Ladies and gentlemen, thank you for standing by. Welcome to the Airbus Q1 2023 Results Release conference call. I am Sharon, the operator for this conference. Please note that for the duration of the presentation, all participants will be in a listen-only mode, and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. At this time, I would like to turn the conference over to your host, Guillaume Faury, Xavier Tardy, and Hélène Le Gorgeu. Please go ahead.
Thank you, Sharon. Good evening, ladies and gentlemen. This is the Airbus Q1 2023 Results Release conference call. Guillaume Faury, our CEO, and Xavier Tardy, our interim CFO, will be presenting our results and answering your questions. This call is planned to last around an hour. This includes Q&A, which we will conduct after the presentation. This call is also webcast. It can be accessed via our homepage by clicking on the dedicated banner. Playback of this call will be accessible on our website. There is no dedicated phone replay service. The supporting information package was published on our website earlier today. It includes the slides, which we will now take you through, as well as the financial statement. Throughout this call, we will be making forward-looking statements.
I invite you to refer to our safe harbor statement that appears in the presentation slide and applies to this call as well. Please read it carefully. Now over to you, Guillaume.
Thank you, Hélène. Hello, ladies and gentlemen. Thank you for joining us today for our Q1 2023 results call. I'm happy to be here in Amsterdam with Xavier, who acts as our interim Chief Financial Officer prior to Thomas Toepfer's arrival in September, and Hélène, our Head of Investor Relations, who you know well and you just heard. We will now run you through our results. During our full-year result call less than three months ago, we highlighted the strong demand in all areas of our business, and particularly for commercial aircraft. We also mentioned that we expected to continue operating in an adverse environment. This has been confirmed in Q1. On one hand, our customers continue to express a strong appetite for our product portfolio, as highlighted by the recent announcement from Air India.
We observe the geopolitical situation which remains complex and turbulences in the banking sector. When it comes to the supply chain, we continue to observe persisting tensions across the sector in many areas, such as labor, raw materials, engines, as well as a range of buyer furnished equipment, for example, seats. Here, I'd like to remind you that the delivery profile is planned to be backloaded this year. In Q1, we delivered 127 aircraft, roughly in line with our plan. This is reflected together with a good performance of our helicopter division in our EBIT Adjusted that stood at EUR 4.8 billion. Our free cash flow before M&M customer financing was minus EUR 0.9 billion, consistent with the necessary inventory built up as we execute our ramp up and consistent with the number of deliveries.
As announced during the full year 2022 results, we target to deliver around 720 aircraft in 2023. We keep our full year 2023 guidance unchanged. Let's now look at our commercial environment. During the first quarter, our global air traffic continued to improve, driven by the acceleration of domestic and regional markets that are now trending close and sometimes above previous levels, while international traffic continues to be paced by the reopening of China. By the way, I was delighted to be there in China a few weeks ago for the first time since 2019, and I was quite impressed with the strong momentum and energy I observed. Airlines are now gearing up for a busy summer season ahead, as indicated by the current level of advanced bookings, in spite of inflationary pressures and higher fuel prices.
Our new generation aircraft are and remain in high demand as customers continue to be actively engaged into fleet planning to fill the skyline in the years to come. Let me remind you of our orders and backlog in Q1. We booked a total of 156 gross orders and recorded 14 cancellations. Net orders were positive at 142 aircraft, and our backlog in units amounted to 7,254 across at the end of March 2023, including 6,075 A320 family aircraft. Looking at helicopters, in Q1 2023, we booked 39 net orders versus the 56 in Q1 2022. The bookings in 2023 were well spread across programs. We are honored GDAT, one of our Chinese customers, has decided last month to bolster their fleet with 50 civil H160s.
This contract is the largest single order for the program on the civil and parapublic market. This order is not yet reflected in our order book as of the end of March 2023. In addition, we continue to see positive momentum in home countries for both civil and military markets. Finally, in defense and space, the conflict in Ukraine has highlighted the essential role that defense and space plays for society and the importance for European nations to support their security and defense industry. We started the year with a good order intake of EUR 2.5 billion in Q1 2023. The extensive use of our military aircraft across the portfolio is reflected by the good order momentum in services. We also received an order for an additional MRTT, which is showing its capabilities as a military oil tanker since its arrival in the NATO fleet in 2020.
In space systems, despite a difficult environment, our Q1 orders highlight the strength of our products. We recently booked the so-called slice two of the order for the European Service Module, the ESMs four, five, and six of the Orion spacecraft. ESM is an integral part of the Artemis mission and is powering humankind's return to the moon. In April, an Ariane five successfully launched the Airbus design and built Jupiter Icy Moons Explorer, or JUICE, for its eight-year journey to Jupiter. This demonstrates what the best of Europe can deliver when it comes together. By the way, this means that there is only one Ariane five launch left before transitioning to Ariane six. Before moving to financials, let me give you a quick update on two strategic future programs.
On FCAS Demonstrator phase Ib, the signature of which was celebrated last Friday by the defense ministers of France, Germany, and Spain. This FCAS Demonstrator phase Ib is now in progress, paving the way for the in-flight demonstrations phases. In the Eurodrone program, we continue to progress and carefully build up what will facilitate the preliminary design review, so-called PDR, in the second half of this year. Now, Xavier will take you through our financials. Xavier, the floor is yours.
Thank you, Guillaume. Hello, ladies and gentlemen. Our Q1 2023 revenues slightly decreased to EUR 11.8 billion, mainly reflecting the lower number of commercial aircraft deliveries and partly offset by a higher contribution from our helicopters division. Our Q1 2023 EBIT Adjusted decreased to EUR 0.8 billion from EUR 1.3 billion in Q1 2022. Q1 2022 included a net EUR 0.2 billion positive impact from non-recurring elements related to retirement obligations and to international sanctions against Russia. The year-over-year decrease in our EBIT Adjusted also reflects the lower commercial aircraft deliveries, a slightly less favorable hedge rate versus Q1 2022, as well as investments for preparing the future. On R&D, our expenses in Q1 2023 stood at EUR 0.7 billion versus EUR 0.6 billion in Q1 2022.
We continue to expect our full year R&D to slightly increase compared to last year. Our Q1 EPS Adjusted stood at EUR 0.72 based on an average of 788 million shares. Our Q1 free cash flow before M&A and customer financing was minus EUR 0.9 billion, mainly reflecting deliveries and the necessary inventory buildup as we execute our ramp-up. Now on to the next slide regarding our profitability. Q1 2023 EBIT Reported was plus EUR 0.5 billion.
The level of EBIT adjustments total a net negative EUR 0.4 billion, including a -EUR 360 million negative impact from FX mismatch and balance sheet revaluation, mainly reflecting the mechanical impact coming from the difference between transaction date and delivery date, -EUR 9 million related to the Aerostructures transformation, and -EUR 14 million of other costs, including compliance costs. EPS reported includes +EUR 149 million of financial results. It mainly reflects the positive impact from the revaluation of certain equity investments, partly offset by negative impact coming from the revaluation of financial instruments and the net interest result. The tax rates on the core business continues to be around 27%. The effective tax rate on net income is 19%, including the tax effect on the revaluation of certain equity investments.
The resulting net income is EUR 0.5 billion, with earnings per share reported of EUR 0.59. Now, regarding our USD exposure coverage, in Q1 2023, $3.7 billion of forwards matured with associated EBIT impact and euro conversions realized at a blended rate of $1.22 versus $1.21 in Q1 2022. In Q1 2023, we also implemented $2.8 billion of new coverage at a blended rate of $1.10. As a result, our total USD coverage portfolio in U.S. dollars stands at $93 billion, with an average blended rate of $1.24, compared to $93.9 billion at $1.24 at the end of 2022.
As announced during the full year disclosure, we adjusted our portfolio through rollovers to reflect the adapted ramp-up trajectory and our delivery target for 2023. On to a more detailed look at the free cash flow. Our free cash flow before M&A and customer financing was -EUR 0.9 billion in Q1, as we continue to focus on ramp-up. This outflow was mainly driven by the change in working capital and largely reflects a mechanical inventory buildup, resulting from the execution of our ramp-up plan and from lower wide-body deliveries. The A400M continued to weigh on our Free Cash Flow before M&A, less so than in Q1 2022. Our Q1 2023 CapEx was around -EUR 0.5 billion, versus -EUR 0.3 billion in Q1 2022.
We expect our CapEx to slightly increase in 2023, supporting our industrial ramp-up. Free cash flow was minus EUR 0.9 billion, with nearly no impact from M&A and customer financing. The aircraft financing environment remains solid, with sufficient liquidity in financial markets for our products. However, this low level of customer financing activity might not be sustainable. Our net cash position stood at EUR 8.4 billion as of the end of March, and our liquidity remains above EUR 30 billion. Back to you, Guillaume.
Thank you, Xavier. Very clear. On to commercial aircraft. In Q1 2023, we delivered 127 aircraft to 54 customers. After a slow start in deliveries at the beginning of the year, we delivered 61 aircraft in March. Looking at the Q1 2023 situation by aircraft family, on A220, we delivered 10 aircraft, and we continue to ramp up to reach rate 14 by middle of the decade. On A320, we delivered 106 aircraft, of which 59 A321s. This included the first A321 from our FAL in China. The first FAL, of course, not yet the second one. We continue to ramp up towards a production rate of 65 aircraft by the end of 2024 and 75 in 2026. No change. I was happy to announce a few weeks ago our decision to add a second FAL in Tianjin.
This will increase our global A320 family industrial capacity up to 10 final assembly lines, supporting Airbus to reach its commitment to produce 75 aircraft per month. The XLR, the flight test program is progressing towards entering to service, expected to take place in Q2 2024. No change. Wide body, we delivered 11 aircraft in Q1, of which six A330 and five A350s. Previously announced, we target rate four in 2024 on the A330 and rate nine on the A350 at the end of 2025. The A350 freighter, the first components were recently produced by Airbus Atlantic in Nantes. The first milestones are reached, we are now slightly adjusting our industrial planning for this variant, with the entry into service now slipping into early 2026. Slight change.
Now let's look at Airbus commercial financials for Q1. Revenues decreased by -5% year-on-year, mainly reflecting a lower number of deliveries, partly offset by the strengthening of the U.S. dollar. The EBIT Adjusted decreased to EUR 0.6 billion from the EUR 1.1 billion in Q1 2022, reflecting, as I said, the decrease in deliveries, a slightly less favorable hedge rate versus Q1 2022, and investments for preparing the future. Q1 2022 included positive impacts from retirement obligations, partly offset by the impact resulting from international sanctions against Russia. Now looking at helicopters. Excuse me. In Q1 2023, we delivered 71 helicopters, 32 more than in the first quarter of 2022. This was mainly driven by the light segment.
The deliveries include the 500th NH90 delivered by NHIndustries to the French Army Aviation. Revenues increased 26% year-on-year to EUR 1.6 billion, mainly reflecting a solid performance across programs, favorable mix effects, and a good start in Q1 for services. As a result of this solid performance, EBIT Adjusted increased to EUR 156 million. Here also, Q1 2022 included net positive non-recurring elements, to be reminded. Let's complete our review of Q1 with Defense and Space. Revenues decreased 6% year-on-year, mainly driven by lower volume in military air systems and in space systems. This decrease is reflected in the EBIT Adjusted. Again, Q1 2022 also included net positive non-recurring elements. On the A400M, we delivered one aircraft in Q1 2023. We continue with development activities towards achieving the revised capability roadmap.
Retrofit activities are progressing in close alignment with the customers. Risk remain on the qualification of technical capabilities and associated costs on aircraft operational reliability, on cost reduction, and on securing overall volume as per the revised baseline. Moving forward, let me remind you of our guidance issued in February. As the basis for its 2023 guidance, the company assumes no additional disruptions to the world economy, air traffic, the supply chain, the company's internal operations, and its ability to deliver products and services. The company's guidance is before M&A. On that basis, the company targets to achieve in 2023 around 720 commercial aircraft deliveries and EBIT Adjusted of around EUR 6 billion and free cash flow before M&A and customer financing of around EUR 3 billion. No change to our guidance.
Let me now summarize the priorities which have also not changed since our full year results call. It starts obviously with our delivery target of 720 commercial aircraft. We all remain focused on ramping up production across all our commercial aircraft programs in close collaboration with our suppliers to meet high customer demand for single aircraft and the growing need for new, fuel-efficient wide bodies. In parallel, we continue the long-term transformation of the company towards sustainable aerospace with a clear focus on digitalization and decarbonization. On digitalization, I want to highlight from our defense business the first in-flight autonomous guidance and control of a drone from an Airbus A310 MRTT above Spain, major milestone. On decarbonization, we continued to be very active in Q1. Highlights include the validation by SBTi of our near-term Scope 1, 2, and 3 emissions reduction targets.
The first flight of the Disruptive Lab helicopter demonstrator, which targets a 50% reduction of emissions. The first flight of an A321 with both engines fueled by 100% of SAF, sustainable aviation fuel. Our investment together with customer and partner, Qantas, in a biofuel production facility in Queensland, Australia. On sustainable aviation fuels, SAF, we are encouraged to see momentum across the globe, and this includes governments putting in place supporting legislation. In Europe with Fit for 55 and ReFuelEU, and in the U.S. with the IRA, the Inflation Reduction Act. Most recently, we signed an MoU with the China National Aviation Fuel Group, CNAF, the Chinese airport fuel provider, to develop cooperation on SAF. We expect this to be another major contribution to reach 10% penetration globally, 10% penetration of SAF globally by 2030, and of course, grow thereafter.
This is it, for my opening remarks today. I'm sure you have questions about this quarter. As I said, overall Q1 execution has proven consistent with our 2023 plans. Hélène, back to you. Thank you.
Thank you, Guillaume. We will now start our Q&A session. Please introduce yourself and your company when asking a question. Please limit yourself to two questions at a time, and this includes sub-questions. Also, as usual, please remember to speak clearly and slowly in order to help all participants, particularly ourselves, to understand your question. Sharon, please go ahead and explain the procedure for the participants.
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one one on your telephone keypad. Please limit yourselves to two questions only. The first question. Just bear with me. It looks like we've lost the first question. He's disconnected. I will go to the next question. One moment. Your first question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead. Your line is open.
Hi. Good afternoon. Thanks for taking my questions. I'll take the option to ask two. First one, just in terms of like, we've seen a lot of news flow regarding deliveries and delays in the supply chain. And you've mentioned obviously before that it was back and loaded. Just wanted to sort of Get a view on what sort of what's noise and what's reality. When you mean back-end loaded now, is it more back-end loaded than you meant when we spoke about the full year? What is the exactly the pressure points at the moment? Is it more engines? Is it more internal ramp up? If you can elaborate on that.
The second question, more sort of in terms of the capital allocation and your obviously, the free cash flow in 1Q is a little bit better than the street expected. You're not doing in VDN. I think you've also done some tweaks in the net debt definition a few months back, and you would probably be now, I think, on the old definition, at more than EUR 10 billion cash, which you said was the threshold for the buyback. What prevents you from sort of launching the buyback at this point? Anything has changed in terms of thinking about capital allocation? Those are my two questions. Thank you very much.
Yes, thank you, Daniela. When it comes to the operating environment and the supply chain situations as expected, unfortunately, and as we highlighted already earlier today, earlier, sorry, during the full year result 2022 in February, there are a lot of supply issues here and there. You see it through the reports. Actually, some of those problems we continue to face the same kind of issues. I went through the list on a short list during my initial speech. It's not more backloaded for 2023 than what we suggested two months ago when we gave the guidance. It's an imbalance between the first half of the year and the second half.
We will have, we expect a very strong September, October, November, December moving forward. I would say no change from that perspective. Production and deliveries are backloaded. We knew it, and that's what we're facing. Probably a bit more issues on the engine side as we see the combined challenges for the engine makers to supply Airbus for the production and delivery of new planes, but as well, the pressure coming from in-service as the customers are flying very much and that we've seen a big increase in the flight hours being flown and the flight cycles in the market, therefore putting pressure on the support and services of engine parts and the MRO parts for engines. When it comes to capital allocation, well, I'm a bit surprised by your, by your statement.
We are not at EUR 10 billion net cash. We have said that we would discuss potential change in the capital allocation once we cross that bridge. I think that's the word we used when we crossed that mark. We're not there. That's not a discussion for today.
Got it. Thank you.
Thank you.
Thank you. We will now take your next question. Your next question comes from the line of Ben Heelan from Bank of America. Please go ahead.
Yeah. Hi, everybody. Thank you for the questions. The first, Guillaume, I wanted to ask you on the A350, because A350 deliveries have been very, very weak through the 1st quarter. It looks like they're gonna be weak again in April. Is there something going on with the deliveries here that we need to be aware of? When do you think we will start to see A350 in particular improving? Then following on from Daniela's question on supply chain, I wanted to ask about... 'cause when we see and hear from other suppliers through Q1, I mean, a lot of the suppliers have said that they see things getting a bit better, they see things getting easier. We saw engine deliveries of LEAP and GTF improving quite a lot as well.
It feels as though it's getting easier, but yet the deliveries continue to be weak. Is there something going on in the delivery centers at Airbus that needs resolving? Thank you.
Maybe starting with your second point. Well, indeed, we need all suppliers to be delivering on time and improving the situation to be able to deliver ourselves on time. I said in February that we would increase inventory and I mean the leeway on the production, on the storage and temporal inventories of parts and components to be safer and secure our 2023 deliveries. That's what we are doing. It comes with an increased working capital, industrial working capital that is weighing on our free cash flow. But there's no specific issue or difference compared to what we were expecting in the production profile at Airbus compared to the plan beginning of this year.
It's a weak Q1, but it's a Q1 that is in line with what we had planned for 2023, and therefore very much still consistent with the perspective for 2023, and therefore we maintain the guidance in the number of deliveries. That applies as well to the A350, and you're right in saying that Q1 has been weak on the A350 deliveries. Q2 will be weak as well. The A350 will be backloaded with a very strong H2 and Q4 expected on the A350. That's the overall background that we are facing. What I can say is that the production ramp up that is necessary to support deliveries at a later stage, and therefore supporting the guidance, is happening on track.
Therefore, the reason why we maintain the guidance and we think that we are on trajectory compared to the execution of the plan.
Okay. That's great. Thanks for the color.
Thank you. We will now go to your next question. Your next question comes from the line of Tristan Sanson from BNP Paribas. Please go ahead.
Yes. Good evening, everyone. It's Tristan from BNP Exane. Thanks for taking my questions. The first one will be on the PW one thousand engine for the A320neo. I wonder whether you could tell us how you deal industrially and commercially with the concerns that are spreading today on the time on wing of the engine. would be more helpful. The second question, you've been mentioning a number of times that in Q1 you've been investing to prepare the future. Can you be a bit more specific, both in qualitatively and quantitatively, about what these spendings are? Is it like training and recruitment to prepare for the wide-body ramp up? Is it tooling? Are we talking about EUR 100 million, EUR 200 million, EUR 300 million?
That would be quite helpful.
Well, let's start with the Pratt & Whitney situation on the A320, I think you said. I think we have as well some concerns on the A220, and indeed, the time on wing for certain kind of operations is lower than expected, leading, combined with the supply chain situation and the global tensions on supply, leading to lack of spare parts or delayed in the spare parts and the MRO, and therefore having some across AOGs. That's mainly a situation to be managed between the engine manufacturer and the airline as the contracts are between those two parties.
Obviously, as the aircraft manufacturer, that's an situation that we are monitoring very closely and coordinating a number of situations between our customers and Pratt & Whitney to minimize the impact of such a situation. That's something that is currently being managed by Pratt & Whitney mainly. When it comes to investment of the future, well, it's a very broad question as we are investing both in R&D and in CapEx for the future. I think your question refer to the CapEx and maybe the announcement of the line two in China that was made recently is sort of contributing to the answer to your question.
Actually, we are building the production system of the future for the A220, the A320, including the 10 FALs that will be all A321 capable, and the ramp up for up to 84 for the A330neo and up to 89 on the A350. I think that's mainly what we mean by investment in the future when it comes to the production system and the ramp up. When it comes to the technologies, but that's primarily all what we have already shared with you leading to the progressive ramp up of our R&D expenses, which is primarily driven by the new programs within the XLR, the A350 Freighter.
Overall, our efforts to decarbonize and to digitalize the product, the production system, and when it comes to digitalization, as well the support and services activities. The overall investment into the future, which leads to this progressive ramp up of costs and expenses, as I try to summarize, because it's a very broad question that you raised when it comes to the many billions we are spending every year to prepare the future.
Yeah. To be clear, I wasn't mentioning CapEx, but OpEx as this investment for preparing the future are mentioned as a driver of pressure on EBIT Adjusted in Q1. I think your explanation should be enough on its own.
That's the increase in R&D, I guess. It's not linear in the year, and it varies from one year to the other one. I don't remember, Xavier, maybe you have the figure, but I guess this year we have started a bit faster or with higher expenses in Q1 compared to last year.
Yes. In fact, we are spending EUR 100 million more than in Q1 2022.
Okay.
Yeah.
That's what we mean by investment in the future.
Yes.
R&D.
R&D.
Thank you.
Thank you. We will now go to your next question. The next question comes from the line of Olivier Brochet from Redburn. Please go ahead. Your line is open.
Yes. Good, good evening. Thank you for taking my questions. I will have two, if I may. The first one is, could you elaborate a bit on how much of a headwind, inflation has been in Q1 for the three different businesses? The second one is, on the Qatar settlement. Has it been a cash out in Q1, or will it only come with the first A350 deliveries that you will make to them? Thank you.
Yeah, I'll start with the inflation for Q1. We are in very low double-digit numbers. It's in the very low to mid-double-digit numbers for inflation. Qatar settlement is a confidential settlement agreement. No comment on the Qatar settlement.
No-not even on timing?
Well, it was signed, earlier this year.
Thank you.
It's behind us, it's forward as partners.
Thank you.
Thank you. We will now go to our next question. Your next question comes from the line of Doug Harned from Bernstein. Please go ahead, your line is open.
Good evening. Thank you. First question, when you talk about strong demand, that's clearly very positive, but can you tell us how long you're sold out for at this point? What you can do to respond to customers that may be seeking to order aircraft for delivery in earlier years? Second question, in the past you've described when you get out to delivery rates, like we saw in 2019, you could get back to Airbus commercial margins that were also like those in 2019. First, is that still the case? As you move beyond this and go to 75 a month, later on, how do you see margins progressing beyond that point?
Well, on the first question. Well, actually, we have a backlog of more than 7,000 planes. If your question refers to the A320, which is the aircraft which is the most in demand, we're actually full in terms of orders till 2029. We cannot deliver to a customer that is coming now and asking for a new plane before 2029. The best way to get there is to ramp up, and that relies on the ramp up. That's why the ramp up is so important for us, to be able to deliver on-time customers who have already placed orders and to not have the date of the first aircraft available moving even further into the future.
This being said, we still continue to take orders even for the A320 family and very significant number of orders as this plane is, as I said, a very leading product in its market segment. It's different on the A220, on the A330neo and the A350. We have more availability and in the shorter term, but still, on those products, we are also quite well booked. When it come to your question on the margins of Airbus, I can confirm that we maintain the perspective of being back to the 2019 profitability when we get back to the 2019 number of deliveries. I remind you that it was top of my mind, 863 aircraft at that time.
Can remind you as well that we delivered last year 661, and the guidance for this year is 720. You see, we still have a lot of work and a long way to go before being back to the 2019 figures. Unfortunately, that's one of the results of this very complex and challenging supply environment growing out of COVID. For the evolution of the margins beyond being back to 863 planes, well, I will not comment here and would take more time. We have given or we are giving building blocks on how the profitability of the company is built.
In combination with the trajectory on the production rates, that gives you the opportunity to build over time what the development of the Airbus profitability would look like. I'm sure that the IR team will be very happy, Hélène and the team, to guide you through this on a private call.
Great. Thank you.
Thank you. We will now go to our next question. Your next question comes from the line of Phil Buller from Berenberg. Please go ahead. Your line is open.
Hi there. Thanks for taking the question. I guess I'm trying to reconcile the comments about the unchanged guide for this year in the midterm ramp, with several of your major suppliers, including Spirit in the past hour or so, who are suggesting that you've recently lowered orders from them on the A320 program from 660 to 580, I think they said. You know, how do we, how do we think about the cadence to rate 65 and 75, when you're reducing rates with suppliers? 'cause I understand you say that they're unchanged. But if I look at consensus, it looks like, you know, the market is assuming you'll deliver 850 aircraft next year, so approaching those 2019 levels, and 980-ish come 2025.
I guess I'm just keen to understand if you think those modeling assumptions are in the right ballpark or perhaps too optimistic, and obviously not because of your own desire or the demand, but given what you've learned about your supplier's ability to ramp up in practice as, I guess, what you're asking them to do near term might introduce another ramp-up challenge for them in due course when they chase those higher rates. That's the first question.
Okay. I'll try to answer that one. You have seen the Spirit information, I guess, on their number of deliveries. Please remember that we were supposed to deliver 720 planes last year, we ended up with only 661 being delivered. We had obviously planned to ramp up in 2023 compared to 2022. With the 2022 at 720, this would have led to a very significant bigger number in 2023. Unfortunately, we ended up with 660. We have rebaselined the production planning, leading to a guidance of 720 again for this year.
Of course, we have to adjust the supply plans with most, if not all of our suppliers, to reflect the fact that we have a slower ramp-up compared to what we were initially planning by beginning of last year. This is reflected in a number of comments from the suppliers. It's easing the ramp-up to do this rebaselining, which we did by end of last year and beginning of this year. There is no change compared to our guidance. What you heard from Spirit and from others, as far as I have seen and heard and commented by my team, is just reflecting what we have done to support the deliveries of the 720 planes this year. I think that's important.
When it comes to the rates moving forward, as I indicated in my preliminary comments, no change on reaching the rate 65 by end of 2024, as far as I remember, and the rate 75 in 2026. This is not changed. You can make your assumptions on how we get there and the trajectory. We are not specific on rates quarter by quarter or even half year by half year, as you see in 2023. We have an unbalance between H one and H two, this can sometime happen. It's not very comfortable this year, it is what it is.
No, I understand. Thank you very much. I guess the reality is the suppliers are struggling to deliver what you need. I was wondering if a downward adjustment near term might make their steep ramp harder for some of those suppliers later as we look beyond rate 65, but you've answered that quite nicely, I'm sure. Then just another question, just a comment in the prepared remarks about the aircraft financing environment I think you said was solid. But I think it was mentioned that the low level of customer financing may not be sustainable. I was hoping you could just elaborate a bit on what that means exactly in practice, please. Thank you.
Xavier or Hélène, someone wants to comment on this? Maybe basically, today the situation is very healthy. That's the first part of the comment. The second one is that we see tensions on financing overall and on the banking and financing system. We don't expect the situation to remain as good as it is today, but there is no specific indication or no specific report to be shared, except that, like all of you, we see the situation on the market being getting a bit more tense. That's basically, I think, reflecting what we want to. Hélène, do you want to add something?
If I recall correct, and Phil, if I recall correctly, we did that already the same comments at the full year 2022 to highlight that it might not be like this forever. That was it.
Thanks for the clarification. Thanks.
Thank you. We will now go to your next question. Your next question comes from the line of Robert Stallard from Vertical Research Partners. Please go ahead.
thanks so much, and, good evening.
Good evening. We hear you.
Good. Guillaume, a couple questions for you. First of all, on the A350 freighter, you noted there's been a modest change to the timetable there. I was wondering if you could elaborate on what occurred, you know, what changed in terms of your thinking on that program. Then on the A220, again, Spirit taking a pretty significant charge in their quarterly results, especially relating to their supply chain, and I was wondering if that has had any knock-on impact on your A220 ramp plans. Thank you.
On the latest question, no. No impact of this Spirit comment on our own plans. When it comes to the A350 freighter, we are in the execution of the program. We are in the development phase. We are starting the industrialization of the product. We are updating constantly the planning and what we have said today reflect a slight slippage of the overall planning. There's no change in thinking of the program. It's just that the entering into service is now slightly pushed into the beginning of 2026. It's an execution. It's the repercussion of the execution of the development program and the industrialization phase.
Quick follow-up on that, if I may. Is there any associated additional cost with this change in the A350F freighter schedule?
Well, we are not communicating on the specific cost of one or the other of the programs. There's no change in the guidance for 2023 on EBIT and free cash flow as a result of this slight delay and, well, I think there's nothing more to be said.
Okay. Thank you very much.
Pleasure.
Thank you. We will now go to your next question. Your next question comes from the line of Ian Douglas-Pennant from UBS. Please go ahead.
Ian Douglas from UBS. Thank you so much for fitting me in. Could I go back on the earlier question on the A350, please? What is the source of the weakness that we've seen so far this year and that will continue for the next couple of months, please? Secondly, if you could, maybe just give some commentary on the helicopter business. One of your competitors this morning has also reported very strong order intake, after very strong order intake last year as well. Should we take this as a signal that the underlying market is very healthy, or is this just a few large orders and just the way that randomness falls? Thank you.
Your question on the weakness of the A350, I guess, refers to the number of deliveries in Q1.
Yes.
We delivered five A350s. You've seen a very strong order intake of A350s in Q1. The A350 deliveries are planned to be very backloaded as well, or to be very backloaded, more than the average. We plan a weak Q1 and a weak Q2 in deliveries for the A350 and a very strong Q3 and even stronger Q4 this year. The A350 itself is very backloaded. When it comes to the other-
I'm sorry. If I could just clarify my question. Does that reflect the customers', you know, desired delivery timeline or are there some problems?
No, no.
in the supply chain that you plan to deal with?
It's not coming from the demand. It's coming from the profile of deliveries, that is not necessarily linear or because it's depending on the large number of constraints and, yeah, perspectives. It's more backloaded than what we would like. Indeed, the overall supply environment is weighing on our ability to get deliveries from a number of suppliers, and that impacts the A350, among others. That's why the A350 is planned to be significantly backloaded in the second half of the year.
Thank you.
Coming from the supply, not from the demand. When it comes to helicopters, I've not seen the results reported by the competitor you're mentioning. What I can say is that the market of helicopters, civil and parapublic helicopters, is improving but recovering from a very low point in 2021, 2022. On the military side, there is more demand, but then it comes indeed with large programs and a very unevenly distributed set of orders. You can consider that there is a trend for a larger market, mainly driven by defense and to some extent by this recovery on the civil and parapublic market. That's the, that's the other view. I cannot comment from this competitor.
Thank you very much.
Sure.
Thank you. We will now go to your next question. Your next question comes from the line of Chloé Lemarié from Jefferies. Please go ahead.
Yes. Good evening. Thank you for the questions. I have two, if I may. The first one is a follow-up on the supply chain questions. Guillaume, you mentioned in the prepared remarks that seats were a pain point, and I wondered if that was now the driver for the slower wide-body deliveries. Also Airbus commercial inventory went up EUR 1.4 billion in the quarter, I think. Would seats be among the reason why some of those aircraft couldn't be delivered by the end of the quarter? The second one is on hedges. How should we interpret the rollout of hedges in both 2023 and 2024? Is that lower internal delivery target, or is it just somewhat lagging adjustment to the hedge book after the rephasing that you announced earlier? Thank you.
Xavier will take your easy question on the rollover of hedges. More seriously, yes, seats are now on the list of supplies that arrive late, and not just for one or the other, but it seems to be a bit more like a broader perspective, a broader issue in the supply chain and demand for high-end seats in particular. Yes, it is one of the contributing factors of the delays we're having on the wide-bodies. It contributes mechanically to the inventory by the end of the quarter. For the hedges.
Yes, I mean.
Xavier?
Yeah, I can take it. I mean, basically, you know, yeah, as we announced it in full-year 2022, we have adjusted the trajectory of deliveries, and the rollout of the hedges is just the illustration of this rephasing of the trajectory. It's fully in line with the adjustment.
Okay. It's to cope with the delivery profile.
Yes, exactly.
Thank you.
Very clear. Thank you.
Thank you. We will now go to your next question.
Your next question comes from the line of David Perry from J.P. Morgan. Please go ahead.
Yeah. Hi, thank you. It's two questions. The first one, maybe it's a bit of an unfair question, but Guillaume, just what's your level of confidence on the 720 this year? Obviously, the word backloaded is used a lot on this call, but do you see much of a risk that we have a repeat of last year where the guidance gets trimmed towards the end of the year or even missed? Would be the first question. The second question is XLR, the six-month slippage on entry into service. Does that affect your view of total deliveries next year, or can you replace those XLR slots with other variants of the A321? Thank you.
Well, just to be clear, we have not changed the XLR and in-service date. I mean, recently, yeah. What I have said for the Q2 2024 is exactly what we said previously. There is no new delay, I would say, on the XLR, and we are stable in for the in-service, therefore the 720 deliveries that are reflected in the guidance do not incorporate, do not include any XLR, neither before this call nor after this call.
No, no, for next year, sorry. Is that there's no change for next year, is there? That might be my mistake. I apologize.
Yeah, yeah. On the XLR there is no change.
Okay. Sorry, my mistake.
No change on the XLR. We have not yet given a guidance for next year, okay. Well, your question, well, it's not unfair. It's a guidance. We missed the guidance last year on the 720. The 720 for this year has been built, taken into account the reality of the supply chain as we have experienced in 2023... Sorry, in 2022, and assuming that it would continue to be roughly the same in 2023, which is what we're observing so far. You've heard maybe earlier that there are slight improvements here and there in the supply chain. It's not yet a complete trend on which we could really rely on. We're confirming the guidance today, which means that we consider that's the best outlook we can have.
I would not say that I feel comfortable because, as you rightly said, it's backloaded, we have made a step forward in Q1 with 127 planes. Obviously a lot remains to be demonstrated almost close to 600 planes for the remaining nine months of the year. There's still a lot of work ahead of us. The execution of the production planning by end of Q1 was consistent with this guidance and this perspective. Yes, we feel that it's the right guidance to give to confirm the 720. That's the best guess and guidance I can give today.
Okay. Thank you. Sorry for unnecessary panic on the XLR. I just don't know what happened there. I misread something. Thanks a lot.
Pleasure.
Thank you. We will now take our last question for today. The last question comes from the line of Christophe Menard from Deutsche Bank. Please go ahead.
Christophe, please.
Yes. Good evening. Thank you for taking my question. Yes. Can you hear me?
Yes, we can hear you. Please proceed.
Can you hear me?
Yeah, we can hear you.
Can you hear me?
We can hear you, but you can't hear us apparently.
Sorry. Sorry. Yes. Yeah, thank you for taking the question. Yeah. No, I can hear you very well. I can hear you very well. So, yeah, two questions. The first one is going back on the helicopters, and the strong performance in services. Could you please tell us whether it's a one-off or something that we should expect as a recurring element? The margin is very strong. You mentioned services being strong. Where is it coming from? Is it military? Is it oil and gas? The second question is on aircraft financing. You mentioned aircraft financing several times during the call.
I'm still trying a little bit to understand on the wide-body delivery, the reason why we have those, I mean, some of delivery delays. I mean, I understand it's seats, but is financing also more difficult to arrange for airlines at the moment? Does it take longer? That's the question.
Yes. Maybe I start with the second question. We are not saying that there are delays caused by seats. We are saying that seats are one of the supplies which are coming late among others, and not justifying the delays or the profile of deliveries of the wide-bodies only by the seats, okay? We had planned to have a backloaded delivery profile for the wide-bodies and that's what we see, and it comes from a number of supplies, including seats, but not limited to seats. It's not related to difficulties on aircraft financing. It is not related to aircraft financing potential difficulties. It's not the case. On helicopters, well, yes, there is a very strong Q1 performance on EBIT.
There's indeed some one-off that will not be repeated in this very strong Q1, but as well good recurring elements that highlight the fact that helicopters continues to be on a trajectory in terms of financial performance. It comes in particular from services, but not only.
Thank you very much.
Thank you.
Thank you very much.
Thank you, Guillaume. Thank you, Xavier. This concludes our Q&A session for tonight. Before we close the call, I would like to remind you that we will be holding our Airbus 2023 Airbus business update in person and webcast live on June 21st, the week of the Paris Air Show. We are very much looking forward to speak to you again on this occasion. Until then, if you have any further questions, please send an email to Philippe, Gustave, or myself, and we will get back to you as soon as possible. Thank you again.
Thank you, Hélène. Thank you, Xavier. Good evening, everyone. Bye-bye.
Thank you.
Thank you. Ladies and gentlemen, the conference is now concluded, you may disconnect your telephone. Thank you for joining, have a pleasant evening. Goodbye.