Welcome to Paris. Welcome to MTU CMD twenty twenty five. After this exclusive and explosive intro we got from with support from the French Air Force, we can start our Capital Markets Day. Maybe later on we will have another short pause because the F-thirty five will also join our party. Anyway, just before we get started, please be aware that this session will be recorded and made available on our homepage afterwards for download.
So if you don't agree on being visible there or even after on the questions, please let us know. With that, I
hand over to Lars to walk you through the agenda. Thank you, Thomas. Welcome everyone to our this year's Capital Market Day. And Thomas, we have organized this show according to our slogan, Passion for Engines. So this is a nicely event next door.
I think we're going to see the F-thirty five in the meantime, so we try to arrange I remember we had that two years ago as well see that as an accompanying program for our CMD. So first of all, maybe to acknowledge you all know that we have scheduled or rescheduled our CMD that was originally planned in the end of twenty twenty four and obviously because of the management changes we have communicated back then and that includes me. But I'd like to take the opportunity to first welcome Katya on board. Katya Garcia Villa is the incoming CFO. She's been with us since three months, four months, two and a half months, it feels longer, and she will transition with Peter at the end of this month.
And then also as a special guest today, I have my successor with me, Doctor. Johannes Busmann, and you might ask the first question, when is this happening? We don't have a date yet, but Johannes and myself, we are actively transitioning already, so you can assume it's not too much in the future, but we are thinking in the next two weeks, we have a date. We have a date to communicate and we'll let you know and make that public. It was obviously important for all of us on the board, but for you as well, that when we talk about the midterm guidance, that the new management team that has to bring home this guidance is fully on board, is fully transitioned into all the figures and that's what we have established that we have been going through in the last couple of weeks and Johannes might take a comment later on.
So before we start into today's event, obviously, we cannot start without a humbleness to what happened last week in India, the India One Hundred Seventy One Incident. And this shows us again how important safety and quality is for our industry. So I'd like to thank a second for all the victims that we have lost last week in India. So safety is important for us. You know when you followed us through our AGM, we have a firm commitment to responsibility, and that responsibility spans over, obviously, safe aviation, but that also spans over European defense sovereignty, that spans over our ecological sustainability and that spans, obviously, with our over our employees.
And all of that should lead to a very prosperous future, and that's why we're here to talk about 2025 short term, but also our midterm guidance then for 02/1930. And this is the agenda that we have prepared. I will start shortly with the market environment, as you know that from us, also technology. I have prepared a couple of slides for you. Then we transition into Michael's topic, the business segments, give an overview of what's happening short term but also midterm.
Silke is going to talk about the OEM operations. Peter and Katja are sharing the financial part. Peter, obviously, doing the $20.25 figures Katja walking us through the 2,030 figures, and then I'll try to wrap it up with a one pager, and then we open all of us, we open to a Q and A session. I see nothing in the room. So this is the program.
Let me first start with one slide and hey, the slides are pretty loaded and will not go through all the points, but we wanted to give you a kind of a reference because it has been a while since we did a CMD day, CMD public, so please use that as a reference, but I'm going to focus and we're all going to focus on the main topics. This is what you see in one chart what we have done since we last came together in our Capital Market Day end of twenty twenty two in London. That was my first day, first Capital Market Day as the incoming CEO back then. And you have seen in all the topics, we have showed a strong financial performance. You know we had a target of 8,125,000,000.000 and we delivered on €1,000,000,000 EBIT one year ahead of the time.
We have advanced in our technological programs given the fact that the GTF advantage is now certified, and we are en route to bring that into the service at the end of this year, beginning of next year. But also NGFE, so FCAS and the flying fuel cell have advanced big time, and we're going to talk about it in a second. Sustainability as well, but only on our product side, but also on our production and operational environment side. Operational excellence, both in MRO and also in the OE section. Expansion.
You've seen us and heard us talking about our MRO expansion that we continue to do in the last couple of years, and now we can earn the benefits because we have capacity, we have something to offer to our customers. And Martin here in the first row, he's the guy selling that capacity to our customers. And last but not least, the portfolio expansion. I believe you have followed our news that beginning of this year, during the MRO Americas, we have published that we're now on board as a CBSA premium license holder for the LEAP engine. We have engaged with GE on the Gen X MRO license and we are starting to have the first engine in the shop for the PW800 in our facility in Berlin.
So remarkable progress as we believe it, resilient to what has happened in the last couple of years because it was not only ups in our short term history, we also had a couple of downs, but you see a clear focus on growth, operational excellence and innovation. Let me guide you a little bit through the market. You see here the numbers of aircraft that we believe are going to be in service for the next twenty years, from 28,000 to 51,000. So that gives a strong momentum, including freighters, including widebody, obviously, including single A. And you see on the text at the side, so the commercial packs and the freighter fleet is growing by 3% year over year and the lead by the, obviously, narrow bodies was 3.5% year over year.
So a robust demand, robust air traffic growth. That you can see also here in a couple of charts, you see the global RPK. So all the figures, all the KPIs are trending upwards. You see a good growth rate on the RPK. You see a nice and steady increase of the aircraft deliveries, both wide body and narrow body.
And you see the aircraft retirement and park rate is going down. If we would put a column of 2024 next to it, that would be roughly 20% to 25% lower than we have seen that last year. This is obviously an effect because the air framers, Airbus and Boeing are not fast enough of ramping up their deliveries and that's why older aircraft, older engines are flying longer, which is very beneficial for our business model. Also on the defense side, I mean it's obvious what's happening around us in the geopolitical environment that we are in. We see that MTU is well positioned.
You know our portfolio. We are the service provider for the German armed forces, especially obviously on the Eurofighter but all the other programs as well. But the Eurofighter, because of the geopolitical world we live in, has a second or maybe even a third momentum. There are a lot of customers, and Mikael might talk about it a little bit, but a lot of customers are reordering or newordering the Eurofighter, and we are as well in the OE but also in the MRO business. And then looking forward, and that spans more than twenty years, you all know the FCAS program, so Future Combat Aircraft Air System and the ENGRT, which is a new helicopter, European helicopter program.
Both of them we are partnering with Safran and we go forward to work on the technologies which are sooner or later then fueled in and transferred into the commercial environment. That's always a good benefit. So you know all the details around it with the GDP 1% increase. NATO is even asking for 5%. So we try to have a meaningful share out of that budget increase, especially in Germany, but given the fact worldwide.
So the key summary: Robust long term growth perspective, new engine deliveries and MRO is a double digit growth actually as we've seen that. Obviously, Zika will refer to that supply chain is not ideal, but we can live with that. It's a challenge, but we can live with that. And the European push for defense and sovereignty is pushing into our hands. So given that, a small upgrade on technology.
You always know our technologies are forward looking, so fifteen, twenty, thirty years ahead of that And obviously, we are engaging in two different streams. One is the future of the geared turbofan and the other is a more revolutionary path towards zero emission where we are engaged with our flying fuel cell and the next generation gear turbofan is something between evolutionary and revolutionary. See that here, we talk a lot about and also Pret, our partner, talked a lot about GTF here on the AISHOW, and we actually made some very good deals on existing customers but also new customers. So the reputation is good. The sales pipeline is good as well.
And we see the GTF as a three step development. Number one is obviously after entering the service 2016 is the so called GTF base, where you know all the facts: 16% less fuel consumption and that means CO2 emissions as well 70% noise footprint reduction and we're building on that legacy now and we are evolving and evolutionizing the Geared Turbofan into the Geared Turbofan Advantage that has been certified two months ago, three months ago, is now delivered to Airbus and we're waiting for the first aircraft to start servicing such service in the end of twenty twenty five, as I just said, and the beginning of twenty twenty six. It's a game changer for us. I'd like to dub it the holy grail because everything what we have learned in the development of the geared turbofan is now being put in into that engine. So it offers a little bit better fuel efficiency.
It offers 4% to 8% more thrust. But what's mainly important also for our business model and for our profitability is it's twice the time under the wing. So durability has improved significantly. And the beauty about that is that some of these upgrades we are able to retrofit into the base engine and this has been named yesterday as a hot section plus event with Pratt and Whitney. So especially on the hot section high pressure turbine, the improvements here will be retrofitted during the MRO shop visits into the GTF base.
And then the next evolution, which is the number three, is obviously our preparation towards the next generation geared turbofan for an entry into service 2035 plus 2038 in that endeavor. But we really like we are working on that and all the key words you find there, we are together with Pratt, are working on the improvement, evolutionary but also revolutionary elements. The focus for us here at the Air Show was really Git turbofan advantage, which we made a lot of positive press lately. This is the git turbofan and then the second element, the flying fuel cell. Also, there has been a lot of communication, especially from Airbus on the Zero E, but we wanted to target still want to, we wanted and still want to target the technology readiness for this propulsion.
We believe in the flying fuel cells as interesting element for zero emission technology. We have made great progress and we put it into the press the last couple of days and weeks and you see here some effects. Design is finalized, the demonstrator engine is being produced as we speak, we have an electric motor available, tested successfully and we can confirm an efficiency rate of 96%. Obviously everything is currently targeted on the technology readiness to show and to demonstrate that this propulsion system is capable of powering an aircraft, let's say, forty, fifty, sixty, seventy passengers in the future. In order to be more streamlined, we are looking and still looking for some more partners and some of that news might evolve in the next day.
So keep an eye on the potential partnerships in the future here at the Air Show. And like I mentioned, this is again a reference. We're not only focusing on our product sustainability but also on our operational footprint. We have had our targets. Based on twenty nineteen, we wanted to reduce 60% of CO2 emission in our global ecosystem.
We have achieved already above 40%. And with this tailwind, we have increased our target for CO2 emission to reduce it by another 60% based on 2024 going into 02/2005. This is Scope one and two and then also we are working on, as we speak this year, on a target baseline for the Scope three. So both goes hand in hand for us and in terms of our sustainability responsibility. With that, I'd like to hand over to Mikael for some business segment update.
Mikael, thank you.
Yes, Lars, I'm happy to do so. By the way, I'm not sure after your very energizing speech in the beginning why you move away from hot and fast spinning engines to rather static fixed wing aircraft.
Know something is going to come. I know that, yeah.
No, welcome again to our Capital Market Day. I hope you enjoyed the show. We definitely enjoyed the last, what was it, twenty four hours here on the show. A lot of interactions with customers, with partners. And again, as Lars also said, it proves that we have got the right products at the right time and the right capacities.
And that's a pretty comfortable position. And this is what I would like to share with you in the next couple of slides. So we will have a look on the military market, then briefly have a look on our commercial footprint. And finally, I would like to spend some time on the MRO evolution. I mean, it's a significant big story, positive story in the last ten years and it will continue like this in the next ten years.
So military first, fighter programs, last mentioned it. We have now our order book already of about 160 new engines from Spain, Italy. Germany is still to sign, but this is committed. The German government has for now committed for about 20 aircrafts personally. If you ask me, I'm sure they will increase this number over the time of the next twenty four months.
International, we get a lot of traction also on the Eurofighter. We have now international export potential identified of up to about 140 aircraft campaigns which we are actively working. And finally also our latest product development, Europe needs a sixth generation fighter. This is clear. Together with our partners, Saffron and ITT, we are on track with the development of the engine for the future combat aircraft or here in France for the SCAF.
And now we are working actively on the Phase two for SCAF, which is a demonstrator phase where we really cut metal, where we test engine components here. So we are now today basically preparing the offer for the Phase two. We will deliver this offer for Phase two to our customers by June July, sorry. And then we expect basically to enter a new follow on order for the couple of about six to seven years in the second half of twenty twenty five. And fighters obviously will remain a key revenue driver for our military business.
On the other side, let's have a look on transport. A front ms has proven to be an operational aircraft. Customers are happy and I'm happy because we could make a lot of deliveries already to our customers. Export potential is picking up with a lot of campaigns which are ongoing. And not to forget also the aftermarket is now picking up with more than 900,000 flight hours, a very well performing engine and an agreement for kind of a performance based logistic concept together with OKA, which we could sign also last year.
So aftermarket revenues are increasing in this program now significantly as well. On the helicopter side, you know that we have got an 18% participation on the Sikorsky C53K. So deliveries are on track to the U. S. Marine Corps.
First export orders are also booked with Israel, I think, now. And then we have a look on the future. So this was basically the past. We have identified a potential of about 1,600 military helicopters coming up here and the helicopter needs obviously two or three engines. And in order to have the latest technology and helicopter engines available, we teamed up last year together with Safran.
And again, stay tuned also, maybe tomorrow also in the press, you will see some more announcement that we will also expand this team beyond Safran and MTU in order to prepare for the next generation of helicopters. So all in all, I think we are happy. We will increase our military revenues. We will grow also with the growth of the defense budget. I think very well positioned in this portfolio.
Then have a look on the commercial side. Last mentioned the increase of aircraft of about 3%. We are proud that we even can outperform the market with our CAGR of 4% with all the engines and applications where we participate with MTU modules or parts. So today we see in the market about 19,000 engines actively. This number will increase in the next ten years by about another 10,000 which equals to a CAGR of 4%.
So also this is not an option or opportunity. Most of these engines are already under contract or under options. You also see a shift from 60% in the narrow body engine market today by the obvious increase of PW1100 production rates to about 66. So also our footprint on the narrow body segment will increase compared to today. And on the next page, we also have a look what this means, what is driving this increase.
Today, our premium product, as you know, is the V2500 program with more than 300,000,000 flight hours already, 8,000 engines delivered, 150 operators in the world and about 3,000 aircraft active today. So this was the history of the last thirty years. Now we come to the next thirty years. We have achieved on the GTF already 40,000,000 flight hours of safe operation. We will see in the market more than 15,000 geared turbofans.
So the narrow body exposure of M2 will just double in this next generation of program. We have already acquired 80 operators around the world. We were speaking Martin to a lot of them in the last twenty four hours. Operators are happy with the performance of the engine and we see in the market more than 2,000 active aircraft are flying. So the GTF will significantly surpass what we have achieved in the last twenty to thirty years with the V2500 program.
And then let's have a look on the aftermarket dynamics. It's a little bit different here. V2500 was driven by a certain coverage, 65% to 70% of aftermarket agreements by the OEM, by our consortia, IAE. So this will change to a more fully covered aftermarket range up to about 90% of all the operators choose the IAE solution via long term support agreements. So it gives some stability for us, the planning stability and quite a certain revenue stability income.
But it also gives a certainty for the customer. It's a kind of insurance solution for the customer to have a predictable maintenance cost. So it's actually a win win. The MRO market share remains about in the same percentage value. MTU performs about 3835%, 36% of V2500 overhauls, whether which year you look on.
And this will remain stable with about a 35% market share of MTU going forward. Actually, it's not so much driven by what we want. It's really driven by the maximum capacity, what we can offer to the market and what we can offer and will offer to IE. The dynamics is a little bit changing. The profit driver in the past was more or less the pricing of the spare parts sales or the escalation of spare parts going forward now.
And this is an activity which we have started together with our partners. We really have to focus on GTF advantage, as Lars mentioned, and a new technology of engine running much, much cooler than the latest generation. So running cooler means more life in the engine, means less material cost for us and also for the customer side. We now have started since two years to really focus on MRO cost management, so what can we rescue on the engine? We have care we repair parts instead of replace parts.
And obviously, also the dynamics will change in terms of pricing of the aftermarket contracts. There are no launch customer prices anymore out in the market. Now we move to the next generation. And obviously, we have an opportunity to increase and improve our pricing given the current conditions. Moving to the next chart, please.
Now we move away from the OEM side to our maintenance section. And I think it's quite helpful I thought it's quite helpful to have a look on the history and where we are targeting to. So 2015, when we were sitting together and speaking about MRO planning, we spoke about an MRO revenue in the MTU Group of USD 1,700,000,000.0. Last year, we closed our books with 5,500,000,000.0 of consolidated revenue. So this does not include the revenue which we make in our joint venture with our friends from Lufthansa Technik in Poland, and it does not include the revenue which we make with our friends from China Southern Airlines in Zhuhai, but 5.5 percent reported revenue.
So if we now look a bit more to the future in the next five years, we target to double the MRO revenue to a number of about CHF 10,000,000 to CHF 11,000,000. And going on with the investments of the Lars mentioned on the LEAP engine, on the Gen X engine in our new Fort Worth facility, we foresee a revenue potential of MTU maintenance of about EUR $1,516,000,000,000. So significant increase and I'll show you in a minute a lot of this investment which are necessary to make this revenue happening have happened already now in this decade. So why we are so successful in the market? First of all, we are committed to invest in MRO.
We are committed to invest in maintenance. We are committed to invest in more capacity. We never stopped to do so. Even where other companies during COVID, they drove down their CapEx investment. We continued this past because we were convinced about the need for capacity in the market.
We have the largest and the most stable MRO portfolio in the industry, 30 plus engines. We constantly expand this portfolio. And I think we have an optimized footprint of optimized means by capable high cost location in combination with really upcoming now best cost location. No, it's not yet this one. Okay.
I was just waiting for it. So let's continue on the next chart, please. Yes, strategic investments in MRO programs. I mean, a lot on when was it in April 8, I think, the MRO Americas, we announced that we want to invest into the LEAP. So we negotiated in a record time, I have to say, together with CFMI and with GE, three licenses for the LEAP-1A, for the 1B and for the Jennings engine.
So all these engines, we will work in our Fort Worth facility. So on the LEAPS, we are premier MRO providers. We are fully integrated in the MRO network of CFMI. Same now on the Jennings engine. On the Jennings, are to now we are repairing the module which we designed only, the turbine center frame, and this will move now by 2030 to a full engine MRO.
And if you just see the ramp of this wide body engine, I think it's a very profitable place to be in in the future. G90, we have been in G90 since 2012. We thought we should target for capacity in the G90 for roughly about thirty, forty engines. The markets told us different. So this is why we decided last year to ramp up to a capacity of 75 engines.
And just two weeks in the border, we have decided to extend our Hannover facility in order to make about 100 engine shop visits per year happening. So again, this deep ramp and a quite interesting market for us because the market participants for the maintenance of this engine is very much limited. This means again positive effect for pricing. Now if you look on this program and this strategic investment program all in all, so three new programs, yes, there are license costs, there's CapEx costs involved, but over the next year, the next thirty years, there's also revenue potential of more than 120,000,000,000 US dollar involved which is resulting from over 6,000 shop visits. And then we have to work all this and now this is a chart which I just was creating yesterday night specifically for Milan because you like our leasing business so much and you asked me yesterday about our leasing business.
So this is something which we started in 2015. Martin was the first managing director. We gave you a little pocket of money, I think it was 50,000,000 US dollar if I remember well and you created a revenue of 30,000,000 in 2015. And then we changed the management and And your successor, Patrick, he created a revenue of about €500,000,000 last year. But Martin, I can tell you, is still in the board, he's driving all the success.
So if you now have a look on our strategic plan towards 02/1930, we will see that our lease and asset management business will continue to grow. We will continue to invest us in this business. So SEK 1,000,000,000 is in our strategic plan for 02/1930. And then the journey will not end, so we will increase further to about SEK 1,500,000,000.0 of rather profitable very profitable MRO revenues, which will contribute also to our margin obviously. So what do we do today?
We have about 80 people, maybe it's now about 100 I would say. We have about two fifty lease transactions, so it's we are one of the bigger ones in the industry. We manage or own roughly about 150, I think the number is today about 180 engines already. And we have access to 400 plus customers in the world. And what is obviously interesting is always a bundling of services and MRO contract together with a lease contract together with end of lease or an asset management or asset sale.
So I think we are quite good positioned there. So this journey will continue. Next page, please. Yes, then we have to work this. We have to create capacity and I told you that we started this expansion program in 2015.
So we have finished the extension of Hannover. I just said also that we want to now increase our wide body capacity. So this will be available by 2028 together with more piece part repair capacity. We have increased the space, especially for industrial gas turbines in our Berlin facility. Together with Johannes, we have decided just before COVID in 2019 to increase our Kula Lumpur joint venture.
Over COVID, we cooled this a little bit down. Now we can use our shop floor very nicely again. And MTO Chuhai is a success story. So the base company in Chuhai, we have now increased the shop floor three times. And in the Board of MTO Zhuhai, we decided two years ago to build another facility 25 kilometers away in Jinhuaang, which is solely focusing on the Pratt and Whitney 1,100 engine.
So this is a facility which we just have opened in March now, which is now fully operational. Next page is then other locations here in Fort Worth. We have a new facility where we increased the staff now and implement the LEAP-1A, 1B and the Jennings was a company in 2030s. In the early 2030s, we will employ roughly about 1,000 people there, contributing to a significant revenue extension also in our MRO business. Serbia is active since 2022.
This year, we will deliver from Serbia about 150,000 repair hours, again increasing to 27,000 to about 470,000 repair hours. And this will not be the end, I'm quite sure. Canada is very stable in operation for two engine types, doing a fantastic job to deliver 80 engines back mainly to Amazon Air, our prime customer there. And AMA in Poland is instrumental to support the entire PW1100, fifteen hundred and nineteen hundred fleets. Currently, about 1,200 people are working there, delivering three fifty engines back to the field every year.
So a lot of investments are done, but necessary in terms of increasing the capacity. Yes, and as a summary and a key takeaway, I think we are very well positioned on the military business with our prime product, the Eurofighter and our next generation fighter engine program, the Scuf, the AFCARS, is ongoing and technology is really on track and providing obviously also material technology, engine architecture technology back to the commercial field. In the commercial MRO business, revenue increase has been proven over the last ten years And I think similar will happen now, as I showed you just a minute ago, also for the next ten years. So all the investments are on track. And capacity is something where the demand is higher than the installed capacity, and this is a situation which will not change anytime soon.
So again, very nice spot for us to be. Commercial OE business, the V2500 is still very, very strong. If you want to buy an engine today in the market, you will have a hard time to find someone. So this market is still hot, more than 800 job visits every year. The GTF will outplace definitely the V2500 program significantly by a factor of two.
And the GTF advantage is something which Lars said will be in operation in about six months from now. So and also providing additional life and therefore also for us cost benefits to the fleet. Yes. And finally, MQ is nicely positioned with all our good performance in the past for the next generation of geared turbofans, which we will bring to the field in February. That leads to the end of my presentation.
And now everyone has someone has to work on all this stuff, produce all this metal. And this is my charming colleague, Silke.
Thank you, Michael. And I you're also leaving the F-thirty five to me, think, right? Well, anyhow, the only message I, as a COO, could make everybody happy is that we have stable supply chains, therefore, internal processes, flawless delivery, competitive cost levels and no issues at all. Unfortunately, as Lars said, that's not the case. And I believe and we believe in our industry, will never be again.
So we better prepare for that. And that's what we did in the last year. Internally, we have a target that's called from white water to calm water to make sure that even if the world is still stormy and the waves are high, we come from wild water rafting to a very, very calm end to end process from the market to delivery, including our suppliers. So what we did is accept all the task force work that we did to think about how to shape our footprint and our supply chain. You might be aware from presentations in the past that we have only about 30% of in house value creation and 71% procurement, which means in whatever we do, we need to talk to our supplier.
We need to shape our supplier base as much as we're shaping our internal network. It might sound simple if I have two locations to shape a footprint. But actually, what we did in the last year was in-depth simulations of the future growth to determine when, how and with what to establish additional locations. And of course, to optimize the grown current locations in their efficiency, in their cost level, in their capabilities. So what we derived from that was a clear target picture for the current locations and also determined the necessity when and with what to decide a new location.
And we came to the conclusion that our current structures, with all the investments that we did, like the new Blisk facility, we will have enough capacity at least until twenty twenty, thirty, and the next decision for a new location is due earliest in 02/1930, which is good news. As regards investment, bad for me because nothing is nicer than creating a really nice and efficient greenfield. So what we came up with was also the target picture for Munich to optimize there, obviously, by automatization, not for the sake of automatization, but for the sake of efficiency, to keep the very, very high competencies that we have there to develop technologies and products and processes for the future. And obviously, to also improve the structures that we're having, I have a lot of buildings from 1973, and of course, we still have to invest in Munich therefore. Cesczow has grown from the child to a very mature, very lean, very good production location.
So we will put more complex product there and, of course, still allocate labor intense work there. What we're going to do in the third location when it's due, we will pull together high volume production there with low complexity products to allow a fast ramp up and to allow there to be highly efficient and obviously very competitive. Martin is always asking me, so how do you improve competitiveness with a new location? I said, no, not only with a new location. Key is that also in the current location, we make significant progress.
And we need our suppliers. You're fully aware that we, as everybody else, have the same issues. When we think one topic is solved, topic like COVID, then another one arises like wars. And you have to digest all those topics in how you manage your supplier base. Managing supplier base on MTU sounds quite arrogant because actually, we are really, really, really small.
And as you might be aware, we have quite a monopolistic supplier structures. So for us, it's 's all about having long term stable relationships based on mutual trust with our suppliers. We also have still capacity constraints that everybody feels in the industry. But as Lars says, I think we're quite well set up. It's getting better every month.
And I would say we cannot blame for long the supply chain anymore. We're going to get out of that. And of course, what makes the supply chain really difficult is all the regulations and bureaucracy that we see. How do we meet the challenges? We continue with our procurement strategy.
That is long term relationships, long term price agreements, which for me coming from automotive is quite strange, no negotiations after two years, having contracts for ten years to make sure that we keep the cost level, but also working together with our R and D colleagues to make products easier, to be able to have more suppliers and to break up a little bit those monopolistic structures. And of course, on the other side, to continue with second or even third sources to make sure that we have a resilient supply chain whatever happens in the world. So key takeaways, and I made it before the next one starts. OEM business is ramping up. We are ready for that.
We're looking forward to that. It's a challenge we love. We're preparing also our supplier base for the growth, but also for more resilience and flexibility. And we have profitable investments that we're going to continue in our current locations but also into new ones. So I feel very well set up with a very competent team.
And for me, the future is bright even if currently we have some whitewater rafting still. And with that, I would hand over to the even brighter financials.
Yes, we have grounded the F-thirty five in order to finish our capital markets presentation. As we've heard before, I mean, split the presentation, so I'm to talk about the twenty twenty five third time update of our outlook for the full year. And Katja then will take over and going to present the midterm outlook and the, let's say, target financials for 02/1930. This time, obviously, the trigger for the guidance revision is not FX. I mean we still think that 2025 will be something like an average rate of 1.1%.
But a long story short, what we think is that our aftermarket footprint, aftermarket franchises developed better as we compared to what we thought, let's say, in April, so in Q1. We think that we're going to ship more spare and lease engines, especially on the PW1100 but also on the GENX. And as you know, I mean, spare engine lease engines don't come with that large discount, so they are contributing positive EBIT to our P and L. We have heard from last that airlines want to prolong life for, let's say, existing mature engines because they get less new equipment. So that's especially true for the V25 in our universe.
Also on the Gen X, so aftermarket is actively growing stronger than anticipated. We see that in the MRO division where shop visits are heavier. Also in the V25 more LLP shop visits, heavier work scopes, and that all drives spare parts, spare parts obviously on the one hand side and also MRO. MRO also GE90, Michael presented that before. We see a huge customer demand and we were able in our MRO division to increase turnaround times and even increase the number of shop visits we can bring through our shops and that contributes also positively to our aftermarket sales.
So if you sum that all up, as I said before, 1.1 is still the assumption for the average FX rate. It might be 1.11 or whatsoever, but that is the right ballpark. Militaries, unchanged. Commercial OE organic growth is still unchanged, up mid teens for the full year 2025. On the commercial spare parts side, we expect something between low to mid teens.
So that is an upgrade from the low teens number we gave you in April. And on the commercial MRO, we expect up to mid to high teens. So that was also increased from low to mid teens. So a significant increase in our MRO revenues. So if you do the math and use the €110,000,000 we come up with total group sales between 108,600,000,000.0 and €8,800,000,000 And on EBIT, that transfers to EBIT growth up low to mid-20s, whereas before somewhere in April, we said up 15% roughly.
So a significant upgrade of EBIT expectation for the full year and then drops through to free cash flow. So also free cash flow, we expect to be a bit stronger, so roughly CHF 50,000,000 stronger at the midpoint. So CHF $250,000,000 to CHF 300,000,000 was the guidance before. And now we expect something between CHF 300,000,000 and $3.50 depending on, let's say, year end effects. It's always a little bit, let's say, volatile.
Net income adjusted obviously grows as EBIT adjusted in our universe. There's not discrepancy in growth rates. So financing cost, tax, that is all very stable. So very positive outlook for 2025. We also finalized our assessment of the tariff.
Let's say, a tariff environment, we said at Q1 that we have a gross impact, something like CHF 70,000,000, 80,000,000. We're working on mitigation measures to reduce the net impact overall. And we have done our homework, and we think we can mitigate most of the tariff impact and have included the net tariff impact in our guidance for 2025. So if things don't change very much, that will be a very manageable number. So having said that, I hand over to Katja to talk about the midterm outlook until 02/1930.
Until 02/1930. Yes, Thank you, Peter. I think these are great news looking at 2025, and I would like to take the chance to guide you now through the main drivers of our future business and also provide you with an update on our 2030 figures. First, coming to the future drivers of our business. For the commercial OE business, we see increase in production volume for the GTF.
We also see an increase in production for the Gen X business. We will see a ramp up of the GE9X business. And also for our business jet business, we expect further growth. So overall, commercial OE growth in all areas. Looking at the commercial spare parts business, also here, we do see continuous growth from our narrow body programs.
The share of our wide body programs will be increasing, and we still continue to have stable support from our older engine programs. Michael has told you expectations on the growing impact from our military business. And also here, you do see that we will continue to grow significantly. We will have increasing deliveries on the EG200 and on the T408. We do expect more service for the existing fleet on the MRO side of the military business.
We do expect increasing impact on the FCAS development to our top line. And last but not least, we also see stable deliveries and support for the TP400 program. And what about the commercial MRO side? Also here, the narrow body programs continue to grow. We see the GTF program predominantly growing in our best cost locations like Poland, for example, as we've pointed out, or the new Kinman location.
We have stronger freighter demands in the maintenance area, and we will also see the ramp up of our LEAP program and the new site in Fort Worth, adding there at a later point in time also the Gen X business. So overall, top line growth in all our business segments. So what does that do to our EBIT line is probably the next question to answer. When you look at the growth rates in the businesses, you see our military business and our commercial OE business growing in a mid to high single digit percentage point over the time. And we do expect the commercial aftermarket to grow even stronger by a high single digit to a low double digit rate low double digit range.
And as you do see that the OE sales are outgrown by the commercial spare sales, this will end up in an expected EBIT margin in 2030 of about 28% to 30%, which is an increase overall. And looking at the commercial MRO business, also here, we do expect a growth in the low teens area with an expected EBIT margin of 8.5% to 9.5%. And this expansion is definitely impacted by our investments into the business, ramping up the site in Fort Worth. So looking at this quite promising bottom and top line growth, what does that do to our cash conversion? Because this is probably one of the biggest asked questions that you have here in the room.
The cash conversion rate we expect to develop during the course of the time from 24% in 2024 to a high double digit cash conversion rate in 02/1930. What are the drivers of this development in the cash flow? On the one hand, it's the expansion of our EBIT. We do expect a contribution from better working capital management, for example, through reduced turnaround times and also an improvement in the supply chain, as Lilleke just pointed out. And we also see a nice in the CapEx and also in the capitalization for R and D.
But as you can also see on the curve on the chart, there are also some headwinds in the earlier years that we still have to manage, such as the GTF fleet management plan, which will still have an impact on us in 2025 and 2026. Plus, we also do see some increase in the receivables due to the prefinancing of the shop visits at the moment. And on the MRO side, we already spoke about the great opportunities that are out there, but they also require some investments. You've seen the ramp up of the Fort Worth facility plus also the expansion in the profitable lease business in the MLS. They will also require some CapEx, which makes the whole development rather back end loaded.
And then you might wonder what are we going to use the cash for, how are we going to deploy the cash. Please let me assure to you that we are fully committed to the increase of our shareholder returns. We will keep a balanced leverage ratio between 0.51.5%, and we are fully committed to protect our investment grade. So what are we going to use the cash for? In the first priority, we still want to invest into the organic growth of our business, as we've demonstrated and shown to you during presentation so far.
During the course of the development, we will return to our dividend policy, which is currently suspended, and we will then provide you with about 40% of our adjusted net income again. Share buybacks might be opportunistic possibility during the course of the time, and we will continuously evaluate M and A opportunities even though we all know that the radar is quite limited at the moment. So after what you've heard now, how will our MTU look like in 02/1930? In 02/1930, based on our dollar rate calculatory of $1.1 expect our revenues to be between 13,000,000,000 and €14,000,000,000 and we expect an EBIT margin between 14.515.5% for 02/1930. All this will come with a high double digit cash conversion rate.
I think I'm very happy to say that MTU is positioned uniquely for future profitable growth. And I don't know, Lars, if you have something to add to that.
Thank you very much Katja and all of the team. It's great to sit there and hear the story. And it's a unique story that first of all thank you to the team, the outgoing team including myself but also the incoming team. We have done a tremendous team effort.
About staying team?
Staying team as well. We have done a tremendous team effort with the board, but also with the top management of the company basically supported by the huge amount of work that every employee of the MTU puts into this story. And it's my task then to summarize what we have seen over the last one hour. You have heard the next era of profitable growth that MTU is entering by first lifting the guidance for 2025. As you have seen, euros 8,600,000,000.0 to €8,800,000,000 revenues, up low to mid-twenty percentage of EBIT adjusted in the range of 300,000,000 to €350,000,000 free cash flow.
The KPIs and the tailwind we have from our business is all supporting this significant growth, both top line and bottom line. You've heard about the market environment in our industry. It's just phenomenal. I don't know any other industry that is growing with this CAGR going forward. Our product portfolio is well set up with the different ranges that we are covering.
Technology, we are always at the forefront of technology, not only, like I said, in the product environment but also in the automatization, in the MRO, in the digitalization. So everything that we do is being thought of in terms of high technology. That's our reputation as our company. And we are focusing in the next couple of years, as we did in the past, on the operational excellence but also on our financial strength. And we have our internal homework, and we have created and started our, we call it, MTU Growth Transformation Program.
The name is Uplift. And with that Uplift program, we are preparing the company for this future growth to be easily scalable. And the main work is we look at 14 or 15 core processes of the company, and we are streamlining these processes so we have an identified, a standardized and optimized but also digitalized environment for MTU going into the end of towards the end of this decade but also going further. This is our homework where we focus on operational excellence but also on financial strengths. And with that being said, we come up to what we see, what we think is a humble, ambitious but realistic target picture that the incoming, the outgoing and the stable team has come up with, with EUR 13,000,000,000 to 14,000,000,000 in revenues, 14.5% to 15% EBIT margin and a high double digit cash conversion rate.
This is the main presentation. And again, thank you first for listening to the team and we are opening up the stage for question and answers. Thank you very much.
Thank you. It's David Perry from JPMorgan. My first question is a bit long, so I hope it's not drowned out by an aircraft engine. So just to clarify, because a lot of investors who are not here have e mailed me the same question. It's just about the guidance and FX.
So I think you have no hedging at the moment for 02/1930. The spot rate is 115. The forward rate for 2030 is 125. So just to be clear, when you say you assume 1.1, is that a 1.1 flat all the way through the five years? Or is it 1.1 today and the forward rate?
So if I summarize, is the reality today for 02/1930, is it €05 worse than you assume? Is it €0.15 worse than you assume? Sorry, it's a long question.
Well, the calculation, do mean? Oh, you can't. Ahead. No, the calculation base is 1.1 for 02/1930. So the achieved rate is assumed to be 1.1 in 02/1930.
And everything what deviates, Stefan, is you have to treat that with the sensitivity we just gave.
Yes. No, but I'm just clarifying the sensitivity because your slide says the sensitivity is €05 But if you rang up Deutsche Bank, Citibank, whatever today, you'd get $1.25 So is the real sensitivity $15 Or is it $5
No, we calculated $2,030 with $1.1
Okay, fine. All right, thank you.
And then There was no expectation that because it's 110 today, we have a forward rate of 125 or so. That was not so whatever happens in 02/1930, so we calculated at 110 because nobody really knows what the FX rate in 2030 will be.
Yes, agreed. And then one business question, please. You had your slide showing that almost all the GTFs today are on LTSAs. Do you expect that to stay the same? Or you try do you have any strategy to try and steer the customers to T and M?
I cannot display the strategy which we have not agreed with our partners yet. But I can give you my personal expectation that the older engine program gets also from the history, the more the customer would like to have an alternative solution. And I think alternative solution means that you not just go with an LTSA with the OEM, but you look also on the free market. And I'm also perfectly sure that the free market will develop on a PW1100 anytime soon. Not now, not in this decade.
I think you have to have a really stable configuration, a really trustful configuration. But in the 2030s, I could foresee such a situation easily. You.
Christophe Menard, Deutsche Bank. I had, well, two or three questions, let's say two. The first one is the margin in OE. 28% to 30% is very narrow. How can you justify it?
Where is it coming from? Is it a mix of spare parts, military, lease? And why such a narrow range? And the second question is still on commercial OE. You used to tell us, well, onethree is OE and twothree is spares.
But you also say that spares will outgrow OE volume. So what in 2030 will be the new mix between spare parts and OE?
I mean, what is the margin driver? It's clear. I mean, you have seen that, I mean, aftermarket activities grow stronger compared to OE, especially if you I mean the one thing is you applied the average growth rate, but towards the end of the decade, obviously OE growth will be very limited. Basically, the only platform which will be growing at the end of the decade will be the G9X. Everything else is flat or slightly going down.
So and aftermarket continues to grow. And that implied, let's say, revenue mix shift in the commercial segment drives the margin in the OEM segment. There's not so much coming from, let's say, the military part of the business. And if you, let's say, translate our 2025 guidance regarding, let's say, segmental margin, you see we are at the more or less at the lower end of that range already in 2025. I mean a little bit driven by especially the high share of spare and lease engine.
That will fade away, obviously, in the next one, two years. And then due to the revenue mix going forward, that will be a tailwind then, bringing us back to that range 28% to 30%. Well, we don't give a target. Target sales, that's not our KPI. That's a rough estimate.
You. So maybe I mean starting for 2025. So you upgraded your spare part guidance. What has been which engine have been driven this? What surprised you on the upside compared to what you were expecting?
Well, I said it in my presentation, so especially two engine platforms, the Gen X and the V2500. On the V2500, we are currently in a situation where roughly a stable number of shop visits. I mean, and Whitney gave the number of something like 800 shop visits annually currently, but the work scope gets richer and richer. We have more LLP shop visits, more content shop visits as airlines look to, let's say, prolong the life of the existing fleet. That drives not so much the number of shop visits but the content that is good for the MRO revenues, but that also drives spare parts demand on all side of things.
And the Gen X, obviously, utilization of the fleet, heavier shop visits. We see that in our MRO shops as well, the Gen X TCF models, which we do in Hannover, are very they have a very heavy material content. And we see it also on the OEM side where we have almost 7% of the spare parts sales. These are the two, would say, major elements of the updated guidance.
Maybe, Milen, to give you also a number on the V25. When in the past we were speaking about a shop visit price or cost, we were speaking about like EUR 8,000,000 or something for a full overhaul. Today, we see shop visits up to EUR 12,000,000. So and this is obviously creating more spare part revenues than on the OE side of the business.
Actually thank you, Michael, because then my second question was on V25. I mean, obviously, you're plateauing now at 800 shop visit, but How should we think about the WarScope evolution? And obviously now with the fleet staying for longer, how should also think also about the third shop visit where we are seeing more material than what we used to?
Yeah. I mean, in the past we said that the peak on the V2500 will be reached in 2023. So and this has been shifted now significantly by, I would say, at least four years. So we see very, very high shop visits in in all the locations. And and we see customers who are flying the AC 20 classics not only for twenty two years but also extending now power by the hour arrangement or above arrangements also with us to an age of the aircraft of twenty five and twenty six years.
So I think this end of life period has shifted by, I would guess, about three to four years. And again, the number is increasing and the customers are willing to pay more cash and more spare parts in lack of availability of new equipment at this stage.
Sorry. And then I had just a quick last one, not on your leasing, sorry, Michael. But just going forward, could we actually expect that with the GTF, we're going to have a higher share of your delivery that will be spare engine compared to what we have seen historically on the V25? That's something we're hearing from CFM. Is it also true for you?
I think it's true today, but as on the long term side like 02/1930, obviously we would like to come back to a spare ratio of what is, say, healthy for such a fleet, 10%, 11%. Today, I think the new narrow body engines, are more like 25% plus to a certain extent. And I think, therefore, over the period of the next five, six years, this will normalize again.
Thank you.
It's good. It's good. I like it. Try your best.
Okay. I'm gonna try I will try my best. Sash Tusa from Agency Partners. A slightly different question, and it's about sovereignty, which you mentioned, I got particularly with regard to defense. But an area where Europe does not have sovereignty is in civil aero engines.
And I wondered whether you are either getting any queries or pressures from Brussels or other capitals to start thinking about doing for aero engines what Airbus did in terms of airframe sovereignty twenty five years ago.
No. The short answer is no. We don't we don't talk to Brussels on that one. It's it's it's mainly a duopoly, a triple e with Rolls Royce, obviously, GE and Brad and Whitney. But these discussions are mainly focused on on defense side, on military side, where we where we are sovereign with our engine technology, but not on the civil side.
But if a US president can effectively try to veto delivery of European civil aircraft if they have American supplied engines, that's an enormous sovereignty gap, isn't it?
It's probably something to think about, but your question was do we talk and we don't talk.
Trash, I think there's maybe two comments on this one. There's no pure American engine, which is existing today in the world. So I think all these engines are built in international collaborations, always involving European partners. So I think this has been recognized now in the Oval Office. And the second comment is also the second comment is also, I think we don't have a guidance from Brussels now to stock parts or something like this, but we're in active discussion with our military customer that we need to have more spare parts, more material, and therefore also be more sovereign from deliveries from the And therefore we also may have super end from the the point of deliveries.
I mean, today when we produce a spare part for our military air air engines like this one, this has a lead time of about one and a half years all in all, raw material to to finish parts. And now we learned unfortunately that a war can also take three years or four years or five years. And that's another active discussion I think with our military customers. How do we pile up stocks of raw material or also finished parts in order to support their missions?
Thank you.
What would be the mix in 2030 between first visit and second, third visit? And what are the unit profit and unit profit margin of the GTF first shop visit compared to the second shop visit today? Is there a difference?
I think first of all, don't declare profit margins of individual shop visits obviously.
Rough estimate of the differences between the first and the
In the GTF environment, if you have a fleet management plan, you have a certain assumption about profitability of a contract and you apply the margin to every And you apply the margin to every shop visit. Now it's a POC kind of accounting. The margin is identical over the lifetime of the contract unless you change the assumption of the contract and say, well, the contract is more profitable because we develop repairs or reduce let's say, the number of shop visits in the contract also. But as long as, let's say, the assumption of the contract is stable, the margin which I apply to a first or a second job is completely identical.
Time to start the party.
Cleo Lovary from Jefferies. Just a I'm not changing house. Just a long air show. Just a question on military actually because your growth rates mid to high single digits. I just wanted to check, I mean, what are you assuming in terms of OE versus services in what you're doing in military?
I mean, are they going into different growth trajectory or not? And the second question was actually
That's the same.
I'll wait until
the follow-up.
The
second question was on free cash flow. So you're raising your free cash flow in 2025 by a lower amount than you're raising your EBIT. I just wanted to check what exactly you put into that rise in free cash flow generation. Thank you.
You have to pay taxes. That's I mean can deduct 30%, roughly 30% and you have to pay taxes. That's in the cash flow, tax payment.
Military half half? The military, would say by 02/1930, should be about half half, yes. I mean Eurofighter is increasing, A400M is increasing, the helicopters are increasing. And on the other side, I think we will have some development revenues on the FCAS still. So it will be, I think, between OE and aftermarket half half.
Actually, in terms of the Eurofighter production rates, what are you taking into account by 02/1930?
Sorry?
On the Eurofighter production rates, what are you taking into account on 02/1930?
Basically, we introduced in the schedule those engines and aircraft which we have under contract, which is what I said here roughly about the 60 for the core nations plus an export potential. The overall production rate should be then in the range of about 15 to 20 aircraft a year.
It's on the ground now.
Yes. It's landed. No, grounded.
Very loud eagle has landed.
There's one more.
You gave a free cash flow target of high double digits. I'm just curious if you can expand on that. That could mean 65% to 99%. And if you could distinguish sort of what element of growth seeking CapEx is within that to kind of understand what like a maintenance free cash number would be?
I'm not 100% sure if understood all the elements. So with regards, we will not narrow the bandwidth now. We said we've come up with a high double digit rate for 02/1930, and I think that is an ambition that we have and looking of where coming from 2024 with the 24%. I think that is significant expansion of the cash conversion rate that we are targeting for at the moment. And I think with regards to the drivers of the cash flow, I think we gave you some of the drivers like the EBIT expansion side and improvement from the working capital.
So from working capital from the turnaround times topic, we spoke about reduction of working capital through an improved supply chain. You also heard that we do have some stock at the moment due to the delay of the ramp up of the GE9X, for example. So that is something that we have sitting in our books at the moment that will turn around, yes. And a reduction so we did have some heavy PP and E spendings, for example, during the course of the last years. That will ease down and also the R and D capitalization quote is going to go down.
I think these are the main drivers with regards to the positive side of the cash flow development. Also spoke about some headwinds in the earlier years. So I think if you take all that into consideration, it's a good picture to draw.
One additional question on next gen GTF. We've heard from one of your partners or competitors that they are working on ultra fan narrow body. I mean, type of collaboration could you be thinking about, I mean, to the extent of what you can say? I mean and what specific parts also on the next gen are you working on to improve consumption on that engine, on that evolution of the engine?
I think you should answer the question. No, we don't comment on potential partnerships. I mean there are rumors out but maybe not rumors out. So the UltraFan has been in the game for quite some time and Rolls Royce is public about it. So I don't comment on potential partnership scenarios on that one.
We are working obviously, MTU is working on our work share, meaning being the LPT and being the HPC in order to evolutionize the development and make it suitable for higher temperatures, more pressure. So overall, we can increase our efficiency above what we have seen on the GTF advantage. And then in general, for, I think, Pratt and Whitney and for the whole IAE, I mean, Pratt came public yesterday or two days ago that we are striving for at least a 20% increase in SFC for the next gen. We will see on all cycles, on all modules, will see an improvement, probably some mild hybridization. And we still have some revolutionary ideas on how to increase that number even more.
But this is tomorrow. This is the future. Today was really GTF advantage. And this program takes us for the next ten, fifteen, maybe even twenty years, and then we'll see what kind of technology will arise for
But the future will not be open I guess. I
don't comment. There was another question, Milena B.
So I actually I don't have another question, but I just wanted to thank you Lars. Looking forward to see you at Airbus. And I really wanted to thank Peter for all these years for traveling with you, replying to our question. It has been a real pleasure Thank you. On behalf of everyone.
Peter, one second. Milen, thank you for stealing my last pitch. I don't know if you noticed, have ordered a specific song for one of the shows here and it was time to say goodbye. Unfortunately, they managed to fly earlier than expected. But Peter, thank you very much for twenty six years at MTU.
Many of our guests today, investors know you still from your already from your Investor Relations time.
Yes, 2011,
yes. 2011. And I believe you're all with me and I've seen that with your applause that we all owe a lot of credit and thank you and respect to Peter's work over twenty six years. There's a saying, a share price doesn't lie. And when Peter started in the board together with me in 2018 and compared to today, our share price increased by 130%.
So we owe that to Peter. We give the credit to Peter. And I know you have lots of plans going forward with your different board mandates. I don't believe you will be bored anytime soon. And he's always picking on us already as being a big shareholder.
He will probably come to our AGMs. He will try to ask some tricky questions. But Peter again
I will apply for one on one.
Peter again, thank you very much. Thank you very much. Great. Thanks. So with that, I would like to ask Johannes on the stage as well.
We are finishing our Capital Market Day. I think we have, as always, we have drinks and some flying buffet. Feel free to ask some questions to all of us. And as I said in the beginning, Johannes, I'm really happy to start transitioning now with you. You have been instrumental as well in looking through these figures and our strategy.
You've been a Board member with us more than a year. So you are following us, you know what's behind the story and I see you are nodding, so you are there. Thank you. You. Alright, thank you very much for following us and let's make it informal now.
Thank
you.