debt.

We had a net cash out impact from acquisition of EUR 133 million related to the engine repair company called CRT. This net cash situation does not yet include the acquisition of Collins actuation business, for a total of $1.8 billion, which took place on July 21 with cash on hand. These are the proceeds from the electromechanical actuation business that we sold to Woodward.

On the share buyback front, at the end of July, we have repurchased for cancellation purpose, 3.4 million shares for a total of EUR 850 million. These shares will be canceled at year-end together with a 0.2 million treasury shares that we reallocated for cancellation in April for a market value of EUR 50 million.

Olivier, back to you.

Thank you, Pascal. At last, on Slide 17. We have completed the acquisition of Collins assets. We've seen actuation and flight controls. This is a major milestone in our aircraft equipment strategy, focused on mission-critical equipment and functions. I spent some time last week with our new colleagues in the U.K., and I welcome these teams again from the U.K., Italy and France as well as from many other countries. They are enthusiastic to join Safran. This business will be integrated within Safran Electronics & Defense and be consolidated from August 1.

Our full year guidance does not yet include their 5-month contribution, which we expect to range from EUR 600 million to EUR 700 million in revenues. This business fits very well with our Safran DNA, leading technology, mission-critical systems, recurring aftermarket revenue and drive profitable growth. We expect the business to grow at attractive growth rates and deliver low double-digit EBIT margin through a combination of volume growth and cost synergies.

In light of the H1 performance and the continued business momentum in both civil, aerospace and defense, we are raising our 2025 outlook. Revenue should increase in the low teens, exceeding EUR 30 billion. Recurring operating income guidance is improved by EUR 200 million at midpoint to reflect better performance in civil aftermarket. Free cash flow guidance is improved by EUR 400 million at midpoint, which reflects the improved business perspective and include Indian Navy advance payment on the Rafale contract.

The revenue growth outlook for our 2 key indicators has been raised. Spare parts and services revenues are expected to be up in the mid- to high teens. Our guidance excludes the contribution of Collins as previously said and any potential impact from tariffs.

Thank you. We will now answer your questions.

[Operator Instructions] First question today is from Olivier Brochet from Rothschild & Co Redburn.

Yes. I would have 2 questions for you, please. First of all, on aftermarket, civil aftermarket. Could you give us a bit of color on how things have moved in wide-bodies, narrow-bodies, content price, volume and a breakdown between services and spare in terms of overall contribution? And second, could you give us a bit of a sense of the catch-up in the margin in the LEAP CSAs? What sort of size are we talking about?

Olivier, I will take the first one. On the CFM56 side, what we've seen is a slight growth in the number of shop visits. So we are in the range of mid, low- mid to -- low- to mid-single-digit growth in terms of number of shop visits. And we are benefiting also compared to H1 2024. We are benefiting from the catalog price increase that has been decided and put in place in August 2024.

What has been the main driver for the growth of our revenues on CFM56 spare parts is the work scope. In fact, the work scope has increased compared to 2024. When we look at the high-thrust engine, this is where the growth has been, let's say, the most significant, so higher than -- even higher than on the CFM56. And here, this is really the impact of a higher number of shop visits compared to 2024.

Olivier, on your second question, we've discussed during the last Capital Market Day, our methodology to recognize profit on LEAP RPFH contracts. As you may remember, the trigger point was the introduction of the new HPT blade and the LEAP-1A. So if I was to size the catch-up effect, given the fact that we have not recognized any margins before 2025. I would say that about 60% of the LEAP RPFH profits were recognized in H1, and we expect another 40% in H2. So it was more H1 balance versus H2. But all in all, I would say, it's quite marginal. Don't expect a huge amount of profits.

Next question is from Milene Kerner from Barclays.

I also have 2, please. The first one, could you please clarify what retirement rate assumption you're using for your CFM fleet through 2030, how might the current low level of retirement influence those assumptions?

And then my second question, at your Capital Market Day, you outlined a target of EUR 6 billion to EUR 6.5 billion in operating income by 2028. Following this morning guidance are great. Now you're going to see a compound annual growth rate of about 8%. Should we interpret this as a conservative outlook? Or are there any underlying factor that might explain the trajectory?

Milene, I will take the first one and leave the second one to Pascal. The underlying assumptions on CFM, what we've seen the growth in traffic on the narrowbody side compared to 2024, which is about 5%, just slightly above 5% of available seat kilometers growth compared to 2024. The level of storage of CFM56 fleet has basically decreased a bit. So the -- we've reached something like slightly above 6% our fleet, which is stored, which is a lower level than even before COVID, 2019 where it was 7% to 8%.

And the level of retirements has been very low, basically we were below 50 at the end of May of number of aircraft retired. So this is a very low level. This is even longer than pre-COVID again. So those are the underlying assumptions, which basically create a strong tailwind on the CFM56, flying hours, and therefore, shop visit, work scope and appetite for heavy work scope.

Milene, on your medium-term outlook question. We disclosed our 2028 ambition last December. It was based on our view our medium-term plan that was built mid of last year. Given the strong start of 2025 and the comments made by our partner a week ago or 2 weeks ago, and the aftermarket business on civil engines, we can only confirm that the spare part business is more promising than we had expected with slightly more activity by the end of the decade.

Now our budget cycle calls for a review of our medium-term plan in the fall. So it is only then that we will be able to decide whether the 2028 guidance deserves to be revised or not. And as you know, there are also some uncertainty regarding tariff or reduced domestic demand across the U.S. So we'll take our view and then we'll come back to you in due time if we need to revise or not our long-term view. But for sure, the civil aftermarket activity is much stronger than we expected, and it should last longer than we had expected.

Trend is very positive.

Next question is from Chloe Lemarie from Jefferies.

I have 2, if I may. The first one would be on the guidance for propulsion margin. I think Pascal at the full year, you mentioned 100 to 200 bps improvement. That was obviously much stronger in H1. So how should we think about the outlook for the year now?

And the second one is still another dab at the 2028 outlook. I know it's a bit too early to give a proper updated view. But any reason why we should think that the growth that GE now sees on the CFM56 revenues by 2028. I think now they kind of see a 20-ish percent increase from 2024 to 2028 wouldn't apply to you in full? Or is it something that you view that you share with them?

Chloe, coming back to my comments on margin expansion in the 3 divisions. Let me start to confirm that in Aircraft Interiors, we expect at least 200 basis point margin improvement this year. In Defense, as I said earlier, at least 50 basis points. So, this is unchanged from what we said for this equipment and defense and aircraft interiors.

Now on propulsion, I can confirm that we can raise our ambition and expect now margin to expand by 250 basis points this year instead of 100 to 200 basis points.

On your second question on the 2028 outlook, we can clearly think that what GE said on the revenue compound growth for the years to come should apply in full to Safran on the Propulsion business. Now as you know, more globally, we have a different mix of businesses, with equipment and defense and our Aircraft Interiors activity. But in propulsion, despite that the comparison base could be slightly different from GE and Safran. But in the ballpark, I would say, the same should apply.

Next question is from Benjamin Heelan of Bank of America.

I wanted to go a little bit more in detail on the propulsion margin and some of the comments you made to Olivier because I'm not sure I'm fully on top of it. So when you started recognizing profit on the LEAP-1A, was there an accelerated recognition this year? Or is this just because you've started recognizing profit on the LEAP-1A. And how do we think about that into '26, when you should start recognizing profit on the LEAP-1B. How can we think about that?

So we started to recognize LEAP-1A RPFH profits in H1 for the year 2025, but it also includes a onetime contribution for the margins that we should have recognized in the previous years, typically, 2023, 2024, 2022 and so on. So there was a slight onetime contribution from the non-recognized margin in the previous years. Once again, as I answered to Olivier, but maybe I was not clear enough.

If we expect $100 this year, we did recognize $60 in H1, and we expect $40 in H2. So you see that the onetime contribution is not that important. Then in 2026, as GE confirmed, we plan to introduce a Maverick blade on the LEAP-1B at some point in time in H1 2026. This will be the trigger point to recognize margin on LEAP-1B RPFH contract, which will come on top of LEAP-1A, so you would expect higher profits in 2026.

Okay. And then if we think about the LEAP-1A recognition ex the catch up, are you able to give us some color as to what you've started recognizing that margin out? Is it roughly in line with the divisional margin in propulsion, is it a bit higher? Is it a bit lower? Is there any color there you can help us with?

No, I'm afraid we cannot disclose any details on that, Ben.

Okay. And then one for Olivier. Olivier, can you talk a little bit about the LEAP supply chain issue. Obviously, you've had the strike and resolved that now. Have you been able to catch up the flow of production in the facilities? How do you see that trending over the next couple of months and quarters into the end of the year?

Ben. No, as we speak, we have not completely catch up the impact of the strike. We had a low Q1, mainly driven by, let's say, supply chain issues. And then we had the strike. So the plan is to recover by somewhere like end of October. By the end of Q3, we should mostly are recovered, not entirely recovered. The plan is to recover completely by the end of October in order not to, let's say, impact, let's say, the Airbus delivery plan. This is the goal. Our team and our partners team are fully engaged on that plan. And so we are going to continue to work very hard to recover backlog, this backlog. Yes.

Next question is from Christophe Menard from Deutsche Bank.

I had 2. One to bounce on the LEAP-1A RPFH catch-up. Should we expect a higher contribution when it comes to the 1B RPFH catch-up? Or is it similar in terms of margin? Or will you also apply a 60-40 type of split?

Second question is, you mentioned the new engine for the Rafale. I was wondering the financing of this, is it something you will be paying out of your own funds? Or will there be some funding coming from the government for that?

Christophe, to be honest, I don't know yet what will be the catch-up on the LEAP-1B because the LEAP-1B RPFH contracts may have different margin profile compared to LEAP-1A. So I've not yet looked at the unrecognized margin that we have had in the past years. So I don't have the answer to your question, but there will be a slight catch-up impact, the onetime contribution as soon as we start recognizing the LEAP-1B profit next year, yes.

And Christophe on your second question, this, let's say, increased thrust engine development for the Rafale F5 standard, as it is part of the F5 standard, we are engaged in the discussion with the French MOD for the funding of it, indeed.

Next question is from Robert Stallard, Vertical Research.

Just wanted to follow up on Ben's question. You clearly had a lot of pressure from Airbus to ramp up those LEAP engine deliveries in the second half. I was wondering if you could comment on your confidence in hitting that Airbus delivery target?

And then secondly, on defense, you commented you expect the revenues to double by 2030. Do you see it as a straight line to get into that number? Or is it more back-end loaded?

Robert, well, yes, as I mentioned in my response to Ben, the goal is to recover our net backlog on the LEAP deliveries to Airbus by the end of October. So we have a plan for that. So it's all now a matter of execution. This is a challenging but achievable plan. And once again, the team is fully, fully engaged. We'll take in due time the right decision also with respect to allocation of spares versus installed engines to Airbus in due time.

On your second question, when I mentioned that we expect to double our revenues on defense more precisely, it's on our defense electronics business. On the engine side, on the propulsion side, basically, the growth is driven by the, let's say, very successful export dynamic of the Rafale. We have also a strong dynamic on military helicopter engines as well.

But when I mentioned that we expect to double our revenues in defense, I was basically talking about our defense electronics. Yes, we are really confident on that. By the way, we have decided to double the capacity of our navigation system production in [indiscernible]. We have basically decided to multiply by 3 and probably even more our production capacity for missile engines.

So the dynamic is very strong in Europe. And it's not backloaded. The growth is -- we are talking about like a 20% growth sort of compounded annual growth. So the dynamic is very strong. Our navigation system, what we call hammer. Hammer is our air-to-ground strike missile, in fact, and on optronics as well.

The next question is from Ken Herbert at RBC CM.

Two questions, if I could. The first is on the full year guidance for Civil Services versus aftermarket, the guidance implies a bit of a step down in growth in the second half versus the 21% to 22% we saw in the first half to get to the mid- to high teens. Anything in particular you'd call out there that in terms of the decel in the rate of growth or just general conservatism?

And then second, for the increase in the full year free cash flow guide, can you just comment how much of that is timing of M88 engine payments relative to strength across the business and specifically in the aftermarket?

Good morning, Ken. First, on the full year outlook for spares and services. So we are raising our guidance to -- from mid-teens to mid to high teens. True in H2, we should see the growth rate lower than what we had in H1. But if I look in value in dollar terms, we should have higher revenues in spare parts and services in H2 when I compare to H1. So it's purely as a comp base.

And as you know now, we escalate prices for the catalog and spare parts on the 1st of August, meaning that the seasonality has changed compared to the previous years. Now Q1, Q2, Q3, we see sequential growth for each and every quarter, and usually, there is a bit of a step-down in Q4.

On your second question on the free cash flow guide, it's coming from strength of the business purely. So there is no onetime effect. It's purely aftermarket and the inclusion of the advance payment on the Rafale, which was not in our budget. And by the way, when we look to our 2028 free cash flow guide, I was very explicit at the last Capital Market Day that we had not included any advance payments on the new Rafale contracts. So Indian Navy is a new contract. So we will receive advance payments not only in '25, but for the years to come as well.

Ken, on top of Pascal's comment. And I'd like to add that basically on the military propulsion, on the military propulsion, which encompasses both military combat aircraft engines. And also helicopter engines, basically, we are more back-loaded, meaning that H2 is going to be stronger than H1. So this is also another ingredient that makes us very confident that the H2 performance in propulsion will be similar than H1.

We'll take another a couple of questions.

Next question is from Herve Drouet from CIC Market Solutions.

Two questions as well on my side. The first one is, could you -- is it possible to be a bit more specific on the one-off you have booked for LEAP-1A, profit booked 60% booked in H1 kind of order of magnitude will be useful. And the second question is the allocation of spare engines versus new engine. I understand, I mean there has been a recent spare engines been delivered to airlines. I was wondering how are you allocating spare engines versus OEM? Is there any rule of thumb you can give us in the way you allocate those engines?

Herve, I guess you should not overstate the contribution we benefited from this onetime contribution. Frankly, it's quite marginal. And as I responded to Chloe, with a 250 basis point improvement in margin for the Propulsion segment, you'll see that the performance we will achieve in H2 should be quite similar to what we had in H1, meaning that this onetime contribution in H1 didn't play a lot of -- did not have such a strong impact. So I will not quote more than I did on that, but don't overstate this onetime contribution.

And Herve on the allocation of spares versus installed, our guidance really is and our direction is really to make sure that our airline customers keep flying. This has always been the brand of CFM. So we keep you flying. And so it's really making sure that we avoid aircraft on the ground. This is what is driving us, mainly, and this is what the airlines are asking us to ensure because it is very frustrating for an airline to have an asset and not being able to fly it and use it because of an engine issue. So it's all about avoiding aircraft on ground, making sure we keep airlines flying. So it's a weekly -- it's a week per week decision with respect to allocation.

We'll take last question, if any.

Last question is from David Perry, JPMorgan.

Just a factual question really. It's nice to see the very bullish comments on defense. Can you just tell me what are the actual sales in Equipment and Defense in defense? And what percent of helicopters is defense, please?

On the defense contribution to the electronics, the defense electronics contribution into our defense and equipment branch is today, turning to Pascal above 1.5. It's over 1.5 today, above EUR 1.5 billion today. And so we expect that to double by 2030.

We have a space contribution, space, equipment contribution, which is close to EUR 0.5 billion as well. So EUR 1.5 billion defense, space, close to EUR 0.5 billion. So this is expected to double. On the helicopter side, it's roughly 50-50 between commercial and military. It's roughly 50-50.

Okay. I just -- the reason I ask, I'm just -- I think you said defense is about 18% of the group. And I just can't quite get there. I can follow up with our Armelle offline, but obviously, you got military aircraft, the numbers in defense electronics are about what I thought. I just wondered if helicopters was higher.

I think it would just be -- you're talking about defense a lot and it's an exciting part of the story. It would just be nice to have some audit trail of the numbers would just be a request, if I may. But it's helpful. Your answer is helpful.

David, yes, we always say that defense represents more or less 20% of total group sales. And I will split that into 2 parts, 10% is what I would call military propulsion is there for the Rafale, the A400M military helicopters and another 10% in defense electronics and space that Olivier was discussing. This is a broad split of what we call the broad defense sales within the group.

Sorry, on top of that, some of our equipment business is also directed towards military, such as landing gear for Rafale, landing gear for Eurofighter, landing gear for F-18, wiring for F-16, Aerosystems such as evacuation slide pilot equipment, our Aerosystems are also directed towards military. So the 20% that Pascal has mentioned is taking into account all that.

Thank you. Have a good day.

Thank you. And this concludes today's conference call. Thank you for participating. You may now disconnect.