Earnings Transcript for SAF.PA - Q1 Fiscal Year 2024

Operator: Welcome to the Safran First Quarter 2024 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.

Olivier Andries: Good morning, everyone. Thank you for joining us to Safran's first quarter 2024 call, and I'm here with Pascal. So let's go straight to the key highlights for the quarter. The air traffic good dynamics continues. Narrowbody air traffic ended the quarter at 113% of 2019 level, widebody at 94%. We expect widebody air traffic to fully recover by the end of this year. These good trends support the positive momentum in original equipment and services across all our businesses. We enter 2024 with a soft aircraft production level, with production rates expected to increase going-forward. We post today solid revenue growth in Q1 2024, in line with our full year guidance. This performance was mainly driven by services with notably civil aftermarket up by 27.3% and also by original equipment deliveries in Equipment & Defense. We closed the acquisition of Air Liquide aeronautical oxygen and nitrogen activities in February. We remain focused on meeting our customer commitments, mitigating short-term challenges on volumes and are confident in our ability to deliver our 2024 guidance. Turning to slide four. Let me give an overview of Safran's Q1 sales for 2024. Revenue is up 18% at EUR6.2 billion. We enjoyed double-digit revenue growth in all divisions. Services performed well across the board and in particular, in civil aftermarket, which grew by 27% year-on-year in U.S. dollars and by 12% compared to Q4 2023. This growth was mostly driven by long-term service agreement for both CFM56 and LEAP and is consistent with our full year guidance at 20% growth. OE performance was mainly driven by Equipment & Defense on a low comparison basis. LEAP deliveries were flattish year-on-year, reflecting a soft start of aircraft production. Taking into account this operating environment, we revised our LEAP delivery forecast from plus 20% to 25% growth to plus 10% to 15% for 2024. Turning to slide five, business highlights. Some of our main business successes since we last spoke in February. On civil engines, CFM signed a service agreement with American Airlines on more than 400 LEAP-1B and the Chinese aircraft leasing company, CALC, placed an order for 40 LEAP-1A. With respect to LEAP durability, CFM has shipped the first LEAP-1A outfitted with its new reverse blade system to Airbus. In Helicopter Engine business, we enjoyed a strong commercial momentum. We signed the support-by-the-hour contract for 50 Arriel 2E with ADAC Heliservice, which supports leading actors in helicopter rescue and medical transport in Germany and Netherlands. We won a new contract with the U.K. MOD to continue to support the RTM322 engines, powering the Royal Navy's fleet of Merlin helicopter for a further six years. And we have renewed our contract with the U.S. Coast Guard to support more than 240 Arriel engines, and Bristow Group selected Arrius 2B2 engines and support-by-the-hour contract for their new H135 fleet. In military engines, Safran and Qatar Armed Forces signed a support agreement for the M88 engines powering their fleet of 36 Safran. In our equipment business, we continued to sign several service agreements across all our activities, notably electrical harnesses with Malaysia Airlines Berhad, Nacelle with Cebu Pacific and flyadeal. Let me now hand over to Pascal for more details on Q1 sales.

Pascal Bantegnie: Thank you, Olivier. Good morning, everyone. Starting as usual with FX, the USD remained strong in the quarter, given the geopolitical context and interest rate expectations. Currency volatility is also on the rise. These two trends provide a favorable FX environment for Safran when it comes to hedging its exposure. So for 2024, we do confirm our hedge rate target of $1.12 per euro, which is $0.01 improvement compared to last year. Specifically, in Q1 2024, the average spot rate of 109 compares less favorably to Q1 2023, resulting in a negative impact on sales of about EUR50 million. Turning to page eight. Q1 revenue stood at EUR6.22 billion, a solid 19% organic growth or 18% when taking into account the negative translation impact from the USD. Also, the net impact in revenue is neutral at group level. Change in scope reflects the divestment of Cargo and Catering activities from Safran cabin last May and the acquisition of Thales Electrical Systems in October 2023 within Equipment & Defense. On slide nine, let me provide a few details per activity. Propulsion revenue stood at EUR3.1 billion, up 15% organic. OE revenue was up 10%. As Olivier already said, LEAP volumes were flat year-over-year at 367 units, reflecting the soft start of the year of aircraft production. In the same vein, helicopter engines and military engines had a soft start as well as expected. Revenue growth was mainly driven by favorable pricing and mix and positive volume growth in widebody engines, plus 50% year-over-year. Service revenue was up 19% organic, mainly driven by civil aftermarket. Let me clarify the drivers behind the 27.3% gross performance. The sales coming from either CFM56 or GE90 spare part came in line with expectations, meaning positive volume growth and pricing, but no change in work scope. This significant performance is all attributable to CFM long-term service agreements. We did experience additional costs in some contracts, leading to additional revenue as we recognize revenues as the cost incurred. So this is a phasing effect that will reverse as soon as Q2. And as you all know, Safran does not recognize any profits yet on these contracts. So on a full year basis, the Q1 performance has no impact on our full year guidance of plus 20%. Outside civil engine services were slightly up in helicopter and military engines. On Equipment & Defense, revenue stood at EUR2.4 billion, up 23% organic. This is a much better growth than in Propulsion as it faces a weaker comparative. OE revenue was up 27% organic, benefiting from the strong ramp-up in deliveries in narrowbody and widebody programs for landing gear, power and wiring activities and nacelles. Services were up 17% on all activities, notably carbon brakes, nacelles, landing gear spares and MRO. Electronics & Defense activities were strongly up in the quarter, led by higher deliveries in avionics, guidance systems and optronics activities. On Aircraft Interiors, revenues stood at EUR676 million, up 24% organic, which is still below the 2019 level for Q1. OE revenue was up 17%. Most of the increase came from custom cabin and galleys for A320. As you will have noticed, business class seat deliveries were down by 82 units, mainly due to continued delays in certification of some programs, but customer demand pushout as well as airlines expect to take deliveries of new airplanes later than expected and some supply chain constraints. Services revenue was up 39%, a strong performance with good customer demand for spare parts in both seats and cabin. Olivier, back to you.

Olivier Andries: Thank you, Pascal. To conclude, Q1 revenue and civil aftermarket growth are in line with our full year view. Supply chain production capabilities remain a key watch item. Our LEAP engine deliveries assumption is revised to 10% to 15% growth in 2024 compared to 2023 to reflect a soft start of the year in aircraft production. We reaffirm our financial objectives for 2024 and are confident in our ability to deliver our financial performance for the year. I thank you for your attention, and now Pascal and I will be very pleased to answer your questions.

Operator: Thank you. [Operator Instructions] Thank you. We will now take our first question. This is from the line of Ben Heelan from Bank of America. Please go ahead.

Ben Heelan: Yeah. Good morning, guys. Thank you again for taking the question. The first one I had was around LEAP in the updated guidance. You've lowered LEAP guide as we heard from GE last week, but aftermarket continues to be very good. So can you talk about your level of confidence around the EUR4 billion? I mean, it feels to me that there could be some upside risk to that. So if there's any color you can give around that would be very helpful. And secondly, we've had obviously production challenges like you mentioned across both OEMs and slow start to the year. Can you talk a little bit about how this is impacting your outlook for CFM aftermarket medium term? I mean, if you look at the data, retirements remain very, very low. The OEs can't deliver what thought that they were going to deliver. So how does that impact your thoughts around that midterm peak of CFM56 aftermarket? And then a third, a follow-up on cabin. It's been highlighted as an area of weakness in the supply chain. So can you just provide a bit of an update on the situation here and what exactly is causing the issues? Thank you.

Pascal Bantegnie: Good morning, Ben. This is Pascal. On your first question about any upside we may have on EBIT either coming from less LEAP deliveries or better aftermarket growth. First, on LEAP deliveries, WE are revising downwards our guidance for the year to plus 10% to 15% growth in deliveries. It has several impacts on the P&L. First, it has a negative impact on sales because we'll deliver less engines. It has a slight positive impact on EBIT, because we are selling all these engines at a slight loss. Then it has a strong negative on free cash flow, because we will receive less advanced payments compared to the initial budget we had. And there is a watch item, which remains the inventory level, because we need to make sure that we buy from the supply chain the strict amount of parts we need to build these engines and no more. Otherwise, there is a risk to have over inventory sitting at our place. Now on aftermarket, as I say, this is a strong performance in Q1, above our full year guide of 20%. But this is all driven by LTSA contracts, either for CFM56 or LEAP. And as you know, there is no EBIT impact due to the fact that we are not yet recognizing EBIT on that. And by the way, as I say, this strong performance will reverse as soon as Q2. So by the end of June, I would expect civil aftermarket to be in line with the full year guide namely around 20%.

Olivier Andries: Ben, on the midterm side for the CFM56 aftermarket, I have to say that we have already mentioned that, let's say, the lower ramp-up of new generation aircraft deliveries has a positive impact on the aftermarket for CFM56 spares as airlines basically have to fly more intensively with the CFM56 powered aircraft. As a consequence of that, the storage of the CFM fleet continues to decrease. It's down to 7.6% in March 2024, down from 8.1% in December 2023. This is a similar level as in 2019. And in 2019, there was not some -- there were not so many new generation aircraft in the fleet. So it's quite a very strong signal and a positive signal. Same situation on the retirement of CFM56 aircraft. It's a very low level of retirement in Q1. There's only been 36 aircraft being retired, so -- which is a very low level, even lower than before the COVID pandemic. So all that makes us feel good about the midterm CFM56 perspective, especially the peak that we continue to see mid decade, so 2025. But we believe, as we have already highlighted, that basically, it will remain at this level for probably two to three years. So yes, this is a positive. On cabin and seats, yes, we've seen some slippage of business class seats deliveries from Q1 that will slip into Q2 for certification and supply chain issues, because the supply chain issues are still there everywhere. And you have to know that basically the airworthiness authorities, FAA and EASA, in the aftermath of all the events that happened have just tightened quite significantly their request for certification, the requirement -- the level of requirements, especially on the certification test. And that does impact the entire interior industry. It's not only us. It does apply to everybody. So the certification rules have basically been changing and are much more demanding now than they used to be, and this is in the aftermath of what happened. And this is the reason why basically all the players in the aircraft interiors, cabin, seats, all of them are basically struggling a little bit with the timing of the certification test. Hope it's clear.

Ben Heelan: Yeah, that's very clear. Thank you.

Operator: Thank you. We'll now take our next question. Please stand by. Next question is from the line of George Zhao from Bernstein. Please go ahead.

George Zhao: Hi, good morning, everyone. First question on the guidance. I mean, you are producing LEAP deliveries by about 160 deliveries this year, which is not immaterial, but you left the full year revenue guidance unchanged, including for the civil aftermarket. So where is the positive offset coming when you stick to the revenue guide? And second one, this is the first time we're speaking since the Investor Day from GE recently. And we know that your accounting is independent, you wanted to wait until the CMD to share your financial targets. But I was wondering if you could share some early qualitative thoughts as you look at their chart showing that LEAP targets out to 2028. Now what would you say are the biggest source of variation between their and your target? Is it primarily just conservatism on the profit recognition, which is the case through '25 or differences in spares consumption or even MRO? I guess, what are the main buckets of differences? Thanks.

Pascal Bantegnie: Good morning, George. First, on your question with respect to LEAP, true, the downward revision is about 150 to 200 engines. Have in mind that it's not only installed engines, but also spare engines. So we expect to deliver less spare engines this year compared to the initial budget. And as you know, with spare engines come with some profit. On the revenue guide, true, this downward revision in LEAP will have a negative impact on revenue. But in the meantime, as you can see, we experienced more revenue coming from services, not only in Propulsion, but also in Equipment and Interiors. So all-in-all, we have not changed our revenue guide. We also had some contingencies included in that guide, which have now disappeared. Keep in mind as well that the dollar is a bit stronger compared to the $1.10 per euro assumption that we have. So it also helps in terms of revenues. On your second question on the profit recognition on LTSA contracts for the LEAP, we won't provide more color than we had in the past. And I won't refer to what GE said at their Capital Market Day. As you know, it will be the bulk of our discussion on December 5th when we held our Capital Market Day. The dynamic is good. We see flying hours going up, meaning more cash today being recognized in our statements, but no impact in terms of either -- well, in terms of profit, as you know. So the profit recognition methodology will be described later this year.

George Zhao: All right, thank you.

Operator: Thank you. We'll now take our next question. This is from the line of Ian Douglas-Pennant from UBS. Please go ahead.

Ian Douglas-Pennant: Thanks very much. Ian Douglas-Pennant at UBS. Could you help me understand a bit better the nature of the LTSA effect in Q1? Just a little bit more detail on exactly what this is, please? And then secondly, I just want to confirm on LEAP. You have indeed cut production capacity versus your initial expectations, and we're not going to see an inventory build, which would impact sales in future periods. So given that engines are a tight point in the supply chain, you're not going to build up some kind of buffer stock in any way.

Pascal Bantegnie: Good morning, Ian. On your question for LTSA dynamics in Q1, we have recorded more costs in Q1 that we had expected. As you know, we recognize revenue as we incur costs, so meaning more revenues, and this is why you have a strong aftermarket growth in Q1. But part of the cost we do recognize in Q1 were expected to fall into Q2. So we won't see this cost, meaning revenues in Q2. This is why I'm saying that by the end of June, on the full semester, I would expect civil aftermarket to be more or less in line with the full year 20% guide of 20%. So don't expect this strong Q1 performance to have any impact on the full year guide.

Olivier Andries: And Ian, on the second question, it is not our intention to build the buffer of LEAP engines, because this means cash. So yes, indeed, we will re-planify as we say our purchasing of parts, because we are not going to build an engine that the aircraft manufacturers are not going to take. We need to manage our cash and our inventory.

Ian Douglas-Pennant: Thanks. On the first question, I guess it's a detailed question. I'll follow up. Thanks so much.

Olivier Andries: Thank you.

Operator: Thank you. I'll now take our next question. Next question is from the line of Phil Buller from Berenberg. Please go ahead.

Phil Buller: Hi, there. Thanks for taking the question. I've got three, if I can, please, sorry. On the growth rate for OE for LEAP this year, obviously, that is quite a big change. Is that exclusively to B? Or is the A contributing in any way to that, please?

Olivier Andries: This is primarily B.

Phil Buller: Okay. Thank you. And the storage topic was interesting. Obviously, very good from a mix standpoint. But is there a capacity limit approaching in any way? It's clear why we can't really retire any less planes at this point. So from an MRO capacity or a spare part production standpoint, are there any constraints approaching?

Olivier Andries: We -- today, our revision, our -- yeah, our view or our outlook for shop visit on the CFM56, as we said in Feb, it's high single digit growth for the full year. And basically, there's the worldwide capacity to make it happen. So the capacity is there. And we don't have much supply chain issues on the CFM56 spare parts. Here and there, we need to focus, but it is not something that we believe will impair our ability to deliver spare parts.

Phil Buller: Thank you. And just finally, on the LTSA topic, I appreciate the lack of margin being recognized. But is there anything you're seeing when you're doing the work either positive or negative that may lead to your program margin assumptions changing in any way? Intuitively, it feels like early booking of revenue is possibly not a good thing, but perhaps I'm thinking about that wrong. Thanks.

Olivier Andries: It's still early. So we see ups and downs. So that's why we've decided to be cautious. Pascal?

Pascal Bantegnie: It's a balance of positive and negative news depending on contracts and where engines operate. So there is no change to our view. But from one contract to the other, we could face additional cost or less cost compared to expectations. But all-in-all, no change in our global view.

Phil Buller: Thanks very much.

Operator: Thank you. We'll now take our next question. Next question is from the line of Ross Law from Morgan Stanley. Please go ahead.

Ross Law: Hi, morning, everyone. Thanks for taking my questions. So first one on Interiors. You mentioned some customer pushouts and supply chain disruption. Are you still comfortable with maintaining at least the kind of breakeven level this year? That's the first one. And then secondly, on aftermarket growth, just a quick one. Of the EUR1.9 billion in sales in Propulsion Services, can you give us an idea of how much was specifically LEAP?

Olivier Andries: On interiors, yes, we maintain our target for breakeven this year on Interiors. I confirm, we maintain this objective.

Pascal Bantegnie: To be more specific, I would even say, we expect to be slightly profitable in cabin and at breakeven for seats, I guess, is the main point of your question. On aftermarket LEAP, RPFH represents a small portion of our civil aftermarket index. We have not cut any number, I think in the past, so I won't. Maybe to give you more color on the civil aftermarket guidance. As we say, revenues coming from spare parts on these CFM56 or the high thrust engines came in line with expectations. When we guided for 20% growth full year on civil aftermarket, we say during the [indiscernible] call that there should be less growth in spare parts and higher growth than the 20% average on services. Specifically, in Q1 we see the spare parts growth in line with expectations, but on services growth rate was much higher, but for a small portion of the civil aftermarket revenue base.

Ross Law: Okay, thank you very much.

Operator: Thank you. We'll now take our next question. This is from the line of Robert Stallard from Vertical Research. Please go ahead.

Robert Stallard: Thanks so much. Good morning.

Olivier Andries: Good morning.

Pascal Bantegnie: Good morning.

Robert Stallard: First of all, regarding the LEAP. How confident are you with this revised delivery plan, particularly with regard to the 1B? If the 737 issues continue, is there a risk of Boeing essentially destocking you, or bringing down production again? That's my first question. And then secondly, Airbus announced yesterday they're raising the A350 rate to 12 per month later this decade. Would that require any additional CapEx or investment for Safran? Thank you.

Pascal Bantegnie: Hello, Robert. On LEAP, the 10% to 15% revised guidance is our best estimate. Now the situation is the one you know. Still a little bit foggy, I would say. So this is our best estimate. We'll see what happens in Q2. And we -- I don't know, we think -- I mean this is our best assumption. We think -- we may -- we'll see what happens in Q2 at B. And from there, we'll see whether we revise or not this guidance for the full year. That's the best I can say. On A350, there is not much CapEx involved to increase to 12 on our equipment. This is mainly landing gear for us, some other wiring and electric equipment. So no, I don't expect there's any big CapEx requirement to do that. The 12 rate was the rate that was originally planned before COVID.

Robert Stallard: Thank you very much.

Operator: Thank you. We'll now take our next question. This is from the line of Tristan Sanson from BNP Paribas Exane. Please go ahead.

Tristan Sanson: Yes. Good morning, gentlemen. Thanks for taking my question. The first one would be maybe on spare engines. Last year, you had a pretty front loaded spare engine activity in Q1. Can you comment on how the business has been behaving this year in Q1? And you said you're expecting a slightly less supportive trend for the full year than initially expected. If you can quantify it, that would be great. Second is on equipment shipments. I'm a bit surprised by the strength of the shipment, for instance, on the A320neo in Q1. We know that in the past you had a slightly differing trajectory compared to airframers, maybe a bit lower at the beginning of last year. Is there some kind of restocking ongoing to support the A320 that is supporting the activity right now? And a final one, I just wondered whether you had any ideas about how to use the production capacity that was freed by the reduction in the LEAP production target for this year whether you could reallocate that to publicly spare engines. That's not the case, but maybe to other engine types or spare parts production or anything else that would be useful. Thank you.

Pascal Bantegnie: Morning, Tristan. On spare engines, we expect no impact on the spare engine ratio compared to the installed base. But as we have less installed engines, as I said earlier in the call, there will be less spare engines. But in terms of ratio between the two, it is unchanged. That ratio is reducing over time. It was significantly higher than the average of the 7%, 8% that we usually quote on a program like CFM56 or what we expect on the LEAP. So you should expect this ratio to gradually reduce over time. And again, in '24, same as in '23, I would expect the shipments of spare engines to be frontend loaded in H1 compared to H2.

Olivier Andries: Tristan, on the equipment shipment, you can see page 14, especially on the A320neo. There is a significant increase on landing gear sets. There's almost no increase on nacelle. And at the end of the day, this is for the same aircraft. So it's just a question of buffer at the airframer. So basically this means that they had a buffer on nacelle, and they wanted to basically to increase their buffer on landing gear. That's basically -- it reflects -- our deliveries do reflect the demand of the airframer.

Pascal Bantegnie: And there was a third question about shall we build -- if I understood well, more spare engines or move from 1B to 1A.

Olivier Andries: 1B to 1A we have already discussed the fact that there is almost no commonality between both engines. Even if the supply chain is partially the same. So what I can only say is it will give us, yeah, as a consequence, some airframe and basically facilitate, I would say our adherence to the airframe of demand and to the airline's demand.

Tristan Sanson: I didn't specifically mention the 1A or it's from 1B to 1A, but I mentioned the possibility to increase spare parts production, which I think in the past is sometimes something you used to -- use some free capacity available. Is this something you're considering today, increasing the production of spare parts as well?

Olivier Andries: I mean, we have not been -- let's say, we have not struggled on spare parts. I mean, the supply chain issues have not been so far a big issue for spare parts deliveries. So no, there is no direct link between LEAP production and CFM56 spare parts production. No, we have not been limited on our ability to produce spare parts that are needed by the market.

Tristan Sanson: That's really helpful. Thank you so much to both of you.

Operator: Thank you. We'll now take our next question. Please stand by. Next question is from Chloe Lemaire from Jefferies. Please go ahead.

Chloe Lemaire: Yes, good morning. I have a follow-up on the LEAP, please. I was wondering if you could confirm at which rate you're delivering to Boeing at the moment. Is it tracking in line with their own production or are you closer to the 38 that they intend to ramp up rather soon? And how should we think about the evolution of LEAP deliveries as you -- as they go back to that rate? Second question is on Interiors. The two products for which you disclosed, deliveries were down 25% lavatory and business class seats. So are economy seats and other OE products up strongly, or is it a matter of pricing for OE sales to still be up in the division? Thank you.

Olivier Andries: Hello, Chloe. Rate of delivery of LEAP-1B to Boeing, we have basically continued in Q1 to deliver as per their initial request. So basically the buffer of engines that are at Boeing -- of LEAP engine at Boeing has increased since the start of the year. And obviously, we'll take that into account for the adjustment of the deliveries going forward. On Interiors, no, economy seats are moving up. Deliveries of economy seats are moving up. I don't have the indicator here. We've not mentioned it, but it's up. It's up.

Pascal Bantegnie: But Chloe, as we say, pricing plays a positive role in revenue there.

Chloe Lemaire: Okay. Thank you.

Olivier Andries: And the aftermarket is moving up as well on cabin interiors, cabin and seats. It's moving up. We'll take maybe a couple of questions, if any.

Operator: Thank you. Yes, we have two more. Next question is from the line of Christophe Menard from Deutsche Bank. Please go ahead.

Christophe Menard: Yes, good morning. Thank you for taking my question. I had two last one remaining questions. The first one is on the defense sales within Equipment & Defense. Correct me if I'm wrong, but it's probably the first time that you highlight such a high growth. So the question is, what was the level of organic growth? And how sustainable is it across quarters for that? And the second is linked to your M&A. You mentioned Air Liquide aeronautical oxygen systems. Can you remind us of your M&A priorities? I mean, you've been in the press for artificial intelligence unit in France. So what are the priorities, bolt-on and technology-wise? Thank you.

Olivier Andries: Hello, Christophe. On defense, yes, we are planning for a strong growth on our defense electronics and equipment business for the full year. And we believe it's going to be sustainable. We are mainly involved in optronics. So optronics for UAVs, for helicopters, for combat vehicles, for ships and vessel and submarines. So the demand is quite dynamic there. And we are also involved in navigation, inertial navigation as well as we have guided bomb named AASM, which is a guided bomb for which the demand is strong as well. So yes, I would say this is mainly organic. The growth is mainly organic and this is sustainable we believe. On M&A, our priorities are still the same, no change, bolt-on acquisition. And on defense, this is an area where we are looking at for bolt-on acquisition if it makes sense, on technology-wise, economically-wise to reinforce our portfolio of activities. But it has always to have a connection with what we do today. So yes, still bolt-on acquisition. And artificial intelligence, this is an area that we look at.

Christophe Menard: Okay. And just -- thank you very much for that color. On the defense organic sales growth in Q1 and the rest of the year, are we talking 20% or 15%? Or can you give some sort of an area of -- or ballpark estimates of the organic growth we're looking at?

Pascal Bantegnie: The sales in Q1, Equipment & Defense was up 22.7% organic. Defense was in the same vein.

Christophe Menard: Okay. Thank you very much.

Operator: Thank you.

Olivier Andries: The last question?

Operator: Yes, we have one more question. Please stand by. And the last question is from Olivier Brochet from Redburn Atlantic. Please go ahead.

Olivier Brochet: Yes. Good morning, Olivier. Good morning, Pascal. Thank you very much for squeezing me in. I will have three very quick ones. The first one on the LEAP LTSA. Is there anything in what you've seen in the first quarter that makes you confident that this is not going to happen again in Q2 or in Q3, this, I would say, higher cost that you've seen? Second one on the widebody growth in commercial aftermarket, how does it compare with the average of the 27%? And last one on the 787, Boeing mentioned that it was producing at a lower rate than the five that they were targeting, around three probably. Does it impact growth in Q2, Q3 for you? Thank you.

Pascal Bantegnie: Good morning, Olivier. Again, on the LTSA, this is purely a phasing effect between Q1 and Q2. Again, we were expecting some costs in Q1, Q2, Q3, Q4. Some costs that were due to fall in Q2, did fall in Q1. Hence, the boost in revenue that we see. But once again, it will reverse, fully reverse in Q2. On the spare part sales for widebody, I would say again, it's in line with expectation. Remember that back in 2023, we did experience lower growth in widebody engines spare parts compared to the CFM56. This year in '24, we would expect CFM56 spare parts growth to be lower than what we should experience in widebody engines, because there is some kind of a catch-up, which is expected this year. And what we see in Q1 is that widebody spare parts growth is higher than CFM56.

Olivier Andries: On 787, well, we are on board this aircraft through landing gear, through wiring. And also on cabin interiors, many seats -- some seats. So yes, we may be impacted if Boeing does lower their production plan on 787. But it will not change significantly our equipment top line globally.

Olivier Brochet: Thank you very much.

Pascal Bantegnie: Thank you, Olivier.

Olivier Andries: Thank you.

Pascal Bantegnie: Talk to you soon.

Olivier Andries: Thank you.

End of Q&A:

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