2018 INTEGRATED REPORT - safran-group.comjets and helicopters. To increase cost efficiency and share risks, the world’s leading engine manufacturers develop their engine programs

2018INTEGRATED REPORT

SAFRAN AT A GLANCE

p. 01

EDITORIAL

GROUP PROFILE

p. 02

p. 04

ECOSYSTEM

STRATEGY AND BUSINESS MODEL

p. 14

p. 22

RISK MANAGEMENT

CORPORATE GOVERNANCE

PERFORMANCE AND VALUE CREATION

p. 42

p. 46

p. 52

CONTENTS

I S A F R A N 2 0 1 8 I N T E G R A T E D R E P O R T0 1

Become the world’s leading aircraft equipment supplier within the next 15 years

Worldwide aerospace group, excluding airframers3rd

Worldwide aerospace equipment supplier2nd

2018 KEY FIGURES OUR ACTIVITIES

€780 millionCAPEX (TANGIBLE ASSETS)

92,639EMPLOYEES (at December 31, 2018)

2022 OBJECTIVES

ORGANIC REVENUE GROWTH(2)

4% to 6% annually

RECURRING OPERATING MARGIN trending to a 16%-18% range by 2022

CONVERSION OF RECURRING OPERATING INCOME TO FREE CASH FLOW trending above 60% in 2022

SHAREHOLDER RETURN

75% of cumulated free cash flow over the period 2018-2022 through dividends(3) and share buybacks

€21,050 millionREVENUE (adjusted data)(1)

€3,023 millionRECURRING OPERATING INCOME (adjusted data)

€1,781 millionFREE CASH FLOW

€1,472 millionTOTAL R&D (including customer-funded R&D)

SAFRAN AT A GLANCE

AEROSPACE PROPULSION

AIRCRAFT EQUIPMENT, DEFENSE &

AEROSYSTEMS

AIRCRAFT INTERIORS

(1) Please refer to the 2018 Registration Document (page 52), for a reconciliation of the consolidated income statement with the adjusted income statement and a breakdown of the adjustment.

(2) Based on an estimated average spot rate of US$1.25 for €1 in 2019-2022.(3) Based on the existing dividend practice (40% payout ratio).

S A F R A N 2 0 1 8 I N T E G R A T E D R E P O R T I 0 2

EDITORIAL

ROSS McINNES CHAIRMAN OF THE BOARD OF DIRECTORS

PHILIPPE PETITCOLINCHIEF EXECUTIVE OFFICER


Driven by the belief that sustainably successful businesses are those able to deal with the issues of today and tomorrow, Safran is currently ranked in the top three worldwide aerospace groups (excluding airframers).

Our excellent 2018 operating and financial performance is in line with our enhanced scale. With revenue exceeding €21 billion and recurring operating income of over €3 billion (59% of which was converted into free cash flow), the historic production ramp-up of the new LEAP® engine and the acquisition of Zodiac Aerospace, Safran has strong assets to fulfil its mission: sustainably contribute to more open, comfortable, safe and clean access to the skies.

Strengthened by our fundamentals, our values and our industrial and technological know-how, we are pursuing with confidence our objective to become the world’s leading aircraft equipment supplier.

We are, however, not short of challenges, if we are to satisfy our customers and sustainably create value for all our stakeholders in a constantly changing aerospace and defense sector.

Our development model, that we are pleased to present in this report, fully integrates the environmental challenges facing air transport.

Thanks to the inventiveness of our employees, technological innovation and operating excellence and building on responsible, long-term relations with our suppliers and customers, Safran invents, develops and manufactures high value-added solutions, tailored to the needs of its customers.

Innovation, whether in products or methods, continuous or disruptive, is at the heart of Safran’s identity. This is why it plays a key role in our strategy and our investment. New architectures and propulsion hybridization in the move towards more electric aircraft, composite materials, digitization and connected cabins: we are doing everything necessary to define the next aerospace state of the art.

Our operating excellence, whether in terms of product quality, constant cost control or meeting lead times, has also enabled us to excel in project performance and be the preferred partner of our customers. This success required the mobilization of our entire supply chain. Our know-how will be fully mobilized to ensure former Zodiac Aerospace businesses return to world class operating and financial performance levels.

As a responsible group, we have worked with conviction and determination for professional equality and youth training and to limit our environmental footprint through an ambitious, transparent and measurable strategy covering both our products and our production methods.

This first integrated report therefore shows that we have successfully created value for all our stakeholders for which we are extremely proud!

We can assure you of our total commitment to continuing to guide Safran towards excellence and success and to keeping our corporate social responsibility commitments.

“Safran has strong assets to fulfil its

mission: sustainably contribute to more open, comfortable,

safe and clean access to the sky.”

MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS

AND THE CHIEF EXECUTIVE OFFICER

Ross McInnes and Philippe Petitcolin


A BALANCED BUSINESS PORTFOLIO FOCUSED ON AEROSPACE

AND DEFENSEPresent in all aircraft components, Safran strives to build the future of the global aerospace sector

and be the preferred partner of airframers and airlines.

AvionicsInertial navigation systemsFlight data acquisition units

CockpitControl systems Panels & displaysSeats

Cabin interiorsSeatsIFEC (In-Flight Entertainment & Connectivity)

Electric flight control actuators

Power & data wiring

Oxygen systems

APU (Auxiliary Power Units)

Galleys & equipment

Landing gearBraking & landing

control systemsWheel and carbon brakes

Nacelles & componentsPower transmission systems

Inerting & fuel systems

Lavatories, water & waste systems

Exterior lighting

EnginesEngine control systems (FADEC)Power distribution and generation

Anti-icing & de-icing

Exit slide

SAFRAN: A COMPREHENSIVE OFFERING

Safran is an international high-technology group specialized in the aerospace and defense sector, where it is ranked third worldwide

(excluding airframers), either alone or in partnership. The world’s oldest aircraft engine manufacturer and heir to France’s rich aerospace industrial

past, Safran has constantly adapted and renewed itself in response to the sector’s technological and economic challenges.

GROUP PROFILE


LEADERSHIP POSITIONS IN OUR BUSINESS SEGMENTS

Since the disposal of the Identity and Security businesses in 2017 and the acquisition of Zodiac Aerospace in the first quarter of 2018, Safran is entirely focused on the aerospace and defense markets. Safran is a

global leader in its main markets. In a favorable context, shaped by an expected twofold increase in air traffic over the coming twenty years and the introduction of new generations of aircraft, this portfolio

focused on the aerospace and defense sector and this tier-one supplier position, will enable the Group to capture the strong growth in its business sectors.

AE

RO

SPA

CE

PR

OP

UL

SIO

NA

IRC

RA

FT

EQ

UIP

ME

NT

/

DE

FE

NS

E /

AE

RO

SY

ST

EM

SA

IRC

RA

FT

IN

TE

RIO

RS

N°1 worldwide for landing gear

N°1 worldwide for wheels and carbon brakes for 100+ seater aircraft

N°1 worldwide for wiring

N°2 worldwide for nacelles

N°3 worldwide for inertial navigation systems

N°1 worldwide for helicopter flight controls

N°1 European for optronic and inertial navigation systems

N°1 worldwide for evacuation slides and oxygen systems

N°1 worldwide for onboard water and waste management systems

N°1 European for tactical drones

N°1 worldwide for galleys, lateral partition panels, carts, containers and cabin interiors for regional and business aviation

22% market share for cabin interiors for commercial aircraft

30% market share for commercial aircraft passenger seats

N°1 worldwide for engines for 100+ seater commercial aircraft(1)

N° 1 worldwide for helicopter turbine engines

N°4 worldwide for military aircraft engines

N°1 worldwide for launch vehicles for commercial launches into geostationary orbit (GEO)(2)

(1) With GE Aviation, within the joint venture, CFM International.(2) With Arianespace, a subsidiary company of ArianeGroup, a joint venture with Airbus.

GROUP PROFILE

S A F R A N 2 0 1 8 I N T E G R A T E D R E P O R T I

A LEADING GLOBAL PLAYER

Since its creation in 2005, Safran has expanded internationally. With over 92,000 employees in 26 countries, the Group has extended

its footprint beyond its European base and is now present in the American continent, Africa, the Middle East, Asia and Oceania. This global presence enables it to establish strong and sustainable relationships with the majority of aeronautic players and airlines.

It reflects its desire to promptly deliver local services to customers.

56 9 25

AMERICAS28%

25,601 EMPLOYEES

65 18 13

FRANCE48%

44,492 EMPLOYEES


GROUP PROFILE

I S A F R A N 2 0 1 8 I N T E G R A T E D R E P O R T

25 3 7

EUROPE (excluding France)

12%10,983 EMPLOYEES

9 3

AFRICA MIDDLE EAST

7%6,701 EMPLOYEES

7 6

ASIA OCEANIA

5%4,862 EMPLOYEES

Geographic spread of employees and sites

Percentage of employees

% of employees in the total Group workforce

Number of sites(1)

R&D and production activities

Service and maintenance activities

Commercial and administrative activities

(1) Each site corresponds to a legal entity covering one or more tertiary, production, service or maintenance sites.


GROUP PROFILE


Long-term prospectsThe propulsion business generates significant service activities, mainly comprising the sale of spare parts and maintenance, repair and overhaul services (MRO). With the increasing size of the engine fleet in service, Safran has substantial growth potential. The Group has developed Rate Per Flight Hour (RPFH) contracts for a number of years, in response to customer demand. These contracts now apply to the LEAP engine. After market services for this engine will gradually take over from the CFM56 engine from 2025.

Full-fledged engine manufacturerA full-fledged engine manufacturer(1), Safran supplies airframers with engines for commercial aircraft, military aircraft, regional transport aircraft, business jets and helicopters. To increase cost efficiency and share risks, the world’s leading engine manufacturers develop their engine programs in partnership. Safran has primarily partnered with GE Aviation since the 1970s, when they set up the 50/50 joint venture, CFM International, which develops the CFM56® and LEAP engines.

CFM ENGINE DELIVERIES P.A. CFM56 IN OPERATION(2)

0

500

1,000

1,500

2,000

2,500

“Year #” stands for the number of production years for each engine.For instance, after 5 years of production, ~600 CFM56 were delivered(in 1985) vs ~2,000+ LEAP (in 2020).

Year 1

Year 7

Year 1

3

Year 1

9

Year 2

5

Year 3

1

Year 3

7

LEAP

CFM56

35,000

33,000

31,000

29,000

27,000

25,000

23,000

21,000

19,000

17,000

15,0002008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Weighted average annual

growth rate+5.5% p.a.

LEAP DELIVERIES FROM 2020

2,000+ENGINES ANNUALLY

4.4MILLION AGGREGATE

LEAP FLIGHT HOURS SINCE ENTRY INTO SERVICE

LEAP BACKLOG

15,329ENGINES AT

MARCH 31, 2019

49.7% of adjusted

Group revenue

€10.5 billionadjusted

revenue in 2018

Thanks to its complete range of civil and military engines and the partnership formed nearly half a century ago with GE Aviation,

Safran has become a global leader in propulsion.

AEROSPACE PROPULSION: A FULL-FLEDGED ENGINE MANUFACTURER

CFM56 in operation(2)

2016 29,395

2017 30,822

2018 31,500

LEAP Deliveries

2016 77 2017 459

2018 1,118

(1) A full-fledged engine manufacturer is present in all engine components and all propulsion market segments.(2) In operation base is equal to engines delivered less engines dismantled or scrapped. It differs from the operated base which does not integrate the removed and repaired engines.

GROUP PROFILE


BUSINESS AIRCRAFT

Safran develops the Silvercrest engine in the mid/high-end engine range (10,000 pounds of thrust) for Cessna’s (Textron Group) Hemisphere. In October 2018, the US private jet company, NetJets, announced a purchase option for up to 150 aircraft powered by the Silvercrest engine.

NARROWBODIES

In this segment, which represents 60% of global aircraft deliveries, CFM International has a market share of around 80% thanks to forty years of commercial success. With an in operation base of over 31,500 engines at the end of 2018, the CFM56 is the biggest commercial success in the history of civil aviation: every two seconds, a CFM56 engine takes-off somewhere in the world. It will continue to generate service activities for Safran over the next twenty years, which are expected to peak around 2025. The CFM56’s successor, the new LEAP engine, is already a commercial success. Produced since 2016, its ramp-up is the steepest ever known in the aviation industry: 1,118 LEAP engines were delivered in 2018. Highly innovative, the LEAP engine reduces fuel consumption by 15% relative to the last generation of CFM56 engines. At the end of March, 2019, the LEAP engine has an order backlog of 15,329 engines, representing seven years’ output at current production rates.It has been selected for three aircraft:

LEAP-1A for the Airbus A320neo (59% market share); LEAP-1B for the Boeing 737 Max (100% market share); LEAP-1C for the COMAC C919 (China, exclusive Western source).

WIDEBODIES

Safran is a risk and revenue sharing partner(1) of GE Aviation. Participation rates vary from 7% to 24% in several high-thrust civil engine programs, and particularly the GE90 powering the Boeing 777 and its successor, the GE9X powering the future Boeing 777X.

MILITARY AIRCRAFTSafran is present in all three sectors: fighter aircraft (notably with the M88 engine powering the Rafale), training aircraft, and patrol, tanker and transport aircraft. In the coming years, the Group will be one of the main pillars of the European Defense and is actively preparing the Future Combat Air System (FCAS) in partnership with MTU.

HELICOPTERS

In ten years, Safran has completely renewed its range of turbines in the 500 to 3,200 shp category, with best-in-class engines. Safran’s market share is 27% (between 2014 and 2018).

SPACE

ArianeGroup (a 50/50 joint venture between Safran and Airbus) is prime contractor for Ariane 5 and Ariane 6 European space launchers. It is responsible for design, the entire production chain and commercialization by its subsidiary, Arianespace.

REGIONAL TRANSPORT AIRCRAFT

Safran is the prime contractor for the SaM146 program, in partnership with the Russian engine manufacturer, UEC Saturn. The SaM146 is the sole engine for the Superjet 100, the 70-to 95-seater aircraft made by Russian manufacturer Sukhoi.

SAFRAN EXCELS IN THE FULL RANGE OF PROPULSION TECHNOLOGIES

(1) Sharing of risks and revenues in proportion to his level of participation.

GROUP PROFILE


Safran’s legacy businesses (Aircraft equipment, Defense) and Aerosystems are reported separately in 2018 financial communication.

With the acquisition of Zodiac Aerospace, Safran proposes a strengthened range of equipment.

AIRCRAFT EQUIPMENT, DEFENSE AND AEROSYSTEMS:

LEADERSHIP POSITIONS

internal and external engine airflows, helps reduce noise, incorporates safety components and provides additional braking. Safran benefits from the ramp-up of nacelle delivery rates for the A320neo and A330neo and growth in service activities. In mechanical power transmission, Safran proposes an extensive range for civil and military engines.

Electrical systems and related engineering. Safran covers onboard electricity generation and distribution systems, wiring and ventilation. Safran is actively preparing the shift towards electric onboard aircraft systems, a major structural trend. In the longer term, backing gas turbines with electric engines will help reduce the carbon footprint of each aircraft.

Landing and braking systems. Technology requirements are high, as aircraft must bear extreme loads when landing. With nearly 9,700 aircraft fitted with Safran wheels and carbon brakes, the Group enjoys substantial prospective revenue streams.

Engine systems and equipment include, on the one hand, nacelles and thrust reversers and, on the other hand, power transmission systems. The nacelle is a complex piece of equipment which optimizes

In this niche sector, Safran provides solutions and services in optronics, avionics, navigation systems, tactical drones, electronics and critical software for civil and defense markets. Prime expertise in these technologies enables Safran to offer its customers observation, decision-support and orientation

solutions, under optimal conditions of security, for land, sea, air and space applications. With the acquisition at the beginning of 2019 of ElectroMechanical Systems from Collins Aerospace, Safran recently strengthened its position in electric and flight controls.

Safran is a global leader in aircraft aerosystems, following the acquisition of Zodiac Aerospace. Aerosystems encompass equipment performing functions essential to aircraft and their security:(i) security systems (slides, lifejackets and rafts, oxygen systems and masks); (ii) cockpit systems (switching, wheel-steering; wiper systems; external lighting solutions; electromechanical actuator systems for secondary flight controls, door opening and closing mechanisms, etc.); (iii) control systems (fuel control; measurement instruments; ice detection and protection solutions); (iv) onboard fluid and waste management systems; (v) in-flight entertainment systems, where Safran proposes an innovative range with its RAVE™ system.

AIRCRAFT EQUIPMENT

DEFENSE

AEROSYSTEMS

6.6% of adjusted

Group revenue


revenue in 2018

25.6% of adjusted

Group revenue


revenue in 2018

8.5% of adjusted

Group revenue


revenue in 2018

GROUP PROFILE


Initially from Zodiac Aerospace, these activities are currently being restructured to bring them to the same standards of quality

and competitiveness as the Group’s other businesses.

AIRCRAFT INTERIORS: A NEW BUSINESS

With the aim of ensuring passenger security while maximizing their comfort, the aircraft interiors business targets not only airframers, but also airlines, particularly for seats. Cabin interiors must meet demanding

requirements on appearance and quality, because airlines use them as part of their brand image. In addition, the arrangement of cabin interiors impacts profitability, where it enables occupation of the space to be maximized while reducing the weight of equipment and aircraft fuel consumption. While the majority of aircraft systems and equipment are generally defined by the airframer (“SFE” model(1)), commercial aircraft internal fittings are mainly decided by airlines (“BFE” model(2)). Safran also offers customers cabin retrofits. Given their service life (five to ten years), cabins will need retrofitting two or three times during the aircraft’s lifetime.

CABINSSafran is a global leader in cabin interiors, with a market share of 22% and an extensive product portfolio (overhead bins, kitchens and galleys, trolleys, wash-hand basins, lavatories, etc.). Safran has technical (high-technology molding, proficiency in advanced composite materials), industrial and commercial expertise, enabling it to offer customers an extensive range of interior fittings for all types of aircraft (commercial and business aircraft, VIP aircraft, freight aircraft).

SEATSIn 2018, Safran has 30% of the global market for passenger seats. Its expertise covers the whole seat manufacturing chain, from design and certification through to assembly. This expertise is applied to offer customers a full range of innovative and customized seats combining ergonomics, comfort, aesthetics and cabin space optimization. Safran also proposes seats for flight and cabin crew and helicopter seats.

(1) SFE (Supplier Furnished Equipment): equipment specified and purchased by the airframer, which offers airlines one or more configurations from catalogue.(2) BFE (Buyer Furnished Equipment): equipment specified and purchased by the airline. For new equipment, fitting is usually delegated to the airframer.

9.6% of adjusted

Group revenue

€2 billionadjusted

revenue in 2018

GROUP PROFILE


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With a rich history of over a century, Safran has made high technology its hallmark.

A LOOK BACK AT OUR HISTORY

1 9 0 5

Société des Moteurs Gnome is founded in the Paris suburb of Gennevilliers. Gnome rotary engines become the standard for planes around the world.

1 9 1 2

Creation of Société des moteurs Le Rhône, Gnome’s main competitor before being taken over.

1 9 2 4

Creation of Société d’applications générales d’électricité et de mécanique (Sagem), that will mainly manufacture cameras and artillery equipment and go on to design the world’s first infrared guidance system for air-to-air missiles.

1 9 4 5

Gnome & Rhône are nationalized and renamed Snecma (Société nationale d’étude et de construction de moteurs d’aviation).

1 9 4 5 - 2 0 0 2

Several aeronautic companies join Snecma: Hispano-Suiza, a specialist in power transmission for aircraft engines, followed by Messier-Hispano-Bugatti, a specialist in landing gear.

In 2000, the wiring specialist, Labinal, and its helicopter engine manufacturer subsidiary, Turbomeca, join Snecma.

Finally, in 2002, it is the turn of the nacelles specialist, Hurel-Dubois, to join Snecma.

1 9 7 4

Snecma becomes a civil aircraft engine manufacturer through a cooperation agreement with GE Aviation for the manufacture of the CFM56 engine.

2 0 0 5

Safran is formed from the merger of Snecma and Sagem.

2 0 0 8

Extension of the partnership with GE Aviation until 2040.

TRENDS IN THE SAFRAN SHARE PRICE AND THE EURO STOXX 50 INDEX (In %) (May 11, 2005 – April 8, 2019)

SAFRAN: +696.12% EURO STOXX 50: +15.74%

GROUP PROFILE


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2 0 1 3

Acquisition of Goodrich’s electrical systems business.

2 0 1 7

Business combination agreement between

Safran and Zodiac Aerospace. Disposal

of the Identity and Security businesses.

2 0 1 6

Inclusion of “Safran” in the corporate name of all its subsidiaries. Creation of the ArianeGroup with Airbus.

2 0 1 8

Takeover and merger-

absorption of Zodiac Aerospace

by Safran. Rebranding

under the Safran name of all

former Zodiac Aerospace businesses.

SHAREHOLDING STRUCTURE(In %)

Share capital at December 31, 2018Number of shares: 435,767,951

81.8Free float

11.0French

State

0.3Treasury shares

6.9Employees

GROUP PROFILE


CONSTRUCTIVE RELATIONSHIPS WITH OUR STAKEHOLDERS

To contribute to more open, comfortable, safe and clean access to the sky, Safran develops relationships

with all stakeholders and incorporates their concerns into its business model.

BUSINESS COMMUNITYCustomers (airframers, airlines, etc.) Suppliers and sub-contractors Partners (industrial companies, research laboratories, etc.)

PUBLIC PARTNERSGovernment bodies and local authoritiesEuropean and international bodiesCertification authorities

Main expectations

Customers: reliability and efficiency of products, with related services.

Suppliers and sub-contractors: relationship based on reciprocal long-term commitments.

Partners: search for constant innovation and control of intellectual property for these innovations.

Group contribution

Operational excellence, relationship of trust renewed with each generation of aircraft, reliable products that create value (increased availability, operating gains, weight reduction, etc.). Rapid payment periods.Team work, each day, with suppliers and sub-contractors, to deliver the best to our customers at competitive prices. Organizational agility and capacity to form sustainable industrial and commercial partnerships.

Main expectations

Ethical business conduct, internal and external Corporate Social Responsibility commitments.Safe products that comply with international standards.

Group contribution

Systematic communication of the business ethics culture to all our employees and suppliers, sustained R&D and quality of our products at the highest level.

STAK

EH

OL

DE

RS’

MA

PP

ING

ECOSYSTEM


CIVIL SOCIETYAcademia, local community, associations/ Non-Governmental Organizations (NGOs)

EMPLOYEES AND EMPLOYEE REPRESENTATIVES

FINANCIAL COMMUNITYInstitutional investors, individual shareholders and employee shareholders, financial analysts, non-financial rating agencies

Main expectations

Youth training, on-site environmental measures, absence of noise pollution, effective management of social and environmental challenges in the value chain.

Main expectations

Compensation consistent with individual commitment and Group results, motivating career paths, skills development, commitment to workplace health and safety and compliance with international labor conventions.

Group contribution

More employees, trained throughout their career, steadily decreasing accident rates, profit sharing, payment of an exceptional bonus in 2019 (in France) to stimulate purchasing power, calm and constructive labor relations, development of employee dialogue at global level.

Main expectations

Transparency in the management of the company, compliance with our financial commitments, the long-term strategy and its implementation and consideration of corporate social and environmental responsibility (CSR) criteria.

Group contribution

Accurate, precise and fair information accessible to the financial community, regular presentation of the Group’s multi-year objectives at Capital Markets Days, availability for the entire financial and non-financial community.

STAK

EH

OL

DE

RS’

MA

PP

ING

ECOSYSTEM

Group contribution

Renewed commitment in favor of apprenticeships and the employment basins where the Group is present, sustained R&D to prepare the future of the aerospace industry and the development of new products and equipment. Implementation of a low-carbon policy notably to reduce greenhouse gas emissions from the Group’s products.


The long-standing dialogue between Safran and its stakeholders enabled the Group to map its CSR and operational challenges in a “materiality matrix” as early as 2015. Using this materiality analysis, the main challenges were ranked taking

into consideration Safran’s businesses and their impacts. The challenges identified impact strategic discussions. Actions plans have been drafted and key performance indicators developed. They are presented in Chapter 5 of the 2018 Registration Document.

They contribute to attaining the undertakings given by the Group to the United Nations (UN) when it signed up to the UN Global Compact in 2013 and are aligned with the UN’s Sustainable Development Goals (SDG).

Exp

ecta

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afra

n’s

stak

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Importance for Safran

Anti-corruptionand business ethics

Quality of productsand services

Continuity of businessand procurement

Transparency and dialogwith stakeholders

Customerrelationships

Waste and recycling

Innovation durable

Protection of personaldata and privacy

Intellectual propertyand access to technology

Safety of productsand services

Corporate governance

Support for research

Greenhouse gas emissions

Energy e�ciency

Diversity and equal

opportunities

Employer/employeerelations

Socio-environmental impactof procurement

Human rightsSocio-economicdevelopment

Well-being at work (safetyand security, quality of life)

Image of the Group, attractivenessand employer brand

Managerial relations

Human capital developmentand talent management

Compensation, employeebenefits and social protection

Local disturbanceConsumption ofnatural resources

Biodiversity

Water consumption

Support to local populationsand employee engagement

in society

Responsible relationshipswith suppliers

1

1 2 3 4

2

3

4

PRODUCTS AND SERVICES

CSR CHALLENGES

GOVERNANCE EMPLOYEES AND MANAGEMENT ENVIRONMENT SOCIETY

Control of exports

OPERATIONAL CHALLENGES

MANAGING CHALLENGES AND STAKEHOLDER DIALOGUE

MATERIALITY MATRIX OF SAFRAN CHALLENGES

ECOSYSTEM


Safran and the United Nations’ Sustainable Development GoalsThrough these SDG, in 2015 the UN reviewed its blueprint for the global population and the planet for 2030. This approach primarily aims to eradicate poverty, fight climate change, provide access to quality education and fight for justice and peace. Safran’s actions, together with its stakeholders, follow on from this approach.

In 2018, Safran was the first European company in its sector awarded the GEEIS label (Gender Equality European & International Standards) (page 40).

Safran takes the environmental impact into consideration when designing its products (page 30).

Safran’s health, safety and environment (HSE) approach is founded on a holistic policy and guidelines (page 35).

The Group pays close attention to water and waste treatment at its sites (page 35).

Each year, Safran welcomes interns and apprentices representing at least 10% of its workforce (page 39).

Safran is a responsible business partner (page 38).

Safran is ranked in the top three French companies for the number of patents filed since 2011 (page 26).

As an aircraft equipment supplier, Safran helps reduce the environmental footprint of its customers (page 27).

Safran has stepped-up its low-carbon strategy for its sites since 2018 (page 35).

Safran signed the UN Global Compact in 2013 and was recognized from the following year in the Advanced category (page 38).

Safran signed a global framework agreement on working conditions, CSR and sustainable development in 2017 (page 41).

SAFRAN AND SUSTAINABLE DEVELOPMENT GOALS

1

Impact on Safran's businesses

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ECOSYSTEM


Several factors contribute to this momentum:

the increasing popularity of air travel spurred by falling prices;

pressure on capacity, with load factors reaching new highs in the majority of airlines;

demand in regions enjoying strong economic and demographic growth (in particular China, South-East Asia and India) and the renewal of the existing fleet (mainly in North America and Europe).

41,400 new aircraft are expected in the next twenty years, particularly in the narrow body segment (24,800 aircraft).

Furthermore, aircraft interior refurbishment requirements are accelerating, with several retrofit cycles in an aircraft’s lifespan.

STRONG MARKET GROWTH

The global commercial aircraft fleet (36 passengers and over) and passenger traffic are expected to double in the next 20 years.

CIVIL AVIATION: SIGNIFICANT INCREASE IN TRAFFIC

SCHEDULED PASSENGER NETWORK, WORLDWIDE

RPK: Revenue Passenger Kilometers (in billions) (number of seats occupied by passengers multiplied by the distance traveled by the global fleet).ASK: Available Seat Kilometers (in billions) (number of available seats multiplied by the distance traveled by the global fleet).

Source: Safran Aircraft Engines.0

62.8%

+4.2%

3,000

6,000

9,000

12,000

15,000

18,000

21,000

1980

ASK Tra�c

Load Factor

RPK Tra�cASK average annualGrowth until 2038

+4.3%RPK average annualGrowth until 2038

Air tra�c has doubled

Air tra�c expected to double

1985 1990 1995 2000 2005 2010 2015

2018

2020 2025 2030 2035

84.1%82.1%

ECOSYSTEM


The business aviation market is stable. In 2018, there were around 21,000 business aircraft in service. The helicopter market is restructuring, after several years marked by the crisis faced by players in the oil and oil-related sectors.

After several years of downward trends, defense budgets are increasing steadily across the globe, in a context marked by several areas of armed conflict and geopolitical tension. In Europe, joint defense initiatives were kick-started in the summer of 2017 with the launch of several projects,

including the European Defense Fund (EDF). On a financial front, the aim is to mobilize over €35 billion in community credits between 2021 and 2027 for defense and space initiatives, including €13 billion comprising €4.1 billion for R&T and €8.9 billion for R&D.

DEFENSE: PROJECTED INCREASE IN BUDGETS

BUSINESS AVIATION AND HELICOPTERS

FOCUS ON SAFRAN’S MILITARY ACTIVITIES

Over and above the electronic activities of Safran Electronics & Defense, all Group subsidiaries are present in the military sector, which accounts for approximately 15% of Group revenue. Products notably include the M88 engines powering the Rafale, military helicopter turbines, TP400 engines powering the A400M transport plane, electrical wiring for the Rafale, landing gear, tactical drones and auxiliary power units (APU). Safran also supplies deterrent equipment, but not munitions.

ECOSYSTEM


TRANSFORMATION OF THE AEROSPACE INDUSTRY

Safran operates in a changing industrial landscape.

RAPID CHANGES

CO2 and NOx emission and noise reduction objectives are a major technological challenge for the aviation sector. The global aviation industry generates around 2% of global CO2 emissions.

The expected strong growth in air traffic should result in a 3.5-fold increase in passenger traffic by 2050.Air transport players (equipment manufacturers such as Safran, airframers, airlines, air traffic control and airports) have been assigned extremely ambitious environmental requirements. These objectives were documented in the CORSIA agreement signed with the civil aviation organization (ICAO) in 2016, following on from the Paris Agreements in December 2015: 1 between 2009 and 2020,

improving fleet fuel efficiency by 1.5% annually;

2 from 2021 to 2035, capping net emissions at 2020 levels to ensure carbon-neutral growth;

3 from 2050, target reduction in net aviation emissions of 50% relative to 2005 levels.

The various players, including Safran, are committed to effectively managing the sector’s environmental footprint using four levers:

introducing new technologies;

progressively using renewable or alternative fuels;

improving aviation operations and infrastructures;

creating a carbon offset mechanism (transitional measure).

Environmental and economic objectives are well aligned in the aviation sector, as each improvement in an aircraft’s fuel efficiency not only has an impact on CO2 emissions avoided, but also has an immediate economic impact on operating costs, as fuel represents 20% to 40% of an airline’s recurring costs.

1 LONG-TERM ENVIRONMENTAL ISSUES

Technological upheavalTowards electrical plane

OEM consolidation and repositioning

Equipment manufacturer alliances, supply base

consolidation

Growing global competition Newcomers (start-up,

emerging markets, etc.)

Long-term environmental issuesCO2, NOx, Noise, etc.

CO2 REDUCTION CHALLENGE

2005 2010

Impact of new technologies

2020e

No action

Carbon-neutralgrowth

-50% for CO2 emissions

Mill

ion

tonn

es o

f C

O2

2030e 2040e 2050e

Improved operating e�ciency

Better infrastructure use

Additional technologiesand biofuels

1

2

3

1

5

4 3

2

ECOSYSTEM


Innovation is in the aerospace sector’s DNA since its beginning. Today’s aircrafts are five times more fuel efficient than their counterparts in the 1950s, mainly thanks to engine improvements.In addition, numerous innovations have enabled considerable progress in aircraft safety, making civil aviation one of the safest means of transport in the world.

Since 2017, airframers have consolidated around the traditional duopoly: alliance between Bombardier and Airbus around the CSeries program renamed A220 (finalized in 2018) and alliance currently under negotiation between Boeing and Embraer. In addition, the emergence of new players continues, in particular in China and Russia. Airframers are also considering a change in their business scope, bringing certain activities back in-house and increasing their range of services.

Newcomers have appeared among the equipment manufacturers, attracted by the strong sector growth.Airframers are furthermore subject to intense competition and put substantial pressure on their equipment manufacturers to reduce prices, with major cost reduction programs. Certain key materials are also rare resources worldwide (titan, rare earths, etc.) and their supply can be disrupted

by geopolitical tension. For airlines, the sector is marked by strong growth in Middle-East and South-East Asian companies. The ramp-up of low cost players is also significant in short- and medium-haul transport. Finally, investors, finance companies and aircraft leasing companies are becoming major players in the aviation ecosystem.

2 TECHNOLOGICAL UPHEAVAL

3 OEM CONSOLIDATION AND REPOSITIONING

5 GROWING GLOBAL COMPETITION

New areas of innovation in short-, medium- and long-haul aviation have appeared: digital (big data, artificial intelligence), connectivity, autonomy, hybrid and/or electric propulsion, materials, processes, low-carbon fuels, hydrogen, etc. These innovations open the way for new engine architectures, new concepts, new production methods, new services, new players and new uses (particularly VTOL(1)).

4 EQUIPMENT MANUFACTURER ALLIANCES, SUPPLY BASE CONSOLIDATION

Encouraged by airframers and airlines, suppliers and equipment manufacturers in the supply chain have also consolidated. Major combinations include, in 2018, the acquisition of Zodiac Aerospace by Safran and the acquisition of Rockwell-Collins by UTC, in turn preceded by the acquisition of B/E Aerospace.

(1) VTOL: Vertical Take-Off and Landing aircraft.

ECOSYSTEM


OUR AMBITIONS

The major trends in the ecosystem described above suggest sustainable sector growth, but also a sector

that will be more competitive and required to face technological and environmental challenges.

AIRCRAFT EQUIPMENT/ DEFENSE/AEROSYSTEMS

Become the world’s leading aircraft equipment supplier

Be the leader in equipment for more electrical aircraft

Capitalize on Defense niche businesses

Draw on the Aerosystems portfolio to strengthen our

equipment positions

A CLEAR ROADMAP

Safran aims to become the world’s leading aircraft equipment supplier within the next 15 years. To achieve this goal, the Group draws in particular on:

its business model; a clear strategy founded on the Group’s assets: sustainable innovation, operating excellence, agility and responsible conduct.

By focusing both on operating excellence and the investment needed to define the technological state of the art, the Group is ideally

placed to reach a new milestone in business growth and value creation.


(1) Safran is present in all engine components and all segments of the propulsion market.

AEROSPACE PROPULSION

Consolidate the position of full-fledged engine manufacturer(1)

Prepare the propulsion technologies of the future

Profit from growth in service activities thanks to a large in operation base

of civil engines

AIRCRAFT INTERIORS

Restore the operational excellence and competitiveness of this new activity

Propose innovative solutions for our customers

Return to world-class financial performance


ECONOMIC LIFE CYCLE OF AN AIRCRAFT ENGINE PROGRAM (ILLUSTRATIVE)

The Group’s strength lies in its balanced business portfolio:

the business cycles for Safran’s products are uncorrelated and they have different maturities (from just a few years for an aircraft seat to more than 40 years for an engine);

in addition to the initial sale in a new aircraft (Original Equipment), the Group proposes services and aftermarket (including spare parts and long-term contracts), that now generate nearly half its revenue. These services provide recurring revenue streams and margins, spread over time;

the Group is present in all sub-segments of the aerospace and defense sector (regional aircraft, short-medium haul, long haul, business jets, helicopters, military aircraft), making it less sensitive to changes in their business cycles.

Safran has the main resources necessary to its development: primarily human, intellectual, industrial and financial capital. These resources are the fruit of several decades of constant investment in line with the Group’s strategy.The talent of its 92,000 employees, the richness of its technology

portfolio, the performance of its industrial tool, its responsible conduct in the sector where it plays a key role, are today the main sources of the Group’s success. Safran’s financial performance also enables it to prepare its future while guaranteeing its independence and the sustainability of jobs.

Safran products also have common features that contribute to the resilience of its business model:

position as a tier-one supplier to airframers and, for some products, to airlines;

high technology content, notably reflecting the high levels of investment inherent in our products;

high demand, whether in original equipment sales (ramp-up of products equipping the new generation of narrow body aircraft and visibility provided by the order backlog) or after sales services, with strong growth expected.

OUR BUSINESS MODEL

OUR RESOURCES

Entry into serviceand firstdeliveries

Services and aftermarket(including spare parts and

long-term contracts)

Developmentand testing

Initial sales (Original Equipment)

40 years+

INITIAL SALES (ORIGINAL EQUIPMENT):

54%OF 2018

ADJUSTED REVENUE

SERVICES AND AFTERMARKET:

46%OF 2018

ADJUSTED REVENUE



A FAST-GROWING MARKETPassenger demand expected to double in 20 years.

LONG-TERM ENVIRONMENTAL CHALLENGESLimiting CO2 and NOx emissions and noise.

TECHNOLOGICAL UPHEAVALShift to hybrid and electric propulsion, additive manufacturing, composite materials, big data, AI, etc.

OUR RESOURCES(1)

A BALANCED BUSINESS PORTFOLIO

OUR STRENGTH: SIMULTANEOUSLY PREPARING THE SHORT- AND LONG-TERM

OUR BUSINESS MODEL

HUMAN CAPITAL • Over 92,000 employees

in 26 countries • 4% of payroll spent on training• 13,050 recruitments• Recognized governance

INTELLECTUAL CAPITAL• €1.5 billion of total R&D expenditure• Approximately 1,200 PhD graduates• 16% of Group employees work in R&D

(including R&T)

INDUSTRIAL CAPITAL• 246 sites in the world serving

our customers• €740 million in industrial investment• Structuring alliances and partnerships,

including the CFM International joint venture formed with GE Aviation in 1974 and renewed until 2040

FINANCIAL CAPITAL• A full order backlog

(over 7 years for LEAP)• A growing base in operation

(approximately +5.5% annually for short- and medium-haul engines)

• One of the strongest financial signatures in the industry

• A stable shareholders base (employees, French State, French industrial families, long-term institutional investors)

• A strong financial structure (net debt / EBITDA(2) of 0.9)

• A foreign exchange risk hedging policy providing visibility

SOCIAL AND ENVIRONMENTAL CAPITAL• 75% of our R&T investment

focuses on reducing our environmental footprint

• Training in responsible purchasing and good conduct charter

(1) All figures refer to 2018 except where noted.(2) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is equal to a company’s profits before deduction of loan interest, taxes and duties and charges

to depreciation, amortization and provisions on fixed assets.


INNOVATION, DESIGN

2018 R&D expenditure:€1.5 billion

TRENDS IN THE AEROSPACE INDUSTRY

CREATE VALUE FOR ALL OUR STAKEHOLDERS

OUR BUSINESS MODEL SERVING OUR CUSTOMERS


OEM CONSOLIDATION AND REPOSITIONING

EQUIPMENT MANUFACTURER ALLIANCES, SUPPLY BASE CONSOLIDATION

GROWING GLOBAL COMPETITION With newcomers, new markets, new uses.

OUR IMPACTS(1)

4 ASSETS

SUSTAINABLE INNOVATION (page 26)

OPERATIONAL EXCELLENCE (page 32)

AGILITY (page 36)

RESPONSIBLE CONDUCT (page 38)

Product lifetime (illustrative)

0 5 10 15 20 25 30 35 40 years

Aerospace Propulsion

Aircraft interiors

Aircraft Equipment, Defense and Aerosystems

HUMAN CAPITAL • A favorable and attractive social

model: profit-sharing, incentive schemes, employee share ownership and employee savings funds

• 67% of employees (excluding Zodiac Aerospace) are Company shareholders and together hold 6.9% of the share capital

INTELLECTUAL CAPITAL• 40,000 intellectual property titles• Safran ranked in the global top 100

most innovative groups

INDUSTRIAL CAPITAL• €250 million of synergies expected

in 2022, following the acquisition of Zodiac Aerospace

• A robust supply chain enabling the ramp-up of LEAP production (dual active source for all specific engine parts)

FINANCIAL CAPITAL• Average organic adjusted revenue

growth: mid-single digit annually between 2019 and 2022

• Recurring operating margin between 16% and 18% in 2022

• Disciplined M&A policy• EBIT(3) to FCF conversion rate trending

above 60% in 2022• Debt reduction objective targeting a

net debt / EBITDA ratio of 0.5 by 2022• Stock market performance

(+696% since 2005)

SOCIAL AND ENVIRONMENTAL CAPITAL• LEAP: -15% CO2 emissions

and -50% N0x emissions• “RESPONSIBLE SUPPLIER

RELATIONS” label • 1st CAC 40 company certified

“anti-corruption” by ADIT(4)

(3) EBIT (Earnings Before Interest ans Taxes) is equal to company’s profit before deduction of loan interest and taxes.(4) French Agency for the Diffusion of Technological Information.


INNOVATION, DESIGN

2018 R&D expenditure:€1.5 billion

2018 revenue:€11.6 billion

54%

2018 revenue:€9.5 billion

46%

INITIAL SALES (Original Equipment)

SERVICES AND AFTERMARKET

TRENDS IN THE AEROSPACE INDUSTRY

CREATE VALUE FOR ALL OUR STAKEHOLDERS

OUR BUSINESS MODEL SERVING OUR CUSTOMERS


SUSTAINABLE INNOVATION: DEFINE THE NEXT AEROSPACE

STATE OF THE ARTIn this rapidly changing environment, success depends notably

on managing disruptive innovation and technological excellence, to provide customers with a critical advantage.

Our innovation capabilities are demonstrated across a breadth of sectors such as electric taxiing, composite 3D woven fan blades and hemispheric resonator gyros. With the support of the Board of Directors’ Innovation and Technology Committee, the Group is implementing an innovation strategy firmly focused on efficient R&T serving all its businesses. This strategy is founded on considerable investment, budgeted to increase over the coming years. It is also based on a dedicated R&T management system and an internal organization providing a balance for Group subsidiaries between own development and shared activities. The R&T plan comprises a limited number of roadmaps tied to the strategic challenges facing the companies and coordinated by the Group.Innovation projects aimed at preparing the main disruptive products, processes and systems are motivated and led under

placed on protecting intellectual property. The Group is one of the leading French filers with INPI, the French patents office and has been consistently ranked during the past eight years by Clarivate Analytics, among the world’s hundred most innovative companies.Overall, the Group’s patent portfolio protects close to 10,000 inventions and encom-passes over 40,000 intellectual property titles.

a “proof of concept” approach, closely associating the Group companies. Finally, interactions with the scientific, technological and innovation ecosystem are organized around strategic partnerships, scientific networks and chairs, collaborative innovation in the supply chain and investments in the share capital of young innovative companies. The number of patents filed bears witness to the creativity of the teams and their capacity to innovate, as well the importance

+€600 million

R&T and innovation expenditure internally

funded in 2022

3,000 R&T employees



4 R&T PRIORITIES:

optimize the aircraft energy and propulsion chain

develop high-performance materials and processes

design the cabin of tomorrow

develop autonomous systems

75%OF R&T

INVESTMENT FOCUSEDON ENVIRONMENTAL

EFFICIENCY

+1,050 INITIAL PATENT REQUESTS

FILED BY SAFRANWORLDWIDE IN 2018

1,200PhD GRADUATES

IN THE GROUP

Improvements to propulsion have already more than halved the fuel consumption of commercial aircraft if we compare the LEAP engine with engines in the 1970s. Relative to the last-generation CFM56, the LEAP engine reduces fuel consumption by 15% and NOx emissions by 50%. Further optimization of the energy chain is necessary to attain sector environmental objectives.

Group efforts therefore focus on several aspects at the same time:

optimizing performance and reducing the weight of jet engine and turbofan components. The LEAP engine is already equipped with a highly innovative lightweight fan made from composite materials and a high-efficiency low-pressure turbine. R&T work has already been launched to ensure continued performance improvements. The Arrano engine, selected by Airbus Helicopters as the sole engine to power its H160, incorporates technologies validated by the Tech 800 demonstrator in the Clean Sky European Research program;

disruptive technology in engine architecture and aircraft integration: several avenues are being explored such as the Open Rotor concept, as well as high bypass ratio ducted turbofans under national and Clean Sky programs. In 2017, this work led to ground tests for the open-rotor demonstrator at the open-air test stand in Istres (France);

OPTIMIZE THE AIRCRAFT ENERGY AND PROPULSION CHAIN

DEMONSTRATION PARTNERSHIP WITH AIRFRAMERS

Safran is working with airframers on vertical take-off and landing (VTOL) demonstrators, with Safran supplying innovative hybrid and/ or electric propulsion systems.



analysis of potential gains from alternative fuels and adaptation of propulsion systems: low-carbon fuels, hydrogen, which has shown to be compatible with current engines at high incorporation rates, synthetic fuels and liquefied natural gas.

exploration of different hybridization approaches in the energy chain: scenarios considering the emergence of hybrid or even fully electric propulsion are being studied for smaller aircraft, “commuters” or vertical take-off and landing aircraft associated with new uses

over short distances and in urban areas. Safran’s hybrid electric propulsion system was selected by the US manufacturer, Bell, for its Nexus demonstrator. Evaluations and simulations are also being carried out to identify the potential contribution of propulsion hybridization for narrow bodies.

TOWARDS MORE ELECTRIC AIRCRAFT: NEW USES PROGRESSIVELY DEPLOYED

Electrical Power/Voltage

100 kW

500 kW

1 MW

10 MW

Storage systems'energy density

(batteries and other)

<1,000 V

Bi-turbine HelicopterMicro-Hybridization

VTOLAir taxior Logistic

Commuter10 Seats

>1,000 V

Electrically assisted Turbofanfor futurenarrow body aircraft

40 Seats Regional

DistributedPropulsion for 200 SeatsCommercial aircraft

2022 2025 2040+2025+ 2030+

Long term technology challengesfor largeaircraftE-taxiing(1)

(1) Taxiing is the movement of an aircraft on the ground using its propulsion system. Electric Taxiing (also known as “e-taxiing”) is the replacement of engines during taxiing with electric technology, generating fuel savings and significant reductions in CO2 and NOx emissions.


Optimization concerns the entire energy chain, with innovations such as Electric Taxiing(1) for moving planes on the ground without using the main engines, and power generation, distribution and wiring technologies to enable the implementation on-board aircraft of the substantial power required for hybridization.

These technological developments are founded on collaborative programs with airframers in a national or European context and on partnerships

with the laboratories of the CNRS (French National Scientific Research Center), ONERA (French National Office for Aerospace

Studies and Research) and major industrial companies at the cutting edge of their sector, such as Alstom or EDF.


The need to reduce the weight of planes, helicopters and their equipment leads to an increased use of composite materials. Safran engines and equipment, whether nacelles, landing gear or brakes, are characterized by heavy mechanical loads. To develop these solutions, Safran set up the Safran Composites Center, part of the Group’s R&T center, Safran Tech,

Under Safran’s 4.0 industry roadmap, automatic imaging solutions (based on “machine learning”) are already deployed in the Group’s plants for the non-destructive control of complex parts.

Additive manufacturing provides an opportunity to improve costs, cycles and performance for numerous engine and aircraft equipment components, by reducing the number of parts and tooling and introducing new methods of optimizing design. Certification has already been obtained for parts produced by these processes, including fuel injector nozzles and combuster swirlers for helicopter engines produced via selective laser melting, where an assembly of 15 components can be replaced by a single part. Safran Tech’s Safran Additive Manufacturing hub, along with partnerships such as the one with Saclay’s Additive Factory Hub, help accelerate the development of these processes for their future use in serial production and repairs.

with resources and expertise in organic matrix composites. To target extreme temperatures, major research work is carried out on composite ceramics by Safran Ceramics. This Group technology specialist subsidiary, inaugurated a unique platform in Europe in 2018. Other research focuses on new metal alloys, and on high-performance coatings

compliant with European REACh(1) regulations. Increasing operating temperatures is a key factor in improving engine performance. A specific focus is therefore placed on materials for very high temperatures. A platform for developing new monocrystalline casting techniques for turbine fans was inaugurated at the beginning of 2019.

DEVELOP HIGH-PERFORMANCE MATERIALS AND PROCESSES

AMBITIOUS POTENTIAL GAINS THANKS TO ADDITIVE MANUFACTURING: THE ENGINE EXAMPLE

15%REDUCTION IN MANUFACTURING COSTS

UP TO 50COMPONENTS REPLACEDBY A SINGLE PART

LEAD TIME DIVIDED BY

625%WEIGHT REDUCTION

(1) REACh (Registration, Evaluation, Authorisation and Restriction of Chemicals) is a European regulation that came into effect on June 1, 2007. It seeks to improve protection of human health and the environment, against risks relating to chemical substances.



The cabin of tomorrow will offer passengers an improved experience and comfort by innovating, integrating and optimizing its systems. It will also offer airlines a distinctive signature and an economic competitive advantage.

Safran’s design studio (ZEO) based in Huntington Beach (California), has developed a cabin product range that goes beyond the mere supply of equipment, proposing integrated and connected solutions: connectivity for InFlight Entertainment (IFE)(1)

and services, passive and active noise control, ambient lighting, air conditioning, etc. Efforts to make equipment modular provide optimal flexibility in the use of space. The supply of passenger communication infrastructure also offers airlines the possibility of additional revenue. Moreover, Safran develops innovative solutions for automating ground operations, refueling and preparing the cabin prior to take-off and in flight prior to landing.In addition, connected equipment enable dysfunctions to be moni-tored, in order to reduce their negative impact on operations.

DESIGN THE CABIN OF TOMORROW

FOCUS ON ECODESIGN OF PRODUCTS

Safran adopted audited eco-design standards in 2016, to reduce the environmental footprint of its products during the main stages in their life cycles.

To ensure compliance with these standards, Safran has set up a dedicated organization in each of its tier-one companies: skills, training, design rules, control processes, etc. In addition to applying ISO standards, Safran systematically incorporates environmental concerns from the design phase of its new programs and in the development of its technological bricks.

Reducing the environmental impact has therefore become central to the Group’s selection process for materials and manufacturing processes.

The Group is also looking to increase the percentage of recycled materials in its products, taking into account the forecast journal of fleet withdrawals in the coming years. At the same time, it supports recycling channels aimed at maintaining a near identical level of use characteristics in recycled materials (e.g. titanium alloys with Ecotitanium, additive manufacturing metal powders with Metafensch).

(1) InFlight Entertainment refers to the activities and entertainment available to passengers during a flight. It has become a major competitive advantage for airlines.



Air, land, sea, satellite and military navigation markets are constantly evolving. The integration of mobile units into cooperative groups, increasing autonomy requirements and the required land-onboard continuum via secure links are driven by major operational or economic gains. Safran is actively preparing the shift to autonomous systems for civil and defense applications based on technologies developed in optronic sensors, inertial navigation, critical onboard electronic systems and image processing and analysis. Specific research focuses on robust and reliable artificial intelligence for autonomous functions, working closely with the scientific community. Thanks to eRider, the autonomous vehicle demonstrator for military applications, the Group won a demonstration program contract with the French Armed Forces Ministry, associating autonomous vehicles, small land robots and drones working collaboratively.

Proficiency in navigation data merger and environment perception technologies also enables the development of piloting assistance applications for all types of aircraft. Safran has also expanded its technology sources by integrating new sensor families in complex and smart systems, working in partnership with Valeo at their joint laboratory in Magny-les-Hameaux (Yvelines, France), on autonomous vehicle technologies.

DEVELOP AUTONOMOUS SYSTEMS

“Safran is actively preparing the shift

to autonomous systems for civil

and defense applications.”



OPERATIONAL EXCELLENCE: AT THE HEART OF OUR DNA

Safran aims to become the leading supplier of its customers by proposing world-class products and services. The Group’s operational know-how is mobilized to ensure the turn-around of the Aircraft

Interiors businessess from Zodiac Aerospace.

Customer confidence and satisfaction is founded on the Group meeting its commitments to quality-cost-lead time and the safety of products and services delivered. Performance quality in the delivery of products is only possible thanks to excellent control over the supply chain. Safran’s purchasing policy is designed to meet its objectives of excellence in seamless alignment with its manufacturing strategy. Safran has successfully built a supplier panel that meets its present and future performance needs (cost, quality and lead time) and enables Safran to provide its customers with innovative, value-creating solutions. To promote an agile supply chain, the Group involves suppliers from the development of its products and services, offering them the opportunity to put forward their innovations and contribute their expertise. Safran has also implemented a policy to diversify supplier sources, by systematically qualifying multiple sources for critical materials and parts.

Performance quality for services is founded on constantly listening to customer expectations. Maintenance centers have been located to ensure maximum proximity to customers and the Group has also developed remote maintenance solutions to enable rapid and efficient troubleshooting and action.

PERFORMANCE QUALITY

OPERATING EXCELLENCE SERVING LEAP

Since production of the LEAP engine was launched in 2016, its ramp-up has been a challenge. Over and above the high level of innovation and the use of new manufacturing procedures (additive manufacturing, composite materials, etc.), the ramp-up of LEAP production has been the fastest ever known in civil aviation industry history, with 1,118 engines delivered in 2018. To sustain this fast pace, Safran invested to increase its production capacity and adapted the entire production chain:

introduction of three pulse lines, transforming assembly at the Group’s plants;

active double source supplier policy and introduction of a 3rd and potentially 4th source for the most critical engine components;

set-up of dedicated teams to share its development and industrialization expertise and accompany production ramp-up by suppliers of the most critical parts.

This control over the production chain has enabled commissioning schedules to be met (August 2016 for the LEAP-1A engine powering the Airbus A320neo family, May 2017 for the LEAP-1B engine powering the Boeing 737 Max) and the technical specifications to be respected (15% reduction in fuel consumption and 50% reduction in NOx emissions and noise). The LEAP engine is now in operation in 100 airlines and has over 4.4 million flight hours at the end of April 2019. It is the most reliable new generation civil engine in its category.



Increasing Group competitiveness is founded on constant efforts to reduce production costs. These efforts have contributed to improving the Group’s margin since 2015, with an increase of at least 100 basis points annually in the recurring operating margin. Thanks to constant productivity gains (optimization of industrial sites and Group locations, modernization of the production tool), recurring purchasing gains and annual synergies of €250 million expected by 2022 following the combination with Zodiac Aerospace, the recurring operating margin should continue to improve.

Safran is constantly improving its processes, notably through research and the implementation of innovative concepts, by developing cooperation with suppliers to increase sharing of best practice within the Group. This methodology know-how is mobilized, in particular, for the integration of the former Zodiac Aerospace businesses.

Permanent, cross-Group initiatives are carried out:

participative innovation initiatives, enabling all employees to put forward ideas for improving the Company. Nearly 130,000 employee ideas were applied in 2018;

lean-Sigma, which structures and standardizes project management;

CONSTANT IMPROVEMENT

COST CONTROL AND COMPETITIVENESS

QRQC(2) which has been rolled out across industrial and technical operations in all Group companies.

ONE SAFRAN, KEY SUCCESS FACTOR

One Safran is a management system encompassing the main processes applicable to all Group entities and proposing common methods and tools based on shared experience and best practices. Over 500 operational excellence projects were launched in 2018, with 300 completed, compared with 100 projects launched and 50 completed in 2017. The results of these projects are very tangible, as regards both their impact on performance and buy-in by the teams.

(1) From January 1, 2018, IFRS 15 replaced IAS 18 as the standard governing the recognition of Group revenue.(2) QRQC: Quick Response Quality Control: a fast problem-solving management method that emphasizes constant vigilance and immediate response.

2022 RECURRING OPERATING MARGIN OBJECTIVES > FOR THE GROUP

2019

e

2020

e

2021

e

2022

e

2010

2011

2012

2013

2014

2015

2016

2017

2018

5%

10%

14.4%

16-18%

IAS 18(1) IFRS 15(1)

15%

20%

> BY BUSINESS

- Aerospace Propulsion > 20%- Aircraft Equipment > 16%- Defense > 10%- Aerosystems and Aircraft Interiors approximately 15%

(including all acquisition synergies)



Safran invests in and adapts its production sites to ensure they are always of the highest industrial standard. This constant strive for excellence has enabled Safran to confirm its position as a leader in France and Europe in the implementation of technologies and processes relating to the digital transformation of industry. The Factory of the Future is the preferred method for obtaining the best possible profitability from investments and a disruptive competitiveness tool producing remarkable productivity gains. It is a major asset for the Group’s current activities and is at the very heart of its strategy. Projects for the production lines of the future were identified and planned by all companies from 2017. They encompass industrial manufacturing activities (46%), assembly (40%), repair/ MRO activities (12%), processes (2%) and technical activities covering the advancing maturity of innovative technologies and their impact on industrialization. 65 production lines at over 30 sites are concerned. The emergence of new production technologies motivated the creation of a specific roadmap in Safran’s R&T plan, to coordinate company efforts in industrial R&T areas.

This roadmap covers five main sectors: Controls of the future, Cobotics, New manufacturing processes, Connectivity of resources and Cognitive operator assistance.

Part of this industrial R&T roadmap is carried out in partnership with other industrial companies and scientific laboratories:

Safran is a stakeholder in the Factory Lab ecosystem in Saclay. Since the end of 2016, this hub brings together industrial companies, universities, small and medium-sized companies and start-ups, on a limited number of projects, with strong leverage thanks to implementation synergies; Safran is also working with the French Atomic Energy Commission (CEA) on an industrial cobotic initiative. This joint CEA-Safran initiative uses the CEA’s TROPIC hub in Pessac and is supported by the New Aquitaine region for the acquisition of equipment. A portfolio of 70 projects are planned over three years.

Finally, at the end of 2018, Safran launched a project for controls of the future, to prepare the replacement of non-digital techniques (die penetrant, magnetoscopy) with digital techniques. This project will cover not only control techniques, but also all other components of the chain: automation, analysis, computerization system and related software.

INDUSTRIAL INNOVATION AND DIGITALIZATION: THE FACTORY OF THE FUTURE

“The Factory of the Future

is a major asset, at the very heart

of the Group’s strategy.”

65PRODUCTION LINESAT OVER 30 SITES

SAFRAN AIRCRAFT ENGINES

SAFRAN LANDING SYSTEMS

SAFRAN HELICOPTER ENGINES

SAFRAN NACELLES

Villaroche (France) Bidos (France) Bordes (France) Le Havre (France)



SEEKING OPERATING EXCELLENCE IN HEALTH, SAFETY AND THE ENVIRONMENT (HSE)

The roll-out of Safran’s HSE operational excellence approach is based on a policy, a management commitment, expertise and holistic guidelines. The Group drives a proactive, prevention culture at the highest level, to protect the health and safety of all and the environment. Over and above the requirements of ISO 14001 and OHSAS 18001, the uniqueness of Safran’s HSE guidelines lies in an original management system. This comprises standards setting tangible and specific requirements in four categories: regulatory prerequisites, managerial

leadership, commitment of “all players” to best practice and technical excellence.The proper roll-out and application of guideline requirements is audited annually, enabling operational performance to be measured and supported through the level of HSE maturity attained by the sites. The guidelines and audits are monitored and validated by expert third parties with an ambitious objective: certification of all Group industrial sites at the highest level by 2025 (including Zodiac Aerospace entities).

FOCUS ON THE FALL IN THE ACCIDENT FREQUENCY RATE

Reducing the lost-time accident frequency rate is the main health and safety policy indicator in recent years.

2.72015

2.2

2018

FOCUS ON OUR ENVIRONMENTAL APPROACH

Through its HSE policy, the Group has developed a proactive, prevention culture to control the risks of impacting the environment. In its production and service activities and product design, Safran limits the use of chemical substances of concern, optimizes its manufacturing cycles and works to reduce greenhouse gas emissions.

In May 2018, Philippe Petitcolin, Safran’s Chief Executive Officer, undertook to implement a low-carbon policy. Already actively reducing greenhouse gas emissions by its products, the Group wishes to go further, through a comprehensive strategy encompassing infrastructures, supplies, production cycles, etc. A project comprising several Executive Committee representatives was launched at the end of 2018, to steer this strategy.

The work undertaken will enable us to reduce CO2 emissions while optimizing our competitiveness. A number of examples support our view that it is possible to combine performance with cost savings: the Safran Landing Systems biodiesel power plant (renewable fuel) in Gloucester, United Kingdom; guided and optimized management of clean room air (where inertial systems are produced) at the Safran Electronics & Defense Montlucon site; the Safran Helicopter Engines wood-fueled biomass power plant in Bordes.

In addition, a dedicated structure has been set up. Each company now has a Carbon Officer, to identify emission sources and solutions for reducing consumption and greenhouse gas emissions.

Another environmental issue of importance to Safran is managing risks associated with chemical substances.

Safran has drawn up a list of substances, materials and processes that can be used, with or without restrictions, and others that are banned. In addition, before being approved for use in a production facility, each new chemical is analyzed in depth by a panel of stakeholders. Although programs deployed in the product cycle upstream can substantially attenuate the hazards at the workstation, residual risks remain and must be managed. In addition to a dedicated auditable and annually audited standard applied at every facility and a network of more than 120 highly skilled, specially trained chemical risk correspondents on every major site, Safran carries out scientific and technical studies and issues recommendations for managing these chemical risks.

Finally, Safran has also implemented innovative and shared solutions within the Group for waste management and water resources preservation (see page 240 of 2018 Registration Document).

Greenhouse gas emissions

2018, Safran worldwide(1)

Scope 1 direct emissions (t CO2-eq/employee)

3.3

Scope 2 indirect emissions from the consumption of energy (t CO2-eq/employee)

4.55

(1) Excluding the Bellevue, Homberg, Sell Burg, Seminole, Verulam, Xedel and Wessling sites.



AGILITY: A KEY TO THE GROUP’S SUSTAINABILITYAgility is founded on three major fundamentals.

While meeting its financial discipline criteria, priority is given to transactions rationalizing the existing business portfolio, notably with regards to former Zodiac Aerospace businesses, and to focused acquisitions strengthening the Group’s positions in sectors where it can attain critical mass.

Safran has a long experience of alliances and targeted partnerships. With a long timeframe and a win-win approach, these partnerships accompany the Group’s strategy. They are relevant given the investment levels associated with each new program.

3 – FOCUSED AND DISCIPLINED M&A POLICY

1 – ABILITY TO FORM TARGETED PARTNERSHIPS

Thanks to the richness of its business portfolio, the Group is able to understand and anticipate changes in customer needs, markets, technologies and uses. The Group builds a lasting relationship with its customers, by offering them innovative solutions and constantly ensuring their satisfaction and compliance with its commitments. This long-term approach is particularly adopted to the typical lengths of aeronautic cycles.

2 – CUSTOMER PROXIMITY AND LASTING CONFIDENCE

Focus on the joint venture with GEThe most emblematic of these alliances is very certainly the partnership with GE to develop engines for short and medium-haul fleets. It was established in 1974 and renewed in 2008 until 2040, within the joint venture, CFM International. This alliance helped redefine international cooperation and contributed to changing the course of commercial aviation. CFM International is currently the world’s leading supplier of commercial aviation engines, with a product line (CFM56 and LEAP) that is the sector reference for efficiency, reliability and low production costs.

Initium Aerospace: joint venture with BoeingSafran and Boeing teamed up in 2018 to design, build and service auxiliary power units (APU), within the joint venture, Initium Aerospace. This long-term partnership will enable the companies to develop a competitive offer for upcoming civil aviation programs.

Focus on the Valeo – Safran partnershipValeo and Safran are globally recognized equipment manufacturers in their respective sectors – automobile and aviation – for their cutting-edge technology and ability to innovate. They have been working together since 2013 in a research partnership focusing on assisted steering and autonomous vehicles.

Safran Corporate Ventures Created in 2015 with €50 million in funding, Safran Corporate Ventures is the Group’s investment subsidiary tasked with financing start-ups, that have developed disruptive technologies or business models with potential application in aerospace and defense industries.A perfect fit with Safran’s innovation and transformation strategy, the portfolio mainly comprises minority stakes in the following companies:Diota, Krono-Safe, Prodays Group, SafetyLine, Kalray, Cailabs, Turbotech and Oxis Energy.

AGI partnership with Rolls-RoyceSince 2015, Safran and Rolls-Royce are equal partners in Aero Gearbox International (AGI), a specialist in power transmission systems for civil aircraft powered by Rolls-Royce engines. This company makes the power transmission systems for the Trent 7000 engines that power the Airbus A330neo and will have exclusive coverage of the whole range of Rolls-Royce’s forthcoming civil aircraft engines.

RESEARCH AND INNOVATION

VENTURE CAPITAL

INDUSTRIAL AND COMMERCIAL



TYPES OF PARTNERSHIP ARRANGEMENTS

R&T R&D Original Equipment Services and aftermarket

Air

fram

ers

Air

lines

Shared demonstrators

BFELinefit

SFEBTS BTP

Joint ventures

RRSP Agreements

Rateper flight

hour

Spareparts

BFERetrofit

Per-usebilling

Arrangement Explanation Example

Shared demonstrators Innovation cooperation.

Safran Electrical & Power joined Boeing’s ecoDemonstrator flight test program for new technologies, which aims to improve the environmental performance of commercial aircraft throughout their life cycle.

Build to Spec’ (BTS)Developments based on functional specifications (significant added value contributed by engineering).

Jet engines designed to airframer specifications (e.g. thrust, consumption, weight, dimensions, etc.).

Build to Print (BTP)Developments based on plans (lower engineering contribution). Wiring plans provided by the airframer.

Supplier Furnished Equipment (SFE)

Equipment is specified and purchased by the airframer, which offers operators one or more configurations from catalogue.

Circulation, fuel management and inertial systems. Emergency evacuation systems for civil aircraft (slides, lifejackets and rafts), oxygen systems and masks for the cockpit and passengers, etc.

Buyer Furnished Equipment (BFE)• Linefit• Retrofit

Equipment is specified and purchased by the operator. For new equipment, fitting is usually delegated to the airframer.

Linefit: Equipment selected and delivered on delivery of the aircraft.

Retrofit: Equipment selected and delivered during the aircraft’s lifecycle.

When a new aircraft is ordered, commercial aircraft passenger seats are nearly systematically chosen by the airlines (key to their brand image and economic efficiency) and installed on the airframer’s final assembly line.

Joint Venture (JV) Pooling of resources within a dedicated entity.

CFM International (Safran – GE aviation); Initium Aerospace (Safran – Boeing) for auxiliary power units; Aero Gearbox International (Safran – Rolls-Royce); AES Aerospace Embedded Solutions (Safran – MTU) for the development of programs and electronic equipment for civil and military applications.

Risk and Revenue Sharing Partnership (RRSP)

Sharing of risks and revenue in proportion to one’s level of participation.

High-thrust engines (e.g. GE90 engine powering the Boeing 777. Safran has a 23.7% stake in the program for the -115 version currently in production).

Time & Material (T&M)Supply of spare parts and labor for maintenance activities. Spare parts and labor for the CFM56 engine.

Rate Per Flight Hour (RPFH)

Long-term maintenance contracts based on the number of flight hours. Flight-hour contracts for the LEAP engine.

Per-Use billingService contracts generating billing each time the product is used by the customer.

Service contracts for brakes, with the customer billed for each landing.

Safran’s agility enables it to adapt proactively to the main expectations of its customers. The following diagram summarizes some of the variations that provide Safran today with a balanced and resilient model.



The countries where Safran operates apply strict production and commercialization controls. Safran ensures its activities are conducted to the highest standards of honesty, integrity and professional conduct. The Compliance, Ethics and Anti-Fraud Committee supervises compliance by Safran employees with the general compliance framework defined in the Group’s Ethical Guidelines.

COMMERCIAL COMPLIANCE, A DECISIVE FACTOR

RESPONSIBLE CONDUCT: STAKEHOLDER REQUIREMENTS

As a socially responsible company, Safran gave a number of commitments when it signed the United Nation’s Global Compact in 2013. These are reflected

in a global framework agreement on “working conditions, corporate social responsibility and sustainable development” signed at the end of 2017.

External service providers contribute to the production of Safran’s products and services. Given the Group’s purchasing volumes, relations with suppliers and sub-contractors are also based on the principle of a sustainable and responsible relationship.Under our Duty of care plan, our general purchasing conditions lead our suppliers to sign-up to the Group’s corporate responsibility approach.

Suppliers therefore complete a self-assessment questionnaire on their environmental practices and respect for human rights.Implementation of Safran’s Purchasing, Quality, Safety and Environmental policies concerns its entire supply chain and the supply chains of services providers. Their commitment must be formally documented by the signature of the Responsible Purchasing Charter.

A RESPONSIBLE RELATIONSHIP WITH EXTERNAL SERVICE PROVIDERS (SUPPLIERS AND SUB-CONTRACTORS)

PURCHASES

~60% OF ADJUSTED REVENUE

53%OF PURCHASING

VOLUME SOURCED IN FRANCE, INCLUDING 85% SOURCED FROM SME AND MID-SIZED

COMPANIES

SAFRAN WAS AWARDED THE RESPONSIBLE SUPPLIER

RELATIONS AND SUSTAINABLE PROCUREMENT LABEL

IN 2017 AND IN 2018

SAFRAN IS A MEMBER OF THE SME PACT

SINCE 2010

Risk mapping for 100% of subsidiaries

168 information memos issued internally

22 Trade Compliance Officers

169 Trade Compliance Managers/Correspondents

77 Export Control Officers

427 Export Control Correspondents

41 Customs Managers and Customs Correspondents

9 of the 12 tier one companies certified anti-corruption by ADIT

11 companies certified Authorized Economic Operator by the Customs Authority

40 trade compliance reviews performed in 2018

Prevent the risk of corruption

Internal network

Employees trained in 2018

Export controls

Customs rules

4,600 4,400 1,429



SAFRAN, A RESPONSIBLE EMPLOYER: 2018 KEY FIGURES

Develop Safran’s attractiveness and diversity

With 42,000 natural departures and 45,000 recruitments planned over the next four years(1), the recruitment, integration and skills management challenges are decisive. In a sector as highly competitive as the aviation sector, Safran’s attractiveness is a key question. Safran therefore implements a proactive and

forward-looking policy to constantly develop its employer brand by:

strengthening ties and a long-term partnership policy with schools and universities training students in the Group’s businesses;

a dynamic network of Safran “Ambassadors” in Belgium and France, bringing together 300 employees who are alumni of target schools and universities.

These ambassadors represent the Group and carry out occasional actions to improve visibility and accompany students in their educational choices;

a welcome policy for young people, through internships and work-study contracts. Each year, Safran (excluding Zodiac Aerospace) welcomes interns and apprentices representing 10% of its workforce.

FOCUS ON EMPLOYEE SHARE OWNERSHIP

With around 7% of its share capital held by current and former employees (and 10.6% of voting rights) at December 31, 2018, Safran is in the top five major French companies (CAC 40) with the most developed employee share ownership.

Safran successfully encourages the presence of its employees in its share capital through permanent measures such as savings plans receiving employer contributions: 67% of Group employees worldwide (excluding Zodiac Aerospace) hold Safran shares. This share ownership is also reflected by the participation of two representatives of the employee shareholding funds in the activities of the Board of Directors.

In seeking to give employees a vested interest in the growth of the Group’s businesses and improving its results, Safran is looking to strengthen the individual motivation of the teams and their sense of belonging to the Group. A true historic pillar of the corporate culture, employee share ownership enables the Group to rely, over the long-term, on a stable shareholder base.


92,639 EMPLOYEES,

60% IN EUROPE

96% OF EMPLOYEES

HAVE A SUSTAINABLE JOB

13,050 RECRUITMENTS

IN 2018; 36% WOMEN(1)

84% OF EMPLOYEES

RECEIVED AT LEAST ONE TRAINING SESSION

DURING THE YEAR(1)

28.5% WOMEN

12% WOMEN IN TOP MANAGEMENT

2.6% GLOBAL

ABSENTEEISM RATE(1)

(1) Excluding Zodiac Aerospace.


Safran’s employer brands are highly reputed, as demonstrated by its top ranking among the most attractive companies for students in France: 3rd place in the Universum ranking (6th place six years ago). In addition, Safran was ranked seventh best employer in France in the annual ranking published by the magazine Capital, which draws up a list of the top 500 companies as rated by French employees. Initiatives in favor of diversity also ensure Safran is not deprived of any talent and has balanced male/female representation.

In 2017, Safran was awarded the GEEIS label (Gender Equality European & International Standards) at European level. In addition, the male/female professional equality index in France is 87% for entities with 1,000+ employees. Finally, Safran is deploying a plan to increase the number of women in the workforce and particularly in top management positions. This involves, for example, including female profiles in all succession plans for the Group’s management committees.


Training for businesses of the future: CampusFabSafran already uses virtual/ augmented reality in certain of its training courses. In this context, Safran is part of the CampusFab project, the “Training platform for the industrial mechanics of tomorrow”. Under construction in Bondoufle, it is scheduled to open in 2019. The project is steered by a consortium of industrial companies, training centers, the ASTech Paris-Région competitiveness cluster and The Adecco Group and has received funding from the French State and local authorities.CampusFab will allow apprentices, students, interns and trainers to access the industrial and digital means typical of a “Factory of the Future”, with the aim of accompanying the transformation of industry in France.

In particular, it will help satisfy industrial company requirements to recruit technicians trained in new production processes. This center of excellence will include a digital room with design and industrial operation simulation equipment. An additive manufacturing hub, a “model” machining line using robots, cobots and automatic carts, assembly and erection hubs and a maintenance and production means hub will also be available.

A digital management system for industrial operations will enable students to plan, pilot and optimize use of these resources. Over and above technology, this training platform seeks first and foremost to place the operator at the heart of production processes. Safran also plans to make this training platform available to its employees as part of ongoing training initiatives.


Promote social dialogueIn a global survey, the non-financial rating agency, Vigeo, ranked Safran in the top 10 companies worldwide for the quality of its social dialogue in 2018. Safran stands out at several levels:

representative bodies, such as the European works council, Group trade union coordinators and representative bodies in each subsidiary;

collective negotiation policies at global and European level and for each country. The global framework agreement on “working conditions, corporate social responsibility and sustainable development” signed at the end of 2017, confirms the desire to promote open and constructive social dialogue worldwide and to improve and develop good working practices at all Safran sites. A global monitoring committee was created in 2018, to assess the implementation of this agreement and the appraisal of its commitments.

In 2018, 200 company agreements were signed worldwide within the Group. Depending on the country, these agreements covered all employee issues (employment, compensation, working conditions, organization and working hours, etc.). Other agreements covered specific issues (employment, health and safety and working conditions, working hours, flexible working, etc.). In addition, 71% of Group employees have employee representatives through the representative bodies.

Managing talentFor Safran, mobility is a sign of agility and it is important to regularly expand the scope of an employee’s expertise and experience. Managers take part in the career management process through team reviews and career committees set-up in their companies. The career prospects of each employee are discussed at least once annually by the manager and an HR manager.

The manager also contributes each year to drafting the workforce mid-term plan. Based on this information and his vision of the future of the sector, workload and businesses, the manager reflects the impacts on the jobs and expertise of his team (job and skills forward planning). A European company-wide agreement confirms the Group’s policy in this area.

It is based on three objectives: anticipate changes in businesses and ensure the professional development of employees, through a shared approach; develop and secure the professional career paths of Group employees, so they may develop in their current positions and benefit from career opportunities throughout their professional life; encourage professional mobility as an opportunity for employees to develop expertise and an efficient response to the Group’s growing needs.

This approach is accompanied by Group investment in training. Safran University provides 1.5 million training hours each year, organized around three strategic fundamentals: integrating new recruits, upskilling all employees and creating supportive and interactive manager networks.



SAFRAN’S ENTERPRISERISK MANAGEMENT (ERM) SYSTEM

The primary objective of the ERM system is to ensure the security of aeronautical operations involving

the Group’s products and services.

RISK MANAGEMENT

The aerospace industry is historically, naturally and culturally sensitive to risk management. Safran’s ERM system therefore contributes directly to the processes for obtaining the necessary certifications. Furthermore, as the aerospace industry is intrinsically capital intensive, its programs involve extremely costly research and development activities and significant industrial investment.These efforts must be maintained throughout long cycles, potentially of up to 40 years. Safran’s ERM system also participates directly in the efforts deployed by the Group to meet

these challenges. Over time, Safran’s ERM has expanded its scope of action and become progressively more sophisticated and proactive. It is now a comprehensive risk management system which contributes fully to securing the Group’s profitability. Due to its activities throughout the world, Safran is currently exposed to a wide range of risks that could have a significant impact on its results, reputation or share price. Safran’s ERM system has attained a level of maturity that enables it to identify major risk exposures, quantify their impact on attaining its objectives and ensure the implementation

of appropriate mitigating actions to reduce exposure to an acceptable level. It is positioned upstream of decision-making processes and offers a unique competitive advantage, accompanying and supporting key Group decisions and actively contributing to the execution of its strategy. Furthermore, the principles of the comprehensive risk management policy are consistent with the recommendations issued by the French Financial Markets Authority (AMF), the provisions of the AFEP/MEDEF Code (revised version of June 2018) and professional standards (COSO ERM).

The ERM system is rolled-out in all Group activities in compliance with the various governance rules applicable to the different component entities, departments or processes. This comprehensive methodology is therefore broken down harmoniously in all organizations and at all levels, with an initial consolidation level for tier-one subsidiaries(1) and a final consolidation level at the Safran holding company. The risk management policy falls under the responsibility of each entity and of the central corporate departments, and is embedded in all of Safran’s organizational processes.

Each risk factor identified is analyzed and forms the basis for various risk scenarios charted along three lines: impact, probability of occurrence and level of control. The impact and probability of each risk are assessed in terms of their direct and indirect potential impact on the Group’s businesses based on the most realistic, worst-case scenario allocated to the risk. The level of control, essential in characterizing the risk and the way it is to be managed, is then determined.

An owner is designated for each risk identified and is responsible for drafting action plans and ensuring their implementation. These may include steps to be taken, additional controls to be implemented or investigations into financial transfers or transfers of liability, particularly involving regularly updated insurance policies. The objective is to provide continuous risk oversight to ensure optimum treatment. The entire risk management approach is periodically reviewed and events that occurred within the Group over a given period are systematically compared with analyses and risk mappings for the same period. This feedback enables Safran to ensure that all risks have been effectively identified, assessed and managed and to enhance and strengthen the process if necessary.

Lastly, Safran’s ERM system has a crisis management component that enables the Group to anticipate and handle any “abnormal” situation that leaves one or a number of its business oversight parameters exposed. Regardless of the component affected, it seeks to provide the Group with the means for responding in a pragmatic way by delivering the solutions needed to deal with the crisis. The crises in question may range from serious accidents to people of technical, human or natural origin to long-term unavailability of industrial facilities that jeopardizes Safran’s capacity to honor certain commitments to clients and partners. As such, business contingency planning is an integral part of crisis management.

IMPLEMENTATION OF SAFRAN’S ERM SYSTEM

Roll-out at all levels

Risk analysis

Action plans and risk monitoring

Crisis management

(1) Companies formed by business. Their strategic direction is defined by the Board of Directors of the lead company. Executive Management of the lead company ensures the implementation of and compliance with the strategic direction operating plan defined for each business. Tier-one companies steer the management of Tier-two companies for which they have operational responsibility.


RISK MANAGEMENT

The Risk and Insurance Department reports to the Group Chief Financial Officer. It comprises the Risk and Insurance Department director and Corporate Risk Managers and is responsible for implementing the Group’s ERM system. The Risk and Insurance Department develops methodological techniques and processes to ensure consistent handling of risks by companies and central corporate departments.

Each tier-one company has a risk manager who prepares a risk mapping and liaises constantly with the Risk and Insurance Department.

Tier-one company risk managers are tasked with implementing the risk management process for their entire operational scope, i.e.,in their company as well as in their subsidiaries and investments.

Each of Safran’s central corporate departments also prepares a mapping of the main risks in its scope.

The Audit and Risk Committee reviews the risk mapping and the work related to the main risks faced by the Group, as presented to it twice a year by the Risk and Insurance Department.The Committee reports to the Board of Directors on its risk management work at the same intervals.

CEO

1st Tier entities

Second Tier Entities and JV

Central Functions

Group Risk Committee(CEO + 8 Senior Executive VPs)

Group Risk & Insurance

Informationon risks

to be published

Quarterly Groupindicators

Quarterlyindicators

Annual report onthe organization

of ERM in the Group

Annual reporton ERM

organization

Board of Directors

Audit &Risk Committee

ERM SYSTEMThe Group Risk Committee periodically updates

the identification, appraisal, processing and, therefore, control, of major risks.


MAIN RISKSThe risks identified by Safran as material are grouped into a limited

number of categories and ranked by their degree of criticality (in terms of likelihood of occurrence and potential impact).

Risks relating to the environment in which the Group operates

Changes in economic conditions Impact of the aviation cycle Competition

Risks relating to the Group’s development

Technological risks Uncertainty regarding returns on investments Acquisition and restructuring risks

Financial market risks

Foreign currency risk Interest rate risk Commodity risk Counterparty risk Liquidity risk

Human Resources risks

Legal and regulatory risks

Risk of negative media coverage

Risks relating to Group business sectors

Aircraft accidents Delays, program development and industrialization Quality and safety of products and services Supplier and partner risks Health, safety and environmental risks Personal safety risks Data confidentiality risks

FOCUS ON FOREIGN CURRENCY RISK

Most revenue earned in the civil aviation sector is denominated in US dollars, the benchmark currency used in the industry. The Group is therefore exposed to foreign currency risk. To protect its earnings, the Group implements a hedging policy with the aim of reducing uncertainty factors affecting profitability.

Two basic principles underscore the foreign currency risk management policy defined by Safran for most of its subsidiaries:

protect the Group’s economic performance from random fluctuations in the US dollar;

optimize the quality of hedging whenever possible, without jeopardizing the Group’s economic performance.

The hedging policy is based on managing the financial instrument portfolio in order to guarantee a pre-defined minimum parity. At April 12, 2019, Safran’s hedging portfolio totaled US$27.4 billion and provided visibility up to 2022.

OPERATIONAL EXCELLENCE AND AGILITY

• Factory of the future• Health, safety

and the environment• Improve the carbon

footprint

SUSTAINABLE INNOVATION

• Self-funded R&T and R&D

• Patent portfolio

FINANCIAL PERFORMANCE

• Growth in adjusted revenue• Growth in service activities

• Growth in the recurring operating margin

• EBIT to FCF conversion rate• Dividends

RESPONSIBLE CONDUCT

• Responsible purchasing• Recruitment

• Non-discrimination

RISK MANAGEMENT




A BOARD OF DIRECTORS INCORPORATING BEST GOVERNANCE

STANDARDS INTO ITS ACTIVITIESSafran refers to the

“Corporate Governance Code of Listed Corporations”, drawn up jointly by the French companies’ associations, AFEP and MEDEF.

FORMAL ASSESSMENT OF THE BOARD OF DIRECTORS’ OPERATING PROCEDURES CARRIED OUT IN 2018

In 2018, the Board assessed its operating procedures with the assistance of a specialist international firm.In addition to individual interviews with each director, major institutional shareholders were contacted to obtain and analyze their views on Safran’s governance. These shareholders’ views were shown to be positive. They are happy with the separation of the roles of Chairman of the Board of Directors and Chief Executive Officer and have a good understanding of Safran’s governance structure. They are also satisfied with the performances of the Chairman of the Board and the Chief Executive Officer. The following areas for improvement were suggested:

increasing the number of independent directors on the Board to provide greater assurance of a challenge to Executive Management;

reducing the representation of the French State on the Board;

enriching the Board’s membership with more directors from leading companies and in-depth knowledge of international markets;

deepening discussions with shareholders about governance matters.

The changes in the Board’s composition proposed to the 2019 Annual General Meeting contribute to achieving these improvements.

An appraisal of each Director’s actual contribution to the Board’s work was also carried out by the specialist consultancy firm. The Chairman or Lead Independent Director provided individual feedback on this appraisal to each director.

Executive Committee

Board of Directors

Chief Executive Ocer

Chairman of the Boardof Directors

Innovation andTechnology Committee

Audit andRisk Committee

Scientific Committee

Compliance, Ethics andAnti-Fraud Committee

Appointments andCompensation Committee

Separation of the roles of Chairman of the Board of Directors and Chief Executive OfficerSince 2015, the Board has chosen to separate the roles of Chairman of the Board of Directors and Chief Executive Officer.Thanks to this governance structure, the Company benefits from the Chief Executive Officer’s managerial expertise and industry experience, as well as the Chairman’s international standing. The strong strategic fit of their profiles enables the Group to be governed harmoniously, based on transparent relations between the Board of Directors and Executive Management and a balanced and respectful distribution of their roles.

Lead Independent DirectorIn 2018, the Board of Directors decided to appoint Monique Cohen as Lead Independent Director and define her duties. It was considered good practice to create this position, even if it is not indispensable because the Company has separated the roles of Chairman of the Board and Chief Executive Officer.

Independent DirectorsThe aim of having independent directors on the Board is to provide shareholders with assurance that the collegiate body of the Board comprises members who have total independence to analyze, judge, take decisions and act, always in the Company’s interests. Highly engaged and involved in the Board’s work, their freedom of judgment and expression contributes to the quality of the Board’s discussions and decisions. Their professional and personal experience provides an outside view that is beneficial for the Group.



COMPOSITION OF THE BOARD OF DIRECTORS AND ITS COMMITTEES FOLLOWING THE 2019 ANNUAL GENERAL MEETING(1)

(1) Projected composition, subject to the adoption by the Annual General Meeting of May 23, 2019 of the draft resolutions concerning the Board’s composition.(2) Excluding directors representing employees and directors representing employee shareholders.

PROPOSITIONS PRESENTED TO THE 2019 ANNUAL GENERAL MEETING

Re-appointment of Ross McInnes as a Director and Chairman of the Board of Directors

Re-appointment of Philippe Petitcolin as a Director; he has undertaken to tender his position to the Board of Directors at the time of the expiration of his term as Chief Executive Officer (2020 Annual General Meeting)

Increase in the number of independent directors (independence rate up at 61.5%)

Number of Directors representing the French State on the Board reduced from 3 to 2

17(1) MEMBERS

61.5% INDEPENDENT(2)

I Independent

C Chairman

Audit and Risk Committee

Appointments and Compensation Committee

Innovation and Technologies Committee

W Woman

M Man

HÉLÈNE AURIOL-POTIER

I W

GÉRARD MARDINE

Director representing employee shareholders

M

ODILE DESFORGES

Chair of the Audit and Risk CommitteeI W

ELIANE CARRÉ-COPIN

Director representing employee shareholdersW

DANIEL MAZALTARIM

Director representing employees

M

DIDIER DOMANGE

M

HÉLÈNE DANTOINE

Director representing the French State

W

SOPHIE ZURQUIYAH

I W

BRIGITTE LESSCHAEVE

Director representing employees

W

JEAN-LOU CHAMEAU

Reappointment proposed to the 2019 AGMI M

PATRICK PÉLATA

Chair of the Innovation and Technology CommitteeI M

LAURENT GUILLOT

Appointment proposed to the 2019 AGMI M

MONIQUE COHEN

Lead Independent Director Chair of the Appointments and Compensation CommitteeI W

ROBERT PEUGEOT

Director representing F&PI M

VINCENT IMBERT

Appointment proposed to the 2019 AGM, at the recommendation of the French State

M

ROSS McINNES

Chairman of the BoardC M

PHILIPPE PETITCOLIN

Chief Executive OfficerM


Number of directors

Aerospace industry 12

Other industries 14

Innovation, R&T, Development, Engineering 12

International career and experience 11

Strategy, competition and M&A 10

Finance and management control 9

Digital – New technologies 6

Governance and compensation 13

Human Resources – CSR 7

AN EXPERIENCED BOARD OF DIRECTORS, REPRESENTATIVE

OF SHAREHOLDERS

The Board of Directors has a wide range of experience, making it well equipped to deal with strategy and performance challenges. It regularly considers the desired balance and diversity of its composition and that of its committees. Its diversity policy is notably structured around principles and objectives related to the size of the Board, the representation of the Company’s various stakeholders, the proportion of independent directors, the depth and fit of the directors’ skills and expertise, international experience, and gender balance.

A DIVERSE RANGE OF PROFILES, EXPERTISE AND SKILLS WITHIN THE BOARD

BOARD COMPOSITION(1) CONSISTENT WITH SAFRAN SHARE OWNERSHIP

(1) One Representative of the French State appointed by way of a ministerial decree and One Director put forward by the French State and appointed by the Shareholder’s Meeting.(2) Projected composition, subject to the adoption by the Annual General Meeting of May 23, 2019 of the draft resolutions concerning the Board’s composition.(3) Pursuant to law, directors representing employees are not included in this calculation.

SHAREHOLDERS – VOTING RIGHTS AT MARCH 31, 2019(in %)

BOARD OF DIRECTORS(number of directors)

2Representatives of the French State(1)

8Independent

Directors

4Employeesand employeeshareholders

1Other

1Chief ExecutiveO�cer1Chairman

18.0French State

71.7Free float

10.3Employees

Experience and specific duties exercised by Directors in different sectors and activities

FOCUS ON THE BOARD OF DIRECTORS FOLLOWING THE 2019 ANNUAL GENERAL MEETING(2)

INTERNATIONAL DIMENSION65% of directors (i.e. 11 of 17 directors) and 88% of independent directors (7 of 8 directors) will have spent part of their career outside France, irrespective of their nationality.

GENDER BALANCE – MALE/FEMALE REPRESENTATIONThe Board will comprise 7 women and 10 men. 40% of directors will therefore be women(3).

DIRECTORS REPRESENTING EMPLOYEE SHAREHOLDERS AND DIRECTORS REPRESENTING EMPLOYEESThe Board includes 2 directors representing employee shareholders and 2 directors representing Group employees. Their presence is required by French law and enables the representation of the significant stakeholders group formed by Group employees, who hold 6.9% of the share capital.



ORGANIZATION AND OPERATING PROCEDURES OF THE BOARD OF DIRECTORS AND THE BOARD COMMITTEES TO MEET

THE GROUP’S STRATEGIC CHALLENGES

5 MEETINGS

4 MEETINGS

2 MEETINGS

96% ATTENDANCE

96% ATTENDANCE

91% ATTENDANCE

5 MEMBERS

7 MEMBERS

5 MEMBERS

75% INDEPENDENT(1)

67% INDEPENDENT(1)

60% INDEPENDENT

BOARD OF DIRECTORS

THREE PERMANENT COMMITTEES – 2018 KEY FIGURES

FOCUS ON THE STRATEGIC WORK OF THE BOARD

Preferring the direct involvement of directors in the Group’s strategy and its objectives, the Board decided in 2015 to no longer have a specific strategy committee. The Board considers the Group’s strategic objectives during strategy seminars. Each year, these seminars examines specific topics and issues reflecting subjects identified as a priority by the Board and Executive Management. The resulting objectives and goals adopted are subject to ongoing monitoring during Board meetings.

FOCUS ON THE INNOVATION AND TECHNOLOGY COMMITTEE

Given the importance of innovation to the Group, the Board decided to set up a specific permanent committee. The role of this committee is to study:

the Group’s medium- and long-term strategic goals and choices concerning innovation, R&T, and the development of new products and services; technological trends and developments; progress made with roadmaps; the suitability of the organization structures and resources in place.

The Board is agile and able to mobilize its resources for strategic transactions by setting up temporary committees, where necessary, as on the acquisition of Zodiac Aerospace.

• Definition of the Group’s strategic objectives

• Compensation policy for corporate officers

• Composition of the Board of Directors and its Committees

• Organization of succession processes

• Approval and monitoring of the annual budget, the Medium-Term Plan and the outlook communicated to the market

• Prior approval of significant projects

ROLES AND RESPONSIBILITIES

10 MEETINGS

95% ATTENDANCE

2018 KEY FIGURES

Audit and Risk Committee

Appointments and Compensation Committee

Innovation and Technology Committee

(1) Excluding directors representing employees and directors representing employee shareholders.



Compliance, Ethics and Anti-Fraud Committee

AN EXECUTIVE COMMITTEE IMPLEMENTING THE GROUP’S STRATEGIC

AND OPERATING PRIORITIESTHE EXECUTIVE COMMITTEE IS IN CHARGE OF CONDUCTING SAFRAN’S BUSINESS IN LINE WITH THE STRATEGY DEFINED BEFOREHAND BY THE BOARD OF DIRECTORS

To maximize the Group’s strengths, which are integral to its success (see the previous section), the Executive Committee is supported by a number of committees, including the Compliance, Ethics and Anti-Fraud Committee and the Scientific Committee.

This Committee is responsible for supervising employee compliance with the rules defined in the Ethical Guidelines (upholding the law, engaging in proper business practices, protecting people and assets, etc.), as well as any updates and revisions.

This approach is sponsored by the Corporate Secretary, and the responsibilities are handled by the relevant departments

(for example, the Group Department of International and Public Affairs manages trade compliance and export control). The Group’s resources mainly include the Ethical Guidelines, anti-fraud policies, internal control procedures, processes and standards, and a fraud prevention, awareness, detection and assessment program.

Led by the Group Director of Innovation, the Scientific Committee is tasked with helping Safran deploy a world-class scientific research policy. It assesses, in particular, the excellence of scientific partnerships and the relevance of the long-term R&T plan. The Committee also contributes to Safran’s technological difference by identifying new areas

of research. The Committee comprises 8 top-level academics and holds 3 plenary meetings a year. Recent work includes approximately 15 theme-based reviews in 3 major areas (software and systems engineering, materials and structures and sensors and signal processing). These reviews ensure the Group is advancing in the right direction.

The Executive Committee ensures that Safran’s strategy is implemented consistently across all Group entities. It also monitors its operational performance and facilitates interaction with the various Group companies.

The Executive Committee comprises the Chief Executive Officer, holding company executives and the heads of the Group’s main operating companies. This membership structure pro vides for balanced representation of the Group’s businesses and cross-business support functions.

Under the authority of the Chief Executive Officer, the Executive Committee meets as often as is necessary and at least once a month. It has 16 members.

Composition of the Executive Committee

STÉPHANE ABRIAL

Senior Executive VP International and Public Affairs

JEAN-PAUL ALARY

CEO Safran Landing Systems

OLIVIER ANDRIES

CEO Safran Aircraft Engines

JEAN-LUC BÉRARD

Executive VP Human Resources

STÉPHANE CUEILLE

Senior Executive VP R&T and Innovation

BERNARD DELPIT

Group Chief Financial Officer

PASCALE DUBOIS

Executive VP Communications

ALEX FAIN

Corporate Secretary

CÉDRIC GOUBET

CEO Safran Nacelles

NORMAN JORDAN

CEO Safran Cabin

VINCENT MASCRÉ

CEO Safran Aerosystems and Safran Seats

JEAN-JACQUES ORSINI

Executive VP Performance and Competitiveness

FRANCK SAUDO

CEO Safran Helicopter Engines

ALAIN SAURET

CEO Safran Electrical & Power

MARTIN SION

CEO Safran Electronics & Defense

PHILIPPE PETITCOLIN

Chief Executive Officer

Scientific Committee



A COMPENSATION POLICY SUPPORTING SHORT- AND

LONG-TERM VALUE CREATION

In the interests of the Group and its stakeholders, the compensation policy must be competitive in order to attract, motivate and retain the best profiles and talent (which may come from within or outside the Group) for key positions.

Chairman of the Board of Directors’ compensation policy and structureIn line with his position as a non-executive Director and the specific duties conferred on him, the Chairman receives a fixed compen sation. He does not receive any variable compensation or compen sation under a long-term incentive plan. He does not receive attendance fees. The Chairman is covered by the supplementary pension schemes and personal risk insurance plan implemented by the Group.

An equivalent variable compensation policy is adapted for certain Group executives and senior managers.

Chief Executive Officer’s compensation policy and structure The Chief Executive Officer’s compensation package comprises fixed compensation, annual variable compensation and performance shares awarded under a long-term incentive plan.He is covered by the supplementary pension schemes and personal risk insurance plan implemented

by the Group. The underlying aim is to closely align the CEO’s interests with those of the Group and its shareholders, by achieving a balance between short-term and long-term performance, as assessed by the Board. Compensation subject to performance conditions accounts for the largest percentage of the overall compensation package.

CORPORATE OFFICER COMPENSATION POLICY

≈31%Not subject toperformance conditions

≈ 69%Subject to performance conditions≈ 38%In performance shares(potential)

≈ 63%In cash

≈38%Target long-term

incentive*≈31%

Target annualvariable compensation

≈ 31%Fixed annual compensation

* Value at grant date in accordance with IFRS.

ANNUAL VARIABLE COMPENSATION

The Chief Executive Officer’s annual variable compensation is contingent on achieving economic and individual, financial and non-financial, quantitative and qualitative performance objectives, consistent with the Group’s overall business. For 2019, the CSR-HR objectives cover measures and priority actions relating to the environment (carbon footprint management system), security (accident frequency rate and ergo-nomics in industrial projects) and human resources (gender balance plan for executive positions).

VARIABLE COMPENSATION OBJECTIVES(2) (in %)

20FCF

7WC

40ROI33

Individual

LT INCENTIVE PLAN – PERFORMANCE SHARES

This mechanism is well adapted to the Chief Executive Officer position given the level of direct contribution expected from him to the Group’s long-term performance. This system helps promote the alignment of management’s interests with those of the Company and shareholders. Performance shares are all awarded to Group top managers. The grant of these shares is subject to the attainment of demanding internal (ROI and FCF)(1) and external (TSR)(1) performance conditions, measured over 3 years.

LT INCENTIVE PLAN PERFORMANCE CRITERIA(3) (in %)

35FCF

30TSR

35ROI

Chief Executive Officer’s recurring compensation structure

(1) TSR: Total Shareholder Return (dividends plus the change in the share price). ROI: Recurring Operating Income. FCF: Free Cash Flow. WC: Working Capital. (2) Reference: annual budget. (3) Reference: Group Medium-Term Plan.




SUSTAINABLE VALUE CREATION

By generating a positive contribu-tion for all its stakeholders and investing in technologies that will contribute to meeting aviation sector greenhouse gas emission commitments, Safran is preparing the foundations for its future growth.

The Group therefore shares the value that it creates among all its stakeholders: customers benefit from unique and competitive products serving their businesses, employees enjoy attractive working conditions and a social model where they share in profits,

the environment benefits from the Group’s technology portfolio and R&D efforts and shareholders receive an attractive and sustai-nable remuneration thanks to a capital allocation policy that seeks to provide, over the long-term, organic growth in our businesses.

Safran is convinced that in order to sustain prosperity, a company must create and share value

with all its stakeholders.

N.B.: Based on 2018 adjusted data.(1) Raw materials and consumables used + net charges to provisions + asset

impairment + other recurring operating income and expenses + share in profit from joint ventures + other non-recurring operating income and expenses + foreign exchange gain (loss) + other income + change in inventories + capitalized production.

(2) Personnel costs and benefits, excluding employee share ownership.(3) Profit for the year not distributed, plus net charges to depreciation and amortization.(4) Dividend proposed to the Annual General Meeting of May 23, 2019.(5) Income tax and other taxes and duties.(6) Cost of net debt and other financial income and expenses.

6% to 7% of revenue spent

on self-funded R&D between 2018

and 2022

4% of revenue spent on investment

in capex

INVESTMENT IN THE FUTURE(3)

22% Attractive social

model founded on giving employees a vested interest in Group results

EMPLOYEES(2)

59%TSR 2005-2019:

+16.27% per annum

75% of 2018-2022 free cash flow redistributed through share

buybacks and dividends

SHAREHOLDERS(4)

8% Taxes and duties

The world’s best technology serving

national security and dissuasion

FRENCH STATE(5)

10% One of the

best industry financial signatures

worldwide

DEBT HOLDERS(6)

1%

Breakdown of value in 2018

SALES

PURCHASING AND OTHER

COSTS(1)

VALUE GENERATED BY SAFRAN



KEY PERFORMANCE INDICATORS

Key sustainable innovation indicators 2018

Number of employees in R&T Approximately 3,000

R&D expenditure self-funded€1,226 million

Between 6% and 7% of revenue over the period 2018-2022

Number of PhDs in the Group 1,200

Number of initial patent requests More than 1,000

LEAP consumption and emission reductions -15% fuel consumption; -50% NOx emissions and noise

Key responsible conduct indicators 2018

% of buyers trained in responsible purchasing methods 43%

Number of employees% sustainable jobs

92,600 96%

Annual recruitment(4) 13,050

Purchasing volume sourced in France% sourced from small, medium and intermediate-sized companies

53% 85%

Global absenteeism rate(4) 2.6%

% of women in the workforce 28.5%

% of employees trained(4) 84%

(1) At March 31, 2019.(2) Industrial activities excluding tertiary sector (HSE Indicators). Excluding Bellevue, Homberg, Sell Burg, Seminole, Verulam, Xedel and Wessling sites.(3) Excluding Bidos, Sandayan, Queretaro SAE and Sedziszow sites.(4) Excluding Zodiac Aerospace.

Key operational excellence and agility indicators 2018

Number of production lines “of the future” 65

Number of sites certified HSE “Gold” (internal standard) 30

All industrial sites by 2025

Capex (tangible assets)€780 million

4% of revenue over the period 2018-2022

CFM56 in operation 33,100

LEAP backlog(1) 15,329

Lost-time accident frequency rate 2.2%

Greenhouse gas Scope 1 (t CO2-eq/employee)(2) 3.3

Greenhouse gas Scope 2 (t CO2-eq/employee)(2) 4.55

Total waste recovered and reused metric ton/ Safran employee (World)(3) 0.76


Key financial performance indicators 2018 Objective

Organic growth in adjusted revenue +10.4% Mid single-digit annually between 2019 and 2022

Growth in civil aftermarket (in US$) +12.2% High single-digit annually on average up to 2022

Recurring operating margin 14.4% 16%-18% of revenue in 2022

EBIT to FCF conversion 58.9% Above 50 % each year between 2019 and 2022 and trending above 60% in 2022

Dividend€1.82/share

(41% distribution rate)The Board of Directors will review

the shareholder return practice in 2020

Key governance indicators Results

Average attendance rate at Board meetings in 2018 95%

% of Chief Executive Officer compensation subject to performance conditions in 2018

69%

% of independent directors on the Board of Directors after the 2019 AGM

61.5%(1)

% of women on the Board of Directors after the 2019 AGM 40%(1)

% of Board members with international experience after the 2019 AGM

65%(1)

(1) Subject to the adoption of the resolutions by the Annual General Meeting of May 23, 2019.



ABOUT THIS FIRST INTEGRATED REPORT With this first report, Safran embarks on an integrated reporting process, aimed at sharing its strategy and business model with a wide public of stakeholders. Our strategy and business model stand at the very heart of the major economic, industrial, technological, social and environmental challenges facing the aerospace industry.

Inspired by the reference framework published by the International Integrated Reporting Council (IIRC), this report presents a comprehensive overview of Safran and its strategic direction, governance, performance and value creation for stakeholders. This report also sets out Safran’s contribution to UN Sustainable Development Goals (SDG) and the societal challenges facing the aerospace industry, such as reducing greenhouse gas emissions.

Under the impetus of Executive Management and coordinated by the Financial Communications Department, this report is the result of a cross-functional approach. Its preparation mainly involved managers in charge of strategy, innovation, programs, communication, risks, human resources and sustainable development. It helps strengthen the emergence of a shared vision of the Group’s main strategic and operational choices.

This report covers the entities included in the Group’s consolidated financial scope (unless otherwise stated). It was published in English and French for the Annual General Meeting of May 23, 2019. It supplements the other financial and non-financial communications issued by the Group and particularly the 2018 Registration Document and all French and European regulatory information. Such communications are available on the Group’s website.

Safran’s integrated reporting trajectory is an incremental progress approach and is intended to be long-term. This first integrated report is therefore a starting point and will be enriched in future editions, notably by taking account of feedback from readers who can send their comments to the following email address: [email protected]

2018INTEGRATED REPORT


2018 REGISTRATION DOCUMENT www.safran-group.com/, section Finance

Document prepared in accordance with French and European regulations and notably including the annual financial report, the Board of Directors’ report, the consolidated and separate financial statements for the fiscal year, all corporate, social and environmental information concerning Safran and the resolutions presented to the Annual General Meeting for approval.

ESSENTIALS www.safran-group.com/, section Media/Publications

Institutional brochure presenting an overview of Safran’s activities, products, results and commitments.

PRESENTATION OF SAFRAN www.safran-group.com/, section Group

Presentation of the Group’s profile, its roles and its governance.

OTHER SAFRAN PUBLICATIONS (IN FRENCH AND ENGLISH)

CAPITAL MARKETS DAY 2018 www.safran-group.com/, section Finance Presentation of the Group’s strategy and mid- and long-term financial objectives (2018-2022).

CONTACT

FINANCIAL COMMUNICATIONS DEPARTMENT

Analysts and institutional investors Individual shareholders

> Tel.: +33 (0)1 40 60 80 80

> Email: [email protected]

> Toll-free number (France landline only): 0 800 17 17 17

Monday to Friday, 9 a.m. to 5 p.m.

> Email: [email protected]

SAFRAN2, boulevard du Général-Martial-Valin75724 Paris Cedex 15 – France

All financial information pertaining to Safran is available on the Group’s website at www.safran-group.com, in the Finance section.© Photo credits: Front cover: Raphael Soret / Safran • Eric Drouin / Safran • Pascal Le Doare / Safran • Cyril Abad / CAPA Pictures / Safran • Inside photos: Eric Drouin / Safran • Cyril Abad / CAPA Pictures / Safran • Thierry Dosogne / Safran • Thomas Laisne / Safran • Adrien Daste / Safran • Philippe Stroppa / Safran • Remy Bertrand / Safran • Ricardo Funari / CAPA Pictures / Safran • Adam Wiseman / CAPA Pictures / Safran • Pierre Soissons / Safran • Mark Woolcott / CAPA Pictures / Safran • CFM International • Alexandre Paringaux / Safran • Abdellah Azizi / CAPA Pictures / Safran • Marc Detiffe / Safran • Laurent Pascal / CAPA Pictures / Safran • Thierry Mamberti / Safran • Anthony Pecchi / Safran • Christel Sasso / CAPA Pictures / Safran • Frank Rogozienski / CAPA Pictures / Safran • Raphael Olivier / CAPA Pictures / Safran • Bell Helicopter Textron Inc.

Design & production:

Tel.: +33 (0)1 55 32 29 74

Safran

2, boulevard du Général-Martial-Valin – 75724 Paris Cedex 15 – France

Tel.: +33 (0)1 40 60 80 80

www.safran-group.com

2018 INTEGRATED REPORT - safran-group.comjets and helicopters. To increase cost efficiency and share risks, the world’s leading engine manufacturers develop their engine programs

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