RISK FACTORS

Perspectives of Airbus
Group

Introduction
Any company is subject to many risks and
uncertainties that may affect its financial
performance
Additional Risks and uncertainties currently
Financi
al
unknown may also impact
company
Market
Risks

Industrial
&
Environm
ental
Risks

Risks and
Uncertainti
es

Legal
Risks

Busine
ss
Related
Risks

Financial Market
Risks

Financial Market Risks

Global Economic and Sovereign Debt Concerns
As a global company, its operations and performance
depends significantly on market and economic
conditions in Europe, the US, Asia and the rest of the
world
Market disruptions and significant economic
downturns may develop quickly and affect:

Credit or liquidity markets

Regional or global crisis
Sharp fluctuations in commodity prices
Restructuring or defaults

Any such disruption or downturn could affect the

companys activities for short or extended periods
These may have negative impacts on the company's
future results of operation and financial condition.

Financial Market Risks

Global Economic and Sovereign Debt Concerns
European financial markets have recently
experienced significant disruptions
Due to concerns regarding the ability of certain
countries in the Euro-Zone to reduce their budget
deficits and refinance their sovereign debt
obligations
The ECB and Eurozone policy have so far succeeded
to stabilise the eurozone and European banks
Improvement in the governance of the Eurozone
banking system has led to decreasing the volatility of
Euro against other major currencies
However, the asset quality of banks remain a risk for
the financial system
Despite signs of slow recovery, EU sovereign debt

Financial Market Risks

Global Economic and Sovereign Debt Concerns

If economic conditions were to deteriorate, there

could be a new or incremental tightening in the
credit market, low liquidity and extreme volatility in
credit, currency and equity market
This could impact companys business, including:
Postpone or cancelation of orders due to lack of adequate
credit supply from market to finance aircraft or weak levels of
passenger demand
Increase in amount of sales financing to customers to support
aircraft purchases and increased exposure to risk of defaults
Reduction in public spending for defence, homeland security
and space activities
Insolvency of key suppliers impacting companys ability to
meet its customer obligations in a satisfactory and timely
manner
Reduce the availability of bank guarantees needed by the

Financial Market Risks

Foreign Currency Exposure
Revenues denominated in USD, while a major
portion of costs is incurred in Euro and little bit in
Pounds sterling
To manage the impact of the market changes on
the profits, company has implemented long term
hedging portfolio
Its future USD denominated revenues are
converted to Euro or Pounds sterling

Financial Market Risks

Foreign Currency Exposure
The exchange rates at which the company is able
to hedge its foreign currency exposure may also
deteriorate
Above was the case for past few years with the
steady appreciation of the Euro against the USD
The portion of companys USD denominated
revenues that is not hedged, will be exposed to
changes, it may be significant
The companys ability to compete may erode, if
any of the companys principal currencies
appreciates in value against the principal
currencies of such competitors
The companys consolidated revenues, costs,
assets and liabilities are reported in Euro,

Financial Market Risks

Sales Financing Arrangements
To support sales, company agree to participate in
financing of selected customers
This lead to significant portfolio of leases and
other financing arrangements with airlines and
other customers
This leads to:
Credit risk customers ability to perform its obligations
Aircraft value risk unexpected decrease in future value
of aircraft

Above risks are mitigated by:

Optimised financing and legal structures

Diversification over a number of aircraft and customers
Credit analysis of financing counterparties
Provisioning for the credit and asset value exposure, and

Financial Market Risks

Counterpart Credit
The company is also exposed to credit risk to
extent of non-performance by its counterparties
for financial instruments
To manage this, company limit its transactions
with highly rated financial institutions, corporates
or sovereigns.
The credit exposure and limits are reviewed on
regular basis
Certain level of diversification is also done
between individual counterparties, financial
institutions, corporates and sovereigns to avoid
increased concentration of credit risk
The progressive implementation of financial
regulations will impact the business model of

Financial Market Risks

Equity Investment Portfolio
The company holds several equity investments
for industrial or strategic reasons, the business
logic of same may vary over the life of
investment
Company invest in associates at fair value
Other investments are minor and those are
insignificant
Treasury shares are not considered as being
exposed to risk, as any change in value of
treasury shares is recognised directly in equity on
time of sale in market (Fully .

Financial Market Risks

Pension Commitments
The company participates in several pension
plans for both executives as well as non-executive
employees
These are underfunded, leading the company to
record additional provisions in respect of such
plans
Adjustments of such provisions are driven by:
The discount factor and Inflation Rate to calculate NPV
The performance of the asset classes represented in
pension assets
Additional cash injections in pension funds

Any additional provisions have a negative effect

on companys total equity, which may impact
future financial conditions

Financial Market Risks

Tax Issues
Due to operations in numerous jurisdictions and
sales around the world, the company is subjected
to tax legislation in a number of countries
Company endeavours to structure its operations
and transactions in tax efficient manner
But still company is exposed to risk of getting its
interpretations challenged by the tax authorities
The tax laws and regulations that apply to
companys business may be amended by the
authorities.
Any such change could effect the overall tax
efficiency of the company.

Business Related
Risks

Business Related Risks

Commercial Aircraft Market Cyclicality
The market for commercial aircraft has shown
cyclical trends due to changes in passenger
demand for air travel and cargo
The key factors for determining the market for
commercial aircraft includes:
Economic or Gross Domestic Product (GDP)
Average age and technical obsolescence of the fleet
relative to new aircraft
Number of aircraft taken out of service & parked
pending potential return into service
Passengers and freight load factors
Airline pricing policies
Airline financial health and availability of external
finance
Deregulation

Business Related Risks

Commercial Aircraft Market Cyclicality
The market for commercial aircraft has shown
cyclical trends due to changes in passenger
demand for air travel and cargo
The key factors for determining the market for
commercial aircraft includes:
Economic or Gross Domestic Product (GDP)
Average age and technical obsolescence of the fleet
relative to new aircraft
Number of aircraft taken out of service & parked
pending potential return into service
Passengers and freight load factors
Airline pricing policies
Airline financial health and availability of external
finance
Deregulation

Business Related Risks

Terrorism, Pandemics and Other Catastrophic Events

As past terrorist attacks and the spread of

pandemics (such as H1N1 fl u) have
demonstrated, terrorism and pandemics may
negatively affect public perception of air travel
safety and comfort, which may in turn reduce
demand for air travel and commercial aircraft.
Major airplane crashes may have negative impact
on demand
The Company may suffer from a decline in
demand for aircraft and customers may postpone
delivery or cancel orders.
In addition to affecting demand for its products,
the occurrence of catastrophic events could
disrupt the Companys internal operations or its

Business Related Risks

Dependence on Key Suppliers and Subcontractors

Legal Risks
Legal Risks arise due to the following factors : Joint Ventures and Minority Holdings
Product Liability and Warrenty Claims
Intellatual Property @ Copyright, Trademark,
Trade Secret Laws, Agreement between
Employees, Customers Suppliers, Technoloy.
Export Controls and Other Laws and
Regulations
Legal and Regulatory Proceedings.

Industrial and Enironmental

Risk
A Global Company has
to follows regulations related
to Health, Safety and Enviroment of various countries
around the world.
Due to these regulations, global company contine to
incur significant capital expenditure and other
operating costs to comply complex laws and
regulations.
If company fails to complythe HSE requirement, even
if caused by factors beyond its control, the failure may
result in criminal penalties and fines.
In case of any industrial accident, company may incur
huge losses as all the liabilities may not be entirely
coverd by insurance.
If any products soldfails to comply the HSE
requirement, company may incur administartive, civil