Airbus 2015 Annual Report Download - page 40

AIRBUS GROUP REGISTRATION DOCUMENT 2015 l 08 l
Risk Factors
1 Financial Market Risks
The Company is subject to many risks and uncertainties that may affect
its financial performance. The business, results of operation or financial
condition of the Company could be materially adversely affected by
therisks described below. These are not the only risks the Company faces.
Additional risks and uncertainties not presently known to the Company
or that it currently considers immaterial may alsoimpair its business
andoperations.
1. Financial Market Risks
Global Economic and Sovereign Debt Concerns
As a global company, the Company’s operations and
performance depend significantly on market and economic
conditions in Europe, the US, Asia and the rest of the world.
Market disruptions and significant economic downturns may
develop quickly due to, among other things, crises affecting
credit or liquidity markets, regional or global recessions, sharp
fluctuations in commodity prices (including oil), currency
exchange rates or interest rates, inflation or deflation, sovereign
debt and bank debt rating downgrades, restructurings or
defaults, or adverse geopolitical events (including those in
the Near and Middle East, Ukraine, Africa and other regions).
Any such disruption or downturn could affect the Company’s
activities for short or extended periods and have a negative
effect on the Company’s future results of operation and financial
condition.
In recent years, European financial markets have experienced
significant disruptions as a result of concerns regarding the
ability of certain countries in the euro-zone to reduce their budget
deficits and refinance or repay their sovereign debt obligations
as they come due. The European Central Bank and euro-zone
policy makers have so far succeeded to stabilise the euro-
zone and the European banks. However, austerity measures
as well as lower credit supply to the real economy have slowed
down economic activity and as a result consumer prices are
far below the target levels. The European Central Bank has
amplified its expansive monetary policy in order to fight against
deflationary trends, induce economic growth and complement
structural reforms. The policy includes negative deposit rates
and a quasi open-ended quantitative easing programme started
in March2015 and further extended in December2015 to an
equivalent of about € 1.5trillion which triggered a weakening
of the euro. The progressive implementation of an institutional
framework for Eurozone has decreased the immediate pressure
on EU sovereign debt but risks for medium term economic
prospects remain.
Improving economic fundamentals such as in particular the low
unemployment rate in the US have triggered the first increase in
interest rates of 0.25% by the Federal Reserve in nearly a decade
signalling confidence in the continued strength and sustainability
of a US recovery. The strong labour market, the recovery of the
housing prices, and low energy cost support the recovery of the
US economy. However, a further strengthening of the US dollar,
the slowdown of growth in Emerging Countries, the fall of equity
markets and more globally the development of risk aversion may
reduce the growth dynamic in the US. Risks on growth and more
importantly deflationary risks linked to the drop of oil price might
reduce the pace and magnitude of the further normalisation
of the US monetary policy. Medium term concerns about the
increasing budget deficit and the sustainability of sovereign
debt will likely have to be addressed over the next several years
through a combination of tax increases, agreed budget cuts
or budget sequestration in defence and entitlement spending,
combined with an increase in the debt ceiling to finance further
borrowing. This could negatively affect economic growth in
the US and worldwide, the creditworthiness of US Treasury
securities and the exchange rate of the USdollar against other
major currencies (in particular euro or pound sterling), which may
in turn adversely impact the Company’s sales in the defence
sector, the market value of the Company’s investments or the
exchange rates at which the Company is able to hedge its
foreign currency exposure.
Financial Statements 2015
11 22 33 44 55
QRegistration Document 2015
Annual Report 2015 Financial Statements 2015