Welcome to the conference call on MTU Aero Engines first quarterly results 2021. For your information, the management presentation, including the Q&A session, will be audiotaped and streamed live or made available on demand on the Internet. By attending in a conference call, you grant permission for audio recordings intended for publication on the Internet to be taken. The speakers of today's conference call are Mr. Reiner Winkler, Chief Executive Officer, and Mr. Peter Kameritsch, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President Investor Relations, for some introductory words. Thank you, Lynn, and good morning, ladies and gentlemen. Welcome to our conference call for MTU's Q1 2021 results. We will start with a business review presented by Reiner. Peter will start with a financial overview and a more detailed look into our OEM and MRO segment. After that, Reiner will share our view on the current situation and the remainder of 2021. After that, we will open the call for your questions. Let me now hand over to Reiner for the review. Yeah, thank you, Thomas, and welcome also from my side. Let me start with a brief review of the first quarter of 2021. Globally, high COVID-19 infections rates and ongoing travel restrictions resulted in a weak start into the year. Passenger traffic was 70% below pre-crisis levels, whereas cargo traffic accelerated 11% in the first two months. IATA estimates a slightly better recovery of 26% in 2021, which equals 43% of 2019 air traffic. Main driver expected to be domestic RPK with a plus of 48%, while international traffic remains stable. This is the first positive revision of IATA's outlook for 2021 since the beginning of the pandemic. The GTF is one of the products recovering fastest in the aviation market. The GTF utilization is back to over 80% of pre-COVID levels. The fleet-wide retrofit program for the GTF engine has been almost completed and supports a high utilization. KLM has received its first Embraer E2 jet equipped with GTF engines. This happening in the current situation is an encouraging sign for the positioning of our products. Switching to the MRO business. MTU Shanghai celebrated its 20th anniversary beginning of April. In its history, the facility was expanded twice and currently has a capacity of 450 engines per year. The next step up in capacity to 700 shop visits has already been decided, and we expect to see the second site in China to start operations in 2024. For another expansion project, the progress is actually visible. Construction work of MTU Serbia has started. Sichuan Airlines, which is a long-term customer of MTU Shanghai, has signed a five-year MRO contract to maintain their V2500 and CFM56 engine fleet. This is once more evidence for our successful strategy to provide customer and tailor-made solutions. Progress on the military side. In April, MTU and Safran signed the joint venture agreement for the engine of the FCAS project, as we confirmed last night in the press release. MTU and Safran came to an overall agreement with ITP on the cooperation to jointly develop, produce, and support the next generation fighter engine. Each partner will have a work share of 1/3. Sikorsky announced its first export customer for its CH-53K heavy transporter helicopter. Israel ordered the helicopter to bolster its fleet. On the 21st of April, our proposal to reinstate the dividend payment was confirmed by the votes at our AGM. This is an important next step forward towards normality as we move through the crisis. The first three months in 2021 were still disrupted, and we have seen a lot of ups and downs. The current market developments are within the expected ranges that led to our revised guidance in February. Given that we are confident to achieve our targets and we can keep our guidance unchanged. Let me now hand over to Peter for the financials. Yes. Thank you, Reiner, and also a warm welcome from my side. Let's have a brief look at the financial highlights of the first quarter. Please let me remind you that the first quarter in 2020 was a normal quarter with no impact from COVID-19. Therefore, the comparison base is rather skewed and quite tough. Revenues decreased by 22% to almost EUR 1 billion. In U.S. dollar terms, revenues were down 15%. We had a significant headwind here from the weaker U.S. dollar in Q1 2021, where the average rate was $1.20 versus $1.10 in the quarter last year. Group EBIT adjusted was down roughly 50% to EUR 86 million, resulting in an EBIT margin of almost 9%. Respectively net income decreased to EUR 58 million. On the positive side, free cash flow came out at EUR 106 million, which is a strong start into the year. This mainly results from a strong cash collection in the MRO, following a high level of receivables at the end of 2020. Now turning the page and jumping into our business segment, starting with our OEM division. Total OEM revenues decreased by 32% to EUR 337 million. Military revenues were down 11% to EUR 87 million, showing the typical seasonal effects with a weaker Q1 and a stronger H2 and Q4 as last year. We are going to see the same pattern also in 2021. Commercial business revenues declined by 37% to EUR 250 million. Within that, organic OE sales in U.S. dollars were down in the high 30s% range, reflecting production rate cuts at Airbus for the A320neo platform and Boeing for the Dreamliner. Q1 2021 key revenue drivers were the GTF engine programs. Organic spare parts in U.S. dollars were down in the high 30s%. V2500 and CF6 and PW2000 engines started a bit weaker into the year, as expected. This business mix resulted in a decrease of EBIT adjusted to EUR 47 million with a margin of 14%. Turning to the commercial MRO segment, reported MRO revenues here decreased by 15% to EUR 678 million, while USD revenues were down only 8%. Core MRO business was down in the low to mid-30s% range, widely compensated by GTF work. EBIT adjusted decreased 40% to almost EUR 40 million, resulting in an EBIT adjusted margin of 5.8%. The lower margin here results from a higher share of GTF work, as mentioned before, as was already the case in last year. At this point, I'd like to hand back to Reiner for some words on our guidance 2021. Thank you, Peter. As you see in our financials, we had a relatively slow start into the year. This was not surprising. Q1 results came in broadly in line with our expectations. The overall developments in our end markets are also within the expected ranges. Airlines, especially in certain key markets such as North America, look more optimistic into the second half and are planning for a strong summer season. Vaccination progress and the sequential lift of travel restrictions should support this. We expect to see an improving aftermarket business quarter by quarter, with Q4 expected to be the strongest of the year. All of this supports our outlook. We can confirm our guidance as issued early this year. Revenue outlook remains at EUR 4.2 billion-EUR 4.6 billion, based on rate of $1.20. The outlook per segment also remains unchanged. Military and commercial OE sales to be up slightly, commercial spare parts revenues to be up low to mid-single digit, and commercial MRO revenues are expected to grow in the range of 15%-25%. The EBIT adjusted margin should be between 9.5% and 10.5%, and net income to be in line with that. Finally, our cash conversion rate is confirmed in the range of mid-double-digit percentage. Anyhow, the development in passenger traffic seems to remain volatile. We'll certainly monitor the developments closely and will update our outlook if necessary during the year. Thank you very much for your attention, and we are now ready to answer your questions. Thank you very much. We will now begin the question and answer session. If you'd like to ask a question, please press star one on your touch- tone telephone. The operator will announce your name when it's your turn to ask a question. In case you wish to cancel your question, please press the hash key. Mr. Robert Stallard from Vertical Research, may we have your question, please? Yes. Thanks so much. Good morning. Morning. Morning. I have a couple of questions for you. First one, I was wondering if you could comment on how the Zhuhai MRO business performed in the quarter, and whether this did start to see some benefit from the recovery in Chinese domestic flying. Then secondly, probably for Peter, on the cash flow, a strong performance in the first quarter, and you mentioned, I think it was from collections. I was wondering if there was any cash there that was pulled forward from what you may have anticipated later in the year. Thank you. Commenting first on Zhuhai. The activity results from Zhuhai was rather flattish. We saw the COVID-19 impact in Zhuhai already in the first quarter in 2020. We had the Chinese New Year, we prolonged Chinese New Year. In Q1, we had a little bit of disruption operations in Q1. The pipeline in Zhuhai is full, we did the induction pipeline. We expect also here in Zhuhai, regarding revenues and activity results, obviously for the consolidated P&L, a small tailwind throughout the year. On Q1, free cash flow, yes, it was a strong start, obviously, to the year. There's no pull forward I would see. We had a strong Q4 revenue-wise in 2020 on the military business, on the one hand side, also in the MRO. Obviously, the respective cash inflow was in Q1. It was a strong start into the year. Obviously the free cash flow for the full year won't be four times Q1 cash flow. Yeah. Okay. Would be nice, obviously. It would be nice. We'll work on that. Thank you very much. Thanks. Thank you for your question. Your next question comes from the line of Mr. Charles Sauer from Bernstein. May we have your question, please? Hi, good morning, everyone. Morning. Could you just share the organic spares performance for each of your three main engine programs? Secondly, there's been some discussions from some of your peers about customers bringing some repair and MRO work forward to prepare for a busy summer season. Just curious if you've been seeing any of that going on. Yes. On the V2500, we had something like in the 50s. It was organically, in U.S. dollars, down in the 50s. CF6 and PW2000 was down slightly. Together, this CF6 had a little bit weaker start into the year. It was down in the 10% range, I would say. On the other side, PW2000 was even slightly up. Especially, you might know that PW2000, the major part of the fleet is installed on the military C-17 transporter, and that is even growing that business. That is supportive here, obviously. Both together were down something in the 5% range. The rest of the portfolio, roughly down 30%. Regarding the MRO activities, yes, we also see more and more customers asking for shop visits in the next quarter to come. They prepare, as I mentioned in the statement before, for a strong summer season, especially in the U.S. market. We don't see that in the same range in the European market, especially in the Asian and the American market, we see demand growing. Great. Thank you. Thank you. Mrs. Chloé Lemarié from Exane BNP Paribas, may we have a question, please? Yes. Thank you for taking my question. I have two, if I may. The first one is actually if you could comment on the March performance in commercial spares and MRO versus the rest of Q1. Are you already seeing some slight improvements versus the beginning of the year? How should we think about it going into Q2? What trends are you expecting? I know that you mentioned gradual improvement throughout each quarter, maybe quantifying it a little bit would be great. The second question is on the cost-cutting that you managed to do. Can you tell us what the net cost savings impact were in Q1 and what we should expect for the rest of the year? Thank you. Yeah. On the spares, I wouldn't quantify that. Q2, we're going to see a sequential improvement throughout the year. We expect Q2 to be, also on the spare parts side, stronger compared to Q1. I would say the main acceleration would be rather in the second half of the year. This year will be a little bit back-end loaded, obviously, in the commercial spares, in the commercial MRO, and also, as usual, also in a typical year, not in a non-COVID year, the military business. Cost-cutting, yeah. If you look on our staff capacity, we have reduced. From the peak level one year ago, we reduced the full-time equivalence by roughly 800 headcounts in the year. You can translate that into something like EUR 80 million of staff cost. That is one quarter happened obviously then in Q1. Eventually you'd have EUR 80 million lower? It's for the full year, exactly. For the full year. Okay. Yeah. Perfect. Thank you. Thank you. Mr. Benjamin Heelan from Bank of America, may we have a question, please? Yeah, morning. Morning. Can I ask on the OEM margins were pretty weak? How should we be thinking about those through the remainder of the year, and was there anything in particular that we should be aware of in Q1? Secondly, on scope, and any view on what you're seeing in terms of revenue per shop visit. We've heard a lot about the potential impact of USM, so anything that you're seeing in there would be helpful. Thank you. Ben, I would start with the OEM margin. Certainly. In the OEM margin, we had two major, I would say, headwinds for the margin. It's on the one hand side, obviously, a weaker start regarding spare parts and a weak military business in Q1. That together with a decent level of OE deliveries obviously led to that 14% OEM margin. Throughout the year, as I commented, we're going to have at least a significant tailwind to EBIT coming from an acceleration of spare parts demand and also from a significantly higher share of military business. Definitely that is a tailwind for the OEM margin. Where then exactly will be with IFRS 15, honestly, so the revenue line is not so easy to forecast, but from today's point of view, the OEM margin will be definitely higher compared to the 14%, yeah, for the full year. The second question was about the scope of the shop visits in the MRO business. Yes, indeed. Actually, we see, let's say, compared to previous quarters, a very lower scope of shop visits. The airlines, they maintain only, or they ask only for a minimum of what has to be done. We also think that that will change over the year, especially then in the second half, that we will see a higher content of the shop visits as well. Any view in terms of what magnitude scope has been a headwind for your aftermarket business? Is there a kind of percentage number you can put on it? Oh, no, I don't have a percentage on that. It's also very customer specific. Yeah. For example, if a customer holds a flight hour agreement, obviously this customer is not very scope sensitive because this customer pays the scope via his flight hour rate. For these customers, the scope is the same as in the past. The sensitive part of the market is obviously. Time and material. time material market. Yeah. Okay. No, that's clear. Thanks, guys. Thank you. As a reminder, if you wish to ask a question, please press star one on your touch-tone telephone. Mr. Christophe Menard from Deutsche Bank, may we have a question, please? Yes. Good morning. I have three questions. One, a follow-up on the comments you've just made on time and material versus contract. Are you seeing a very different dynamic on time and material at the moment, apart from the lower scope? Are airlines actually refraining from putting some of those engines in maintenance? Is there a huge difference between contract and time material in terms of your revenues in MRO? The second question is on the free cash flow. You collected the cash from, I understand, the MRO receivables that you had. On the OE side, are you seeing any impact from Airbus normalizing its production, i.e., less cash collection in Q1? Would you expect less cash collection in Q1 from the OEs, especially Airbus in the future? Last question is on the GTF campaign, OE campaigns. There seems that GTF is gaining more momentum at the moment, gaining more market share. I mean, Delta Air Lines, if I understand well, took the GTF on its neos. Can you comment on that renewed, I would say momentum, but it seems that it's gaining some market share versus LEAP at the moment. I will start with your question regarding time material and flight hour customers. From the point of revenue recognition, it's completely identical. Also with flight hour customers, we book revenues when a shop visit happens, not upon payment. Time material customer, obviously also when the shop visit has been done, and this is delivered to the customer. From the point of revenue recognition, it's identical. On the one hand side, obviously a flight hour customer is, as explained before, not very sensitive to the scope because the payment is stretched over his flight hour payments. A time material customer obviously has to pay the shop visit when he really orders or when he sends the engines to the shop. Obviously that is very sensitive. On the other side, it's also airline specific. When an airline, for example, operates in the U.S., preparing for a summer season, this customer will do everything that he has the capacity in the air when the respective customer thinks demand will come back. It is on the one hand side, geographic footprint and on the other side also, which contracts does the airline hold? We have a mixture of everything in our portfolio. As Reiner pointed out before, we see a strong demand coming from especially North American operators as the vaccination campaign is there, far more advanced compared to the European market. European market will lack probably maybe two months or a quarter behind the U.S. market. On the cash flow in the OEM business, there's no change in the behavior of payment. It's a normal process in the OEM business. As you mentioned, the strong cash flow in the first quarter mainly came from the cash collection in the MRO business. GTF market share, we had some successful campaign wins in the last month. All the Indigo Partners airlines chose the GTF for the A320neo fleet. You know that was something like a 400 aircraft order from the Indigo Partners airline and also on the A220. I think Breeze Airways takes another 20 A220s with exclusive with the PW1500. The last months we are very successful, but it's an ongoing process. At the end, the target is obviously that we have something like a 50% market share. Is it then 48% or 47% or 51%? Nobody knows. Yes, there were some very nice campaign wins in the last month. Maybe the reason is also for that, a couple of years ago, we had some technical issues. Some of the customers or potential customers, they did not select the GTF at that time. Maybe now when also all of the technical issues have been more or less solved, there's more confidence into the engine, and maybe that supports also. As Peter said, at the end, it will be something around 50/50, what we are targeting for. Thank you very much. Thank you. Thank you. Mr. Harry Bridge from Stifel, may we have a question, please? Yes. Hello, Reiner. Hello, Peter. Hello, Harry. Guys, hi. Can I maybe ask you three, if I may? All slightly different. Maybe just firstly, completely different topic. ITP and the sale process there, I think when we spoke in February on the call then, I think, Reiner, you said, "Look, if they open the door to you guys, you might be interested." Has anything changed there? Have you had the opportunity to participate maybe more in the sale process with ITP? Secondly, this one's probably just down to my ignorance again. The new European fighter engine program for FCAS. The work share arrangement of 1/3, 1/3, 1/3, I guess that was maybe a little bit of a surprise to me given that, I guess historically, maybe one wouldn't always have evaluated the sort of modules typically supplied by the partners and the scope of work in those proportions, and maybe it's divided that way because the purchase quantities indicated by the customer countries are going to be in that proportion too. Can you help me understand just the thinking behind that work share on new European fighter engine, if you could? Then actually, guys, maybe could we address those two first? Yes, we do. Harry, first of all, ITP, Rolls-Royce has not opened the door yet for us. They are still, what we know, just have invited private equity companies to make an offer for ITP. If they will change their mind, yes, we are still interested. As I said, actually only P/E companies have been invited into the process. We have to wait. In general, yes, we are interested, there are some concerns on Rolls-Royce side to sell the company to MTU. They prefer a P/E solution. We have to wait whether it will work or not. On FCAS, that's just a result when Spain joined the program, they will finance 1/3 of the program, of the R&D spendings. As a consequence, the Spanish industry has also, let's say, 1/3 of the work share. ITP, as a smaller engine company, received also 1/3 of the engine. It was not easy to find, let's say the perfect packages. In the last days, we made some progress and we agreed on that, as announced yesterday evening. Maybe it's not the best way. We would prefer another solution, but I think as a consequence of paying 1/3 of the program, they have also the right of 1/3 of the work share to get. Guys, maybe the final question. When we spoke in February, Reiner, I think you said in the MRO business, I think you said that you had visibility, firm visibility about four to six months ahead, high certainty in the outlook in 2021. Given what you said earlier on about increasing demand from U.S. and Asian customers, specifically on the MRO side, are you seeing any sort of maybe movement to the upside in terms of your shop load units for the back half of this year? Is there any sort of increase in how you're looking at work volumes later this year? Actually, not. I would say, actually, we can, let's say, confirm the guidance we have given before. Let's wait for another quarter and maybe in end of June and in July when we release the half-year results, we have a better visibility, and that's the right point of time to, let's say, to update the outlook. Actually, I would say it's too early for that. Yeah. Just to be clear, you are seeing sort of increased demand from- Yes U.S. and Asian customers on that. Yes. Great news. Thank you. Thank you very much. Thank you. Mr. Holger Horn from DZ Bank, may we have a question, please? Yes. Hello, Holger Horn, DZ Bank. Hey. Thanks for taking my question. Hello. I have two questions, actually. First on the GTF. I heard your comments regarding the retrofits, and you said that they are almost finished. Does that mean it's finished by Q1 or Q2 or even later until the end of the year? How should we think about it? Related to that, can you give us some idea about the sequence of overall GTF deliveries, including these retrofits? Does that mean that you're linearly producing or sending out the normal GTF, but on top of that, you have more, let's say, in the first and second and maybe even in the third quarter, to be pushed out? Regarding delivery sequence, we do the GTF in Hannover. We do it in our Lufthansa joint venture in Poland. We do it from second half of the year, we do it also in Zhuhai. We're going to see, regarding GTF work, we're going to see more revenues coming in the second half of the year. On the one hand side, Hannover is more or less stable. EME Aero, the joint venture with Lufthansa in Poland, is currently in the phase of ramping up. The GTF is introduced in Shanghai in summertime. Technically, Shanghai and EME bill their work to MTU and we bill it to IAE. We have these revenues in our P&L, despite the fact that these are 50/50 joint ventures. That's the revenue-wise answer. The retrofits will be finished more or less in the second quarter. Okay, thank you. Coming back to the sequence of your earnings stream over the course of the year. Just as a clarification, you commented about the fourth quarter being the strongest. Was that only related to MRO or in total for the group, in terms of earnings? Obviously, from today's point of view, I would say the strongest quarter in the military business will be Q4. We expect acceleration of aftermarket demand throughout the year. Probably Q4 is the strongest on the commercial spares and commercial MRO, and as a consequence, also the margin or the absolute EBIT number. Yeah. For the group? For the group, yes. Yeah. Okay. Thank you. Thank you. Mr. Adi Aini from Algebris, may we have your question, please? Hi there. Yes. Thank you very much for taking my question. Congratulations on the results. I'll be honest, all my questions have been answered. I just had maybe one question left, which is that just based on how you're seeing Q2 start to evolve with one month down and how you sort of start to see the next two months evolve, is there a reasonable chance that your full year guidance, would you think about revising your full year guidance in June or when you do your half year results? Thanks. Yeah, it's always the process in any year that we typically, Q1 obviously is very close to the guidance we released, and typically in February with the full year results. In summertime, obviously six months, almost seven months are behind us. You know what you have in the shops, and that's the point of time where we take a deep look in our business and our financials. Based on that, we going to update the guidance in some form. Right. Based on how you think you're going, do you think there's a reasonable chance it can be revised higher? Because you seem to be already doing on track and in certain regions, we're starting to see improvements. If we answer that question now, I think we have to make a ad hoc announcement. Fair enough. Okay, cool. Thank you very much for your time and congratulations on the results. Thanks. Thank you. Mrs. Chloé Lemarié from Exane BNP Paribas, may we have a question, please? Yes, thank you for allowing me to reintroduce with you. I have two clarification, actually. The first one is actually on free cash flow performance. How should we think of the performance you gave in Q1 versus your guidance? Will you face some working capital headwinds, I don't know, maybe linked to the OE ramp-up towards the later end of the year that explains why you should have a weaker cash generation over the next three quarters? Are you actually expecting to be closer to a 60% cash conversion than the strictly 50% that is guided? The second question I would have is actually on the impact of the situation in India on your GTF work. Has it shifted demand earlier given that there's obviously poor air traffic, or does it have no impact whatsoever for you now? Thank you. First, on the cash flow trajectory. Throughout the year, there are, I think two major lines below EBIT to consider. The one thing is working capital. I think the moving item here is when exactly do we see the higher demand and then resulting in a higher level of inventories. Spare parts, for example, in the MRO shops, a higher level of engine in the shop, obviously. As a consequence, also receivables. I think when exactly the acceleration will start triggers finally the working capital level at the end of the year. To forecast that exactly is not impossible. We're going to see an inflection point throughout the year at a certain point of time. The second is, obviously Q1 was, CapEx-wise, it was a bit weaker. As Reiner mentioned, we going to start construction of MTU Serbia. Currently, we do all groundwork. That is below CapEx. Anytime in summer, we're going to start construction, and that is then the higher CapEx consumption, so to say. There's also a headwind, I would say from the CapEx side in the second half of the year. That will dampen a little bit the free cash flow development. We are, as we sit here today, very confident to achieve a double-digit cash conversion in the year. Okay. Thank you very much. Regarding India, I think it's too early. Actually, we don't see an impact, but we have to look on the situation. As I said, actually, we have to wait a little bit of time to see, is there any impact or not. Thank you very much. Thank you for your question. Mr. Miro Zuzak from JMS Invest, may we have a question, please? Yes. Good morning. Thank you for taking my question. Miro speaking from JMS Invest. Good morning. Good morning. I have basically one central question, which is about, let's say, the mid to longer term outlook. I understand that there is a negative mix effect now from the spares mix, versus OEM, this also depending on the recovery path of the capacity basically coming back into the market. This also will probably persist for a couple of years, depending on what your expectations are. At the same time, you have also optimized your costs. You have made some restructuring in Germany. You've optimized the production footprint and so on. The question would be, when do you expect to be back at the, say, 18%-20% level, in terms of gross profit? You mean segment margin or 18%-20% what? No, the gross profit margin. Which is now heavily down, right? Was 18%, 20% before the crisis, now 12.5%, in last year. Now it should probably come up again, right? How quickly will this come up again? When will it reach, let's say, the pre-COVID levels in your basic assumption? Yeah, I wouldn't say an exact point of time when that will be, because we don't give a guidance beyond 2021. The answer is, obviously, capacity demand is back from the customer side, upon lifted travel restrictions and so on. We're going to see an increase in traffic triggering, aftermarket demand, spare parts demand and also demand for MRO service. Military business anyhow is unaffected by military business. In the next two, three years, we're going to move back to a level we have seen before the crisis. If you look on the EBIT margins or MRO, I think we won't come back to 10% or so given the mix in the next two, three years, given the mix with a higher share of OEM or work for the GTF, that is, we continue to be a lower margin business compared to the independent business now. If you look on the forecast of the passenger traffic development, I think the common sense is that passenger traffic will be back on pre-COVID-19 level or on 2019 level, maybe 2024, 2025. Within that, earlier for the narrow body market where we have an high exposure, maybe in the year 2023 to 2024. It's as Peter said, in the next two to three years, we will reach the levels as we have seen before the crisis. Yes. Okay. Thank you. Thank you for your question. Mr. Richard Schramm from HSBC, may we have a question, please? Yes. Hello. Hello. Two questions, if I may. One concerning this ITP. Just a clarification, if you really would be able to acquire this company, wouldn't that mean that the whole process is mixed up? You would just have settled for this FCAS project because, through the backdoor, MTU would then have much bigger share than before? No, it will not be changed. The contracts are more or less negotiated now. I would say from today's perspective, the probability that we will acquire ITP is not very high. Okay. You would say you are not prohibited by these contracts you just signed? No. Definitely not. Okay. Second question concerning this issues we hear from most other sectors currently, namely what's happening on the supply side in respect of prices for materials and volume shortages. What do you see in this respect? Have you made any preparations in this respect for possible issues here, or are you still relaxed in this respect? What's your situation there? We are not relaxed. On the other side, we don't see the big issues arising here. To my understanding, we don't have any issues on the supply chain, actually, and also not for the next couple of quarters or years. Different to what we see in the automotive industry, where they have some issues with semiconductors and things like that. We do not have these issues. The supply chain is stable. Okay. Concerning material prices, where we have seen some very excessive increases, for example- One thing is, typically we have long-term pricing agreements with our suppliers. Engine prices are typically subject to price adjustments. In that price adjustment mechanism, there are also the raw material price included. The general answer is you can pass the price increases on to your customer. No, that's very comfortable then. Thanks. Thank you. Mrs. Milène Kerner from Barclays, may we have a question, please? Yes. Hello, Reiner, Peter, and Thomas. Hello, Milène. Thank you for taking my question. Hello. I have two questions. The first one is on the OEM margin. Could you comment on the OE revenue decline impact on your profit that you saw in Q1? Was it a headwind? Was it a tailwind in your year-on-year bridge? Also, what's the outlook for the rest of the year in terms of profit impact coming from the OE side of the OEM? My second question was on spare. Could you also share some color on what drove the deterioration you have seen in the CF6 engine in Q1 apart from the tough comps? Thank you. Yeah. Regarding margin, I would say, we had a drop in new engine sales of also high 30s% in Q1, more or less as high as the spare parts demand. From an absolute level, we wouldn't expect a big increase of OE deliveries throughout the year. We expect a rather flat delivery line for the GEnx, the one engine for the Dreamliner, and a flat to slightly up delivery line for the PW1100. That's a little bit the question, when exactly will Airbus raise production rate and so on? We're going to see a small ramp-up of the PW1500 for the A220. Overall, yes, a small sequential improvement throughout the year, but not so much. On the spare parts demand on the other side, we definitely think that we're going to see, from absolute levels, a sequential improvement throughout the year. A significant sequential improvement. That will drive the EBIT margin higher, and that will be supported also by, as mentioned before, the military business. Which, especially in the second half of the year, will contribute much more EBIT compared to Q1, obviously, and also Q2 will not be something like EUR 180 million like the Q4 2020 year. With the second question. Yeah. Sorry, Peter, just to follow up on this one. Yeah. Thank you for the color. In terms of your profit, given that OE is loss-making, so you had lower volume on one side, but on the other hand, you have more cost versus the volume. In terms of the impact on the profit on the adjusted EBIT in Q1, was it a headwind or a tailwind in your bridge, this high 30s% decline? Yeah, a headwind. A headwind? Yeah. Okay. For the rest of the year, should we also expect a headwind or? A small one, yes. A small one. Okay. Thank you for the clarification. My second question was on CF6. I just wanted to understand, apart from the tough comps, what drove the deterioration you have seen, the minus 10% you have seen in Q1? Yeah, the CF6 is always a little bit of a volatile program. On the one hand side, you have a broad customer base, and then you have also the ordering pattern of the different MRO shops in the world. I wouldn't read so much into that. It's a typical, I would say, quarterly fluctuation. Typically, you have a strong Q4 in the spare parts business. When the global MRO shops for the CF6-80 orders slightly higher level of spare parts because they get the old prices, and typically Q1 is then a bit weaker. That's a typical pattern, so I wouldn't read too much into that or extrapolating that into the full year. Okay. Thank you. Thanks. Thank you. There are no further questions over the phone at this time. Therefore, I would like to hand back to Mr. Thomas Franz. Yes. Thank you, Lynn. Thank you all participants for joining. If you have further questions, contact the IR team. Further to that, I have nothing to add. Wish you a pleasant Friday night weekend, and stay safe. Bye-bye. We want to thank Mr. Reiner Winkler and Mr. Peter Kameritsch, and all the participants of this conference. Goodbye.