Welcome to the Safran third quarter 2026 revenue. At this time, I would like to turn the conference over to your hosts, Olivier Andriès, Safran CEO, and Pascal Bantegnie, Group CFO. Mr. Andriès, please go ahead.
Good morning, everyone, and thank you for being with us today. I am here with Pascal. As you know, we are operating in a complex market environment with air traffic growth softening, particularly in the wide body segment. Narrow body was up 1.8% over nine months, measured in ASK, Available Seat Kilometers. Airlines continue to rely on the fleet powered by CFM56 engines. Retirements remain low, and the aircraft storage rate remains stable at 7.3% in Q3, below its 2025 level. This continued fleet activity supports demand for spare parts and services. Against this backdrop, Safran once again delivered a robust Q3, with revenue of EUR 9 billion, up 15% on a reported basis. Over nine months, revenue amounted to EUR 26.6 billion, up 17% on a reported basis. Aftermarket continues to show a solid trend.
For civil engines, spare parts sales in U.S. dollar show no sign of deceleration as they increased by 17% in Q3, with activity above Q1 and Q2 levels, and by 24% over nine months. Services grew by 19% in Q3 and by 32% over nine months, driven by LEAP RPFH contracts. Turning to LEAP OE. We delivered 535 engines in Q3, up 5% year-on-year with a higher mix of installed engines. This brings deliveries to 1,565 engines over nine months, up 26%, reflecting solid progress in our production ramp-up and parts availability. Momentum in defense remains strong, particularly in Europe, boosting defense electronic sales in Q3. More broadly, to meet demand from our defense customers for the AASM Hammer guided bombs, for navigation systems, and missile seekers, and deliver at a larger scale, we are increasing investment in production capacity both in France and Germany.
We are confirming the full year 2026 outlook that we raised in July. The priorities are very clear. Deliver on our commitments, support our customers' operations, and build the industrial capabilities that are required for accelerated growth in both civil and defense activities. Turning to slide four. CFM has signed an MoU with Turkish Airlines for more than 300 LEAP-1B engines. It also covers long-term services for its full fleet of LEAP-1B engines and a material services agreement for its future maintenance, repair, and overhaul facility. This further develops CFM's open MRO ecosystem to support the growing LEAP fleet. In avionics, Airbus has selected our SkyNaute inertial navigation system for the A220, marking our entry into commercial aviation. Already selected on military aircraft, helicopters, and UAVs, SkyNaute maintains precise navigation when satellite signals are unavailable, jammed, or spoofed.
This selection demonstrates the value of our dual-use technologies in addressing the growing disruption of satellite navigation in civil aviation and opens a significantly new market for SkyNaute. It also breaks a decades-long monopoly in commercial navigation systems. In Texas, we are doubling our missile turbojet production capacity with a new TR40 assembly line coming on stream in 2028. Demand for this engine family, which powers notably the Naval Strike Missile for the U.S. Navy, has quadrupled in recent years. This investment strengthens our U.S. defense presence and positions us to support further growth and new applications. on October 6th, our joint venture, ArianeGroup, supported the first successful submarine launch of the M51.3 ballistic missile. This acceptance test validated the submarine and crew's ability to launch it under operational conditions, illustrating our joint venture's role in France's deterrence capability.
On civil activities, Amazon selected Arianespace for six additional launches of Ariane 6, bringing the total number of ordered launches to 24. So far in 2026, 100 Amazon Leo satellites have been placed into orbit on three Ariane 6 missions in less than five months. Pascal will now take you through the financial performance in more detail. Pascal, the floor is yours.
Thank you, Olivier. Good morning, everyone. Let's begin with currency effects. You can follow along on slide 6. At the end of September, our hedge book stood at $61.1 billion, which is almost unchanged from the $59.5 billion at the end of June. Currency markets are still quite sensitive to changes in monetary policy and developments in the Middle East conflict. We saw the U.S. dollar weaken a bit over the summer, but it strengthened again in September with the EUR to U.S. dollar rate dropping below 1.14 by the end of the month. Since then, the U.S. dollar has continued to gain ground, and we are now close to 1.12 as we speak. We are making the most of this situation to reinforce our hedge book. Just to be clear, there is no change in our targeted hedge rates for the coming years.
Now, if we look to our revenue bridge on slide seven, we can see that organic growth reached 13.4% in the third quarter. On top of that, currency effects contributed an additional 1.1 percentage points, with the EUR to U.S. dollar rate averaging 1.15 this quarter compared to 1.17 in Q3 last year. In terms of scope changes, the impact was more or less neutral. That's because the one month of contribution from the actuation and flight control business was balanced out by the sale of SPI, Safran Passenger Innovations. All in all, our revenue for Q3 2026 came in at EUR 9 billion, which represents a 14.7% increase on a reported basis. Let's now dive into the details of organic growth by activity as shown on slide eight. Starting with propulsion. Revenue reached EUR 4.6 billion, up 13% organically.
For civil engines, we delivered 535 LEAP engines this quarter, which is a 5% increase both year-over-year and sequentially. We are right on track to meet our full-year target. Spare part sales grew by 17% in U.S. dollar terms, with both CFM56 and LEAP contributing, notably thanks to favorable pricing. We are seeing CFM56 work scope stabilizing quarter-on-quarter and up compared to Q3 last year as parts availability began to improve from Q3 2025 onwards. LEAP also drove spare parts growth supported by more third-party shop visits and extending work scope and better pricing. Services for civil engines grew strongly, 19% in U.S. dollars, driven by the ramp-up of LEAP RPFH contracts. On the military side, engine revenue was down this quarter due to the schedule of Rafale deliveries to end customers. Moving now to equipment and defense. Revenue stood at EUR 3.6 billion, up 16% organically.
OE sales climbed 16%. In defense, the momentum was particularly strong thanks to a robust demand for our AASM Hammer guided bombs, optronics, inertial navigation, and missile seekers, showcasing the breadth of our defense portfolio. On the equipment side, we continued to ramp up across all platforms, particularly with electrical systems for both Airbus and Boeing, power distribution for the 787, A350, and Nacelles for the A320neo. Services revenues in this segment grew by 15%, mainly driven by the A320neo Nacelle and actuation activities. Lastly, looking at aircraft interiors, revenue was EUR 751 million, up 6% organically. In seats, we saw growth in both services and business class OE, boosted by higher volumes and improved pricing. The market for seats still exceeds available supply, which puts us in a strong position to negotiate favorable terms.
In the cabin business, there was some impact from transferring Safran Ventilation Systems over to equipment and defense. But before that transfer, both OE and services showed good momentum, especially in the aftermarket, where we had notable growth in the Middle East, Europe, and the Americas. In this positive context for Safran Cabin, we launched the process to divest our cabin business a few weeks ago.
For your reference, Cabin now generates around EUR 2 billion in revenue per year and is delivering positive EBIT and free cash flow. Now turning to slide nine. I want to update you on our share buyback program. We are continuing to deliver on our EUR 5 billion commitment. In fact, we just completed a new tranche of EUR 375 million. All together, as of today, Safran owns 4 million shares, which is about 1% of our capital share, which are set to be canceled by year-end.
On the regulatory side, you may have seen that the 2027 French draft finance bill is proposing to extend the corporate surtax into 2027, though at a lower rate of 31.4% compared to 41.2% in 2026. If this is adopted as currently proposed, we estimate it could mean a cash outflow of around EUR 400 million for Safran in 2027, or as much as EUR 500 million+ if the current rate is maintained. Of course, these figures are still subject to the final legislation. I'd also like to mention some positive news on our credit rating. Early September, S&P upgraded Safran's long-term issuer credit rating and senior unsecured debt rating to A, with a stable outlook up from A- with a positive outlook. This upgrade is a strong recognition of Safran's financial strength. And finally, a quick note for your calendars.
We will be holding an IFRS 18 workshop on December 3, where we will walk you through how the standard will be applied in our financial statements and explain any adjustments to our reporting for 2027. That said, we do not anticipate any significant change to our bottom line. Back to you, Olivier.
Thank you, Pascal. Turning to slide 11. The performance over nine months supports the outlook that we have raised in July. We are confirming all of our full year 2026 objectives, despite the shift to 2027 of the one-time profit recognition related to LEAP-1B RPFH contract. This comes as a consequence that the Maverick blade for the LEAP-1B is going to be introduced in the market in early 2027 rather than 2026 as expected before. We continue to monitor supply chain production capabilities and the potential impact of the Middle East conflict. The resilience we have seen in aftermarket demand is encouraging, and we remain fully focused on execution through Q4. Looking beyond the quarter, our ambition is to convert our leadership positions into additional sustained growth, supporting a larger installed base in civil aerospace and bringing greater industrial scale to our defense technologies.
That requires accelerated investment and close cooperation with our customers. We remain focused on delivering our full year commitments while building the capacity and capabilities that will support and feed Safran's development over the coming years. Thank you for your attention. Pascal and I are now ready to take your questions.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We would kindly ask that callers are limited to a maximum of two questions per person. We will now start with our first question. This is from Christophe Menard from Deutsche Bank. Please go ahead.
Yes. Good morning. Thank you for taking my question. The first one, obviously, is on the service guidance in Q4. Your guidance still implies that there is a slowdown in Q4 in services. Could you elaborate on this or is it just being conservative? The second question was on the spare parts growth. I understand it is linked to shop visits, quite obviously, and pricing. Is there also an element of inventory buildup of spare parts? We are seeing a lot of those open MRO ecosystem being created. Is it helping you also going forward in terms of visibility on spare parts demand? Thank you.
Hello, Christophe. As we have communicated on our Q3 2026 growth compared to Q3 2025 is 17% on spare parts. This is mainly coming from a very strong comparison base in 2025, as in 2025, we had a very strong Q3 in 2025. When we look sequentially, our Q3 2026 is +4% compared to Q2 2026. We are still on a strong dynamic of spare parts deliveries, especially on CFM56. You are asking on Q4. Our forecast is that our Q4 2026 is going to be mid to high 20s above our Q4 2025. Basically this means that we still have a sustained dynamic that we see up to the end of this year and also as we will discuss also in 2027, 2028, but the dynamic keeps very strong. This is why we are reaffirming our full-year guidance on spare parts at mid-20s. That is one.
Do we see an inventory buildup? What I can say is we still see strong consumption of spare parts. We have not particularly seen a buildup from the shops as we speak. We do not have the full visibility on every shop inventory, but we have not seen specifically an inventory buildup dynamic.
Thank you, Olivier.
I would add on that we have not yet burned down our backlog despite an improvement we can see in material availability.
Yes.
That is on spare parts. The second question was on services.
On services, Pascal?
Well, we kept our mid-20s year-over-year growth for the full year, so 25%. At the end of Q3 year to date, we are at 32%. You may call it a deceleration. This is not a deceleration. It is purely a question of mix as we recognize revenues according to the cost we incur. It is purely a question of mix within our LEAP RPFH contracts. No worries around that.
Okay. That is very clear. Thanks. Thank you very much.
Thank you. We will now take our next question. This is from Adrien Rabier from Bernstein. Please go ahead.
Morning. Thank you for taking my questions. Two, if I may as well. Pascal, can you follow up on what you said on the backlogs, please? You said that it was not burned down, but could you tell us how much of your 2027 earnings you think are covered by the backlog at the moment? And then second question, I am sorry, this is a bit of an entire question, but I guess we are all trying to figure out how to think about this environment. Could we ask you to give us directions as to where and when you think the impact could materialize in your business if the oil prices remain high, say, until middle of 2027?
Okay. So good morning, Adrien. First, the CFM56 remains the biggest contributor to our spare parts indicator. Then we have the LEAP, which should continue to drive growth. That will be both on volume, mix, and price. When you look forward on CFM56, revenue will increase, but only based on price, as we said many times. We are now on a plateau in terms of number of shop visits at about 2,400. We expect the work scope to be stable, so it will be only a question of price. And in the high-thrust engines, we should benefit from the same momentum we see on LEAP. So we know what are the revenue growth and profit drivers going forward. As I said, we are starting to burn our backlog, and we have pretty good visibility into 2027.
We can't say we have such a visibility coming from the backlog for 2028, but from the conversations we have with airlines, we continue to feel pretty confident that the growth will continue to be sustained for the next two years. Maybe Olivier wants to jump in.
Yeah. Well, maybe I can say what are the catalysts we believe for a durable CFM56 aftermarket, and what is fueling our confidence? First of all, on the Middle East, airlines have come back to 80% of, let's say, their flying hours, 80% of the pre-conflict level. We've seen no request from airlines to push out aircraft deliveries. No request. The retirement rates still is very low. 130 aircraft has been retired to date since January 2026. So we will end up the year with a retirement rate, which is going to be between 1.5% and 2% of the fleet. So below 2%, which is very low, and again, which is lower than what we've seen pre-COVID. The demand for shop visits exceeds the available capacity. In fact, we are tracking engine removals and engine reinduction in shop, and there are still more engine removals than engine induction in shops.
The demand still exceeds the capacity. Last but not least, talking to airlines, all of them, most of them, have been able to pass a good portion of the fuel price increase onto the passenger ticket. Not all of them. Of course, those that have more of a premium positioning can do that more easily than low-cost airlines. But all of them are trying to pass through a portion of the fuel price increase. Overall, what we think is that the fuel price increase is significant, yes, because the kerosene price has doubled the one of the pre-crisis level. This will eat into the profits of the airlines in 2026, but globally, when we compound all the profits of all the airlines, we believe, overall, they are going to stay positive. Some of them will turn negative, obviously, but overall, they will keep making profit.
That's what we see, and this is why we are fully confident and basically the end of the year is somehow ballistic now. We are very confident in 2027, and we are still confident in 2028.
Thank you very much.
Thank you. We will now take the next question. This is from Chloé Lemarié from Jefferies. Please go ahead.
Yes. Good morning, Olivier and Pascal. Thank you for taking my question. I have first a clarification, if I may, coming back to your comment, Pascal, on Q4 services. What does that mean exactly in terms of the revenue recognition? Do you have a high concentration of later shop visits? Is that how we should think about it for Q4? Second question is on the impact of the LEAP-1B profit recognition, given that it is pushed out to 2027. Could it mean that it becomes a bit more of a material tailwind for EBIT next year because you will have essentially more years to address for? Thank you.
Yes. Good morning, Chloé. On your first question, you are right. It is purely a mix of the quick turns we could have with respect to performance restoration shop visits within our RPFH contract. So depending on that mix, we could recognize less or more revenue. So if you have more quick turns and performance restoration shop visits, then you have less revenue. This is why in Q4, we would expect the growth rate to be lower than year to date at the end of the first nine months. On the LEAP-1B, Olivier said that we will start to recognize profits on the LEAP-1B RPFH portfolio in 2027 and not in 2026 as we initially expected. Meaning that first we reiterate our guidance for 2026, meaning that even though we do not have to recognize that profit, we still keep our guidance.
To your question, this will be a plus to 2027. We have never mentioned how much that represents. It is a much smaller number than what we had for the LEAP-1A, because there are less LEAP-1B engines in the fleet being covered at this point in time with RPFH contracts with respect to LEAP-1A.
Very clear. Thank you.
Thank you. We will now take the next question. This is from Ross Law, Morgan Stanley. Please go ahead.
Hi. Morning. Thanks very much for taking my questions. Another one just coming back on the full year guide and the Q4 acceleration in spare parts to mid or maybe even mid to high 20s. Can you just walk us through moving parts behind that? It is quite a meaningful acceleration versus Q3. Then just on the OE side, whether you can confirm you are meeting all your commitments to Airbus across engines, equipment, and interiors, or whether there are any sort of supply chain or operational issues that may be causing you to be a bottleneck to Airbus. Thank you.
I'll take the OE side, and Pascal will answer on Q4. Yes, indeed. We confirm our commitment to both Airbus and Boeing in 2026. We are very confident to land as we guided. We've reached 1,565 for nine months. We are very confident we will land above 2,100. Indeed, we will deliver on our commitments to the airframers. Pascal?
Yeah. Good morning, Ross. On your question on Q4 for spare parts. When you look to the seasonality, the quarterly seasonality for spare part business for CFM56, remember that two years ago we anticipated the price escalation from December 1st to August 1st, which means that now the strongest quarter is Q3. Usually Q1 is up from Q4, Q2 is up from Q1, Q3 is up from Q2 and being the strongest quarter, and Q4 is usually slightly down from Q3. This is exactly what we should experience this year. year-over-year, Q4 is expected to be up in the mid to high 20s, and we will meet our full year guidance, which is calling for mid-20s.
The same drivers apply, meaning price, obviously. We had, by the way, mid to high single-digit price increase as expected on the August 1st for the CFM56. Volume will be more or less stable. We have seen 1,800 shop visits year to date, which calls for 2,400 shop visits on a full year basis. The work scope is really elevated compared to what we had a year or two years ago and will remain at that level. So it provides more than confidence on reaching these numbers.
Thanks very much.
Thank you. We'll now take the next question. This is from Benjamin Heelan, Bank of America. Please go ahead.
Yeah, morning guys. Thank you for the question. First of all, I wanted to ask Olivier, you mentioned they're confident on reaching 2,100 deliveries for LEAP. Can you talk a little bit about the capacity that you've been putting in and how confident you are on the ramp over the next two to three years to the 2,500, 2,600 range, and is there any potential upside on that ramp medium term? That will be the first one. Second one, on the interiors business, I think you mentioned in the slides, still seeing certification constraints for the industry. It's obviously been a very long time that we continue to see these certification constraints in interiors. Can you give a little bit of color in terms of where we are on that? Why are you still seeing these challenges?
Has the interiors challenges been holding up some of the deliveries at the airframers? Do you have any views on that? Thank you.
Thank you, Ben. Yes, we have a strong confidence in our ability to ramp up our LEAP deliveries. We've already communicated on the fact that we would reach 2,600 by 2028, so we are on that path. We've said that basically we would be close to 3,000 by 2030. We have invested in that respect. We are heavily investing, in fact, as you've seen with our various announcements, and we will continue to invest. But basically, we are making sure that we are fully prepared and capable to reach and sustain the Airbus. That's the rate 75 for the A320 family and the Boeing rate 63 for the 737 MAX. So we are going to accelerate our investment, in fact. We have announced, if you remember well, we have announced a new assembly line in Morocco. This is for the LEAP-1A for Airbus.
It is going to be our fourth line of assembly for the LEAP. I mean, Safran, four lines. We are also investing in our parts manufacturing everywhere, including forgings and casting, by the way. On interiors, indeed, the certification constraints do continue. They have not been alleviated, and it continues, let's say, to pace seat deliveries to the airframers and seat acceptance also. Sometimes, yes, it may have an impact on aircraft delivery. It is an industry-wide issue. It is not specific to Safran. It is an industry-wide issue. Yes, as an impact, it may shift seat deliveries from, let's say, end of 2026 to beginning of 2027. That may happen, especially for new innovative seats. This is a challenge. Business class seats. Yes, it has not been alleviated, and it will not, most probably, but we are navigating through that.
Okay. Thank you.
Thank you. We will now take the next question. This is from Milène Kerner from Barclays. Please go ahead.
Bonjour, Armel, Olivier, and Pascal. My question relates to the LEAP shop visit, and there are two parts to that question. First, when do you see the mix shifting from the light scope shop visit to a performance restoration shop visit? Then the second question is, at what point does the average LEAP shop visit generate more revenue than a CFM56 shop visit? Thank you.
Good morning, Milène. On your question on LEAP shop visit, it's true to say today that the vast majority of the shop visits we perform on LEAP are more what we call quick turn or light shop visit compared to
normal performance restoration shop visit. We are still in the early days of maintaining that fleet. Remember that the first engines were introduced in 2016, which is only 10 years from now. The quick turns were indeed necessary in order to remove and change and introduce a new Maverick HPT blade. This is why we had to perform quick turns. With time, that mix will obviously go towards more performance restoration shop visits. Now, in terms of revenue per shop visit, what we see on the LEAP today is significantly below what we enjoy on the CFM56 revenue-wise. I guess GE quoted something like half of the shop visit cost today on LEAP compared to CFM56. It won't be before the end of the decade, I guess, that there will be more or less a balance between the two.
Thank you.
Thank you. We'll now take the next question. This is from Robert Stallard, Vertical Research. Please go ahead.
Thanks so much. Good morning.
Morning.
Morning, Robert.
A couple from me. First of all, Olivier, your partners at GE Aerospace guided to low double-digit growth in civil services revenues next year. I was wondering if you think that reconciles in any way to your propulsion division. Secondly, a lot of talk about Airbus potentially raising the A350 production rate above 12 per month. I was wondering if there could be any CapEx requirements as a result for your equipment and interiors divisions. Thank you.
Hello, Robert. We will guide on, let's say, spare parts in 2027 in February next year. I will refrain from, let's say, giving any indication on that now. But as you know, we don't have the same mix as GE, as they have, let's say, they are more exposed to the wide body, obviously, engine spare parts as well, than we are. But we have always said that we have reached a peak in shop visit volume at 2,400. We have already said, and I can reconfirm, that we see next year the same volume as this year. That's one. Second, the work scope has significantly moved up in 2026 compared to 2025. We have seen this high proportion of heavy work scope shop visit. We do not expect that work scope to move up next year or to move down.
We believe that the work scope will remain at this high level next year compared to this year. From that, I will let you guess what that means, but the main drivers for next year evolution are going to be price on CFM56 and also the LEAP spare parts, which is moving up. Those are my comments today on spare parts. Yes, Airbus and by the way, Boeing, are going to increase their rate of wide body. This is good news for us. This is good news for us because our equipment and defense, because our equipment division is more exposed to wide body than our propulsion activity by nature. This is very good news, be it for our power distribution or also landing gear, et cetera.
We will have to invest and accelerate investment in the years to come to follow the pace. You should expect, and I think I can say that now, that in the years to come, we will have a significantly higher CapEx level than what we have experienced in the last years. I can say we will be above 6% of CapEx each and every year in the years to come. Because we have to follow the pace of the narrow body ramp up, rate 75 Airbus, rate 63 Boeing. We will have to follow the pace on the wide body as well. Both are going to go double digit, as you know. Rate 12 for A350 is just one step because Airbus is willing to go further. You know also that Boeing has big plan to increase the rate on 787.
Last but not least, defense. We are going to invest significantly on our defense business just to be able to sustain the 20% per year growth that I was mentioning before, between now and 2030. You should expect
A very significant CapEx, let's say, level for the years to come.
That's great. Thank you very much.
Thank you. We will now take the next question. This is from Ian Douglas-Pennant from UBS. Please go ahead.
Thanks very much. On the LEAP-1B profit recognition delay to next year, can you give us any indication of what the impact on the P&L this year was from that delay? Even within an order of magnitude would help. Secondly, just thinking about retirement rates. What we hear from appraisers pretty consistently is that the value of a 15-year-old A320ceo has declined quite materially year-over-year. But the value of the engines, the CFM56 engines under the wing is still very high. That means the economics at least support retiring CEOs a lot younger than would've been true this time last year. Crucially, this is a relatively new phenomenon.
I agree that we can't see the retirements in the data that we're looking for, but when you speak to, or when your team speak to lessors, do you get a sense of where those aircrafts are being sold to, that they get back that are about 15 years or so old? Does that give you confidence that retirements are not going to increase over the winter? Thank you.
Good morning, Ian. I will take the first question. I did not answer to Milène, but I will put out a number, which is in the low three digits. Million euros, which is shifting from 2026 to 2027. Ian, on retirement rate, we know that at some point in time, the retirement rate will increase. We know that. We know that at some point in time, the CFM56 spare parts will sunset, and we have always said that the key point for us is to make sure that we have a smooth transition between CFM56 and LEAP, and the fact that the sunset of the CFM56 will coincide with the sunrise of the LEAP spare parts revenues. So we are looking very carefully at the retirement rate. Once again, the good news is that it is still going to be low this year.
We have a good view for this year, and we are absolutely confident that we will be way below 2%, between 1.5% and 2%, I said. We forecast that this rate is going to increase smoothly year after year. What makes us confident for 2027, 2028 is that we still believe that airlines are mindful to keep capacity despite this complex environment. They want to make sure that they protect their ability to fly and keep capacity, and therefore, are reluctant to reduce their capacity. Of course, we speak with lessors, and the dynamic of, let us say, secondhand at some point in the secondhand aircraft, et cetera. Yes, the main value of, let us say, an aircraft that is being dismantled is mainly relating to the engines.
Because a secondhand engine has a value, it allows to basically provide some flying capacity for airlines, but also the spare parts and used parts do have a value. But again, this has not started yet. We have not seen any signal that it could start to accelerate in the months to come.
Thanks very much. Very helpful.
Thank you. We will now take the next question. This is from Olivier Brochet from Rothschild. Please go ahead.
Yes. Good morning, Olivier. Pascal, thanks for taking my questions. Two from me, please, if I may. To continue on that retirement discussion and shop visit number, essentially, could you maybe help us assess how many engine shop visits are still in the backlog and not happening because of delays? Is it one month of the shop visit for the year? Is it three months? Is it a year that are delayed? That's the first question. The second one is, in the prepared comments, you mentioned an increase in Germany in production for defense. Can you elaborate a bit on what you do in Germany and maybe help us scale its importance for Safran, please?
Good morning, Olivier. I'll take the first one on the engine backlog. We won't comment on the number on that. As Olivier said, we see more removals of engines today than the shop capacity can induce, meaning that there is definitely a waiting list if you want
Yes
to come into the shop. The demand by far exceeds the supply. We are very high confidence into 2027. We have some visibility, provided by first the backlog and the waiting list or the queue list in front of the shops. We have obviously less visibility on 2028, but we remain pretty confident we can sustain those levels going forward.
Olivier, in Germany, we are investing around EUR 100 million to establish a brand new plant in Germany close to Stuttgart. Basically, we are going to produce there optronics. Portable optronics, but also gimbals, and navigation system as well. It is going to be our access door to the German defense market.
Thank you, Olivier. Is it back-
Sorry. Go on, Olivier.
Sorry, go on, Olivier.
Is it backed by a current contract that you have with German customers?
Yes, we have a very good dynamic in Germany on those products. Yes, we do. I think we had announced it, but we have a partnership with Rheinmetall as well.
Okay. That's very helpful. Thank you.
We are selling directly as well. There's a big demand, as you know, in Germany. Yes, it is supported by existing contracts. Yes. The pipeline also have discussions. Yes.
Okay. We'll take a last question, please.
Of course. Please stand by. Last question today is from Sam Burgess of Goldman Sachs. Please go ahead.
Hello, Sam.
Sam Burgess, Goldman Sachs, your line is open.
Good morning, [inaudible], and thank you very much for taking the question. Just coming back to the theme of Good morning. Can you hear me?
Yes, we can.
Yes.
Please go ahead. Oh, we can't hear you, Sam.
Can you hear me? Yeah. Okay. Coming back to the theme of retirements, could you just talk a little bit about your expectation on retirements over the next couple of years? From memory, 3%-4% is what your guidance is premised on, your midterm guidance. I wondered if you had any thoughts as to whether actually 3%-4% might feel a little bit prudent for 2027, given where retirements currently are. That's my first question. The second question is just on defense. If you could give us a little bit of an update on how you are looking at defense at the moment, and whether you're still actively looking at acquisition opportunities in the space. Thank you very much.
Hello, Sam. Yes. What we basically see for 2027 and for 2028 is an additional 1% per year. So meaning basically our baseline assumption is a 3% retirement in 2027 and a 4% retirement in 2028. This is our baseline assumption, and this is what we take in as an assumption for, let's say, our forecast. In defense, yes, I confirm we are looking actively at potential bolt-on M&A opportunities in those areas that fit with what we do. Typically optronics, navigation systems, and what we call ISTAR. Everything related to intelligence, surveillance, tracking, acquisition, recognition. As you know, we are platform agnostic, and we want to keep it that way. We are not going to get into any platform business, be it an aerospace platform, a naval platform, a terrestrial platform. We want to stay in what we do, propulsion of course, and defense electronics.
As you know, on the propulsion side, of course we are going to accompany the French product roadmap for the next fighter. By the way, there's good news, as France has announced an intergovernmental agreement with the UAE for the Rafale F5. And you know that it's an important step for us because within the Rafale F5, which is a Rafale upgrade, where we'll have an engine upgrade that we have called T-REX, which is basically where we are going to increase the thrust from 7.5 tons- 9 tons. So the French roadmap is underway, and we are part of it. On top of that, we have announced, and we have started the development of what we call M30, which is a 3-ton engine, which is designed for CCAs, collaborative combat aircraft, unmanned aircraft. So we've launched this development because we believe that there's a big market there.
Last but not least, as I already mentioned, we are very actively also developing our missile propulsion business as well, through investment. So propulsion on one side, defense electronics on the other side, and M&A relating to defense electronics, mainly. Yeah.
Thank you. We'll close the call, and as I can see in the stock market, it's a good entry point into the stock market.
Great, thank you.
Have a good day. Bye.
Have a good day. Thank you. Bye-bye.
Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.