Welcome to the conference call on MTU Aero Engines preliminary full year results 2022. For your information, the management presentation, including the Q&A session, will be audio taped and streamed live or made available on demand on the Internet. By attending the conference call, you grant permission for audio recordings intended for publication on the Internet to be taken. To ask a question during the question and answer session, you will need to press star one and one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. The speakers of today's conference call are Mr. Lars Wagner, Chief Executive Officer, and Mr. Peter Kameritsch, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, with some introductory words. Thank you. Welcome, ladies and gentlemen. Welcome to our conference call for MTU's preliminary full year results 2022. As usual, we will start with a business review from now on presented by Lars. Peter will give you the financial overview, a comparison to our 2022 guidance, as well as a more detailed look into our OEM and MRO segment. Lars will walk you through the guidance update for 2023. This will be the end of the presentation, and we will then open the call for questions. Let me now hand over to Lars for the review. All right. Thank you, Thomas, and welcome from my side. This is my first presentation today. Please allow me a couple of opening words from my side. I'm sure that most of you know that I've taken over the CEO position since January first. I have been with MTU for the last eight years, and the last five years I spent as COO and CTO on the board. It's my pleasure to guide you through our business review today. I'd like to start with a few words on the market environment. In 2022, passenger traffic improved to roughly 68% of 2019 levels, with North and Latin America and Europe leading the recovery. In January, China lifted its travel restriction, leading to a strong upturn in air travel in that region. This rapid increase in air traffic will also trigger further MRO and aftermarket demand. On the cargo business, after reaching the peaks during the COVID pandemic, traffic normalized in 2022. Overall, the outlook for air traffic in 2023 looks very promising, with passenger traffic reaching 86% of 2019 levels, while cargo traffic is expected to slow down slightly. This recovery is led by the narrow body segment, which is expected to exceed pre-pandemic levels already in 2023. Our strong exposure in this segment makes us very well-positioned to benefit from these near-term developments. Let's have a look at the business in 2022. Let me start with the military business. Obviously, the key highlight here was certainly the agreement on Phase 1B for the FCAS in December 2022. Together with Safran and ITP, we will be responsible for the development of the next European fighter engine. This new military program offers not only attractive growth opportunities, but also a major technology boost for us, for MTU. The development work will enable us to further expand our technological expertise in this high-tech sector. We are actually currently hiring up to 300 engineers for this phase of the engine development. Furthermore, as a result of the Ukraine-Russia war, the German armed forces are seeking to improve the availability of their military equipment. To increase the operational readiness of the German armed forces, we prioritized the maintenance support for these assets and improved the turnaround times in our military maintenance. To the commercial side of the business, in the GTF program, the flight testing of the GTF Advantage engine has started on an A320neo aircraft. These tests and the certification work will continue through the first half of 2023. As most of you know, the GTF Advantage will be the new baseline configuration for the GTF on the A320neo. Its strongest variant will be the most powerful engine for the A320neo family, enabling increased range and payload. Additionally, it will offer full compatibility for sustainable aviation fuel. Entry into service of the GTF A, as we call it, is expected in 2024. Generally speaking, the demand in the narrow body market has improved strongly over the past 12 months. Next to this most important segment for MTU, we are also seeking a pickup in wide body activity, which will support our continuous growth plan. On the commercial MRO, we also experienced a very successful year. In 2022, we secured new contract wins of $3.6 billion. We see the continuous growth in flight activity translating into a strong increase in demand for shop visits. To be prepared for this development, we continuously invest in our product and service portfolio as well as in our MRO capacity. Latest addition in our new parts is our new parts repair shop, MTU Serbia, that opened near Belgrade in October last year. On our product portfolio, we added not only the PW1500G and PW1900G at EME Aero, but also the PW800 at MTU Maintenance Berlin. Finally, on the MRO segment, we are offering engine test runs with sustainable aviation fuel to our customers as the world's first MRO provider to do so. This brings me to our progress on the technology. In 2022, we set out possible solutions for sustainable commercial propulsion systems, but also time horizons for achieving zero-emission flights in three stages in our Clean Air Engine technology agenda. The main routes of action on propulsion were identified and are now followed in the two key projects, the Water-Enhanced Turbofan, the WET Engine concept, and the Flying Fuel Cell. Next to our own ambition in this field, we are very proud that the SWITCH program under MTU's coordination has been selected by the European Clean Aviation Research Program. SWITCH actually focuses on two revolutionary technologies, MTU's Water-Enhanced Turbofan concept based on the GTF and hybrid electric propulsion. Together with our partners, Pratt & Whitney, Airbus, Collins Aerospace, and GKN, we are aiming to pursue a 25% reduction in CO₂ emissions and a significant cut in NOx emissions and contrails. Next to these activities in our product landscape, we are also striving to reduce our emissions in our production facilities worldwide. This is called the ecoRoadmap, and we've expanded it from Germany into Europe and now worldwide. As one example, we are starting the project to use geothermal energy at our Munich site, and this is our integrated part of our commitment to the Paris Agreement. 2022 was again an excellent year for MTU. Details will be provided by Peter in a minute. Based on the good results, we will propose a dividend payment of EUR 3.20 per share at this year's annual general meeting on May 11th. Of course, this is subject to approval by the supervisory board. This marks a step forward towards our targeted payout ratio of 40%. Last but not least, a few words on the change in the management. Since February 1, 2023, Dr. Silke Maurer supports our executive team with her excellent experience in operations and production as our new COO. Mr. Gordon Riske, our new chairman of the supervisory board, elected by the AGM in 2022, is supporting MTU very actively and with great strategic foresight. Speaking of myself, in my new role as CEO, I will continue to be in charge for the technology development and sustainability. With this, let me now hand over to Peter for the financials. Yes. Thank you, Lars, and also a warm welcome from my side. For the full year, total group revenues increased 27% to EUR 5.3 billion. In US dollar terms, revenues were up 14.5%. EBIT adjusted increased 40% to EUR 665 million, resulting in an EBIT margin of 12.3%. Net income adjusted increased respectively 39% to EUR 476 million. Our free cash flow was with EUR 326 million, up 36% compared to last year's figures. Turning the page and comparing our full year 2022 figures with our updated guidance from October 2022. Revenues ended up a bit below our guidance. The main reason for that slight miss was the supply chain instability we faced in all of our business segments. EBIT adjusted, with EUR 665 million and a margin of 12.3% clearly exceeded our expectations. Net income adjusted growth was in line with EBIT adjusted growth as expected. cash conversion rate at 69% was at the upper end of our guidance range of 60%-70%. Overall, very positive results and a clear step forward on our recovery path. Now let's dive as usual into our business segments and starting with the OEM division. Revenue increased 18% to EUR 1.8 billion, within that, our military segment was up slightly with 3% and an absolute number of EUR 496 million. Q4 was a bit weaker than expected back in October, mainly caused by some delays in incoming parts from our partners. Commercial business rose 25% to EUR 1.3 billion. Within that, new engine deliveries were up around 10%. Here the growth mainly was driven by the GTF engine platforms, while GEnx and IGT deliveries were a bit lower than expected, and this jet engines remained roughly flat-ish. Organic spare parts were up high teens, slightly ahead of our full year guidance. Main drivers here, as you know, were narrow body engines and freighter engines on the one hand side. On the other side, we also saw good growth for biz jet engines and also for the GEnx platform. That's the result, EBIT adjusted of EUR 387 million and an EBIT adjusted margin of 21%. The main driver for that was, as I said, the business mix a little bit offset by higher costs for SG&A and R&D. Let's move on to the commercial MRO segment. In that segment, revenues increased strongly by 32% to a number of EUR 3.6 billion. U.S. dollar revenues were up 17%. This is a slight miss compared to our full year expectation, and also here, mainly resulting from supply chain driven longer turnaround times in our MRO shops. The GTF MRO share remained at roughly 30%. EBIT adjusted increased 80% to almost EUR 270 million, resulting in a margin of 7.4%. By the way, the absolute EBIT in the MRO segment already exceeds EUR 261 million we generated in 2019 before the COVID crisis, but it's a record number for the MRO segment regarding absolute EBIT generation. The higher EBIT margin here in that field is especially driven by the mentioned favorable business mix of independent versus GTF MRO. In addition, we saw a healthy IGT business, healthy CF34 business in our Berlin MRO shop, and of course, the current US dollar exchange rate and the development throughout the year detailed and they're very supportive. At this point, I would like to hand back to Lars for some words on our guidance 2023. All right. Thank you very much, Peter. The market environment looks indeed quite encouraging for 2023, despite ongoing supply chain constraints. Air traffic is expected to be almost back at 2019 levels. The strong rebound in China should result in positive effects for the aviation industry. As a result of the developments since November 2022, we are updating our guidance for 2023. Group revenues are expected between EUR 6.1 billion and EUR 6.3 billion. This is a reduction compared to the EUR 6.4 billion-EUR 6.6 billion we had before. Main reason is an updated FX assumption from $1.05 to $1.10 per EUR based on the recent developments. Military revenues are expected to rise 10% due to the start of the FCAS demonstrator work and some spillover effects from 2022. The organic growth outlook for commercial OE, commercial spares, and commercial MRO remain unchanged. Based on these expectations, we are able to specify our EBIT outlook and are now expecting a stable EBIT adjusted margin. Within the segments, the MRO margin will be lower compared to 2022, as it benefited from FX effects in the year. The OEM segment margin will compensate that lower MRO profitability even under the expectation of some FX headwind on EBIT adjusted. Based on the ongoing uncertainties in the supply chain, we will not provide a free cash flow outlook today. This closes our presentation. Thank you for your attention, and Peter and I are now happy to answer your questions. Thank you very much. We will now begin the question and answer session. As a reminder, if you would like to ask a question, please press star one 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 star one one again. Please stand by while we compile our Q&A queue. Our first question comes from the line of David Perry from JP Morgan. Please go ahead with your question. Yes, good morning, Lars, Peter, and Thomas. I've got three questions, please. First one is about long-term service agreements. It's about new ones that you may enter into. It does look like the new, the new engines from all of the manufacturers, not just Pratt, but also GE and Rolls are a bit less reliable than older generation engines and cost more to maintain. I just wondered what scope you might have, if any, to charge higher prices on new long-term service agreements. Second question, please, is on existing long-term service agreements, and I'm just curious what inflation-linked price increases you've been able to apply for the year just started. The third question, please, is could you just give us some guidance on your R&D for the coming year, your self-funded R&D in cash and also P&L expense, please? Thank you. For R&D, I would say it will be slightly up 2023 versus 2022 ex the FCAS engine. I mean, as you know, we have, we had the signature of the contract for FCAS. That will be something like a low to mid-double-digit EUR number regarding R&D. That still has to be specified. For the existing R&D work, I would say it will be up in the range of 10% in customer-funded, self-funded, and also P&L. I mean, that has still to be seen throughout the year, what is capitalized, what is expense, and so on, but these are details. Overall, let's say R&D spendings will go up 10%-15%. Yeah. Thanks. Okay. Regarding LTSA, yeah, sure. I mean, the one thing is obviously, we have to work on the existing LTSA. I mean, we finalized or we closed the existing LTSA back when together with the sale of the new engine. You are in a competitive situation, you have to look on the whole contract period. You have your revenue flow coming from the flight hour payments, you have obviously the expected aftermarket costs for these for these contracts. We have to work on these contracts to take costs out, to improve the reliability of these engines, to develop repairs and so on, to manage the fleet in an intelligent way, in a way to avoid chop visits. We can do that. Not only MTU has to work on that, we have to do that with our partner companies, with the Japanese guys, with Pratt & Whitney, so that we can maximize the profitability of these contracts. Obviously we have to live with the higher maintenance costs, which we are currently facing due to the, as you mentioned, the smaller reliability progress we encounter. Do you think on new, I mean, on new LTSA contracts, do you think you have ability to raise the prices and charge more for an hour flow? Yeah, I mean, that is always the ambition, but you are I mean, I mean, you can. If you look, if you look on the landscape, obviously if when you have a follow-up contract with an existing customer, you are in a better position compared to when you are in a competitive situation, when you want to sell the engine together with a flight hour agreement, no? But the ambition is always to increase prices and to maximize profitability. There are both sides, so the pricing side, but also the cost side. Okay. Just the last one was on inflation. On what sort of price increases do inflation link price increases do you get on an LTSA this year? You told us about spares in the past. I'm just curious about LTSAs. I mean, you can typically, you have also in these LTSAs, regarding the labor rates in, incorporated in these LTSAs, you have a price adjustment mechanism based on the worldwide development of labor rates. It's not, I mean, it's not linked obviously to the German labor rates. It's more a basket of worldwide labor rates and also the worldwide development of energy costs and so on. Basically, you can pass on the price increases to customers via these clauses. We won't see a big headwind coming from inflation. Okay. Thank you. Very helpful. Thank you. We'll now move on to our next question. Please stand by. Chloé Lemarié from Jefferies, please go ahead with your question. Yes. Good afternoon, gentlemen. I have three, if I may. The first one is on spares. Given the reopening in China, we've seen, we've seen some, you know, traffic outlook getting a bit stronger than the 86% of 2019 you mentioned last in your opening remarks. I was just trying to gauge how you could possibly see, you know, your spares outlook evolve on the back of this. Second question is actually on net debts. Could you explain the EUR 200-ish million of compensation payments that you've recorded at the end of 2022? What program it relates to, what essentially what those EUR 200 million of liabilities are. Last one in MRO. Could you quantify the sort of one-off FX benefits you recorded in 2022 from the timing of spare part purchases versus sale? What does that mean along with the higher share of GTF work for 2023 margin, please? Right. you could do the spares wise, of course. Okay. I mean, regarding first question regarding spare parts. I mean, yes, I mean, I think the air traffic will grow stronger compared to our initial expectation for the year. The demand side could be stronger, but on the other side, we saw already in 2022 constraints in the supply chain, so availability of raw materials, semi-finished goods, and so that's a headwind. I mean, we have to monitor that in the course of the year. Yes, you are right. From demand side, we could see a bit stronger demand from the spare parts side. Net debt, I won't go too deep into that, but that is a liability which is a compensation payment to one of our partner companies coming from the GTF, coming from the GTF engines. It was in the past. It was in the past part of working capital, so it was a liability and a deductible in the working capital. Now we have agreed with the mentioned partner company, a long-term payment plan. If you agree on a long-term payment plan out to, let's say, five years, then it's classified under IFRS to be a financial liability. As such, it's part of a net debt financial liability, and it's discounted part of net debt, and now it's part of our financial net debt. It's only a technical issue, so nothing has changed fundamentally. It's just a reclassification out of working capital into financial debt. Now we don't quantify that, but it was a, I would say not too small benefit, especially given the longer turnaround times, which we saw in 2022. I mean, we had shop visits, especially in the IGT field where we purchased the material back in 2021, at an exchange rate of 1.20, and we bill it at parity to the customer. You can imagine that there is a significant tailwind. We won't see the kind of 7.5% margin in the MO division, in 2023 again, that will be compensated at group level with a higher OEM margin. Maybe the MO margin in 2022 will be something like 1 percentage point lower, 6.5%. In that field, and that is driven by the mentioned one-time benefit which we saw in the 2022. Thank you very much. Thank you. We'll now move on to our next question. Please stand by. Kseniia Maslova from UBS, please go ahead with your question. Hi. Hello. Thanks for taking my question. I guess I just have one on spares. Your performance came ahead of your guidance in 2022. I was just wondering if you can please give us more color on platform by platform basis, in particular how GTF and GEnx has been ramping up. If these spares activity in 2022, have there been any one-off impacts like shops stocking up with spares as demand visibility improves? Thank you. Well, no, it's not the one and only reason. Which where we thought that this one engine performance was the reason for the better performance. It was across the board, narrow body engines in part. Also, bizjet engine, bizjet engines were quite strong in 2022, but also GEnx. It was not really, let's say, stocking, de-stocking. We didn't see effects like that. Wouldn't say that. No. Thank you. Thank you. We'll now move on to our next question. Please stand by. Robert Stallard from Vertical Research Partners, please go ahead with your question. Thanks very much. Good morning. Good morning. To start off, I was wondering if you could elaborate on these, supply chain issues you experienced, towards the end of last year, and what your expectations are for these challenges going forward in 2023. Yeah. Basically, we say, we do see continuing supply chain hiccups throughout the year 2023, but it's certainly improving. The majority of the issues are coming with the big structural parts where we usually have a duopoly in the U.S., and they were struggling to compensate the loss of employees that occurred during the post pandemic or with COVID. Meanwhile they are stepping up their personnel. They're back in recruiting, but it takes some months, maybe even a year, depending on the level of know-how to qualify and certify the employees. The industrial capacity from my point of view, is available. Shortages are on labor, and this is to be continued and to be improved over the year of 2023. Okay. As a, as a follow-up, this might be for Peter. You mentioned that you're not giving any guidance for cash flow at the start of 2023 here. I was wondering if you could maybe elaborate on your thinking there and what the puts and takes could be in cash flow this year. I mean, on the one hand side, we expect higher earnings, compared to, it's quite obvious. That is obviously a tailwind for cash flow. CapEx should be rather flattish. I think the unknown part of the equation is the working capital development. How fast does the supply chain recover throughout the year? Is it already stable middle of the year? I think we're gonna see quite good cash flow cash conversion. If it recovers, let's say in December or even in the beginning of 2024, then we're gonna see some drag on working capital. I mean, it's touching every business segment. We saw in 2022 delayed deliveries in our military segment. Raw material supplies, semi-finished goods supply was not very stable in the commercial OEM segment, in the MRO segment. Spare parts supply, but also the performance of outside vendors providing repaired parts for shop visits was we faced higher turnaround times. That all resulted in, let's say a higher level of work in progress in the shops. We cannot finally put the engine on the test cell and ship it to the customer, bill it and receive the money. We have to wait for the last and final bolt, the last and final part until it can be shipped. As a reaction to that, we try to counter that with a higher level of spare parts, or spare parts pool in the MRO shops. That means also higher working capital to be able to deliver at least some engines to the customer. Unless that situation has not cleared up, I think it's not. We don't have a solid basis to give a cash flow guidance at the beginning of the year. I think we're gonna look at the situation mid of the year and decide then will we give a free cash flow guidance then or not. The ambition is, obviously at least to reach the same cash conversion rate as in 2022. Yeah. That's great. Thank you very much. Thank you. We'll now go to our next question. Please stand by. Christophe Menard from Deutsche Bank, please go ahead with your question. Yes, good morning. I had three questions, if I may. The first one more detailed. Hedge rate in your presentation has moved down from 1.16 in 2023 to 1.13. Can you explain how you managed to do this? If I recall in the CMD, you were at 1.16. That was the first question. The second question is on the guidance for commercial EM new engine delivery. You're still in the 30%+. I was wondering what assumption did you take? I mean, is it the same assumption as at the CMD in terms of number of deliveries? Should we, I mean, basically, is it I mean, I'm struggling with this. I'm trying to understand what you base this on in terms of delivery expectation. Since we met at the CMD, the consensus has come down on delivery expectations for Airbus and Boeing. Just wanted to have your view on this and whether there was more pricing embedded in this. The last point was on that increase due to compensation payment for program. I understand this is coming out from the working cap. Is EUR 40 million a fair number to assume that you took out of the working cap and is now classified as a liability? Just wanted to also to understand, is it something that you may see re-happen in the future or reoccur in the future if there are further improvements on programs? First, the evolution of our hedge book. I mean, if you look on our hedge book in Q3, we had a little bit below EUR 1.1 billion of hedges at a rate of 1.16. You are right. Now we have EUR 1.5 billion at a rate of 1.13. We added more than EUR 200 million of hedges in 2023. Obviously, with a far better rate compared to 1.16. We did that at the end of the year, where the FX rate was not exactly at parity, a little bit above parity, and that brought the average hedge rate down from 1.16 to 1.13. It's a cost averaging effect in the hedge book. We added a lot of hedges. The 30% growth in commercial, I mean, if you look on our 2022 performance that we missed the guidance also for OE deliveries in 2022. The basis is lower. We initially guided for more than 10% OE growth and some deliveries slipped. It was the GTF, but also GEnX engine and IGT engines, which moved to the right. The basis is lower. Based on the lower basis, we still expect something like a 30% increase. Your third question was? Compensation payment. I think it's in the net debt in the net debt page in the appendix. You see the on page 22, you see the compensation payment due to a program participation. These are the EUR 290 million which are in a net debt, and they were goofed out more or less out of working capital. It obviously increased the working capital number by the same amount because the 290 was deductible in the working capital. Okay. Okay. Okay. Is it something that could reoccur in the future? In a normal course of the business, not. It basically means that your partner has improved his part, but you need to pay on this, I mean, it's a liability. It hasn't been cashed out, but you need to contribute. Yes, you need to contribute, yeah. In the first step, you also received more. It's a little bit, it's a balancing payment from, you have to always compare what is your program share and what do you deliver into the program, what do you receive. It's a balancing payment. It's. Okay. Over the course of the business, we receive 18% and provide 80% of our cost to our program share. Yeah. Okay. Clear. Thank you very much. Thank you. We'll now move on to our next question. Please stand by. Milène Kerner from Barclays, please go ahead with your question. Yes, good afternoon. Thank you for taking my question. I would like to come back to the question Christophe just asked on your commercial series growth outlook, and the fact, Peter, that you mentioned the lower 2022 base. If we go back 12 months, you had expected a much higher growth that actually turned out to be the case last year . I just wonder what's your confidence level around this 30% growth, and why you're more confident given the current supply chain challenges? That's my first question. My second question is on your EBIT performance for the OEM segment in Q4. I mean, yes, your military sales are always Q4 loaded and that's a help, but your margin performance in Q4 was well ahead of our... Sorry, of your nine-month performance, despite the fact that you had a weaker mix due to higher series business growth relative to your spare parts growth. I was wondering if you can comment at all on what might have driven that. Thank you. I think, Peter, but you commented on it several times. Obviously we expected this growth, what we mentioned in the market environment. Everyone wants to go back flying and the latest discussion on the ramp of the two airframers, we believe there is going to be a lot of push to reach the deliveries that might be forecasted in today's obviously from Airbus. There were a tremendous focus on this ramp because the market is expecting it. The market demand is clearly there. Might be even bigger than what we can deliver. That's our optimistic view on the year 2023. Regarding Q4 margin, I mean, it's not dramatic. I mean, I think Q4, we had in the OEM division, 23.5% margin versus the full year of 21%. As you said, I mean, we had a very, very strong military business in that quarter, almost it was not exactly 200, but 190 million EUR. We had a high teens growth in the spares. A little bit ahead of the low teen, mid-teens growth in spares. I think that the business mix is more or less the explanation for a little bit above above average growth. If you compare Q4 2022 with Q4 2021, we are even a little bit below the margin we had in 2021. We had in the fourth quarter a 25% margin. That is due to the a little bit lower margin in the OE segment. We had less, we sold less spare engines, we sold less IGTs, also a little bit less business jet engines, which are profitable. That explains more or less a little bit lower margin in 2022 versus 2021. Thank you. Thank you. We'll now move on to our next question. Please stand by. Harry Breach from Stifel, please go ahead with your question. Yeah. Hello. Hello, Lars. Hello, Peter. Hello, Thomas. Hello. Harry, hey. Hi, guys. Can I maybe move over to maybe commercial MRO a little bit? You know, just thinking back to the CMD and the second half of last year, you spoke about large numbers of engines waiting induction at Hanover and around the network. Can you give us some sense about the kind of waiting and demand on the MRO side at the moment, whether it's about the same as it was a few months ago or even more engines waiting? Can you also just maybe touch a little bit of on work scopes, whether you're seeing those sort of expand a little bit or more or less the same? On the expected GTF versus core MRO mix in 2023, please. Yeah, I mean, we still see a quite healthy induction pipeline. A lot of engines are waiting for a shop. I mean, we are a little bit cautious. I mean, it does not make sense to induct engines into a already congested shop. We are a little bit cautious there until the, let's say, the situation clears up a little bit, unless we have a stable supply chain regarding spare parts suppliers also, outside vendor performance. I mean, these were the reasons for the situation which we had in 2022. I mean, work scope it has been already I think airlines currently do full shop visits, that is, that's clear. I mean, it's not, I mean, we have a certain level of pent-up demand in the global engine fleet coming out of Corona, and we haven't recovered that yet. We are gonna see the same situation in 2023. If indeed, new engine deliveries move a little bit to the right in the narrow body space, but also in the wide body space, we're gonna see an additional demand for MRO work. Because let's say, if our PKs recover and new engine or new equipment deliveries move to the right, we're gonna see increased demands for aftermarket work, obviously, because the existing fleet or the older fleet will have to absorb that higher demand in 2023. We are not very concerned regarding demand for MRO work in the coming one, two years or so. Maybe Harry, to add, we have now done a big focus on our operation excellence performance inside our factories, especially in Hanover, our biggest factory, but also at the other worldwide shops to make sure that we are prepared and we are improving our turnaround time in order to increase capacity. Obviously, like Peter said, we are relying somehow on the outside vendors and the general supply chain, but at least the focus is on, in our internal performance to perform as best as possible. The mix of core and GTS shop visits? That should stay roughly stable. Bit to high threes. Yeah. Great. Thank you. Thank you both. Thank you. We'll now move on to our next question. Please stand by. George Zhao from Bernstein, please go ahead with your question. Yes. Hi, hi, everyone. First question on freighter. You know, given the some of the softening cargo demand and the return of wide-body belly cargo capacity, you know, do you still expect the spares for your dedicated freighters to grow this year? The first question. The second question, you know, coming back to the GTFs, you know, for a few of the quarters this past year, you've talked about the lower than expected GTF MRO work, and you talked about some of the improved performance as the driver of that. I mean, how do we reconcile that with the comments from airline operators and lessors that these engines have been coming wings earlier than expected? You know, what's driving the differences in the outlook and the commentary here? Regarding freighter, we have incorporated in our planning already a little bit weaker, a weaker freighter traffic. We last spoke about that in this introductory remarks in this review. Looking at our portfolio, it's basically the CF6-80, which is the engine with the highest footprint in the freighter market. There we expect a broadly stable development. In the hot phase of this freighter development, we couldn't serve all shop visits which we were approached to. A lot of customers. We had to really to reject a lot of customers. I think we are now in a situation where we see a better balance of supply and demand regarding freighter shop visits and as a consequence also the sale of spare parts in that field. Not to forget, it's only 50% of the spare parts in the CF6-80 coming out of the freighter market. The PW2000, the freighter, yes, there is some freighter footprint, but that is negligible. The major spare parts for the PW2000, they come from the military fleet, from the C-17, and also from the two major operators, Delta and United, which operate the 757, the PW2000. The freighter footprint here is not not very important. It's all about the CF6-80. As I said, we expect a stable development in 2023 versus 2022, but we don't expect a growth here in that in that field. on the GTF? Basically on the GTF MRO, what you see is we are in a phase where we work through the program, where we put in the latest technology into the shop visits, which indeed also take longer than usually. This in addition to the strong traffic uplift in the utilization of the aircraft, leads to this balance in communication, I would say. It's nothing surprising these days. The engines that's coming offline or from the new engine line today are on a different setting. Compared to what we expected in the shop visits, the part utilization is lower than what we thought 12 months ago. That is what led to a lower share of GTS revenues in the year 2022 and a lower share of GTS revenues in our MRO segment for the coming years. That's part of the guidance. Thank you. Thank you. We'll now move on to our next question. Please stand by. Aymeric Poulain from Kepler Cheuvreux, please go ahead with your question. Yes. Thank you very much for taking my question. My question are mostly follow-up from the previous ones. On the hedging, 2023, could you remind us of the $ gain that you would expect as a boost to the OE margin in 2023? Secondly, on the military side, you obviously now include the contribution of the FCAS R&D contribution. What would be the margin to assume for this R&D re-revenue stream? As we move into 2024, how much bigger do you expect the FCAS contribution to be on the military revenue side? Thank you. Obviously, we don't give away margins for single contract, but you can be sure that it's a positive margin. As I said, low to mid double-digit number regarding revenues contribution in 2023, then I would say a mid to high double-digit number in 2024 for that development work. That's the FCAS contribution going forward for the Phase 1B which spans until 2025. Regarding contribution from the US dollar, I would say on group level, given that we have currently something like 75-80% hedge rate in 2023. The dollar sensitivity is only something like EUR 2 million percent. I mean, the exposure is more or less half in the, in the commercial OEM division, half comes out of the MRO. That is a little bit the framework for the hedging in 2023. I think. Yeah, but specifically on the OE margin, improvement, yeah. No, we don't give away that number. We don't look at that way. What is the contribution of the hedging? I mean, we do hedging, as a, let's say, a measure to protect us from US dollar volatility. We don't speculate, we don't put hedges in place in order to improve margins, but to give a reliable guidance to the market. On the one hand side, if you have a lot of hedging benefits, on the other side you have compensating negative impacts in the base business. The hedges cover our US dollar exposure in part. What the, you have to look on the hedge as I said, as a measure to avoid the US dollar risk and the US dollar benefit you generate out of the unhedged exposure. For 2023, we have something like a sensitivity of two or two to three EUR million% allocated, let's say, half and half to MRO segment and the OEM segment. Okay. Thank you. Thank you. There are no further questions at this time, so I'll hand the call back to you. Perfect. Yeah, thank you. This marks the end of the Q&A session and the end of the first results call 2023, in the year 2023. Thank you all for your participation, and have a great day. We want to thank Mr. Lars Wagner and Mr. Peter Kameritsch and Thomas Franz and all the participants of this conference. Goodbye.