Airbus Group Reports Half-Year (H1) 2016 Results

• Robust and diversified commercial backlog supporting ramp-up
• H1 financials driven by back-loaded aircraft delivery schedule
• Revenues € 29 billion; EBIT* before one-off € 1.7 billion; Earnings per share € 2.27
• Significant progress on strategy to focus on core activities with material capital gains
• A400M and A350 XWB programme charges recognised in Q2 2016
• 2016 guidance confirmed**

Airbus Group SE (stock exchange symbol: AIR) reported half-year 2016 results and confirmed its guidance for the full year**.

"The first-half underlying financial performance reflects our well-flagged back-loaded aircraft delivery schedule this year," said Tom Enders, Airbus Group Chief Executive Officer.

"We continue to see good demand for our products as shown by the brisk order intake at the Farnborough Airshow, with the production ramp-up supported by our robust and diversified commercial backlog. Our operational focus remains squarely on the A320 and A350 ramp-ups and transition to the new engine version of the A320. Unfortunately, we have to cope with new charges on the A400M and A350 programmes. Significant capital gains from the portfolio reshaping mitigated these programme losses but that does not make them more acceptable!

Industrial efficiency and the stepwise introduction of the A400M's military functionalities are still lagging behind schedule and remain challenging. But we are making good progress and the A400M, servicing already five air forces with its impressive performance, proves more and more to be an exceptional aircraft. In the second quarter, we successfully finalised the Airbus Safran Launchers Joint Venture and exited from Dassault Aviation. In summary, despite our near term challenges, we remain committed to delivering our earnings and cash growth story."

Group order intake(1) in the first six months of 2016 was € 39.1 billion (H1 2015: € 53.9 billion), with the order book(1) value totalling € 978 billion as of 30 June 2016 (year-end 2015: € 1,006 billion).

The order book of Airbus Defence and Space decreased by € 4.6 billion due to perimeter changes. Airbus received 183 net commercial aircraft orders (H1 2015: 348 net orders) with gross orders of 227 aircraft including 27 A350 XWBs. The second half of the year started positively with 279 orders and commitments announced at Farnborough, including firm contracts for eight A350-1000s from

Virgin Atlantic Airways and for 100 A321neos from AirAsia. Airbus Helicopters received 127 net orders (H1 2015: 135 net orders) and was selected as the aircraft service provider for the UK's Military Flying Training System contract. It also signed an agreement with a Chinese consortium for 100 H135 helicopters. Order intake was stable at Defence and Space with good momentum seen in Space Systems driven by Earth observation and telecommunication satellites.

Group revenues were stable at € 28.8 billion (H1 2015: € 28.9 billion). Despite lower deliveries of 298 aircraft (H1 2015: 304 aircraft), revenues were stable at Airbus Commercial supported by the strengthening US dollar hedge rate. Helicopters' revenues declined nine percent, reflecting an unfavourable mix despite higher deliveries of 163 units (H1 2015: 152 units). Airbus Defence and Space's revenues were broadly stable.
Group EBIT* before one-off(3) - an indicator capturing the underlying business margin by excluding material non-recurring charges or profits caused by movements in provisions related to programmes and restructurings or foreign exchange impacts - totalled € 1,684 million (H1 2015: € 1,883 million).

Airbus Commercial's EBIT* before one-off was € 1,270 million (H1 2015: € 1,533 million), driven mainly by the back-loaded delivery profile, lower A330 production and transition pricing on the A320 and A330. Helicopters' EBIT* before one-off totalled € 144 million (H1 2015: € 162 million), mainly reflecting a less favourable mix. Defence and Space's EBIT* before one-off rose 22 percent to € 325 million (H1 2015: € 267 million), driven by good programme execution, its portfolio re-focus and efficiency measures.

Group self-financed R&D expenses decreased to € 1,309 million (H1 2015: € 1,506 million).

On the A380, delivery planning is being adjusted to 12 deliveries a year from 2018 with traffic growth supporting the programme's long-term perspective. On the A320 programme, preparation for the ramp-up continues with temporary issues, mainly linked to the supply chain, expected to be recovered by year-end. In the half-year, eight A320neos were handed over to three customers while in July the first aircraft fitted with CFM engines was delivered.

Twelve A350s were delivered in the first half of 2016 with the production ramp-up progressing. The A350 Loss Making Contract provision has been stable since the Full Year 2013 results - throughout the aircraft's certification, entry-into-service and ramp-up phase. As the ramp-up accelerates challenges are being faced on supply chain capability and performance, with the cabin still the critical pacing item and outstanding work causing some slower progress on

recurring cost convergence than planned. Due to this, a charge of € 385 million was taken in the second quarter as an addition to the LMC provision. This also includes lower escalation and delivery phasing. The target for a monthly production rate of ten A350s by the end of 2018 remains unchanged. On the A400M programme, five aircraft were delivered in the first half of 2016. The European Aviation Safety Agency certified an interim fix to the engine propeller gearbox (PGB) which, once available, will give air forces at least 650 flight hours before initial inspections of the affected parts of the PGB.

The first major development milestone of the mission capability roadmap defined with customers earlier this year was successfully completed in June with certification and delivery of 'MSN 33', the 9th aircraft for the French customer. Industrial efficiency and military capability remain a challenge for the A400M programme.

Furthermore, the EASA's Airworthiness Directive, linked to the PGB on the engine, and various PGB quality issues have strongly impacted the customer delivery programme. Management has subsequently reviewed the programme evolution and estimated contract result incorporating the implications at this time of the revised engine programme and its associated recovery plan, technical issues related to the aluminium alloy used for some parts within the aircraft, recurring cost convergence issues and finally some delays, escalation and cost overruns in the development programme.

As a result of the review, including an updated assumption of export orders during the launch contract phase, Defence and Space recorded an additional net charge of € 1,026 million. Commercial negotiations with OCCAR and the Nations are yet to take place with regard to the revised delivery schedule and its implications. As of today, the outcome of these negotiations cannot be reliably estimated. The potential impacts on the financial statements could be significant.

At Helicopters, the investigation into April's H225 accident in Norway is ongoing while the financial impact cannot be reliably estimated at this stage.
Reported EBIT*(3) of € 1,856 million (H1 2015: € 2,229 million) included net one-offs totalling € 172 million which comprised:

• The net charge of € 1,026 million related to the A400M programme;
• The € 385 million net charge on the A350 programme;
• A negative impact of € 509 million related to the dollar pre-delivery payment mismatch and balance sheet revaluation;
• A net capital gain of € 1,139 million linked to the creation of the Airbus Safran Launchers Joint Venture;
• A net capital gain of € 868 million related to the sale of shares in Dassault Aviation and a mark-to-market of the remaining shares;
• A total net capital gain of € 85 million related to portfolio adjustments at Airbus Commercial and Defence and Space.

Net income(4) rose to € 1,761 million (H1 2015: € 1,524 million) with earnings per share of € 2.27 (H1 2015: € 1.94) further supported by an accretion of around two percent related to the share buyback. The finance result was € -148 million (H1 2015: € -344 million).

Free cash flow before mergers and acquisitions amounted to € -3,236 million (H1 2015: € -1,025 million), reflecting the focus on the production ramp-up and transition. Free cash flow was € -1,119 million (H1 2015: € 549 million) and included € 1.2 billion from the sale of Dassault Aviation shares, € 750 million from the implementation of the second phase of the Airbus Safran Launchers JV and € 310 million from the sale of the Business Communications activities. The net cash position on 30 June 2016 was € 7.2 billion (year-end 2015: € 10.0 billion) with a gross cash position of € 19.5 billion (year-end 2015: € 19.1 billion).

Outlook As the basis for its 2016 guidance, Airbus Group expects the world economy and air traffic to grow in line with prevailing independent forecasts, which assume no major disruptions.

Airbus Group confirms its 2016 earnings and free cash flow guidance based on a constant perimeter:

• Airbus expects to deliver more than 650 aircraft and the commercial order book is expected to grow.
• Before M&A, Airbus Group expects stable EBIT* before one-off and EPS* before one-off compared to 2015.
• Before M&A, Airbus Group expects to deliver stable free cash flow compared to 2015, although the A400M industrial situation and delivery re-scheduling makes the achievement of the 2016 free cash flow guidance more difficult. Export Credit Agency financing is targeted to resume in the fourth quarter of 2016.

The perimeter change in Airbus Defence and Space implemented at H1 2016 is expected to reduce EBIT* before one-off and free cash flow before M&A by around € 200 million and EPS* before oneoff by around 20 cents.

* Airbus Group uses EBIT pre-goodwill impairment and exceptionals as a key indicator of its economic performance. The term "exceptionals" refers to such items as depreciation expenses of fair value adjustments relating to the former EADS merger and Airbus Combination, as well as impairment charges thereon.

Refer to full documentation in attachments box, located at the top left, below the headline.