Welcome to the Safran third quarter 2023 revenue. At this time, I would like to turn the conference over to your hosts, Olivier Andriès, Safran CEO, and Pascal Bantegnie, Group CFO. Mr. Andriès, please go ahead. Good morning, everyone, and thank you for joining us to our Q3 2023 revenue conference. I'm here with Pascal Bantegnie, our CFO. Let us go straight to page three, with a summary of our talking points today. We post today a solid Q3 revenue growth, supported by strong market headwinds, with narrow-body air traffic now trending well above pre-crisis level, resulting in a strong demand for CFM56 spare parts and OE deliveries ramp up. We continue to navigate into a challenging macro environment. Supply chain constraints are persisting, especially in raw material and forging and casting, that are still pacing our ability to ramp up production faster. Inflationary pressures remain at a high level so far, with no real sign of losing steam. We have now completed the acquisition of Thales electrical systems activities. This acquisition reinforces Safran's expertise, particularly in power conversion, strengthening our position as a leader in the entire aircraft electrical chain. At last, we confirm our full-year 2023 outlook. And now on slide four. Civil aviation enjoys continued positive trend, with narrow-body ASK now exceeding 2019 level by 107% in Q3 2023. CFM flight cycle also surpass their 2019 level. Most geographies trend above 2019 level, with a noticeable recovery in China. While Europe, which includes a lower traffic in Russia and Asia Pacific, outside of China, remain below 2019 level. In a context of under supply of new generation aircraft and solid traffic growth, airlines continue to fly second generation CFM56 powered aircraft, as demonstrated by the very low level of retirement. 130 aircraft has been retired in 9 months in 2023. As a reminder, we were at 166 for the full year of 2022. On slide five, let me share with you some of the main recent business achievements. CFM delivered 389 LEAP engines in Q3, reaching 1,174 deliveries over the first 9 months of the year. We have already delivered as many engines in 9 months as we did in the full year 2022. It is a major step up in production, representing a 45% increase compared to the same period last year. For the full year, we now expect deliveries to increase by 40%-45%, given the supply chain situation. Civil aftermarket continues to benefit from solid market tailwinds, strength in air traffic and insufficient aircraft capacity. Supporting our customers, enhancing the reliability of our products remain a key focus for CFM. We just announced the introduction of an upgraded HPT blade for CFM56 second-gen engine, to maximize time on wing and provide fleet transition flexibility. As a reminder, these engines have a world-class dispatch reliability rate of 99.98%. On the equipment and defense side, we can highlight that Safran has been selected by Bell to develop the landing gear system on the U.S. Army's Future Long-Range Assault Aircraft. We announced a collaboration agreement with Cuberg on battery systems for advanced electric aviation. Regarding long-term service agreements in landing gear business, we just signed a 5-year contract to support nearly 60 A320 Family operated by Wizz Air. In electrical and power business, we signed a deal with Turkish Technic to support APU generators, engine harnesses, ventilation systems, equipment for more than 500 A320s and A330s. On aircraft interior, Safran Seats signed a new contract to equip the premium cabins of Japan Airlines on 13 A350s. Now on slide six. In Q3, revenue is up 26% year-on-year on an organic basis, a strong performance in dynamic end markets. In the first nine months, revenue increased by the same growth rate, reaching EUR 16.8 billion, on track for our full-year guidance. Let me now hand over to Pascal for more details on Q3 sales. Thank you, Olivier. Good morning, everyone. Starting with FX trends on slide eight, the third quarter was marked by a strong volatility in Euro dollar, with a peak at 1.12 in July and now trending towards 1.05. It did offer opportunities to continue hedging our exposure at attractive rates. Our book of $50 billion should cover our needs for the next four years, 2027 being almost fully hedged. By construction, we decided to cap the estimated net exposure at $13 billion from 2027 onwards. There is no business conclusion to draw from this decision. Q3 and nine- months have seen a weakening dollar compared to the euro, compared to last year, which results in a negative translation impact. Turning to page nine, Q3 revenues stood at EUR 5.8 billion, a solid 26% organic growth, or 20% when taking into account the negative translation impact from the weaker U.S. dollar compared to last year. Service activities were up 33% organically, mainly driven by solid civil aftermarket growth, which is up 39% year-over-year and up 24% sequentially. OE was up 19% organically, driven notably by higher LEAP engines deliveries year-over-year. Also, the net impact in revenue is not material. Change in scope reflects the divestment of cargo and catering activities from Safran Cabin last May. On slide ten, let's go through the Q3 revenue per activities, starting with propulsion, EUR 3.1 billion, up 28% organic. OE revenue was up 22%, mainly supported by an increase in helicopter turbines and LEAP deliveries. Services revenue was up 32%, driven by a solid 39% growth in civil aftermarket revenue, which is a combo between volume, pricing, and work scope. Starting with volume, volume of shop visits was up year-over-year and sequentially, and we confirm that we are on track to reach around 2,000 CFM56 shop visits this year. We also benefited from the price increase we had first of August, and the work scope was heavier, with airlines performing a full work scope maintenance when they come to the shops. In-service engine spare part sales were also slightly up, and services continue to be a growing contributor to the civil aftermarket growth. It includes the contribution of LEAP engines and their revenue per flight hour contracts, which, as you know, have no margin recognition up to 2025. So on the back of this solid nine-month growth, 37.5%, we now expect civil aftermarket to be up in the low 30s in full year 2023, which compares to our initial guidance in the low 20s, which we raised in July to mid- to high 20s. In equipment, EUR 2.1 billion revenue, up 21%. Services were up 30%, with good momentum across the board, from spare parts for landing gears, MRO, carbon brakes, and nacelles. OE revenue was up 16%, thanks to higher volumes in landing gear, both on A350, A320neo, power and wiring activities, FADEC deliveries, but we also have to notice lower nacelle deliveries for the A320neos. Some OE sales continue to be impacted by supply chain constraints and revised demand by airframers. Aircraft interiors, EUR 600 million, up 31%. This is still about 25% below what we had in 2019. OE revenue was up 24%. Most of the increase came from cabins, such as floor-to-floor activities for 787, A320, and some activities at Bombardier. Deliveries of business classes were down year-over-year, as they remain affected by engineering delays in their certification process. On a sequential basis, they were up from 112 units delivered in Q2 2023 to 174 units delivered in Q3 2023. Services in aircraft interiors was up 46%, with very strong growth in seats, and notably with a refresh for a Middle East airline on the A380. Back to you, Olivier. Thank you, Pascal. Let's go now to slide 12. On the back of a solid nine-month performance, we reiterate our full year guidance as per July 2023. As mentioned earlier, to reflect the nine-month trends, we are updating two underlying assumptions. Civil aftermarket revenue growth now expected in the low 30s, given the strong dynamic in CFM56 spare parts activities. LEAP engine deliveries are now expected to increase by 40%-45% compared to 2022. On that basis, we feel comfortable to deliver our 2023 guidance. Thank you for your attention. Pascal and I are now ready to answer any questions you may have. Thank you. If you would like to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Thank you. We'll now take the first question. This is from the line of George Zhao from Bernstein. Please go ahead. Yes. Hi, good morning, everyone. I guess first on, you know, you, you've taken up civil aftermarket guide, lowered LEAP deliveries, but the EBIT guide, I guess, is unchanged. You know, is that just conservatism or are there any additional offsets that led to the reiteration? And secondly, on the LEAP delivery. So deliveries, you know, they have been improving in H1, so what changed in Q3? Were there particular parts or components that became more challenging, and, you know, what, what does this mean for your ability to get to the 2,000 deliveries next year? Thanks. Good morning, George. On civil aftermarket, so we raised our assumption for revenue growth in the low 30s. It's about 10 points better than the initial guidance we gave back in February. So it's a nice increase. We continue to enjoy a very positive combo, as I say, in volume, in pricing, which we had on the first of August, which is 3 months before what we used to do, and work scope, which is heavier than expected. This is definitely a positive for full year EBIT guidance. As I'm sure you've noticed, the second positive is that if we were to deliver less LEAP OE engines than initially expected, there will be less losses, meaning more profits for the full year. So today we are here to discuss, you know, revenue. We didn't provide an indication on the EBIT, neither free cash flow. There is clearly comfort to deliver our full year guidance based on these two changes in our assumptions. George. Hello, George. I will take the second one on LEAP deliveries. Yes, indeed, the deliveries are not accelerating as fast as we were expecting. If you remember well, our guidance was for +50% deliveries compared to 2022. As we speak now, when I look at the nine-month performance, we are at +45% compared to 2022. And yes, indeed, basically the outlook is for +40% to +45% end of the year. The fact is that we, you know, we are discussing every day with our GE partner as well. And as you can imagine, the LEAP deliveries are a function of our own supply chain performance and also our partners' supply chain performance. And yes, indeed, we can see persisting supply chain issues, especially on raw materials, forging and casting. And yes, indeed, this is pacing our acceleration. So, for 2024, we are still targeting around 2000 deliveries. As we see today, we see a +20% to +25% deliveries increase versus 2023, which basically puts us around 2000. So this is still our target. Of course, we will manage very carefully the supply chain over the next month, and come back at the beginning of 2024 to give you a guidance for the 2024 lead delivery then. All right. Thank you. Thank you. We'll now move to the next question. This is from the line of Olivier Brochet from Redburn Atlantic. Please go ahead. Yes. Good morning, Olivier, Pascal. I would have two questions. One follow-up on George's question on the OE side and the 44%-45% increase. Is it focused on one aircraft type, or is it spread across the two? You mentioned different supply chain for yourself and GE, but they are also very different between the two aircraft types, I think. And second question, the competition on the A320neo is, to put it kindly, in a difficult position. How do you approach this situation? Some airlines are mentioning they cannot consider switching to LEAP as you are not offering service contracts. What is it you're doing? Are you trying to win more market share? Are you trying to boost profits going forward? Thank you, Olivier. On the OE side, we don't provide details between 1 A and 1 B. So I will not specifically comment on that. What I'd like to say is simply that as we speak, we are not pacing the aircraft deliveries. We are not, as we speak. And of course, we are focusing to ensure that in Q4, this will continue to be the case, not pacing the aircraft deliveries, and we are totally focused on that. On the A320neo competition, you know, we are, we are not looking for additional market share. As you know, we, we have a 60% market share on the A320neo backlog. In the last one year in life, basically, our win rate was around 70%. So frankly speaking, we are not looking for additional market share. We, we rather are focusing on basically making sure that basically we can strike deals at good economic condition. That's how we are focused. Okay, that's clear. Thank you very much. Thank you. We'll now take our next question. This is from the line of Ian Douglas-Pennant from UBS. Please go ahead. Hi. Yes, it's Ian, UBS. Thanks for taking my question. So, firstly, continuing on from your last comment on pricing, could we shift to aftermarket? Could you talk about how you see the pricing outlook in aftermarket going forward? And within that, would you consider increasing prices again, off cycle, in Q1 of next year? Secondly, could you help us sizing the demand pull forward effect from increasing prices in Q3 versus Q4 normally? To what extent did that provide tailwinds to that civil aftermarket services growth in the quarter? Thank you. Good morning, Ian. On the pricing, remember that in 2022, we upped pricing on the catalog list price for CFM56 spare parts by a bit more than 10% on the first of November, and this year, in 2023, we decided to pull forward, you know, to the first of August the price escalation in the high single digit. It has exactly the same economic impact on a full year basis in terms of of revenue. Do we expect to change, you know, for 2024? The answer is no. What you would expect is, again, a price escalation on the first of August going forward. Okay? Now, with respect to your second question, what I could say that, putting forward the escalation, provided a boost to our Q3 sales, which are up, for sure, sequentially, by 24%. When you look to the civil aftermarket revenue growth, it was also strongly up when you compare to Q3 2019. Now, when we move to Q4 this year, I would expect, you know, a quarter up, maybe 18% year-over-year. It would be down sequentially because we did, you know, the price escalation in Q3 and not in Q4, and last year it was done in Q4, so there is an unfavorable comparison base. If I was to compare to Q4 2019, I would say it's rather flat. Thank you. If I could follow up on the first question again, which was very interesting. Would you be open, just in an entirely theoretical sense, and of course, I'm not asking you what you're actually going to do, but. Would you be comfortable with the kind of showing a double digit price increase, or do you think the sticker shock effect for your customers would be too painful? Maybe you can answer that in general terms rather than, you know, precisely as what you're expecting next year. Yeah, and it's too early to comment on that, but basically, we want to make sure that whatever price increase we decide, there's a rationale behind it. You know, we don't want to be abusive or to appear to be perceived to be abusive. There needs to be a rationale behind it. And if you look at what happened in the last years, you know, even before the pandemic, we've always been above inflation by 3-4 points. That's what we've been doing, you know? And so, we'll continue on that path, I would say, at least for some years. So- Thank you. What's going to be the inflation next year? Don't know. I don't know. It's too early to say. That's very clear. Thank you very much. Thank you. We'll now take our next question. This is from the line of David Perry from JP Morgan. Please go ahead. Yes. Good morning, Olivier and Pascal. I've got three questions, if that's not too greedy, please. First, just on the very strong aftermarket print for civil aero engines. Can you just say, is any of that coming from the zero-margin LEAP work? Is that possibly why you didn't raise guidance? Second question is, at the start of the year, Pascal, you gave a very helpful and detailed bridge in terms of positives and negatives for this year. Inflation, I think, at the time, was EUR 700 million headwind. And I'm not sure you changed that, but I'm just wondering if you had any update on that. And then the last one was, any chance you could give us any early thinking about the hedge rates you might be able to achieve in those outer years? So I'm thinking 2027, 2028. Thank you very much. Okay, morning, David. On civil aftermarket, it's true, and I said it during the presentation, that there is a growing share of services revenue into our civil aftermarket revenue. And part of that is coming from growing LEAP RPFH contracts, which, by construction, is coming with no margin at this point in time. So it has a dilutive effect, if you want, on the overall EBIT margin. I'm not saying this is the reason why we don't raise the guidance. Once again, we feel comfortable with, you know, the guidance and to deliver on the raised guidance we put out in the market in July. Inflation, very good question. At the beginning of the year, our estimate for inflation was around EUR 700 million, representing more or less three points of sales. Today, looking at the trends, I would say that we see some ease in in energy. We see some ease as well in the transportation cost, logistic, but we see a worse inflation coming from raw materials. All in all, inflation in 2023 should now represent four points of sales. So, in euro terms, my expectation this year is about EUR 900 million to EUR 950 million of headwind. The good news is that we are managing or doing well to manage inflation. Again, this is not a reason why we don't raise the guidance. We know that since a couple of months, that inflation will be higher, but we have ways, and civil aftermarket is part of the answer, FX as well. Now, on your third question on FX, what we will do is to refine our FX assumptions in terms of hedge rate next February when we publish our full-year results, and we will provide, you know, a number for 2024 and a range for 2027. Thank you. Can I just one follow-up, if I may? These LEAP aftermarket sales this year, it's kind of—I know it's a very small number, but is it $250 million? Is it $500 million? Just something to help us sort of gauge its impact would be helpful. It starts to be material. You know, it was really marginal last year. It starts to be material, and it will be even more material in the coming years, for sure. But as you know, we don't provide any detailed number of that. All right. Thank you so much. Thank you. We'll now take the next question. This is from Victor Allard from Goldman Sachs. Please go ahead. Good morning, Olivier, Pascal. Thank you for taking my question. So actually, I have a couple of follow-ups to the prior ones, which have been addressed. The first one, if I may, it's to think about Q3, Q4 in civil aftermarket, and to which extent, if at all, you've seen some pronounced level of pre-buy in Q3, because I believe we heard from your partner earlier that they hadn't seen much on their side in Q3. So I was wondering if it was like similar reading on your side. And the second question is also like how to think about recent GE commentary regarding the profitability outlook. And I believe that they recently mentioned that they were expecting the aftermarket to be profit-making next year. I know you have taken this approach of not recognizing profit on those RPFH contracts, as you just mentioned, but I was curious if at some point you think you will be in a position to give color on how the underlying profitability of these contracts are tracking or, so yeah, that would be helpful. Thank you. Okay. On your first question, I've mentioned the favorable combo of volume pricing on scope, so explains the very strong performance of civil aftermarket in Q3. I did not mention the pre-CLP or pre-buy effect because we have the incremental benefits of the price increase, but we didn't see such a strong pre-buy, as we call it, effect in Q3. So pre-CLP, I would say almost no. On your second question, we can't speak for GE because as you know, within CFM, we are sharing revenue but not cost. So I don't know what is the profitability of GE with LEAP, and they don't know what is our profitability. What we said at the capital market day back in December 2021, is that we were aiming to reach breakeven on the OE side in 2025. I've mentioned in July that for 2023, we are already at breakeven due to the fact that there is a favorable mix between spare engines with respect to installed engines. We are working, you know, on cost reduction actions to go to our ambition to be at breakeven, and I would say so far so good. We see, you know, a path to achieving that target by 2025. On after market, as you may have mentioned in in the press release, we anticipate to have a capital market day in Q4 next year. This will be the right timing to discuss into details what will be, you know, profitability with respect to the RPFH contracts for the LEAP, you know, the LEAP spare parts going forward as well. Thank you very much. Thank you. We'll now take the next question. This is from the line of Chloé Lemarié from Jefferies. Please go ahead. Yes, good morning. Thank you for taking my question. I have two, if I may. The first one is actually on Q4 for civil aftermarket. Your guide obviously implies a drop in the momentum in Q4, when Q4 last year was quite low already in terms of momentum. So could you explain what are the drivers for the slight slowdown that you expect for Q4? And the second one is on the AOG scandal. I was wondering if you could comment on the most recent assessment for 145 engines affected, if this is final, and how long do you see, you know, the shop visit to remove those parts taking at this point? Thank you. Morning, Chloe. You know, this year, Q3 has released the strongest quarter in terms of revenue. Nevertheless, I wouldn't say we have to forecast a huge slowdown in Q4. Q4 will continue to be strong, and as I said, more or less flattish when I compare to Q4 2019. Globally, for the year, civil aftermarket revenue should slightly exceed what we had in 2019. So we are now back to pre-crisis level, which was not our expectation when we entered the year 2023. So the momentum is still very good, and you know the drivers behind that. We have the fastest recovery in air traffic. We have an under supply of, you know, new generation aircraft. There is reduced capacity due to the grounding of some A320neo s. We don't see, as Olivier said, much retirements of CFM56, so it doesn't feed a second-hand CFM56 spare parts market. We have this huge pricing power, or at least strong pricing power, which is 20%. You know, we did 10% in November. There are, you know, high single digit in August. So we have really a favorable combo, market-wise and execution-wise, to continue to see, you know, good growth in civil aftermarket going forward, including Q4. Hello, Chloé. I will take your second question on AOG Technics. As you know, we have filed a complaint in the U.K. against AOG Technics, and we've been able to obtain that AOG Technics should provide us the documentation relating to the engines impacted in the past impacted by the falsified documents. To the extent of our current knowledge, that's why I'm careful here, to the extent of our current knowledge, there are 145 engines that have been identified and impacted with suspected parts. Half of them have already been removed, and the other half will be removed in the short-term future by airlines. It's less than 1% of the total number of engines flying today. The impact on basically the maintenance load worldwide is going to be absolutely minimal, so not meaningful. There should not be any concern about, you know, our ability to get to 2,000 shop visit on CFM56, as Pascal has recalled earlier today. Not meaningful. Very clear. Thank you. Thank you. We'll now take our next question. This is from the line of Christophe Menard from Deutsche Bank. Please go ahead. Yes, good morning. Thank you very, very much for taking my questions. I had two actually. The first one is on raw materials. You mentioned the inflation and some issues. We haven't talked about titanium for some time. Can you update us on specifically titanium, and more specifically on Aubert & Duval, the status of the integration, when you expect Aubert & Duval to actually pick up some volumes for you in terms of titanium part production? That was the first question, and the second question is on cabin interiors. I don't know whether it's me, but I found it quite reassuring to see the trajectory in business class seats deliveries. I think it was up sequentially. Is it something that is now, I would say, a sustainable trend? Also noticed that you worked on the MRO of some A380. So, is it, is it, I guess it's all in your business plan, but, is it something that we should consider as a positive on future EBIT contribution for cabin interiors? Thank you. Hello, Christophe. I will take your questions. On raw materials and titanium, we are still buying titanium from VSMPO, as we are still allowed to do that. It's not within the perimeter of the sanctions. So we are building up stocks and inventory in order to be more protected, if you wish, against any potential disruption. So we are building inventory, and we have started to engage with—I mean, we have engaged with alternate suppliers on what we call titanium billets. So we have a deal in place with TIMET on titanium billets. And we are also working on alternative sources for the forging of those parts, for landing gears and engines. Aubert & Duval being obviously one of them, so we have engaged with them. But it takes time because, basically, be it for engine parts or landing gear parts, we are talking about very critical parts. And so the process for qualifying alternative forging sources takes time. Takes time. So we are in this process today, and yes, it's picking up, but it takes time. I mean, you should not expect that, you know, it can come up, you know, within days. It takes some time. So we are in this process. Interiors. Yes, indeed, the business, the number of delivered business class seats has picked up in Q3 versus Q2. This is a result of also delays. I mean, Q1, Q2, H1 has been heavily impacted by, as we've mentioned, development delays, certification delays, which have resulted into basically slippage of deliveries of head over version business class seats. And this is why basically there has been quite meaningful losses in H1. So yes, we are in an improved trend now on business class seats delivery, so we expect H2 to be better than H1 in Safran Seats. Thank you very much. Thank you. We'll now take our next question. This is from the line of Phil Buller from Berenberg. Please go ahead. Good morning. Thanks for taking the questions. I've got a few linked to the next steps in the ramp up, I guess. Just, just for the avoidance of doubt, how much of the adjustment to the OE expectations would you say is due to your own ramp-up challenges versus one or both of the OEMs asking you to deliver lower volumes? Is it 100% due to you or, say, 80/20, 50/50? How should we think about that? I just wanna make sure I understand if some of these bottlenecks are unique to you guys or if it's the broader picture. Thanks. That's question one. Hello, Philip. No, the adjustment of our assumption on the deliveries is our own. Is our own, I mean, and this is related to supply chain. Sorry, on nacelle. I'm talking on the engine. Sorry, I'm talking on the engines. Nacelle, nacelle, this is yes, airframe demand. In fact, we've had a very good performance on deliveries of nacelle in the last two years. And so, we've delivered on time, on quality, and so basically, we are in advance versus the airframe demand on nacelle, in that case, Airbus. So Airbus has asked us to slow down. On Nacelle. Because we were so in advance. Yes. I understand. Okay, so at what point going forward would we need to be on contract from a lead time perspective in order to go above rate 65 on the A320 to, to hit a rate of 75 in 2026? Does that need to be imminent, or do we have several quarters of negotiation time, let's say? Philip, you know, today we are focusing on, on basically delivering our engines in 2023 and 2024. This is really our focus, navigating through supply chain issues, as well. We are preparing ourselves to get back, to get back to the pre-COVID levels for both airframers in 2025. What that means is we are prepared, we are committed, we are prepared and committed should the airframer confirm on their demand to go to rate 50, for Boeing and rate 65 for Airbus in 2025. We have no discussion as we speak beyond that. It's too early. Okay. Okay, that's, that's helpful. I would have assumed that those discussions had at least started in some loose capacity, but perhaps that's not the case. But as and when those conversations do start, obviously, you're in a very different financial position to the likes of Spirit, who reached some kind of pact with Boeing on various programs to support their profitability. There's—we've talked about inflation on this call already. How do you think about your own contracts going forward? Are you keen to shoulder less inflation or make higher margin, unit margin economics beyond current rates with both of the OEM space? I'm not sure I have fully captured your question. Okay. But on the OE side, so with, with the airframers, we are bound by, contracts over the life of the program with escalation formulas. And so, basically, we have a certain room to pass through some of the inflation to the airframers, but not all of it because of those escalation formulas with caps. Okay? We have more friendly formulas for the, for the aftermarket when we have formulas, and contractual formulas, but also in some cases, we, we have complete freedom, which is the case for CFM56 spare parts. But once again, we don't want to be perceived as being abusive. There needs to be a rationale for whatever we do. Sure. No, I understand. I, I guess inflation is abnormally high at the moment. So my question was, would you potentially look to adjust those inflation clauses to be more favorable for you as part of an agreement for higher rates in the future? But I think that that's a discussion for a later date. So thank you. For the existing contracts, there is no way for us to go to the customers and ask for, for a change. So we have multi-year contracts. We are bound by these formulas, and we will just strictly apply the formulas. Now, for new contracts, as I said, I guess it was at the end of 2022, obviously, we have adapted our formulas to push away the cap, to avoid any deadband, to share, you know, high inflation, 50/50 with the customers beyond the cap. There can't be any negative numbers coming out from the formula, so we are adapting over time for new contracts. But it will take years before you see a significant change on the OE side. At some point in time, should we assume that inflation decreases, as you know, we up the price through these formulas on OE on the first of January, based on KPIs, that we have witnessed, you know, the year before. So should inflation ease at some point in time, there will be a lag between, you know, what you see in the cost and what you see in the price. So we could assume at some point it should be favorable. It's not the case at all in 2023, but it could be favorable, maybe not in 2024, but moving forward, at some part, at some point, yes. Thanks. As those formulas are basically based on what happened the year before, there's most often a one-year lag between, you know, what happens on the cost side and what could happen on the pricing side. Now, anytime that happens, anytime there's an expiration date on the contract, and we have the opportunity to reopen a discussion for a renewal of the contract or an extension of the contract, yes, we are resetting the economics. Thank you. That's what we do. Anytime we have the opportunity, we are resetting the economics. Okay. We take maybe, two more questions. Thank you. We'll now take the next question. This is from the line of Alfie Joubert from CIC Market Solutions. Please go ahead. Yes, good morning. Thank you for taking my questions. Just very quickly, two questions. Is there any constraint that may push you to limit delivery of OEM from outside casting and forging? I.e., could it be some contract constraint on market share on certain, you know, planes, lines? Or is there anything that from an economic perspective, as you mentioned, you know, with a lag on the calculation, you have this one-year lag, you know, on the economics, on the pricing, that for you could make sense as well, to some extent, to have a certain gradual ramp up, compared with how inflation behaves? So that would be my first question. And the second question is more on the cost side. I would like to know, I guess, some of your contracts are on a fixed cost or covered by certain instruments in terms of costs like energy, I believe, on some raw material. I guess, we are in the period of the year where, you know, you can retake those covers on a one-year, two-year forward for some raw material on energy and pricing. Could you give us maybe some indications where those pricings are heading at the moment? Thank you. I think the first one, are there any constraint on re-deliveries? No, this is really a matter of supply chain pacing, our ability to accelerate our ramp up. It's all about that. Now, we have the LEAP production has to feed the OE deliveries as well as the spare engine deliveries for airlines. So we need both to support our airfreight customers in their ramp up, and at the same time, support our airline customers because they want to make sure that we want to make sure that we keep them flying, you know? This is a key asset for the CFM brand compared to our competitors. We keep them flying, always. And so we very carefully manage, week after week, you know, what are the real needs on the airfreight side versus the real needs on the airline side, to support their fleet. And this is a, yeah, this is a weekly, arbitrage, if you wish, that we do. This is the only, let's say, also impact or related, impact. On the cost side and raw materials, maybe I will, Maybe, uh- Let Pascal answer. Follow up on the first question. Alfie, there is absolutely no incentive for us not to meet our commitments because we could face financial penalties in case we would be late with respect to the, to the commitment. So for sure, we are constrained by the supply chain, but we do everything we do with the supply chain to meet our commitments. Otherwise, there would be some financial impact. On the cost side, we have some contracts with what we call a firm fixed price. In that case, you know, there is no way we can improve or increase price over time. This is one category of contracts. On the other category, when we have an escalation formula, you know, the escalation formula is based usually on two KPIs. One is based on the labor, and the second one is based on the basket of materials. Usually, they are based on the U.S. KPIs, meaning U.S. labor and the U.S. basket of materials. So again, there is a lag of about a year between when we can increase price and when we have experienced, you know, a cost increase in our channel. We'll take maybe the last question. Thank you. Thank you. We'll now move to the last question. This is from the line of Ben Heelan from Bank of America. Please go ahead. Yeah, morning, guys. Thank you for taking the question. I wanted to go back on LEAP's supply chain, because at Q2, I think the messaging was a lot more positive around supply chain. And obviously, that seems to have, have turned a little bit, and now you're talking about forging and casting materials again. So was there a specific supplier that had an issue in the quarter? Was there something specific that has gone on? Because I do think there's been a real change in terms of the tone around LEAP supply chain, Q2 versus Q3. So that was the first question. And the second question is equipment. We haven't touched on it a huge amount, but that was an area that you talked about challenges on, on supply chain. How are you seeing things in the equipment supply chain playing out? And how should we be thinking about margins in that business into 2024? Obviously, at your capital markets day, you talked about margin expansion in that business midterm. Is that something we should also see in 2024? Thank you. Hello, Ben. I'll take the first one. Yes, yes. The reality is that in Q3, our performance has been paced by supply chain issues. As we just mentioned, raw materials, forging, casting. I don't want to finger point one particular supplier, but, but yes, it is, it is pacing our ability to ramp, to ramp up and to accelerate faster. But be mindful that it's not a slowdown. The fact is, we are in a race for ramping up as fast as we can. Once again, in nine months, we have delivered 45% more LEAP than in the first nine months of 2022. And in Q4, basically, we will deliver roughly what we have delivered at the peak of what we did in 2019, in Q4. So, it's a race. We are running as fast as we can. On equipment, before leaving, Pascal, respond on your margin question, I would just like to say that the supply chain issues are also a burden on the equipment side, impacting specifically landing gear. Same issue. This is forging. Landing gear is really relying on forging and raw materials, so this is exactly the same issue. I'd like to say that the supply chain issues are not easing, in fact. We don't see supply chain easing in the next month, so it will last. It probably lasts over 2024, full year. Morning, and when we look to the macro trends in equipment, on the positive side, when you listen to Airbus and Boeing, they will raise their rate for the 787, and the A350 going forward. As you know, our equipment and defense branch is heavily weighted towards these two platforms, so this is the good news going forward. On a less favorable trend, I would say that inflation has more impact on equipment than it does on the propulsion, because equipment and defense is about two-thirds OE, meaning bound by escalation formulas, okay? And then the second negative is definitely supply chain, as Olivier just mentioned. In terms of margin for 2023, when I look to the consensus, it implies, you know, more or less flat margins compared to 2022. I will confirm that. Moving forward, we'll discuss that, in February, when we publish our full year guidance for full 2024, and, at the capital market day, when we will, shed some light on the outer years beyond 2024. So thank you for attending the call. Again, we believe it was a, a strong quarter, and again, we are comfortable to deliver the, the guidance, and, we'll, we'll speak to you, next month, when we publish our full year results. Thank you. Have a good day. Thank you. This does conclude today's conference call. 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