Airbus 2015 Annual Report Download - page 47

AIRBUS GROUP REGISTRATION DOCUMENT 2015 l 15 l
Risk Factors
Registration Document 2015
2 Business-Related Risks
Technologically Advanced Products and Services
The Company offers its customers products and services
that are technologically advanced, the design, manufacturing,
components and materials utilised can be complex and
require substantial integration and coordination along the
supply chain. In addition, most of the Company’s products
must function under demanding operating conditions. Even
though the Company believes it employs sophisticated design,
manufacturing and testing practices, there can be no assurance
that the Company’s products or services will be successfully
developed, manufactured or operated or that they will perform
as intended.
Certain of the Company’s contracts require it to forfeit part of
its expected profit, to receive reduced payments, to provide a
replacement launch or other products or services, to provide
cancellation rights, or to reduce the price of subsequent sales
to the same customer if its products fail to be delivered on
time or to perform adequately. No assurances can be given
that performance penalties or contract cancellations will not be
imposed should the Company fail to meet delivery schedules
or other measures of contract performance — in particular
with respect to new development programmes such as the
A350 XWB, A400M, H175 or H160 and to modernisation
programmes such as the A320neo and the A330neo. See
“—Programme-Specific Risks” below.
In addition to the risk of contract cancellations, the Company
may also incur significant costs or loss of revenues in connection
with remedial action required to correct any performance issues
detected in its products or services. See “—Management’s
Discussion and Analysis of Financial Condition and Results of
Operations — 2.1.1.3 Significant programme developments,
restructuring and related financial consequences in2013, 2014
and 2015”. Moreover, to the extent that a performance issue is
considered to have a possible impact on safety, regulators could
suspend the authorisation for the affected product or service.
Any significant problems with the development, manufacturing,
operation or performance of the Company’s products
and services could have a significant adverse effect on the
Company’s future results of operation and financial condition
as well as on the reputation of the Company and its products
and services.
Dependence on Public Spending and on Certain Markets
In any single market, public spending (including defence and
security spending) depends on a complex mix of geopolitical
considerations and budgetary constraints, and may therefore
be subject to significant fluctuations from year to year and
country to country. Due to the overall economic environment
and competing budget priorities, several countries have reduced
their level of public spending. This is especially true with respect
to defence and security budgets, where certain countries have
already implemented substantial reductions. Any termination or
reduction of future funding or cancellations or delays impacting
existing contracts may have a negative effect on the Company’s
future results of operation and financial condition. In the case
where several countries undertake to enter together into
defence or other procurement contracts, economic, political
or budgetary constraints in any one of these countries may have
a negative effect on the ability of the Company to enter into or
perform such contracts.
The Company has a geographically diverse backlog. Adverse
economic and political conditions as well as downturns in broad
economic trends in certain countries or regions may have a
negative effect on the Company’s future results of operation
and financial condition.
Availability of Government and Other Sources of Financing
Since 1992, the EU and the US have operated under an
agreement that sets the terms and conditions of financial support
that governments may provide to civil aircraft manufacturers.
In late 2004, however, the US sought to unilaterally withdraw
from this agreement, which eventually led to the US and the
EU making formal claims against each other before the World
Trade Organization (“WTO”). While both sides have expressed
a preference for a negotiated settlement that provides for a
level playing field when funding future aircraft developments,
they have thus far failed to reach agreement on key issues.
The terms and conditions of any new agreement, or the final
outcome of the formal WTO proceedings, may limit access
Financial Statements 2015
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Annual Report 2015 Financial Statements 2015
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