Executive Summary

Safran SA stands as a premier Tier 1 supplier in the global aerospace and defense industry, commanding leadership positions across its core markets of Propulsion, Equipment & Defense, and Aircraft Interiors. The company’s strategic foundation is built upon the unparalleled success of CFM International, its 50/50 joint venture with GE Aerospace, which has established a formidable duopoly in the narrowbody commercial aircraft engine market. This positioning provides Safran with a highly resilient and profitable business model, anchored by a vast installed base of engines that generates a long-tail of high-margin aftermarket revenue through spare parts sales and long-term service agreements.

The current industry landscape presents a powerful combination of tailwinds for Safran. A post-pandemic super-cycle in air travel is driving record flight hours, fueling robust demand for aftermarket services. Simultaneously, persistent production constraints at major airframers are forcing airlines to extend the operational life of existing aircraft, further bolstering the lucrative MRO (Maintenance, Repair, and Overhaul) market for Safran’s legacy CFM56 engines. This dynamic provides a significant stream of cash flow that supports the production ramp-up of the next-generation LEAP engine and funds substantial investments in future technology and shareholder returns.

Financially, Safran has demonstrated a remarkable recovery from the pandemic-induced downturn, with revenue, operating profit, and free cash flow generation now exceeding pre-crisis levels. The company’s balance sheet is exceptionally strong, characterized by a net cash position and an ‘A-‘ investment-grade credit rating, affording it significant strategic and financial flexibility. A pivotal catalyst for future earnings growth is the planned commencement of profit recognition on LEAP engine service contracts in 2025, which are currently accounted for at zero margin. Furthermore, the successful operational turnaround of the Aircraft Interiors segment has eliminated a source of financial drag and positions the division to contribute positively to future growth.

Key growth drivers include the continued ramp-up of the LEAP engine program, the smooth and profitable transition of the aftermarket from the CFM56 to the LEAP, and the long-term strategic positioning through the Revolutionary Innovation for Sustainable Engines (RISE) program, which aims to secure market leadership for the next generation of aircraft. However, the company faces significant near-term risks, most notably from persistent supply chain disruptions that could impede production targets and impact profitability. Other risks include the cyclical nature of the commercial aviation market, competitive pressure from rivals, and the execution risks associated with major new programs and acquisitions. Management has articulated a clear and shareholder-friendly capital allocation policy, balancing investment in innovation with substantial returns to shareholders through a consistent dividend and a newly announced €5 billion share buyback program.

1.0 Company Overview

1.1 Business Profile & Strategic Positioning

Safran SA is a French multinational high-technology corporation and a leading Tier 1 equipment provider in the global Aerospace and Defense markets. The Group specializes in the design, development, manufacturing, and marketing of high-technology mechanical and electronic systems and equipment. Safran’s current corporate structure is the result of a series of strategic moves, notably the 2005 merger between the aircraft and rocket engine manufacturer SNECMA and the security company SAGEM, which established the modern-day Safran Group. A further transformative step was the 2018 acquisition of Zodiac Aerospace, a move that significantly expanded the company’s aeronautical activities and established Aircraft Interiors as a third core pillar of its business.

Headquartered in Paris, France, Safran operates globally and holds leadership positions in its primary business segments. The company is strategically positioned at a critical juncture in the aerospace value chain, supplying essential systems and components to major airframers like Airbus and Boeing, as well as serving a global customer base of airlines and military operators through its extensive aftermarket services network.

1.2 Segment Deep Dive

Safran’s operations are organized into three distinct business segments, each holding strong market positions.

Aerospace Propulsion: This segment is the cornerstone of Safran’s business, representing approximately 50% of the Group’s total revenue in 2024 and serving as its primary engine of profitability. It is a world leader in the design, production, and sale of engines for commercial and military aircraft, civil and military helicopters, and space propulsion systems. The segment’s preeminent position is anchored by its commercial aircraft engine business, which operates primarily through the CFM International joint venture. It also produces the M88 engine for the Dassault Rafale fighter jet and a range of helicopter turbines.

Aircraft Equipment & Defense: Accounting for about 39% of 2024 revenue, this segment provides a diversified portfolio of critical aircraft systems and defense electronics. Safran holds the undisputed #1 worldwide market position in landing gear for commercial aircraft over 100 seats. The segment also produces a wide array of other essential equipment, including nacelles, wheels and brakes, electrical systems, wiring, power distribution, avionics (such as FADEC engine controls), guidance systems, and optronics. This broad product range provides exposure to a wide variety of aircraft platforms, including both narrowbody and widebody commercial jets, as well as military aircraft, creating a resilient and stable business line.

Aircraft Interiors: This segment, which generated 11% of Group revenue in 2024, was largely formed through the acquisition of Zodiac Aerospace. Its product portfolio includes aircraft seats (from economy to business class), cabin equipment such as galleys and lavatories, and in-flight entertainment (IFE) and connectivity systems. The performance of this segment is closely tied to the production rates of widebody aircraft and the cyclical demand from airlines for cabin retrofitting and upgrades. After a period of significant operational challenges and financial losses following the acquisition, the segment has undergone a successful turnaround, returning to profitability in 2024.

The company’s business model can be viewed as a “barbell” strategy. One end of the barbell consists of the highly concentrated, duopolistic, and exceptionally profitable narrowbody engine business, which drives the majority of the Group’s earnings and cash flow. The other end comprises a diversified portfolio of leadership positions in less concentrated, but still critical, equipment markets. This structure provides the dual benefit of high-margin growth from the Propulsion segment and cyclical resilience and diversification from the Equipment & Defense segment.

1.3 The CFM International Joint Venture: The Strategic Cornerstone

The strategic and financial heart of Safran is CFM International, a 50/50 joint venture with GE Aerospace that stands as one of the most successful industrial partnerships in history.

Structure and History: Founded in 1974, the partnership was born out of a strategic necessity for both companies: SNECMA (now Safran Aircraft Engines) sought a partner with experience in high-pressure turbines, while General Electric aimed to expand its presence in the civil aviation sector. The JV is structured such that GE Aerospace is responsible for the engine’s “hot section”—the high-pressure compressor, combustor, and high-pressure turbine (HPT)—while Safran is responsible for the “cold section”—the fan, booster, and low-pressure turbine (LPT). Final assembly, sales, and aftermarket services are handled independently by each partner, creating a deeply integrated and mutually dependent relationship that has been fortified by over $1 billion in joint capital investment in state-of-the-art manufacturing facilities. In a powerful testament to its enduring success and strategic importance, the partnership was extended in 2021 to run through the year 2050. This extension is not merely a renewal but a profound deepening of the company’s strategic moat; it effectively locks out potential competitors from the lucrative narrowbody engine market for at least another generation of aircraft, solidifying the GE/Safran duopoly and ensuring a continued stream of highly profitable aftermarket revenue for decades.

Market Dominance: CFM International is the world’s largest manufacturer of commercial aircraft engines by volume, holding an estimated 39% market share as of 2020. The venture has delivered more than 39,000 engines to over 600 operators worldwide, accumulating more than 1.3 billion engine flight hours. Its first product, the CFM56, became the best-selling commercial engine in history. Its successor, the LEAP (Leading Edge Aviation Propulsion) engine family, has continued this legacy of dominance. The LEAP engine powers all variants of the world’s most popular single-aisle aircraft: the Airbus A320neo family (where it competes with Pratt & Whitney), the Boeing 737 MAX (as the exclusive powerplant), and the COMAC C919 (as the exclusive Western engine option). As of December 2022, LEAP engines commanded an impressive 72% share of the global narrowbody market, underscoring the venture’s entrenched leadership position.

2.0 Industry Dynamics & Competitive Landscape

2.1 Commercial Aerospace Outlook

The commercial aerospace sector is currently experiencing a period of exceptionally strong demand, shaped by a confluence of powerful post-pandemic trends.

Demand Super Cycle and Production Bottlenecks: Global air travel has staged a vigorous recovery, with passenger traffic in 2024 surpassing pre-pandemic 2019 levels. Long-term forecasts project continued robust growth, with passenger traffic expected to more than double over the next two decades, outpacing global GDP growth. This has fueled unprecedented demand for new, more fuel-efficient aircraft. However, the industry’s ability to meet this demand is severely constrained. Major airframers Airbus and Boeing are contending with record production backlogs of over 17,000 aircraft, which could take an estimated 14 years to clear at current production rates. These constraints are exacerbated by persistent and widespread supply chain challenges, labor shortages, and quality control issues, which are expected to persist through 2025 and into 2026.

Aftermarket Boom: The dynamic of soaring travel demand combined with constrained new aircraft supply has created a “super cycle” for the Maintenance, Repair, and Overhaul (MRO) market. Airlines are compelled to fly their existing aircraft more intensively and for longer periods, pushing back retirements and increasing the average age of the global fleet. This directly translates into higher demand for maintenance services and spare parts. The global MRO market is forecast to reach $119 billion in 2025, a figure 12% higher than its previous peak in 2019. This environment is exceptionally favorable for Safran, whose business model is heavily weighted towards high-margin aftermarket services. The production constraints, while tempering original equipment (OE) growth, paradoxically extend the service life of the existing fleet powered by Safran’s CFM56 engines. This legacy fleet generates significantly higher-margin revenue from spare parts sales than new engines, providing a lucrative “cash bridge” that funds the LEAP engine production ramp-up and underpins strong shareholder returns.

Decarbonization Imperative: A defining long-term trend is the industry’s commitment to decarbonization, with an ambitious goal of achieving net-zero carbon emissions by 2050. This imperative is a primary driver of investment in new technology. It has accelerated demand for the current generation of more efficient engines, such as the LEAP, which offers a 15-20% improvement in fuel consumption and CO2 emissions over its predecessor, the CFM56. It is also forcing massive R&D investment into next-generation propulsion systems, like Safran’s RISE program, which targets a step-change reduction in emissions.

2.2 Defense Market Tailwinds

The global defense market is experiencing a period of heightened activity and increased government spending, driven by a complex and challenging geopolitical landscape.

Elevated Global Spending: The ongoing conflict in Ukraine, tensions in the Middle East, and long-term strategic competition with China have prompted many nations, particularly in the US and Europe, to significantly increase their defense budgets. The global defense spending market is projected to see substantial growth, expanding from an estimated $2.7 trillion in 2024 to $6.38 trillion by 2035.

Strategic Priorities: Current spending priorities are focused on modernizing existing capabilities, replenishing stockpiles of battlefield necessities like munitions and air defense systems, and investing in next-generation technologies such as artificial intelligence, cyber warfare, and space-based assets. This trend directly benefits Safran’s defense-related product lines, which include guidance systems, optronics, and military engines like the M88 that powers the Dassault Rafale fighter jet, a platform that has seen strong export success.

2.3 Competitive Analysis

Safran operates in a competitive environment that varies significantly by segment.

Narrowbody Engine Duopoly: In the crucial single-aisle commercial engine market, Safran’s CFM International faces a single primary competitor: RTX’s Pratt & Whitney (P&W). The CFM LEAP engine series competes directly with the P&W Geared Turbofan (GTF) engine, with both offered as options on the Airbus A320neo family. However, the LEAP is the sole Western engine option for the Boeing 737 MAX and the COMAC C919, giving it a significant market advantage. Pratt & Whitney has encountered well-publicized operational and durability issues with its GTF engine, requiring extensive and costly fleet inspections and retrofits. These challenges have likely reinforced CFM’s reputation for reliability, a critical factor for airline customers. This has a direct causal effect on purchasing decisions and, importantly, on the perceived risk and cost of long-term service agreements, potentially providing Safran a durable competitive advantage.

Widebody Market: The competitive landscape in the widebody aircraft segment is different. Here, the dominant players are GE Aerospace and Rolls-Royce, with Rolls-Royce powering four out of five new-generation widebody aircraft platforms. Safran’s direct exposure as an engine manufacturer is limited, but it is a key supplier of equipment such as landing gear and nacelles for major widebody programs like the Airbus A330neo and the Boeing 787.

Equipment & Interiors: In the Aircraft Equipment, Defense, and Aircraft Interiors segments, the market is more fragmented. Safran competes against a broad range of large, diversified suppliers and specialized niche players. Key competitors include RTX’s Collins Aerospace division and Thales, among many others across various product lines. Safran’s strategy in these markets is to maintain #1 or #2 positions in specific, high-technology niches, such as landing gear, where it can leverage its engineering expertise to create a competitive advantage.

3.0 Financial Performance Analysis

3.1 Historical Performance Review (2020-2024)

Safran’s financial performance over the past five years provides a clear narrative of resilience through the COVID-19 crisis and a powerful subsequent recovery, driven by the strength of its core markets and business model.

Pandemic Impact and Robust Recovery: The unprecedented downturn in global air travel in 2020 had a severe impact on Safran’s financial results. In that year, the company’s adjusted revenue declined by 33.0% to €16.5 billion, while adjusted recurring operating income (ROI) fell by 55.9% to €1.7 billion. However, the subsequent recovery has been swift and robust. Revenue grew to €19.0 billion in 2022, €23.2 billion in 2023, and reached a record €27.3 billion in 2024, demonstrating strong top-line momentum.

Profitability Expansion and Operational Leverage: The recovery in profitability has been even more pronounced. ROI rebounded to €4.1 billion in 2024, surpassing pre-pandemic levels and reflecting significant operational leverage. The Group’s adjusted operating margin has expanded consistently, rising 100 basis points in 2023 to 13.6% and a further 150 basis points in 2024 to a strong 15.1%. This margin expansion beyond pre-crisis levels indicates that the disciplined cost-cutting and adaptation measures implemented during 2020, which included significant workforce reductions and the optimization of Safran’s industrial footprint, have resulted in a structurally lower cost base and a more efficient organization. As revenues have recovered, this enhanced operational leverage has amplified profitability.

Exceptional Cash Flow Generation: A key hallmark of Safran’s financial strength is its consistent and robust generation of free cash flow (FCF). Even at the nadir of the crisis in 2020, the company generated over €1.0 billion in FCF. This resilience is a direct result of the cash-generative nature of its aftermarket business. FCF generation has accelerated during the recovery, reaching €2.9 billion in 2023 and a record €3.2 billion in 2024.

Table 1: Safran Financial Summary (Adjusted, €M)

Metric	2020	2021	2022	2023	2024
Revenue	16,498	15,257	19,035	23,199	27,317
Revenue Growth (%)	(33.0)%	(7.5)%	24.8%	21.9%	17.8%
Recurring Operating Income (ROI)	1,686	1,805	2,408	3,166	4,119
ROI Margin (%)	10.2%	11.8%	12.6%	13.6%	15.1%
Net Income (Group Share)	844	2,028 (a)	1,178 (b)	2,028	3,068
Free Cash Flow (FCF)	1,073	1,680	2,666	2,945	3,189
Net Debt/(Cash)	2,792	(c)	(14)	(374)	(1,738)
(a) Net income for 2021 is not directly comparable due to different reporting structures in source documents. Using 2023 figure for consistency where available.
(b) From. Note that different sources may present slightly different adjusted figures.
(c) Not explicitly stated in provided sources for FY2021.

3.2 Segment Financial Breakdown

An analysis of Safran’s individual segments reveals the distinct roles each plays in the Group’s overall financial performance.

Propulsion (The Profit Engine): The Aerospace Propulsion segment is the undisputed financial powerhouse of Safran. In fiscal year 2024, it generated €13.7 billion in revenue and delivered €2.8 billion in ROI, resulting in a stellar operating margin of 20.6%. This exceptional level of profitability, which is significantly higher than the other segments, is driven almost entirely by the high-margin civil aftermarket business, particularly the sale of spare parts for the large and mature fleet of CFM56 engines.

Equipment & Defense (Steady Contributor): This segment provides a stable and substantial contribution to the Group’s results. In FY24, it posted €10.6 billion in revenue and €1.3 billion in ROI, for a solid 12.2% margin. Its growth is supported by a balanced mix of OE sales, which are ramping up on key programs like the A320neo and Boeing 787, and strong aftermarket services, especially for landing systems and carbon brakes.

Aircraft Interiors (The Turnaround Story): After a prolonged period of operational restructuring and financial losses following the Zodiac Aerospace acquisition, the Aircraft Interiors segment achieved a critical milestone in 2024 by returning to profitability. The segment recorded a positive ROI of €27 million on €3.0 billion in revenue. This represents a remarkable €143 million year-over-year improvement from the €(116) million loss recorded in 2023. This successful turnaround is being driven by the recovery in the widebody aircraft market and a strong wave of demand from airlines for cabin retrofitting projects.

Table 2: Segment Financial Performance (Adjusted, €M)

Segment	2022 Revenue	2022 ROI	2022 Margin	2023 Revenue	2023 ROI	2023 Margin	2024 Revenue	2024 ROI	2024 Margin
Propulsion	(a)	(a)	(a)	11,876	2,390	20.1%	13,652	2,819	20.6%
Equipment & Defense	(a)	(a)	(a)	8,835	992	11.2%	10,618	1,298	12.2%
Aircraft Interiors	(a)	(a)	(a)	2,477	(116)	(4.7)%	3,037	27	0.9%
Total Group	19,035	2,408	12.6%	23,199	3,166	13.6%	27,317	4,119	15.1%
(a) Detailed segment revenue and ROI for 2022 are not fully broken down in the provided sources in the same manner as 2023 and 2024.

3.3 Balance Sheet and Credit Health

Safran maintains an exceptionally strong and resilient balance sheet, which provides it with significant financial flexibility.

Fortress Balance Sheet: As of December 31, 2024, Safran’s balance sheet exhibited a net cash position of €1.74 billion, a substantial improvement from the €374 million net cash position at the end of 2023. This robust liquidity is a direct result of the company’s powerful free cash flow generation.

Investment Grade Rating: The company’s strong financial profile and prudent management are recognized by credit rating agencies. In December 2022, Standard & Poor’s upgraded Safran’s long-term credit rating to ‘A-‘ with a stable outlook. The agency cited the company’s ability to generate solid free operating cash flow, its strong cost discipline, its rapid adaptation to the COVID-19 crisis, and its large exposure to the resilient narrowbody aircraft market as key factors supporting the upgrade.

Proactive Debt Management: Safran’s management team has demonstrated a proactive approach to managing its capital structure. During 2024, the company reimbursed $505 million of US Private Placement (USPP) notes and €200 million of Euro Private Placement notes. It also executed an early redemption of its 2027 convertible bonds, a move that had a positive impact on net debt and prevented any dilution for existing shareholders. This strong net cash position is a key strategic asset, providing the flexibility to simultaneously fund organic growth, pursue bolt-on acquisitions, and execute a significant capital return program without straining the balance sheet.

4.0 Growth Drivers & Strategic Opportunities

Safran is positioned to capitalize on several powerful, multi-year growth drivers that are rooted in its market leadership, technological advantages, and strategic execution.

4.1 The Aftermarket Engine

The civil aftermarket remains Safran’s primary driver of profitability and cash flow, underpinned by a business model that generates recurring revenue streams from a massive installed base of engines. This aftermarket business consists of two main components: highly profitable sales of spare parts and long-term service agreements (LTSAs), often structured as Rate Per Flight Hour (RPFH) contracts.

The foundation of this business is the vast fleet of over 30,000 CFM56 engines currently in service globally. This installed base provides a long and predictable tail of demand for maintenance and parts. Critically, approximately 45% of this entire fleet has not yet undergone its first major engine overhaul, or “shop visit”. This represents a substantial reservoir of locked-in, high-margin revenue that will be realized over the coming years as these engines mature. In 2024, the strength of this business was evident as civil aftermarket revenue (denominated in USD) grew by a robust 24.9%, led by strong demand for CFM56 spare parts.

4.2 LEAP Program Ramp-Up & Profitability Inflection

The LEAP engine program, the technological successor to the CFM56, represents the next major wave of growth for Safran.

Market Leadership and Ramp-Up: The LEAP engine has cemented CFM’s dominance in the narrowbody market, securing an order backlog that stood at over 10,300 units as of late 2022. Production and deliveries of the LEAP are in a steep ramp-up phase, with 1,570 units delivered in 2023 and 1,407 in 2024, with volumes being constrained primarily by supply chain limitations rather than demand. The company’s outlook for 2025 calls for a further 15% to 20% increase in LEAP engine deliveries, signaling continued strong growth in the installed base.

Pivotal Profitability Catalyst: A crucial catalyst for Safran’s future earnings is the planned change in accounting for LEAP RPFH contracts, set to begin in 2025. To date, revenue from this rapidly growing portfolio of service contracts has been recognized at zero profit margin, which has acted as a drag on the Propulsion segment’s overall margin. The new methodology will begin to recognize profit based on the estimated margin of each individual contract over its lifetime. This accounting change will unlock a significant new stream of earnings and cash flow as the LEAP fleet matures and begins its own cycle of shop visits. The company’s ability to generate over €3 billion in free cash flow while these contracts contribute nothing to profit is a powerful testament to the underlying cash-generating capability of the legacy business. The addition of a profitable and growing LEAP aftermarket stream on top of this strong base implies a structural step-up in future cash generation potential.

Technological Advantage: The LEAP engine’s market success is built on a strong technological foundation. It delivers a 15% to 20% improvement in fuel efficiency and a corresponding reduction in CO2 emissions compared to the CFM56 engine it replaces. In an era of high fuel costs and increasing environmental scrutiny, this efficiency gain is a compelling value proposition for airlines, making the LEAP the engine of choice for modernizing narrowbody fleets.

4.3 Aircraft Interiors Turnaround

The successful operational turnaround of the Aircraft Interiors segment has transformed it from a financial drag into a positive contributor and a source of future growth. Having achieved profitability in 2024, the segment is now well-positioned to benefit from favorable market trends. Growth is being fueled by the strong recovery of the widebody aircraft market and a corresponding wave of cabin retrofitting activity, as airlines invest in upgrading their fleets to enhance passenger experience and improve efficiency. The Seats business has been a particular bright spot, reaching breakeven in the fourth quarter of 2023 and driving OE sales growth with a dramatic increase in deliveries of high-value Business class seats, which more than doubled from 983 units in 2023 to 2,482 in 2024.

4.4 The RISE Program: Securing the Future

While the LEAP engine will drive growth for the next decade, Safran is already investing heavily in securing its market leadership for the post-2035 era through the Revolutionary Innovation for Sustainable Engines (RISE) program.

A Technological Leap: The RISE program, conducted in partnership with GE through the CFM joint venture, is a technology demonstration program aimed at developing a radically new engine architecture to power the next generation of single-aisle aircraft. The program’s centerpiece is a move to an “open fan” or “open rotor” design, a significant departure from the ducted turbofans of today. This technological leap is targeting a greater than 20% reduction in fuel consumption and CO2 emissions compared to even the most efficient current engines like the LEAP. The scale of this efficiency target is a direct response to the immense pressure on the aviation industry to make substantial progress toward its 2050 net-zero emissions goals.

Future-Proofing the Business: The RISE architecture is being designed for compatibility with future energy sources, including 100% Sustainable Aviation Fuels (SAF) and potentially hydrogen, positioning Safran at the forefront of the industry’s long-term decarbonization roadmap. The program is progressing through ground and wind-tunnel testing, with plans for a flight demonstration on an Airbus A380 testbed later this decade. The success of the RISE program is critical to ensuring Safran maintains its technological edge and market leadership for the next 30 to 40 years.

5.0 Risk Assessment

An investment analysis of Safran requires a thorough evaluation of the key risks that could impact its operational performance, financial results, and strategic objectives. These risks span operational, market, competitive, and programmatic categories.

5.1 Operational & Supply Chain Risks

The most significant and immediate risk facing Safran is the fragility of the global aerospace supply chain. The company has consistently acknowledged that persistent disruptions, material shortages, and labor constraints are impacting its ability to execute its planned production ramp-up, particularly for the LEAP engine program. These challenges have also contributed to inflationary pressures that have compressed margins in the Equipment & Defense segment. A failure to navigate these constraints and meet delivery schedules for key customers like Airbus and Boeing could result in financial penalties and damage to the company’s reputation for reliability.

Beyond production numbers, the supply chain risk poses a direct threat to Safran’s high-margin aftermarket business. Delays in sourcing the necessary parts for engine MRO can extend the time an aircraft spends in a maintenance shop. For an airline, this “turnaround time” is a critical metric, as an aircraft on the ground is not generating revenue. Extended delays could frustrate airline customers, potentially leading them to seek concessions on their long-term service agreements and thereby eroding the exceptional profitability that is the hallmark of Safran’s business model.

5.2 Market & Cyclical Risks

Safran’s financial performance is intrinsically linked to the health of the commercial aviation industry, which is historically cyclical and highly sensitive to macroeconomic conditions. A significant global economic downturn would likely lead to a reduction in both leisure and business travel, depressing demand for air transport. This would have a dual negative impact on Safran:

1. Reduced Aftermarket Revenue: Lower passenger traffic leads to fewer flight hours, which directly reduces revenue from RPFH service contracts.
2. Reduced OE Demand: A downturn would pressure airline profitability, making carriers more likely to defer or cancel orders for new aircraft to conserve cash, thus impacting Safran’s OE sales.

The business is also exposed to exogenous shocks such as geopolitical conflicts, trade disputes, pandemics, and significant fluctuations in fuel prices, all of which can disrupt travel patterns and airline profitability.

5.3 Competitive & Technological Risks

While Safran enjoys a strong competitive position, it is not without threats.

Pratt & Whitney’s GTF Engine: In the narrowbody engine market, RTX’s Pratt & Whitney remains a formidable competitor. Although its GTF engine has faced significant durability and maintenance challenges, a successful and timely resolution of these issues, coupled with an aggressive commercial strategy from RTX, could intensify competition. This could put pressure on pricing for both new engine sales and long-term service contracts on the Airbus A320neo platform.

Long-Term Technological Disruption: The barriers to entry in the advanced aero-engine market are exceptionally high due to immense capital requirements, technological complexity, and rigorous certification processes. However, there remains a long-term risk that a competitor could develop a breakthrough propulsion technology that leapfrogs the open-fan architecture being pursued in the RISE program, potentially challenging Safran’s leadership in the next generation of aircraft.

Defense Program Exposure: A portion of Safran’s revenue is tied to government defense budgets. Shifts in strategic priorities or budget cuts in key customer nations—such as France, the United States, or major export markets for the Rafale fighter—could lead to reduced orders for military engines and defense equipment.

5.4 Program Execution Risks

Safran faces significant execution risks related to its most important strategic programs.

LEAP Aftermarket Transition: Management has identified ensuring a “smooth aftermarket transition” from the CFM56 to the LEAP as a key priority. This involves a delicate financial balancing act. A failure to manage this transition effectively could result in a profitability “air pocket” if the high-margin revenue from the mature CFM56 fleet declines more rapidly than profitable aftermarket revenue from the growing LEAP fleet ramps up.

RISE Program Development: The RISE program represents a massive technological and financial undertaking. Developing a novel open-fan architecture involves significant technical hurdles and financial risk. Any major delays, cost overruns, or failure to meet the program’s ambitious performance and noise targets could jeopardize Safran’s competitive standing for the aircraft generation beyond 2035.

M&A Integration: Safran has a history of growth through acquisition. The pending acquisition of Collins Aerospace’s actuation and flight control business, while strategically sound, carries integration risk. A failure to smoothly integrate new businesses and realize planned synergies can lead to operational disruptions and a failure to achieve the expected financial returns.

Finally, the significant shareholding of the French State presents a nuanced governance risk. While this relationship can provide stability and support for long-term strategic initiatives, particularly in defense and R&D, it also introduces the possibility that non-commercial government objectives—related to industrial policy or domestic employment, for example—could influence corporate decision-making in ways that may not perfectly align with the interests of all shareholders.

6.0 Valuation Analysis

This section provides an objective analysis of Safran’s valuation using standard industry methodologies. It does not constitute a recommendation or a price target but aims to frame the company’s current market valuation in the context of its peers and its intrinsic components.

6.1 Peer Group Benchmarking

A comparative analysis against a peer group of global aerospace and defense companies provides context for Safran’s market valuation. Key competitors and comparable companies include GE Aerospace (GE), Rolls-Royce (RYCEY), RTX (RTX), Airbus (EADSY), and Thales.

Based on trading multiples, Safran often commands a premium valuation relative to many of its peers. This premium reflects the market’s appreciation for its superior profitability, strong free cash flow conversion, and dominant position in the highly attractive narrowbody engine aftermarket. For example, data from mid-2024 shows Safran trading at a last-twelve-months (LTM) TEV/EBITDA multiple of 18.0x. This compares favorably to Rolls-Royce at 17.3x and Airbus at 15.6x for the same period. Analyst consensus data suggests Safran’s forward P/E multiple is in the range of 22.0x to 27.0x, which is noted as being significantly higher than both the aerospace sector median and the company’s own 5-year historical average, indicating that high performance expectations are priced into the stock. The high valuation multiples are a direct function of the market’s confidence in the visibility and predictability of Safran’s long-duration aftermarket cash flows, which resemble a high-quality, growing annuity stream.

6.2 Sum-of-the-Parts (SOTP) Valuation

A Sum-of-the-Parts (SOTP) valuation is a particularly useful methodology for a diversified company like Safran, as it allows for a more granular analysis by valuing each distinct business segment independently before aggregating them. This approach accounts for the different growth profiles, margin structures, and risk characteristics of each division.

Methodology: The SOTP analysis values the three core segments—Propulsion, Equipment & Defense, and Aircraft Interiors—separately. This is done by applying a relevant valuation multiple, primarily Enterprise Value to EBITDA (EV/EBITDA), to each segment’s estimated earnings. The multiples are derived from a set of publicly traded peer companies that are most representative of each specific segment. The resulting enterprise values for each segment are then summed. After adjusting for corporate-level costs, the company’s net cash position is added to arrive at an implied total equity value.

• Propulsion: This segment, with its duopolistic market structure and high-margin aftermarket, is benchmarked against pure-play engine manufacturers like GE Aerospace and Rolls-Royce. Given its superior profitability and market share in the narrowbody segment, it warrants a premium multiple within the peer group range. Publicly traded Aircraft & Engine OEMs have recently traded in a TEV/EBITDA range of approximately 15x to 21x.
• Equipment & Defense: This diversified segment is valued against a basket of high-quality aerospace component suppliers and defense electronics firms, such as RTX’s Collins Aerospace, Parker-Hannifin, and Thales. Valuation multiples for this group are robust, with high-quality suppliers of critical components trading in a TEV/EBITDA range of 14x to 25x.
• Aircraft Interiors: This segment is the most challenging to value due to its recent return to profitability and lower margin profile. It is benchmarked against peers in the cabin interiors market. Given the cyclical nature of the business and its lower profitability compared to Safran’s other segments, a more conservative multiple is appropriate. The aircraft cabin interiors market is projected to grow at a compound annual growth rate (CAGR) of approximately 6%.

Table 3: Sum-of-the-Parts (SOTP) Valuation Framework

Component	FY24A Revenue (€M)	FY24A ROI (€M)	Implied EBITDA (€M, Est.) (a)	Peer Group	Selected EV/EBITDA Multiple (b)	Implied Enterprise Value (€M)
Propulsion	13,652	2,819	~3,500	GE Aerospace, Rolls-Royce	18.0x – 20.0x	63,000 – 70,000
Equipment & Defense	10,618	1,298	~1,800	Collins Aerospace, Thales	15.0x – 17.0x	27,000 – 30,600
Aircraft Interiors	3,037	27	~250	Jamco, Recaro	10.0x – 12.0x	2,500 – 3,000
Total Segment Value						92,500 – 103,600
Less: Corporate Costs (Est.) (c)						~(2,000) – (2,500)
Implied Group Enterprise Value						90,500 – 101,100
Add: Net Cash (YE 2024)						1,738
Implied Equity Value						92,238 – 102,838
This table is illustrative and based on analyst methodologies. Segment EBITDA is estimated from reported ROI. Multiples are based on peer data from. Corporate costs are estimated based on standard analyst practice.
(a) EBITDA is estimated by adding back an estimated D&A charge to the reported Recurring Operating Income (ROI).
(b) Selected multiples reflect the relative quality, market position, and profitability of each segment.
(c) Corporate costs are capitalized at a multiple to reflect their ongoing impact on value.

This SOTP analysis consistently demonstrates that the Aerospace Propulsion segment accounts for a disproportionately large share of Safran’s total enterprise value—likely between 65% and 70%—far exceeding its roughly 50% contribution to Group revenue. This highlights the immense value the market ascribes to the high-margin, long-duration, and defensible nature of the commercial engine aftermarket business.

7.0 Management & Corporate Governance

7.1 Leadership Team Assessment

Safran is led by a seasoned and stable executive team with deep industry and company-specific experience. The leadership is structured with a separate Chairman and CEO, a common practice in French corporate governance.

• Ross McInnes has served as the Chairman of the Board of Directors since 2015. His extensive background includes senior financial roles at Thales and PPR (now Kering), providing strong financial oversight at the board level.
• Olivier Andriès was appointed Chief Executive Officer in 2021. His career has been almost entirely within Safran and its predecessor companies, including critical leadership roles as CEO of Safran Aircraft Engines (2015-2021) and CEO of Safran Helicopter Engines (2011-2015). This extensive operational background, particularly his recent leadership of the core Propulsion division during the crucial LEAP engine ramp-up, provides him with an intimate understanding of the company’s most important business. This deep experience is a direct factor in the company’s clear and focused strategy, which centers on executing the engine aftermarket transition and investing in the next generation of propulsion technology.
• The Executive Committee is composed of experienced leaders who head the various business divisions and key corporate functions, including the Chief Financial Officer, Pascal Bantegnie, and the Chief Technology Officer, Eric Dalbiès. This structure ensures deep expertise across all facets of the organization.

7.2 Capital Allocation Strategy

At its Capital Markets Day in December 2024, Safran’s management team articulated a clear, disciplined, and shareholder-friendly capital allocation framework for the 2024-2028 period. The strategy is designed to balance reinvestment for future growth with significant returns of capital to shareholders, all while maintaining a robust financial position.

The stated priorities are, in order:

1. Maintain a strong investment-grade credit profile.
2. Invest in growth and innovation: This includes funding a robust R&D pipeline, with a total R&D expenditure of €2.0 billion in 2024, heavily focused on decarbonization technologies like the RISE program. It also includes capital expenditures, which are increasing to support the MRO production ramp-up.
3. Return cash to shareholders: Management has committed to returning approximately 70% of the cumulative free cash flow generated between 2024 and 2028 to shareholders. This will be accomplished through two primary mechanisms:

• A dividend policy targeting a 40% payout ratio of adjusted net income.
• A €5 billion share buyback program, with shares to be cancelled, to be executed from 2025 to 2028. This substantial program is a powerful signal of management’s confidence in the company’s ability to generate sustained, strong free cash flow and its belief that the company’s shares are an attractive investment.

4. Pursue disciplined M&A: The strategy includes pursuing targeted, bolt-on acquisitions that are aligned with the company’s core businesses, such as the pending acquisition of Collins Aerospace’s actuation and flight control business, while also engaging in portfolio pruning.

7.3 Corporate Governance Overview

Safran’s corporate governance structure reflects its status as a major French industrial company with a significant government shareholding.

Board Structure: The Board of Directors, chaired by Ross McInnes, is composed of 16 members, including the CEO, a Lead Independent Director, and a diverse mix of independent directors and directors representing key stakeholders. Notably, the board includes one director representing the French State, one director proposed by the French State, two directors representing employees, and two directors representing employee shareholders. This structure is designed to ensure a broad range of perspectives are considered in board deliberations.

French State Shareholding: The French State is a significant and long-term shareholder in Safran. As of the end of 2024, the company’s share capital was composed of 423.6 million shares. While the exact current percentage is not detailed, this shareholding provides a degree of stability but also introduces the governance considerations discussed in the Risk Assessment section.

Executive Compensation: The compensation structure for the CEO is designed to align executive incentives with shareholder interests. The CEO’s annual variable compensation is tied to the achievement of specific and measurable performance objectives, with a two-thirds weighting on financial metrics (Recurring Operating Income, Free Cash Flow, and Working Capital) and a one-third weighting on individual qualitative and quantitative goals. This ensures a strong focus on the key drivers of financial performance and value creation.

Conclusion

Safran SA represents a high-quality industrial enterprise with a uniquely powerful and defensible position in the global aerospace market. The company’s strategic cornerstone, the CFM International joint venture, has created a durable duopoly in the narrowbody engine segment, which serves as the foundation for a resilient and highly profitable business model. This model is characterized by a vast installed base that generates decades of predictable, high-margin aftermarket revenue, providing exceptional visibility into future earnings and cash flows.

The company is currently benefiting from a potent combination of cyclical and structural tailwinds. The robust recovery in global air travel is driving strong demand for its aftermarket services, while persistent supply chain constraints across the industry are extending the life of its most profitable legacy engine fleet. Financially, Safran has emerged from the recent industry downturn with a stronger balance sheet, expanded profit margins, and record-level free cash flow generation. This financial strength provides management with the flexibility to simultaneously invest in next-generation technologies essential for long-term growth and execute a substantial capital return program for shareholders.

Key catalysts for value creation in the medium term include the continued production ramp-up of the market-leading LEAP engine and, most critically, the inflection to profitability of its associated long-term service contracts beginning in 2025. The successful operational turnaround of the Aircraft Interiors division further strengthens the company’s earnings profile. Over the long term, the ambitious RISE program positions Safran to lead the industry’s transition towards more sustainable aviation.

However, the company is not without significant risks. The most immediate challenge is navigating the ongoing supply chain disruptions that could hamper its ability to meet production targets. Furthermore, Safran’s business remains exposed to the inherent cyclicality of the global economy and the aviation sector. Successful execution of the complex aftermarket transition from the CFM56 to the LEAP and the technologically demanding RISE program will be critical to sustaining long-term growth and market leadership. Overall, the analysis indicates that Safran’s strategic positioning, robust business model, and strong financial health place it in an advantageous position to navigate the challenges and capitalize on the significant opportunities within the global aerospace and defense industry.

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