2019 INTEGRATED REPORT CONTENTS

SAFRAN p. 01 p. 10 ECOSYSTEM AT A GLANCE

STRATEGY AND p. 02 EDITORIAL p. 18 BUSINESS MODEL

GROUP RISK p. 04 p. 40 PROFILE MANAGEMENT

CORPORATE p. 42 GOVERNANCE

PERFORMANCE p. 50 AND VALUE CREATION AT A GLANCE 2019 KEY FIGURES

rd Global nd Global aerospace group, excluding equipment supplier* 3 airframers* 2

€24,640 million €3,820 million €2,665 million REVENUE(1) RECURRING OPERATING PROFIT(1) up 17.1% (up 9.3% on organic INCOME (1) (Group share) basis) on 2018 up 26.4% (up 24.6% up 34.5% on 2018 on organic basis) on 2018

€1,983 million €4,114 million €695 million €1,725 million 95,443 FREE CASH FLOW NET DEBT ACQUISITIONS OF TOTAL R&D EMPLOYEES up 11.3% on 2018 PROPERTY, PLANT (including customer- (at December 31, AND EQUIPMENT(2) funded R&D) 2019)

OUR ACTIVITIES

AEROSPACE EQUIPMENT/ AIRCRAFT DEFENSE/AEROSYSTEMS INTERIORS

BREAKDOWN OF REVENUE(1) BY SEGMENT

€12,045 million €9,256 million €3,321 million

BREAKDOWN OF RECURRING OPERATING INCOME(1) BY SEGMENT

€2,485 million €1,209 million €188 million

BREAKDOWN OF RECURRING OPERATING MARGIN(1) BY SEGMENT

20.6% 13.1% 5.7%

* Classification criteria: revenue – Source: Safran. (1) Adjusted data. See page 90 of the 2019 Universal Registration Document for a reconciliation of the consolidated income statement with the adjusted income statement and a breakdown of the adjustment. (2) Net of the cash inflow from the disposal of a tertiary property complex in the region.

1 I SAFRAN 2019 INTEGRATED REPORT EDITORIAL

MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS AND THE CHIEF EXECUTIVE OFFICER

ROSS McINNES Chairman of the Board of Directors

PHILIPPE PETITCOLIN Chief Executive Officer

Faced with the health crisis posed by the coronavirus (Covid-19) epidemic, Safran is taking every possible measure to help slow the spread of the virus and protect the health of its employees. At the same time, it is making continued industrial operations for its customers a priority. Safran is in robust shape, and the commitment of its 95,000 employees is unfaltering. In 2019, the Group showed once again that the trust of its customers, partners and shareholders is well-founded.

Safran strengthened its position as the number-three aerospace group (excluding airframers)(1) worldwide, with revenue increasing by 17.1% on a reported basis (9.3% organically) to reach €24.6 million, and recurring operating income coming in at €3.8 billion, of which 51.9% was converted into free cash flow.

Despite the complications arising from the grounding of the Boeing 737 MAX, all of the Group’s business areas turned in solid performances.

Deliveries ramped up (especially the LEAP® engine, which shipped 1,736 units), products and services met market success, and the seats and cabins businesses brought in from picked up, Ross McInnes driven by convergence of our

SAFRAN 2019 INTEGRATED REPORT I 2 Thanks to the commitment of our employees, proven innovation and operational excellence, Safran designs, builds and supports high-tech solutions to contribute to a safer, more sustainable world, where air transport is more environmentally friendly, comfortable and accessible. We also apply our skills to develop solutions that meet strategic needs, such as defense and access to space.

methods and the development of a common culture, further enhancing Safran’s consistency and efficiency.

The space and defense sectors also had a fruitful year, with progress on the 6 program and prime contractorship on the engine demonstrator program for the next-generation European fighter aircraft, in partnership with MTU Aero Engines. Such developments ensure sustained front-runner positioning for Safran in the decades to come. Safran is geared up to leading high-tech solutions to contribute to the way towards decarbonization a safer, more sustainable world, By honing competitive performance of the aerospace industry. where air transport is more across all Group divisions, we faced With positions in all aircraft-system environmentally friendly, comfortable up well to fierce market conditions, segments, and energy systems in and accessible. We also apply our and proved our capabilities for particular, we can tackle this issue skills to develop solutions that meet adaptation. from many different technological strategic needs, such as defense and In 2019, Safran also began angles. Some 75% of Safran’s R&T access to space." budget goes to direct or indirect a managerial transition with In 2020, against the backdrop measures for reducing the the Board of Directors appointing of the Covid-19 epidemic, Safran environmental impact of air transport. Olivier Andriès to serve as Chief will continue to draw strength from Safran’s low-carbon project also Executive Officer from January 2021. its adaptability, workforce dedication includes an ambitious program and robust business model to tackle There has been a considerable to shrink the carbon footprint the difficulties and continue to seek shift in Safran’s international balance of its processes. in recent years. More than half of lasting value creation that is shared the Group’s workforce is now based This absolute priority, embedded fairly among all its stakeholders. outside . With close contact in our core purpose(2) ("raison d'être"), We would like to thank you for to markets and leading-edge ensures that economic performance your loyalty and hope you enjoy expertise, we can respond promptly is rooted in Group-wide values: reading this report. and precisely to ever-changing "Thanks to the commitment of demand. our employees, proven innovation Regards, Acutely aware of the major challenge and operational excellence, Safran represented by climate change, designs, builds and supports Ross McInnes and Philippe Petitcolin

(1) Classification criteria: revenue – Source: Safran. (2) The wording of the core purpose is not set out in Safran's bylaws. 3 I SAFRAN 2019 INTEGRATED REPORT GROUP PROFILE 

SAFRAN: A COMPREHENSIVE OFFERING

Present in all aircraft components, Safran strives to build the future of the global aerospace sector and be the preferred partner of airframers and airlines.

Avionics Cabin interiors Power & Inertial navigation systems In-flight entertainment data wiring Flight data and connectivity acquisition units Cabin lighting Auxiliary Cockpit Oxygen Electric flight power • Control systems systems control units (APUs) • Panels & displays actuators • Seats

Galleys & equipment Engines Evacuation slides Engine control & life rafts systems (FADEC) Lavatories, water Exterior Power generation & waste systems lighting & distribution Landing & braking control systems Nacelles Fuel & inerting Anti-icing Wheels & carbon brakes Power transmission systems systems & de-icing

LEADERSHIP POSITIONS IN OUR MAIN BUSINESS SEGMENTS

NO. AEROSPACE AIRCRAFT EQUIPMENT/ AIRCRAFT INTERIORS 1 (1) WORLDWIDE : PROPULSION DEFENSE/AEROSYSTEMS

Safran is a global leader in its main markets. In a favorable context for engines for landing gear for lateral partition shaped by an expected twofold for 100+ seater panels, carts, (2) for wheels and carbon containers and cabin increase in air traffic over the coming commercial aircraft brakes for 100+ seater interiors for regional twenty years and the introduction of aircraft and business new generations of aircraft, the for helicopter turbine for electrical wiring aviation Group will leverage its aerospace- engines and defense-focused portfolio and for helicopter flight for onboard water tier-one supplier position to capture controls and waste management strong growth in its business for evacuation slides systems segments. and oxygen systems

(1) Source: Safran. (2) With GE Aviation, within the CFM International joint venture.

SAFRAN 2019 INTEGRATED REPORT I 4 GROUP PROFILE 

A BALANCED PORTFOLIO ACROSS THE AEROSPACE AND DEFENSE SECTOR

Breakdown of revenue A by segment (adjusted) IR 37.6% C (in %) R €9,256 MILLION A F A T N D E 44,231 Landing Q and braking A U EMPLOYEES N systems E I P O R I Engine M O S systems and E S L Civil aviation equipment N Y U 77% Electrical S T P , T systems and O D

engineering E

R M E P

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P Helicopter S

O turbines Cabins

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E 13% Seats A Military Passenger 48.9% aviation Solutions 13.5% €12,045 MILLION 10% €3,321 MILLION

26,632 FT 22,118 RA S EMPLOYEES AIRC R EMPLOYEES RIO INTE

Safran products have common features that contribute to the resilience of its business model: position as a tier-one supplier to airframers and airlines; high technology content and high demand, whether in original equipment sales or aftersales services.

A full-fledged engine manufacturer(1), Safran offers a wide range ofaircraft To ensure passenger safety and Safran supplies airframers with equipment including landing and enhance their comfort, Safran engines for commercial aircraft, braking systems, nacelles, electrical develops cabin interiors (overhead military aircraft, regional transport systems and related engineering bins, lavatories, galley and catering aircraft, business jets and helicopters. solutions. equipment, etc.), passenger and To increase cost efficiency and share crew seats, water and waste Defense: Safran provides solutions risks, the world’s leading engine management systems, in-flight and services in optronics, avionics, manufacturers develop their engine entertainment systems (RAVE™), navigation systems, tactical drones, programs in partnership. Safran has and interior refits for commercial electronics and critical software primarily partnered with GE Aviation aircraft. Safran’s aircraft interiors for civil and defense markets. since the 1970s, when they set up business addresses both airframers the 50-50 joint venture CFM Aerosystems: Safran is one of the (under the SFE(2) model) and airline International, which develops world’s leading players in aircraft companies (BFE(3) model). the CFM56® and LEAP® engines. safety systems (evacuation slides, This partnership has been extended oxygen masks, etc.), cockpit systems through to 2040. Safran also and fluid management systems (fuel, contributes to access to space pneumatic and hydraulic circuits). through its 50% stake in the ArianeGroup joint venture, prime contractor for the and launchers.

(1) A full-fledged engine manufacturer is present in all engine components and all propulsion market segments. (2) Supplier Furnished Equipment: equipment specified and purchased by the airframer. (3) Buyer Furnished Equipment: equipment specified and purchased by the airline.

5 I SAFRAN 2019 INTEGRATED REPORT GROUP PROFILE 

A LEADING GLOBAL PLAYER

Since its creation in 2005, Safran has expanded internationally. With over 95,000 employees in 27 countries, the Group has extended its footprint beyond its European base and is now present in North and South America, Africa, the Middle East, Asia and Oceania.

AMERICAS 29% 27,585 EMPLOYEES

72 27 8

Leveraging its global footprint, the Group establishes strong and sustainable relationships with the majority of aerospace players and airlines, reflecting its desire to promptly deliver local services to customers.

Geographic spread of employees and sites

Percentage of employees % of employees in the total Group workforce

Number of sites(1) R&D and Service and Commercial and production maintenance administrative activities activities activities

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

SAFRAN 2019 INTEGRATED REPORT I 6 GROUP PROFILE

EUROPE FRANCE (excl. France) 48% 11% 45,198 EMPLOYEES 10,668 EMPLOYEES

66 14 19 26 8 3

ASIA OCEANIA 5% AFRICA 5,137 EMPLOYEES MIDDLE EAST 9 7 2 7% 6,855 EMPLOYEES

9 3 1

7 I SAFRAN 2019 INTEGRATED REPORT GROUP PROFILE 

A LOOK BACK AT OUR HISTORY

With a rich history spanning over 100 years, Safran has made high technology its hallmark.

1 9 0 5 TRENDS IN THE SAFRAN SHARE PRICE AND THE EURO Société des Moteurs Gnome STOXX 50 INDEX (in %) (May 11, 2005 to March 25, 2020) is founded in the Paris suburb of Gennevilliers. Gnome rotary engines become the standard 1,000 for planes around the world.

1 9 1 2 SAFRAN: +430.61% Creation of Société des Moteurs Le Rhône, Gnome’s EURO STOXX 50: -5.74% main competitor before being taken over by its rival. 800 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 600 for air-to-air missiles.

2 0 0 8 1 9 4 5 Extension Gnome & Rhône is nationalized of the partnership and renamed Snecma with GE Aviation (Société Nationale d’Étude until 2040. et de Construction de Moteurs d’Aviation). 400

1 9 4 5 - 2 0 0 2 Several aerospace companies 2 0 0 5 join Snecma: Hispano-Suiza, Safran is formed a specialist in power transmission from the merger of for aircraft engines, followed Snecma and Sagem. by Messier-Hispano-, a specialist in landing gear. 200 In 2000, wiring specialist Labinal and its helicopter engine manufacturer subsidiary Turbomeca join Snecma. In 2002, nacelles specialist Hurel‑Dubois joins Snecma.

1 9 7 4 0 Snecma becomes a civil manufacturer through a cooperation agreement with GE Aviation for the manufacture of the CFM56 engine. Trends in the Safran share price since May 2005 Trends in the EURO STOXX 50 index since May 2005

-200

05/11/2005 01/01/2006 01/01/2007 01/01/2008 01/01/2009 01/01/2010 01/01/2011 01/01/2012 01/01/2013 01/01/2014 01/01/2015 01/01/2016 01/01/2017 01/01/2018 01/01/2019 03/25/2020

SAFRAN 2019 INTEGRATED REPORT I 8 GROUP PROFILE 

OWNERSHIP STRUCTURE (in %) 2 0 1 8 Share capital at December 31, 2019 Takeover and merger of Zodiac Aerospace Number of shares: 427,234,155 by Safran. Rebranding under the Safran name 6.8 0.6 of all former Zodiac Aerospace businesses. Employees Treasury shares 11.2 French State 81.4 Free float 2 0 1 7 1,000 Business combination agreement between Safran and Zodiac Aerospace. Disposal of the detection, identity and security businesses. 800

2 0 1 6 Inclusion of “Safran” in the corporate name of all its subsidiaries. Creation of ArianeGroup with . 600

2 0 1 3 Acquisition of Goodrich’s electrical systems business. 400

2 0 2 0 Worldwide stock-market downturn resulting 200 from coronavirus (Covid-19) epidemic.

0

Trends in the Safran share price since May 2005 Trends in the EURO STOXX 50 index since May 2005

-200

05/11/2005 01/01/2006 01/01/2007 01/01/2008 01/01/2009 01/01/2010 01/01/2011 01/01/2012 01/01/2013 01/01/2014 01/01/2015 01/01/2016 01/01/2017 01/01/2018 01/01/2019 03/25/2020

9 I SAFRAN 2019 INTEGRATED REPORT ECOSYSTEM

CONSTRUCTIVE RELATIONSHIPS WITH OUR STAKEHOLDERS

To contribute to a safer, more sustainable world, where air transport is more environmentally friendly, comfortable and accessible, Safran develops relationships with all stakeholders and incorporates their concerns into its business model.

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SAFRAN 2019 INTEGRATED REPORT I 10 ECOSYSTEM

BUSINESS COMMUNITY PUBLIC PARTNERS CIVIL SOCIETY Customers Government bodies Academia, local community, (airframers, airlines, etc.) and local authorities associations/Non-Governmental Organizations (NGOs) Suppliers and sub-contractors European and international bodies Partners (industrial companies, Certification authorities research laboratories, etc.) Main expectations Youth training, on-site environmental Main expectations measures, absence of noise pollution, effective management of social Main expectations Ethical business conduct, internal and environmental challenges and external Corporate Social reliability and efficiency in the value chain. Customers: Responsibility commitments. of products, with related services. Safe products that comply Group contribution Suppliers and subcontractors: with international standards. relationships rooted in reciprocal Renewed commitment in favor of long-term commitments. apprenticeships and the employment Group contribution areas where the Group is present, Partners: pursuit of continuous Systematic communication sustained R&D to prepare for the innovation and control over of the business ethics culture future of the aerospace industry intellectual property for these to all our employees and and the development of new innovations. suppliers, sustained R&D products and equipment. and quality of our products Implementation of a climate strategy, Group contribution at the highest level. notably to reduce greenhouse gas Operational excellence, emissions from the Group’s products. relationship of trust renewed with each generation of aircraft, reliable products that create value (increased availability, operating gains, weight reduction, etc.). Prompt payment terms. Team work on a daily basis, with suppliers and sub-contractors, to deliver the best to our customers at competitive prices. Organizational agility and ability EMPLOYEES FINANCIAL COMMUNITY to form long-standing industrial AND EMPLOYEE Institutional investors, individual and commercial partnerships. REPRESENTATIVES shareholders and employee shareholders, financial analysts, non-financial rating agencies Main expectations Compensation consistent with individual commitment and Group Main expectations results; motivating career paths; Transparency in the management of skills development; commitment the company, compliance with our to workplace health and safety and financial commitments, the long‑term the environment; and compliance strategy and its implementation and with international labor conventions. consideration of corporate social responsibility (CSR) criteria. Group contribution Employees trained throughout Group contribution their career, steadily decreasing accident rates, profit sharing, Accurate, precise and fair information payment of an exceptional bonus accessible to the financial community, in 2019 (in France) to stimulate regular presentation of the Group’s purchasing power, calm and multi-year objectives at Capital constructive labor relations, Markets Days, availability for the development of employee entire financial and non-financial dialogue at a global level. community.

1 1 I SAFRAN 2019 INTEGRATED REPORT ECOSYSTEM

OUR CSR(1) COMMITMENTS

Safran is intent on fully undertaking its corporate social responsibility, given its leading market position, international profile, and responsibility as an employer of more than 95,000 people.

SAFRAN’S CSR APPROACH IS AN INTEGRAL PART OF ITS CORE PURPOSE

Corporate social responsibility, challenges, for which the materiality These challenges were submitted an integral part of Safran’s business matrix was updated in 2019. to more than 600 internal model, is built on the three strategic This update was an opportunity stakeholders, including employees assets of sustainable innovation, for Safran to invite representative of all Group companies at sites operational excellence and input from internal and external worldwide, as well as to a panel responsible conduct, the aim being stakeholders, with a view to taking of 70 external stakeholders. to create increasing, lasting value these findings on board. Stakeholder Nine priority challenges for Safran and fulfill responsibilities input was elicited on 37 challenges (shown below) were identified, to all concerned. identified by an in-depth analysis with a similar consensus both Safran’s CSR approach factors of international standards across internally and externally. in the Group’s non-financial the aerospace sector.

MATERIALITY MATRIX OF NON-FINANCIAL CHALLENGES THE NINE PRIORITY CHALLENGES FOR STAKEHOLDERS APPEAR IN THE CIRCLE AT THE TOP RIGHT.

Quality of life at work Anti-corruption and business ethics

High Skills development, support for research Attractiveness, recruitment of talent

Carbon impact of production methods Innovation and eco-design Quality, safety and sustainability of supplies Workplace gender equality Reduction of emissions from products and services Quality of supplier relationships Duty of care and respect for human rights CSR performance Technological of the supply chain change Customer satisfaction Integration of CSR into governance structure Health and safety in the workplace Adaptation to the eects of climate change Skills development and talent retention Diversity and inclusion Quality and safety of products Control of site emissions and services Intellectual property Responsible use of natural resources Quality of governance Socioeconomic development Security of personal data and goods in local communities Waste management and recycling Responsible use of products and services Employee experience Export and customs control Protection of biodiversity Social dialogue Responsible tax policy Compensation, benefits and social protection Importance for Safran’s external stakeholders Personal data protection Quality and transparency of financial and non-financial information Social and philanthropic initiatives Low Low High Importance for Safran employees

GOVERNANCE HUMAN CAPITAL INDUSTRIAL PRODUCTION PRODUCTS AND SERVICES SOCIETY

(1) Corporate Social Responsibility.

SAFRAN 2019 INTEGRATED REPORT I 12 ECOSYSTEM

SAFRAN’S CONTRIBUTION ON THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS

Safran contributes to work on meeting the United Nations Sustainable Development Goals for 2030, through its CSR policy and with support from its stakeholders. Its commitments cover 12 of the 17 goals in particular, corresponding to the action taken by the Group consistent with its operations and the nine priority challenges in its materiality matrix.

Safran applies a health, safety and Safran pursues an active policy on environmental (HSE) policy based employment for people with disabilities, on guidelines covering all employees under its 2018-2022 disability agreement. at all sites. Comprising 30 standards, People with disabilities accounted for these guidelines are used to audit 5.1% of the overall workforce in 2019 HSE performance, which is rated bronze, (France agreement scope)(2). silver or gold, according to the level of HSE maturity reached. Objective for 2025: Safran’s low-carbon project sets a 100% of sites with gold rating. trajectory on reducing greenhouse gas emissions linked to its production methods. Safran promotes the professional Targets for 2025 are an 8% reduction in integration of young people: 11.6%(1) direct (Scope 1) emissions and an of recruitment across Europe in 2019 18% reduction in indirect (Scope 2) related to interns, work-study program emissions compared with 2018. participants and PhD students. Initiatives and partnerships are run with educational Safran sees the transition to sustainable establishments in all Safran’s host countries. aviation as an absolute priority, and operates a climate strategy designed to Safran sees gender equality at work as bring down product-related and site-related a driving force in business transformation, greenhouse gas emissions. Furthermore, its and this means developing a more inclusive policy has always been to ensure maximum corporate culture, enhancing employment protection of its sites against natural, attractiveness for women and increasing the technological and environmental risks. proportion of women in executive positions. In 2019, Safran obtained renewal of the Through its health, safety and environment GEEIS (Gender Equality European & policy, Safran is committed to preventing International Standard) label and took and minimizing pollution potentially on ambitious objectives for 2023. caused by its activities.

Safran pays close attention to water, discharge and waste treatment at its sites. Sites that implement chemical processes In 2012, Safran became the first CAC 40 such as surface treatments have brought company to obtain “anti-corruption” in a specific organization for treating certification from the French Agency for discharge. the Diffusion of Technological Information (ADIT). This certification, renewed in 2017 Safran signed a global framework for a three-year period, attests to the agreement on working conditions, robustness of Safran’s anti-corruption CSR and sustainable development in 2017. program group-wide, with requirements as It also operates a duty of care plan for strict as those of international standards. suppliers and subcontractors on matters of health, safety, the environment and human Safran develops many partnerships with rights. Signing Safran’s Responsible the business community, the financial Purchasing Charter is one of the first community, associations, the academic commitments undertaken by all suppliers. world and public partners to advance and share its knowledge and operations and Around 75% of Safran’s R&T budget goes their implementation. to direct or indirect measures on reducing the environmental impact of air transport. In 2019, Safran filed more than 1,200 initial patent requests worldwide. NB: The figures in the icons above correspond to the numbering of the United Nations Sustainable Development Goals. (1) Percentage of European workforce. (2) Excluding Safran Aerosystems, Safran Passenger Solutions, Safran Seats, Safran Cabin.

1 3 I SAFRAN 2019 INTEGRATED REPORT ECOSYSTEM

OUR MARKETS

The global commercial aircraft fleet (36 passengers and more) and passenger traffic are expected to double in the next 20 years, excluding consideration of the impact of the coronavirus (Covid-19) epidemic.

CIVIL AVIATION

Several factors contribute to High growth in air traffic proved same period. In addition, airframers this momentum: resilient against previous global Airbus and Boeing report very the increasing popularity of air economic crises (in 2001 and 2008), high order backlogs of 7,482 and travel spurred by falling prices; but may suffer sudden fluctuation in 5,406, respectively, at the end of December 2019. We see the same pressure on capacity, with load the event of a local or global health trend in the aftermarket, with strong factors reaching new highs in the crisis such as SARS and Covid-19. majority of airlines; growth driven by the increasing Estimates point to a total of around in-service fleet size and longer demand in regions enjoying strong 39,400 new planes over the next aircraft service lifespans. economic growth (in particular 20 years. This dynamic is especially China, South-East Asia and ), Furthermore, aircraft interior pronounced in the short- and and renewal of the existing fleet refurbishment requirements are (mainly in North America and medium-haul aircraft segment, which accelerating, with several retrofit Europe). expects 23,500 new planes over the cycles in an aircraft’s lifespan.

CIVIL AVIATION TRAFFIC, GLOBAL PROJECTIONS These long-term projections do not take into account the impact of the coronavirus (Covid-19) epidemic. 2019 21,000 84.1% 82.3% 18,000 +3.8% +4.0% Global Global 15,000 aircraft capacity aircraft trac (measured in ASK) (measured in RPK) 12,000 until 2039 until 2039 Expected twofold increase in air trac 9,000 62.8%

6,000

3,000 Air trac increased by 2.5x 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

RPK: Revenue passenger kilometers, in billions (= number Global aircraft capacity (ASK) of occupied seats multiplied by the total distance Global air trac (RPK) traveled by the global fleet). ASK: Available seat kilometers, in billions (= number Load factor of available seats multiplied by the distance traveled by the global fleet).

Source: .

SAFRAN 2019 INTEGRATED REPORT I 14 ECOSYSTEM

DEFENSE BUSINESS AVIATION AND HELICOPTERS

The business aviation market is stable. At the end of 2019, there were around 21,900 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. Some 50,000 helicopters were in service worldwide in 2019.

After several years of downward this means more than €500 million trends, defense budgets are now budgeted through to 2021, and plans increasing steadily across the globe, to mobilize over €35 billion in in a context marked by several areas community funding for defense and of armed conflict and geopolitical space initiatives from 2021 to 2027, tension. including €13 billion broken down as In Europe, defense initiatives have €4.1 billion for R&T and €8.9 billion been boosted with the launch of for R&D. projects such as the European Defense Industrial Development Programme (EDIDP), for 2019-2020, and the European Defense Fund (EDF), from 2021. In financial terms,

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 16% 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 (APUs). Safran also supplies deterrent equipment.

1 5 I SAFRAN 2019 INTEGRATED REPORT ECOSYSTEM

AEROSPACE INDUSTRY TRANSFORMATION

Safran operates in a changing industrial landscape.

RAPID CHANGES 1 Long-term environmental challenges

CO2, NOx, noise, etc.

Technological upheaval Growing global competition 6 2 Newcomers (startups, Towards hybrid and electric aircraft emerging markets, etc.)

3 Aviation safety: under closer scrutiny by regulators and the public Equipment manufacturer alliances, supply base consolidation 5 4 Airframer consolidation and repositioning

1 2 LONG-TERM TECHNOLOGICAL UPHEAVAL ENVIRONMENTAL CHALLENGES Innovation has been an essential New areas of innovation in short-, element of the aerospace sector medium- and long-haul aviation from the outset. Today’s aircraft are have appeared: digital (big data, Climate change is prompting a five times more fuel efficient than artificial intelligence), connectivity, systemic transformation in civil their counterparts in the 1950s, autonomy, hybrid and/or electric aviation. The need for a response mainly thanks to improved engines. propulsion, distributed propulsion, consistent with the magnitude and materials, processes, sustainable urgency of the global environmental In addition, numerous innovations fuels, hydrogen, etc. These issue raises substantial social and have driven considerable progress innovations pave the way for new political expectations in all sectors in aircraft safety, making civil aviation engine architectures, new concepts, (pages 22 to 25). one of the safest means of transport in the world. new production methods, new services, new players and new uses (particularly VTOL(1)).

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

SAFRAN 2019 INTEGRATED REPORT I 16 ECOSYSTEM

3 4 AVIATION SAFETY, AIRFRAMER UNDER CLOSE SCRUTINY CONSOLIDATION AND BY REGULATORS AND THE PUBLIC REPOSITIONING

Aviation safety is a fundamental us of the absolute need to take collective challenge taken up by all every possible measure to ensure Safran Group companies. that this does not happen again. For Safran, this is an absolute priority Strong and legitimate public concern, and an unwavering commitment to addressing industry players and customers, passengers, pilots and regulatory authorities, is bringing crews. Though air transport is today about closer scrutiny on aviation one of the safest means of transport safety by certification authorities in the world, the two Boeing 737 MAX throughout the aircraft life cycle. accidents, in 2018 and 2019, remind

Since 2017, airframers have consolidated around the well- established duopoly: transfer of Bombardier’s residual interest in the A220 program (former “C Series”) to Airbus in February 2020 and the alliance currently under negotiation between Boeing and Embraer. In addition, new players are continuing to emerge, particularly 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.

5 6 EQUIPMENT GROWING GLOBAL MANUFACTURER COMPETITION ALLIANCES, SUPPLY-BASE Newcomers have appeared among For airlines, the sector is marked CONSOLIDATION the equipment manufacturers, by strong growth for Middle Eastern attracted by the strong sector and South East Asian companies. Encouraged by airframers and growth. The ramp-up of low cost players airlines, suppliers and equipment Airframers are furthermore subject is also significant in short- and manufacturers in the supply chain to intense competition and put medium-haul transport. Lastly, have also been consolidated, with substantial pressure on their investors, finance companies and major operations including the equipment manufacturers to reduce aircraft leasing companies are 2018 acquisition of Zodiac Aerospace prices, with major cost reduction becoming major players in by Safran and the more recent programs. Certain key materials the aviation ecosystem. merger underway between Collins are also rare resources worldwide Aerospace and Raytheon, following (titanium, rare earths, etc.) and on from the Rockwell-Collins their supply can be disrupted acquisition of B/E Aerospace. by geopolitical and trade tensions.

1 7 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

OUR AMBITIONS

The major trends in the ecosystem described above suggest sector growth, with a focus on safety, competitive performance, and technological and environmental challenges.

Safran aims to become the world’s • coverage of all sub-segments of By focusing both on operating leading aircraft equipment supplier the aerospace and defense sector excellence and the investment within the next 15 years. To achieve (regional aircraft, short-medium needed to lead in state-of-the-art this goal, the Group draws in haul, long haul, business jets, technology, the Group is ideally particular on: helicopters, military aircraft), placed to reach a new milestone in a business model building on: to reduce sensitivity to variations business growth and value creation. • products with business cycles in business cycles; of different maturities (from just two absolute priorities: climate a few years for an aircraft seat change and aviation safety; up to 40 years for an engine); a clear strategy drawing upon • service and aftermarket three key Safran assets: sustainable businesses (including spare parts innovation, operating excellence and long-term contracts), and responsible conduct. that now generate nearly half of its revenue. These services ensure recurring revenue streams, margins with smooth time- spreads, and improved visibility; 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 operation base of civil engines AIRCRAFT EQUIPMENT/ DEFENSE/AEROSYSTEMS

Become the world’s leading aircraft equipment supplier A CLEAR Be the leader in equipment for more electrical aircraft ROADMAP Capitalize on Defense niche businesses Capitalize on leading global positions in aerosystems

AIRCRAFT INTERIORS

Restore the operational excellence and competitiveness of this new activity Propose innovative solutions for our customers Return to world-class financial performance

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

SAFRAN 2019 INTEGRATED REPORT I 18 STRATEGY AND BUSINESS MODEL

ILLUSTRATION OF OUR AMBITIONS IN THE MEDIUM-HAUL SEGMENT, THROUGH THE CFM56-LEAP TRANSITION

In this segment, which represents 60% of global aircraft deliveries, CFM International has a market share of around 80% thanks to 40 years of commercial success.

Long-term prospects contracts for a number of years, the CFM56 is the biggest commercial The propulsion business generates in response to customer demand. success in the history of civil aviation: significant service activities, mainly These contracts now apply to the every two seconds, a CFM56 engine comprising the sale of spare parts LEAP engine. Aftermarket services takes off somewhere in the world. and maintenance, repair and overhaul for this engine will gradually take It will continue to generate service services (MRO). With the increasing over from the CFM56 engine activities for Safran over the next size of the engine fleet in service, from 2025. 20 years, with a peak expected around 2025. Safran has substantial growth A large CFM56 fleet in service potential. The Group has been With an in-operation base(1) of over developing long-term service 31,800 engines at the end of 2019,

ECONOMIC LIFE CYCLE CFM56 IN-OPERATION BASE(1) OF AN AIRCRAFT ENGINE PROGRAM 35,000 Services and aftersales 33,000 (incl. spare parts 31,000 and long-term contracts) 29,000 27,000 31,802 Entry 25,000 CFM56 into service 23,000 End-2019 and first 21,000 deliveries 19,000 17,000 Initial sales 40 years+ 15,000 (original equipment) 2011 Development 200820092010 2012 2013 2014 2015 2016 2017 2018 2019 and testing * Weighted average annual growth rate

CFM56 (-5B/-7B) FLEET BY NUMBER OF SHOP VISITS PERFORMED ~ 20% No shop visit ~ 45% with no performed with no shop visit 1 shop visit 2020 e shop visit 2025 e performed ~ 23,000 ~ 20,000 More than ~ 40% engines engines 2 shop visits with performed 1 shop visit ~ 50% with Source: CFM data 1 shop visit

LEAP, following through Highly innovative, the LEAP engine LEAP-1A for the Airbus A320neo, on the CFM56 success story reduces fuel consumption by 15% which came into service in (2) The CFM56’s successor, the new relative to the last generation of August 2016 (60.5% market share ); CFM56 engines. At the end of LEAP engine, is already a commercial LEAP-1B for the Boeing 737 MAX, success. Produced since 2016, December 2019, the LEAP engine which came into service in its ramp-up is the steepest ever had a record order backlog of May 2017 (100% market share); 15,614 engines, including 1,968 orders known in the aerospace industry: LEAP-1C for the COMAC C919 registered in 2019.  1,736 LEAP engines were delivered (China, exclusive Western source). in 2019 (compared to 1,118 in 2018). It has been selected for three aircraft:

(1) In-operation base is equal to engines delivered less engines dismantled or scrapped. (2) Firm orders at January 31, 2020.

1 9 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

CREATE VALUE FOR ALL OUR STAKEHOLDERS

TRENDS IN THE AEROSPACE INDUSTRY A FAST-GROWING LONG-TERM AVIATION SAFETY TECHNOLOGICAL MARKET ENVIRONMENTAL Under closer and legitimate UPHEAVAL Passenger demand expected CHALLENGES scrutiny by regulators Shift to hybrid and electric and the public. to double in 20 years. Limiting CO2 and propulsion, additive manufacturing, composite NOx emissions and noise. materials, big data, AI, etc.

OUR RESOURCES(1) OUR BUSINESS MODEL SERVING OUR CUSTOMERS

HUMAN CAPITAL • More than 95,000 employees in 27 countries • 4% of payroll spent on training • 14,880 recruitments in 2019 • Recognized governance OUR BUSINESS INNOVATION, MODEL DESIGN INTELLECTUAL CAPITAL • €1.7 billion total R&D expenditure • Approximately 1,200 PhD graduates •  of Group employees 16% 2019 in R&D (including R&T) R&D expenditure: €1.7 billion INDUSTRIAL CAPITAL • 274 sites in the world serving our customers • € 695 million(2) in industrial investments • Structuring alliances and partnerships, including the CFM International joint venture formed with GE Aviation in 1974 A BALANCED and renewed until 2040 BUSINESS FINANCIAL CAPITAL PORTFOLIO • A full order backlog • A growing base in operation (up approximately 5.6% annually for short- and medium-haul engines) • One of the strongest financial positions in the industry • A stable shareholder base (employees, French State, French industrial families, long-term institutional investors) • A strong financial structure (net debt/EBITDA(3) of 0.86) • A foreign exchange risk hedging policy providing visibility TWO ABSOLUTE PRIORITIES

SOCIAL AND ENVIRONMENTAL CAPITAL • 75% of our R&T investment focused on reducing our environmental footprint • Training in responsible purchasing and good conduct charter Climate Aviation change safety (page 22) (page 26)

(1) All figures refer to 2019 except where noted. (2) Net of the cash inflow from the disposal of a tertiary property complex in the Paris region. (3) 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.

SAFRAN 2019 INTEGRATED REPORT I 20 STRATEGY AND BUSINESS MODEL

CREATE VALUE FOR ALL OUR STAKEHOLDERS

TRENDS IN THE AEROSPACE INDUSTRY AIRFRAMER EQUIPMENT MANUFACTURER GROWING CONSOLIDATION ALLIANCES, SUPPLY BASE GLOBAL COMPETITION AND REPOSITIONING CONSOLIDATION With newcomers, new markets and new uses.

OUR BUSINESS MODEL SERVING OUR CUSTOMERS OUR IMPACTS(1)

HUMAN CAPITAL • A favorable and attractive social model: profit-sharing, incentive schemes, employee share ownership and employee savings funds INITIAL SALES SERVICES • 43% of employees are Company (original equipment) AND AFTERMARKET shareholders and together hold 6.8% of the share capital

INTELLECTUAL CAPITAL • 42,000 intellectual property titles 2019 revenue: 2019 revenue: €13.9 billion €10.7 billion 56% 44% 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 Product lifetime (illustrative(4)) engine parts)

FINANCIAL CAPITAL Aerospace Propulsion • Organic adjusted revenue growth of 9.3% vs. 2018 Aircraft • Recurring operating margin of 15.5%, Equipment, up 110 basis points on 2018 Defense and • A disciplined M&A policy Aerosystems • EBIT to FCF conversion rate of 51.9% • 16.54% annual growth in TSR(5) Aircraft from 2005 to 2019 Interiors • Stock market performance (up 431% from May 11, 2005 to March 25, 2020) 0 5 10 15 20 25 30 35 40 years SOCIAL AND ENVIRONMENTAL CAPITAL

• LEAP: -15% CO2 emissions

THREE ASSETS and -50% NOx emissions • RESPONSIBLE SUPPLIER RELATIONS Label • 1 st CAC 40 company certified 1 2 3 “anti‑corruption” by the ADIT(6) SUSTAINABLE OPERATIONAL RESPONSIBLE INNOVATION EXCELLENCE CONDUCT (page 28) (page 32) (page 36)

(4) Aircraft engines have an average service life of 20 years in civil aviation and 35 years in military aviation. Aircraft equipment has an average service life ranging from two years for carbon brakes to 35 years for wiring. Aircraft interiors have an average service life ranging from five years for business-class seats to ten years for economy-class seats. (5) TSR: Total Shareholder Return corresponds to dividends plus the change in the share price. (6) French Agency for the Diffusion of Technological Information (Agence pour la diffusion de l’information technologique – ADIT).

2 1 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

SAFRAN AND THE CLIMATE PRIORITY NO. 1 CHANGE CHALLENGE

Climate change sets a major and systemic challenge for civil aviation. Safran’s climate strategy addresses the challenge by offering customers innovative solutions at a competitive cost. With its position in most aircraft-system segments, and all energy systems in particular, Safran makes climate change a central part of its technological solutions.

AN AMBITIOUS COMMITMENT FOR THE AVIATION SECTOR AND SAFRAN’S VISION TO ACHIEVE IT

The goal of a 90% reduction in CO emissions per Impact 2 of new passenger kilometer by 2050 No technologies will be reachable through:  action Better

Renew infrastructure use global fleet with new-generation aircraft Improved 40% operating and engines eciency Introduce Additional Carbon- disruptive neutral technologies and biofuels technologies growth Improve air traffic management -50% -90% 10 to 20% -50% and operations Millions of metric tons CO for CO emissions Incorporate 40% sustainable fuels

2005 2010 2020e 2030e 2040e 2050e … while also reducing other pollution (noise,

NOx, particles, etc.).

Air transport accounts for 2% Ambition:

of global CO2 emissions from human low-carbon aviation by 2030-2035, activities. With air traffic expected towards carbon neutrality to double over the next 20 years, by 2050 THE SAFRAN COMMITMENT the transition to sustainable aviation The aviation sector commitments At the 2019 Chief Technology Officers is an absolute priority for Safran. are consistent with the Paris In 2008, the aviation sector took up (CTOs) of seven of the world’s Agreement on keeping global major aviation manufacturers(3), a voluntary commitment on achieving temperature rise below two including Safran, made this (1) carbon neutrality by 2050 (ATAG) , degrees centigrade. Our objective statement: by halving net fleet emissions by is achievable and should involve "As industry CTOs we are 2050 compared to 2005 to bring all players in the sector (industry, committed to driving the sustainability of aviation. a 90% reduction in average emissions airlines, air traffic control, airports, per passenger kilometer across the We believe in this industry government authorities). and its role in making our worldwide fleet, taking into account world a brighter and safer (2) the expected growth in air traffic . place. We also strongly believe we have an approach to make aviation sustainable and play an even bigger role in (1) ATAG: Air Transport Action Group. our global community." (2) Annual growth of around 4% is expected, bringing a 3.5 times increase in air traffic from 2005 to 2050. (3) Airbus, Boeing, Dassault Aviation, GE Aviation, Rolls-Royce, Safran, United Technologies Corporation.

SAFRAN 2019 INTEGRATED REPORT I 22 STRATEGY AND BUSINESS MODEL

SAFRAN’S CLIMATE STRATEGY

Safran intends to lead the way towards decarbonization of the aviation sector, through a climate strategy taking two focuses: reduction in CO2 emissions from its production methods, and, what constitutes its essential mission, reduction in CO2 emissions from its products.

REDUCTION IN CO₂ EMISSIONS FROM ITS PRODUCTION METHODS

Safran takes a committed and ambitious stance on reducing the carbon footprint of its production methods (referred to as Scope 1, Scope 2 and Scope 3 emissions in the GHG Protocol(1)), through its low-carbon project.

Safran’s low-carbon project Safran’s targets to reduce Some of the assets employed to Safran’s Health, Safety and CO emissions across its production meet our objectives are as follows: Environment Department has been 2 methods by 2025 (compared running the Group’s low-carbon reducing sites’ energy with 2018 levels: 218,906 t CO eq. project since late 2018, and a steering 2 consumption, chiefly by improving for Scope 1 and 374,691 t CO eq. committee comprising several 2 the energy efficiency of buildings; for Scope 2). members of the Safran Executive developing breakthrough solutions Committee has been formed. for heat generation at our sites, In addition, a dedicated organization by conversions such as replacing has been set up, with the Scope 1 gas boilers with biomass boilers; appointment of project leaders Direct choosing low-carbon energy in each of the Group’s tier-one emissions sources, as with electricity suppliers companies, and identification of -8% in Mexico, with the signing of “business line” liaison officers. a solar power energy contract. The first phase of this project involves reducing direct and indirect emissions Scope 2 from energy consumption in our Indirect emissions production methods: direct energy-related emissions -18% (referred to as Scope 1 emissions) include emissions from LPG (butane, propane), natural gas, home heating oil, diesel fuel, heavy fuel oil, aviation fuel and refrigerants; indirect energy-related emissions (referred to as Scope 2 emissions) THE EUROPEAN CO EMISSIONS QUOTA SYSTEM (EU ETS(2)) include emissions from purchased 2 electricity, steam, heat and cold. EU ETS, introduced in 2005, framework for 2021-2030 was The second project phase, launched was the world’s first international reviewed in early 2018 to meet in early 2020, concerns Safran’s emissions trading system. the emissions reduction objectives It today stands as the largest under the 2030 climate action indirect emissions (referred to as global mechanism for trading and energy framework and under Scope 3 emissions): from logistics emission rights, representing more the EU contribution to meeting operations, purchases of goods and than three quarters of international the 2015 Paris Agreement. services, and employee travel. carbon emission trading. EU ETS only applies to three A ceiling is set to limit total of the more than 150 sites Work here will enable us to reduce emissions of certain greenhouse that Safran has in Europe: CO emissions while optimizing our gases from sites covered by the Gennevilliers, Villaroche and 2 system. This ceiling is gradually Villeurbanne. The emissions competitiveness. reduced to bring down the generated by these three Safran overall emissions volume. sites have never required the

Under the ceiling level, companies purchase of CO2 quotas. In addition, are granted or can purchase Safran is examining alternative emission quotas, which they energy solutions that would enable can trade with other companies it to no longer use “licenses according to their respective to pollute” for the Gennevilliers needs. The EU ETS legislative and Villaroche sites by 2025.

(1) Greenhouse Gas Protocol. (2) European Union Emission Trading System.

2 3 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

SAFRAN’S CLIMATE STRATEGY

REDUCTION IN CO₂ EMISSIONS FROM ITS PRODUCTS

Because the production of an aircraft accounts for only a small percentage of its emissions over its life cycle, Safran considers that its first challenge is to reduce CO2 emissions from its products (referred to as Scope 3 emissions in the GHG Protocol).

2030 2020 - 2050(2) 2035(2) “Skip a generation”(3): Ultra-efficient • Future aircraft conventional with carbon- propulsion TOWARDS CARBON • Long-haul free energy Public policies aircraft and Public policies source NEUTRALITY & regulations increased use of & regulations BY 2050(1) • Short- and sustainable fuels medium-haul • Green synthetic • Small electric fuel and/or liquid • Regional aircraft/Hybrid regional aircraft hydrogen • Helicopters Technologies Technologies • New short- • Ultra-high range mobility power density solutions batteries

100% LOW-CARBON TOWARDS KEROSENE CARBON NEUTRALITY(1)

NOT JUST ONE BUT SEVERAL SOLUTIONS Rather than one single solution, there will be a series of measures, ULTRA-OPTIMIZED SUSTAINABLE FUELS HYBRID PROPULSION at different timeframes, THERMAL PROPULSION addressing specific market AND ELECTRIFICATION segments and usages: short-, medium- and long-haul aircraft, helicopters, business FLIGHTS OVER 1,000 KM jets and new air mobility. FLIGHTS UNDER 1,000 KM

(1)  In-flight emissions & emissions/capture related to fuel production close to zero by 2050. (2) Target date for aircraft in service. (3) New aircraft release bringing twice the usual next-generation gain (15%).

SAFRAN 2019 INTEGRATED REPORT I 24 STRATEGY AND BUSINESS MODEL

ELECTRIFICATION Safran is actively involved in Given the current performance of & HYBRIDIZATION: all-electric and hybrid propulsion electrical power systems (especially SOLUTION FOR SHORT systems addressing applications as regards battery energy density), DISTANCES in new short-haul aviation solutions Safran considers the prospect such as lightweight urban, suburban of an all-electric medium- and or even regional transport (VTOL(1) long-haul aircraft to be unrealistic or STOL(2) vehicles). for the time being.

Since flights longer than 1,000 km account for 50% of journeys and close to 80% of emissions, the priority is on reducing emissions in the medium- and long-haul segment, which will remain predominantly thermal-powered from 2030 to 2050.

SUSTAINABLE FUELS:  This primarily involves solving the ULTRA-OPTIMIZED A WORKABLE issue of the lifespan of seals and THERMAL PROPULSION: SOLUTION FOR pumps for fuel systems and TOWARDS NEW- THE NEAR FUTURE ensuring optimum combustion GENERATION AIRCRAFT performance. The only way to achieve an Safran has a major role to play in immediate reduction in aircraft • E-fuels produced using low- the arrival, by 2035 at the latest, carbon footprint is by using kerosene carbon electricity, water and CO2 of new low-carbon aircraft around alternatives in the form of fuels that (such as the e-kerosene produced 30% more energy efficient than have a lower carbon profile across by power-to-liquid technologies) the present-day fleet. Engine the life cycle and do not, in offset biomass needs to improve advancements are an instrumental the production process, entail emission reduction rates. factor here. competition with other uses In the field ofnon-drop-in The challenge is summed up in a (food crops in particular). sustainable fuels, if biofuel volumes phrase: “skip a generation”. Safran and GE are working on the successor As a supplier of engines and fuel are insufficient and power-to-liquid to the LEAP engine, which is system equipment, Safran is processes fail to live up to their expected to offer a consumption working on making the field promises, Safran is also examining saving at least equal to the reduction of drop-in sustainable fuels(3) the breakthrough option of achieved by LEAP compared to as wide as possible: cryogenic fuels such as liquid the CFM56. Work also includes hydrogen, with a longer • Biomass-derived alternatives, or lightweight design technologies R&T horizon and a step-by-step biofuels, are the only immediately for aircraft systems and cabin investment approach. available option, though the interiors, and electrification for new, incorporation of biofuel in aircraft Sustainable fuels should make a ultra-efficient aircraft architectures. fuel remains very low worldwide substantial contribution to short-term The objective will require the search (0.1% currently). Safran is solutions. This will require the for breakthrough technologies targeting the development development of production and (for example, “open rotor” of technologies enabling engines distribution processes capable of engines) which imply a profound to go above the present-day reducing the cost of this type of fuel, transformation of aircraft and technical threshold of a 50% which is today two to three times their architecture. This requires biofuel-kerosene mix. more expensive than kerosene. the active involvement of airframers.

If kerosene is eventually to be phased out entirely, this will also require OPTIMIZING THE MASS work on reducing the fuel consumption of fleets in service. Among other things, this will mean continuing to phase in new-generation aircraft such as & EFFICIENCY the A320neo and the Boeing 737 MAX. OF AIRCRAFT With its extensive product portfolio in aircraft equipment and interiors, Safran is ideally placed to come up with solutions in areas such as operating IN SERVICE efficiency improvement, electrical system optimization and lightweight equipment design, with new cabin interior materials for example.

(1) VTOL: Vertical Take-Off and Landing aircraft. (2) STOL: Short Take-Off and Landing aircraft. (3) Drop-in fuels are fuels that can replace all or some of conventional kerosene without any operational impact, i.e., without requiring modification to infrastructures (at airports, for example) or to aircraft or engines, whether existing or under development.

2 5 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

AVIATION PRIORITY NO. 2 SAFETY

Aviation safety has always been an absolute Group-wide priority for Safran.

Aviation safety is the responsibility of all the Group’s employees. As a leading global aerospace industry player, Safran gives the utmost importance to safety. The lives of passengers, crew and those on the ground under flight paths depend on this. Safran is as committed as ever to ensuring its customers (airframers and airlines), passengers, crew and populations under flight paths that the products and services it supplies are safe. This is an imperative that influences everything we do.

AVIATION SAFETY FUNDAMENTALS FOR SAFRAN

THE STRONGEST POSSIBLE AVIATION SAFETY CULTURE THAT: makes aviation safety a top priority; prevents and mitigates aviation safety risks; encourages everyone to report aviation safety concerns within a climate of confidence through a just and fair culture; investigates and addresses safety concerns.

SAFETY MANAGEMENT SYSTEM ACROSS ALL SAFRAN COMPANIES ENSURING THAT: adequate resources are available; all Safran employees understand the effects of their own actions In 2021, European regulations on aviation safety; will extend coverage of the Safety aviation safety is promoted; Management System to design and production functions, in addition aviation safety performance is measured and continuously improved. to maintenance operations, already bound by this requirement in France, Canada and some Asian countries. Safran is preparing for application of this directive by further improving ensure continuous monitoring Each company’s policy will come the visibility and reach of its aviation of and improvement in safety with detailed objectives spanning safety fundamentals. These chiefly performance. the whole product life cycle, involve the implementation of Safran is stepping up its including design, production a safety management system harmonization approach here to and maintenance. at each company, capable of ensuring attain the highest performance level, Accompanying action plans will company-wide employee compliance standing as the industry benchmark include details on organizational with safety principles and take-up in this field. and product focuses. of a strong aviation safety culture. Safran Aircraft Engines, Safran Safran is preparing for the It is essential that all people Helicopter Engines and Safran amendments to Part 21 European in the Group are fully aware of their Landing Systems have already drawn regulations on design and production individual roles and the possible up formal flight safety policies based practices in the civil aerospace consequences of their actions, that on these fundamentals. industry. information sharing is encouraged, The other Safran Group companies and that safety management systems will be following suit in 2020.

SAFRAN 2019 INTEGRATED REPORT I 26 STRATEGY AND BUSINESS MODEL

OUR COMMITMENT TO FLIGHT SAFETY

SAFRAN AIRCRAFT ENGINES THE EXAMPLE OF SAFRAN its understanding of customers’ needs on engine safety and In late 2018, the Safran Aircraft HELICOPTER ENGINES availability, and to improve Engines Management Committee Since 2016, Safran Helicopter Engines its SMS maturity. launched its Safety Management has been running an annual Safety System (SMS) project across all Management System (SMS) seminar Safran Aircraft Engines entities with all SMS managers (in MRO(1), worldwide. production and design). This includes a presentation of Safety Management System results and updates along with a roadmap for the coming three years. Participants also discuss best practices in aviation safety risk prevention at all cycle stages. Airframers and operators(2) are invited along for a broad industry- wide examination of safety matters. For Safran Helicopter Engines, this is an opportunity to improve

SAFRAN LANDING SYSTEMS

The aim is to coordinate departments’ For , strong Safran Landing Systems is ready for and stakeholders’ initiatives growth, new sites, the merger of the changes under way in European (on navigability, flight safety, quality, three companies, and a worldwide Aviation regulations, which will risks, human resources, progress, etc.) footprint have brought a strong influx require all aerospace-industry and extend this system, based on of personnel of many different origins manufacturing and design businesses (1) MRO experience, company-wide. and backgrounds. This raises a major to implement a safety management The project will also put forward challenge in the need for a common system in 2021. a joint response to the need, basis for working together. recognized by all units, to prepare Flight safety is an important pillar for the amended regulation that will of the underlying shared culture here. extend the SMS requirement to The major principles behind the flight design and production functions, safety policy include identification, improve detection and processing analysis and the tackling of risks, of flight safety risks, and provide regular personnel training, an greater clarity on flight safety anonymous whistleblower alert matters to customers and partners. system accessible to all, and In 2019, Safran Aircraft Engines drew assistance on determining the up its SMS standard, including its kinds of event to report in this way. policy, and developed rollout tools. The aim is to improve products and Communication and awareness- in-service behavior, and not to assign raising operations in 2019 included blame. The whole of this project is the first Flight Safety Culture survey overseen by a flight safety committee and the release of a film and journals chaired by Quality and Engineering on air safety. directors.

(1) MRO (Maintenance, Repair and Overhaul). (2) Participants included: Airbus Helicopters, the SAF group (French operator), the air arm of the French police force, and the association of offshore helicopter transport operators (Helioffshore and Babcock Spain).

2 7 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

ASSET NO. 1 SUSTAINABLE INNOVATION: SHAPING THE NEXT STATE OF THE ART IN AEROSPACE

In this rapidly changing environment, success depends first and foremost on managing disruptive innovation and technological excellence, to provide customers with a critical advantage.

More than €600 million 3,000 employees in self-financed in R&T R&T and innovation expenditure in 2022*

Safran’s 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 more than Technology Committee, the Group is implementing an innovation strategy firmly focused on efficient 1,200 75% R&T serving all its businesses. initial patent requests of R&T investment 1,200 This strategy is founded on filed by Safran focused on environmental PhD graduates considerable investment, budgeted worldwide in 2019 efficiency in the Group to increase over the coming years. It is also based on a dedicated R&T management system and an internal partnerships, scientific networks organization providing a balance and chairs, collaborative innovation for Group subsidiaries between own in the supply chain and investments development and shared activities. in the share capital of young 5 R&T The R&T plan comprises a limited innovative companies. PRIORITIES: number of roadmaps tied to The number of patents filed bears the strategic challenges facing witness to the creativity of the teams Aircraft energy chain the companies and coordinated and their capacity to innovate, as well High‑performance materials by the Group. the importance placed on protecting and processes Innovation projects aimed at intellectual property. Safran stands preparing the main disruptive among the front-runners for patents Aircraft cabin of the future products, processes and systems filed with the French patents office are motivated and led under (Institut National de la Propriété Navigation and autonomy a “proof of concept” approach, Industrielle – INPI). technologies Overall, the Group’s patent closely involving the Group Digital technologies and digital companies. Finally, interactions portfolio protects close to transformation with the scientific, technological 11,000 inventions and encompasses and innovation ecosystem are over 42,000 intellectual property organized around strategic titles.

* Excluding the impact of the coronavirus.

SAFRAN 2019 INTEGRATED REPORT I 28 STRATEGY AND BUSINESS MODEL

AIRCRAFT ENERGY CHAIN Improving aircraft propulsion systems ( or gas turbine engines) is presented on pages 24 and 25.

Safran enhances each link in the energy chain.

1 2 3 4 POWER ELECTRIC ELECTRIC POWER TRANSMISSIONS GENERATORS MOTORS MANAGEMENT

From materials and To meet the needs of more Safran offers different Power management is processes to system and all-electric aircraft, families of compact yet taking on an increasingly design, Safran keeps Safran is developing the powerful electric motors important role with the upgrading its systems most extensive and with integrated control electrification of aircraft, and equipment to enhance advanced range of “smart” electronics, tailored for to distribute this energy integration with engines. generators on the market, various applications such and ensure a stable and with fully integrated as landing gear actuation. protected power supply. control electronics. Other motors are purpose- designed to drive propellers on aircraft with all-electric or hybrid propulsion systems.

5 6 7 8 WIRING ELECTRICAL AUXILIARY BATTERIES DISTRIBUTION POWER UNITS (APUs)

With more and more Because of the high power Emerging more and All aircraft are fitted functions going electric, required by non-propulsive all-electric architectures with batteries used to start aircraft need denser and electrical functions and are changing the their engines. Tomorrow’s more complex wiring emerging propulsion needs traditional role of the APU, batteries will have to rise systems. Safran is especially propulsion, making it less and less to the challenge of electric developing these systems the aim is to develop “auxiliary”! Safran is propulsion. Safran is with its advanced smart distribution systems, therefore developing the naturally focused on modeling system, and capable of managing eAPU to address the significantly increasing is also working on systems an increasing number requirements of new more battery power density and capable of handling of loads, and supporting electric aircraft, and is endurance, while keeping the high voltages needed high voltages without already looking further weight as low as possible. for electric propulsion. overheating, short ahead with fuel cells that Even so, Safran considers circuits or arcing. could supplement or even the prospect of an replace APUs. all-electric medium- and long-haul aircraft unrealistic for the time being.

NEW AIR MOBILITY: A STRATEGIC FOCUS FOR SAFRAN Working in partnership with airframers in a highly dynamic ecosystem, Safran stands out as a leader in key systems (propulsion, equipment and interiors) for players in urban and regional air mobility. Safran is ideally placed to provide electric and hybrid propulsion and autonomy solutions for demonstrators and forthcoming commercial programs. The Mission Driven cabin: Safran and Uber have presented an eVTOL(1) cabin offering passengers an identical experience regardless of vehicle manufacturer.

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

2 9 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

HIGH-PERFORMANCE MATERIALS AND PROCESSES

The need to reduce aircraft and Higher running temperature is equipment weight leads to an a key factor in improving engine increased use of composite performance. A specific focus materials. Safran engines and is therefore placed on materials for equipment, whether nacelles, landing very high temperatures. A platform gear or brakes, are characterized for developing new monocrystalline by heavy mechanical loads. casting techniques for turbine fans To develop these solutions, Safran was inaugurated at the beginning set up the Safran Composites Center, of 2019. part of the Group’s R&T center, Safran In addition, Safran Seats is Tech, with resources and expertise developing its technological lead in organic matrix composites. in materials (plastics, composites, Other research focuses on new metal metals, fabrics, etc.) and alloys, and on high‑performance implementation processes. coatings compliant with European REACh regulations(1).

THE AIRCRAFT CABIN NAVIGATION AND AUTONOMY OF THE FUTURE TECHNOLOGIES

Through system integration Air, land, sea, and military the French Directorate General and optimization, the aircraft cabin navigation markets are constantly of Weapons Procurement (DGA). of the future will offer passengers evolving and expanding. Operational This covers autonomous vehicles, enhanced comfort and traveling and economic gains are sought by small land robots and drones, experience. integrating mobile units into laying the groundwork for Through Safran Cabin Innovation, cooperative groups, by increasing autonomous and collaborative Safran offers its customers autonomy, and by ensuring land- combat systems. Proficiency in opportunities for improving sales onboard continuum via secure links. technologies merging navigation (by adding seats capable of Actions such as these prove to be and environment perception data generating revenue or providing powerful drivers of renewed also enables the development new services), offering an exceptional technological development. of piloting assistance applications passenger experience (with a more Safran is actively preparing the shift for all types of aircraft. spacious and comfortable cabin, to autonomous systems for civil new features, etc.), and creating and defense applications based on or enhancing brand image technologies developed in optronic (through distinctive service, sensors, inertial navigation, critical design and products). onboard electronic systems and Safran is also developing innovative image processing and analysis. solutions in three major aspects The use of sensors and artificial of the aircraft cabin of the future: intelligence in an integrated system smaller ecological footprint, resulted in eRider, an autonomous improved passenger experience vehicle demonstrator for military and optimized cabin operability applications that can transport in flight and on the ground. infantry equipment on the ground and navigate autonomously. The demonstrator helped Safran Electronics & Defense win the Furious contract put out for tender by

(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.

SAFRAN 2019 INTEGRATED REPORT I 30 STRATEGY AND BUSINESS MODEL

DIGITAL TECHNOLOGIES AND DIGITAL TRANSFORMATION

INDUSTRY 4.0 These processes also open DATA PROCESSING opportunities for reducing the cost and environmental impact of Safran invests in and adapts transportation in the production of Innovation efforts are called for its production sites to ensure parts. Safran Tech’s Safran Additive to address the growing role played they are always of the highest Manufacturing hub, along with by services in the Group’s operations. industrial standard. partnerships such as the one with Techniques used to diagnose and Tools and resources in design, Saclay’s Additive Factory Hub, help forecast the condition of aircraft production, maintenance and services accelerate the development of these equipment and systems bring value benefit from Safran’s investments in processes for their future use in for Safran product users, as regards digital solutions such as augmented both operational considerations series production and repairs. reality, robotics, imaging, artificial (optimization of maintenance) intelligence and data use. These new AMBITIOUS POTENTIAL and fleet management support applications significantly improve GAINS THANKS TO ADDITIVE (evaluation of residual value). operational performance in terms MANUFACTURING: of cycle, cost and product quality. THE ENGINE EXAMPLE ELECTRONICS, The Factory of the Future is the DIGITAL PLATFORMS method of choice for obtaining AND CRITICAL SOFTWARE the best possible profitability from investments and a disruptive 15% competitiveness tool producing reduction in manufacturing costs Given that onboard electronics remarkable productivity gains. technologies for harsh environments It is a major asset for the Group’s are a central feature of many current activities and is at the very Group products, Safran heart of its strategy. A total of Electronics & Defense runs ambitious 49 projects for the production lines 25% projects on controller architectures of the future, at 30 sites, have been mass reduction featuring more efficient processors, scheduled across all companies and on component packaging from 2017. Twenty-two of these lines capable of withstanding the higher up to were running by the end of 2019. temperature environments of future aircraft systems. ADDITIVE MANUFACTURING 50 In systems engineering, Safran is components replaced working on process harmonization: by a single part a modern software development Additive manufacturing provides an workshop has been set up opportunity to improve costs, cycles for Group-wide rollout. and performance for numerous Lead time divided by engine and aircraft equipment components, by reducing the number of parts and tooling and introducing 6 new methods of optimizing design.

SAFRAN ECO-DESIGN AND PRODUCT LIFE CYCLES Environmental impact reduction at each stage of a product’s life cycle is an integral factor, from product design onwards. Safran pays particular attention wherever non-renewable natural resources are used, making product repairability a key point in its offering of maintenance solutions. Safran also proposes the use of reconditioned parts, applying a circular-economy logic in partnership with other industry players. In 2007, Safran partnered with Airbus and Suez in founding Tarmac Aerosave, which has become the European benchmark operator in storage and dismantling of military and civil aircraft. Since 2007, 170 aircraft and 135 engines have been dismantled and recycled, with a recovery rate of more than 92%.

3 1 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

ASSET NO. 2 OPERATIONAL EXCELLENCE: FOR LASTING CUSTOMER TRUST

Safran aims to become its customers’ leading supplier by offering world-class products and services. Quality and flight safety are the first decision criteria for all the Group’s employees.

VOICE OF THE CUSTOMER, A SAFRAN PRIORITY

Customer confidence and to customer needs. Maintenance In February 2020, Safran Helicopter satisfaction is founded on the Group centers have been located to ensure Engines opened a new 4.0 aerospace meeting its commitments to quality- maximum proximity to customers maintenance facility in south-west cost-lead time and the safety of and the Group has also developed France. products and services delivered. remote maintenance solutions Flow streamlining and new industrial Performance quality for services to enable rapid and efficient resources at this site result in a is founded on constantly listening troubleshooting and action. 30% reduction in maintenance cycles.

A CUSTOMER-FOCUSED TRANSFORMATION PROJECT To meet expectations expressed by its customers on excellence and competitiveness, in early 2018 Safran Landing Systems launched the BEST (“Bring Excellence to our cuSTomers”) transformation project. This seeks to provide all its airframer and airline customers the assurance of optimum, lasting quality. The transformation involves three phases: “Make non-quality visible”, “Demonstrate that quality is possible” and “Make non-quality impossible”. More than 1,500 employees across all sites are involved in the project, through 150 initiatives spanning all development functions, from production through to assembly line or service provision support. In the two years the project has been running, best practices have become standard, and the non-quality-on-delivery rate has been cut threefold, with customer satisfaction rising accordingly.

OPERATING EXCELLENCE SERVING LEAP Since production of the LEAP engine was launched in 2016, its ramp-up has 15% been a challenge. Over and above the high level of innovation and the adoption lower fuel of new manufacturing procedures (additive manufacturing, composite consumption materials, etc.), the ramp-up of LEAP production has been the fastest ever than with known in civil aviation industry history, with 1,736 engines delivered in 2019. CFM56 To sustain this fast pace, Safran made investments to increase its production capacity and adapted the entire production chain: introduction of three pulse lines, transforming assembly at the Group’s plants; active dual source supplier policy and introduction of a third source for the most critical engine components; set-up of dedicated teams to share its development and industrialization expertise in view of supporting 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

compared to the CFM56 and 50% reduction in NOx emissions and noise in relation to the CAEP/6 standard). The LEAP engine is the most reliable new-generation civil aircraft engine in its category, used by 109 airlines with over 7.2 million flight hours at the end of January 2020.

SAFRAN 2019 INTEGRATED REPORT I 32 STRATEGY AND BUSINESS MODEL

SUPPLY-CHAIN PERFORMANCE

Excellence in supply-chain control is a prerequisite for performance quality in product delivery. 700 Safran’s purchasing policy is supplier quality designed to meet its objectives assurance managers 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, 300 quality and lead time) and enables supplier performance Safran to provide its customers with managers measure suppliers’ quality and innovative, value-creating solutions. lead-time performance To develop an agile supply chain, the Group promotes supplier involvement from the development stage of its products and services, quality assurance managers, inviting them to put forward their responsible for ensuring day-to-day requirements set by international innovations and contribute the full quality of all products purchased. quality standards, thereby furthering breadth of their expertise. Safran has The supplier quality assurance standardization throughout the also designed a policy to diversify managers are backed by a team of aerospace sector. The 2020 version suppliers, by systematically more than 300 supplier performance of SAFe will extend the Advanced qualifying multiple sources for managers, who measure suppliers’ Product Quality Planning (APQP) critical materials and parts. quality and delivery-time requirements, strengthen Safran’s suppliers undergo a rigorous performance and ensure progress requirements on prevention and selection and approval process. plans are properly implemented. remediation of quality deviations, Decisions to award new supply or The requirements that Safran applies clarify design requirements for development contracts are taken to its suppliers are formalized in its build-to-spec(1) suppliers and ensure collectively by a Supplier Selection general purchasing conditions, in the suppliers’ personnel are familiar with Committee spanning industrial, general quality requirements set out the Safran Group’s ethics whistle- quality and purchasing functions. in the SAFe (SAFran exigencies) blowing system (safran@alertethic. Suppliers are regularly audited and document, and in product-specific com). SAFe also includes Safran’s monitored by some 700 supplier documents. SAFe includes the Responsible Purchasing Charter.

CONSTANT IMPROVEMENT

Safran is constantly improving its Lean Sigma, with Green Belts, Black processes, notably through research Belts and Master Black Belts driving and the implementation of innovative the Group’s transformation through concepts, by developing cooperation a structured and standardized with suppliers to increase sharing project management approach; of best practices within the Group. visual management; Permanent, cross-Group initiatives QRQC (2), which has been rolled out are carried out: across industrial and technical participative innovation initiatives, operations in all Group companies. enabling all employees to put forward ideas for improving the Group. More than 143,000 employee innovations were taken up across all the Group’s business sectors in 2019;

(1) Designed by the supplier according to customer specifications. (2) QRQC: Quick Response Quality Control, a fast problem solving management method that emphasizes constant vigilance and immediate response.

3 3 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

ONE SAFRAN, KEY SUCCESS FACTOR

Safran is pushing ahead with its One One Safran involves building Safran initiative, launched more than on best practices and extending four years ago with the purposes of them throughout the Group. developing group-wide take-up of a 1,300 Since mid-2016, a total of 1,300 One common corporate management projects launched since Safran projects have been launched, system and performance indicators, mid-2016, with close to and nearly 1,000 completed. In and deploying operational excellence, 1,000 completed production, more than 500 projects all with the goal of product quality have been completed, and some and reliability. teams have already taken up a second or third project. The results of these projects are very tangible, as regards both their impact on performance and buy-in by ONE TEAM the teams. To improve the efficiency of assembly-line operations and support Airbus To anchor One Safran more firmly in addressing its industrial throughput challenges, a One Team project, in Group practices, its standards now applying the principles of the One Safran standard, was run at the A350 line, feature in the training courses given with personnel from Airbus and six Group companies (Safran Landing at Safran University. One Safran Systems, Safran Electronics & Defense, Safran Electrical & Power, Safran contributes to upholding customer Seats, Safran Cabin and Safran Aerosystems). The initiative leaders on trust in the Group. Some of its the workshop worked together to forge a cohesive and responsive FAL (final assembly line) team capable of effectively solving problems projects are run jointly by Safran encountered on the ground. with its customers. One example More One Team projects will be run in 2020 to further develop is the One Team project in which this close contact with the customer. all Safran teams at a customer’s assembly lines work together with the operational managers of these lines at the customer’s site.

COST CONTROL AND COMPETITIVENESS

Increasing Group competitiveness SAFRAN OPERATING MARGIN is founded on constant efforts ON THE RISE ACROSS ALL BUSINESSES (ADJUSTED DATA) to reduce production costs. Building on endeavors previously undertaken, recurring operating AEROSPACE margin has continued to grow since PROPULSION 2015, by at least 100 basis points GROUP per year. Thanks to constant productivity gains (optimization of industrial sites and Group locations, modernization of 14.4% 19.2% the production tool), recurring 15.5% 20.6% 2018 2019 2018 2019 purchasing gains and annual synergies of €250 million expected by 2022 following the combination with Zodiac Aerospace, the recurring operating margin should continue AIRCRAFT EQUIPMENT/ AIRCRAFT to improve. DEFENSE/AEROSYSTEMS INTERIORS

12.5% 13.1% 3.2% 5.7% 2018 2019 2018 2019

SAFRAN 2019 INTEGRATED REPORT I 34 STRATEGY AND BUSINESS MODEL

OPERATING EXCELLENCE IN HEALTH, SAFETY AND THE ENVIRONMENT

Rollout of Safran’s occupational entities and provide the basis reach of its health and safety culture. health, safety and environment for audit of the level of Three priorities were identified: policy (HSE) draws upon: HSE maturity reached at each digitized training, prevention of a tight-knit organization across site (50% of sites were “gold” rated situations liable to entail psychosocial all levels, with HSE coordinators at in 2019, and the aim is for all sites risks and improved expertise in tier-one companies, site prevention to attain this rating by 2025). ergonomics. officers, occupational health Safran’s health & safety culture services, a network of decentralized Safran is committed to nurturing experts, and division coordinators a culture of prevention of covering several entities locally; occupational health and safety Safran’s global Health, Safety risks, for the greater benefit of and Environment (HSE) guidelines, its employees, suppliers, customers, for steering risk management and all other stakeholders concerned and improving HSE performance. by its operations, in a spirit of These guidelines set out transparency and sincerity. requirements applying to all In 2019, Safran published its HSE processes throughout the Group. vision through to 2025, setting out They are implemented by all a roadmap to further advance the

ABILITY TO FORM TARGETED PARTNERSHIPS

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

INDUSTRIAL AND COMMERCIAL VENTURE CAPITAL

Focus on the joint venture Safran Corporate Ventures Oxis Energy, a UK company, with GE Safran Ventures, the Safran front-runner in lithium-sulfur cells The most emblematic of these investment subsidiary formed for high-energy-density battery alliances is very certainly the in March 2015, contributes to systems, in which Safran Ventures partnership with GE to develop the Group’s innovation strategy has invested alongside Samsung, engines for short- and medium-haul in five priority areas, by financing Arkema, Sasoil and Umicore; fleets. It was established in 1974 and companies at average first-round EPS, a US company in which Safran renewed in 2008 until 2040, within amounts of €1 million to €5 million, Ventures has invested alongside the joint venture, CFM International. under an overall portfolio target Boeing Horizon X, selling high- This alliance helped redefine of €80 million. performance batteries that are international cooperation and In the field of new air mobility, used in programs set up by contributed to changing the course for example, from 2017 to 2019 NASA (X57), Bell (Manta), Boeing of commercial aviation. CFM Safran invested in three companies and Bye Aerospace (a front-runner International is currently the world’s developing breakthrough in electric aviation). leading supplier of commercial technologies in aircraft electrification: Safran Ventures also continues aviation engines, with a product Turbotech, a French startup its close watch on US, German, UK, line (CFM56 and LEAP) that is founded by four former Safran Swiss and French startups in the the sector reference for efficiency, employees, developing a fields of batteries, autonomy, electric reliability, cost of ownership 55kW regenerative-cycle machines and sustainable fuels. and emissions levels. turbogenerator under a disruptive heat-exchanger patent, for VTOL(1) aircraft weighing under 650kg. Operational service is set for mid-2020;

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

3 5 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

ASSET NO. 3 RESPONSIBLE CONDUCT: A STAKEHOLDER DEMAND

Safran’s leading positions in aerospace, defense and space owe everything to the dedication of its 95,000 employees, and to its many partners. Key factors behind Safran’s successful performance, and the workforce engagement, include the provision of safe, respectful, ethical working conditions, the promotion of diversity in all Group entities, and the assurance of satisfying and rewarding career prospects.

COMMERCIAL COMPLIANCE, A DECISIVE FACTOR AND COMPLETE COMMITMENT

In 2012, Safran became the first commercial compliance, again specific risk mapping; code of CAC 40 company to obtain based on the requirements set conduct; dedicated organization; “anti-corruption” certification from by international conventions appropriate procedures; information the French Agency for the Diffusion and the national regulations and training program; procedure of Technological Information (ADIT). applicable to Safran’s operations. monitoring; and an internal This certification, renewed in 2017 This commercial compliance program whistle-blowing alert system. for a three-year period, attests seeks to instill a group-wide culture It comprises a series of standard to the robustness of the Group’s of honesty, as set out in Safran’s operating procedures applied by anti-corruption program. Its Ethics Guidelines, and see that every each subsidiary in accordance with requirements are as strict as those employee embraces the imperative local legislation applicable to its of international standards: US Foreign of demonstrating exemplary organization, products and markets. Corrupt Practices Act, UK Bribery conduct in this regard. It is also proposed to affiliates in Act, OECD Convention, the French With the dual objective of developing which the Group is not the majority Sapin II Act, the tenth principle of the personal responsibility and protecting shareholder. UN Global Compact, and ISO 37001. Group assets, the program takes Safran’s anti-corruption measures eight focuses: exemplary conduct include a specific program on from the very top (“tone at the top”);

Preventing corruption risks Export control Customs regulations

28 Trade 434 Export 38 Customs INTERNAL Compliance Officers Control Experts Officers NETWORK 199 Trade & Correspondents Compliance Managers

EMPLOYEES 4,900 11,600 1,470 TRAINED IN 2019

9 out of 14 15 companies 40 trade Risk mapping 214 information tier-one companies certified Authorized compliance for 100% memos issued holding ADIT Economic Operator reviews performed of subsidiaries internally anti-corruption by customs in 2019 certification authorities

SAFRAN 2019 INTEGRATED REPORT I 36 STRATEGY AND BUSINESS MODEL

A RESPONSIBLE RELATIONSHIP WITH SUPPLIERS AND SUBCONTRACTORS

Safran operates a purchasing policy Purchasing that seeks to ensure it works with a base of suppliers guaranteeing 47% high-performance, reliability and ~57% of purchasing volume strict compliance with all applicable sourced in France, including of adjusted national and international 83% sourced from SME Group revenue regulations. Suppliers are required and mid-sized companies to comply with international trade regulations and with all applicable In application of French Law requirements on environmental No. 2017-399 of March 27, 2017 SAFRAN HOLDS protection, personal health and on duty of care, Safran has drawn up RESPONSIBLE SUPPLIER safety, ethics and labor relations. a vigilance plan. This sets out risks RELATIONS ACCREDITATION The policy ensures business is faced by the Group and its main SINCE 2017 awarded to suppliers capable subcontractors and suppliers in of meeting the Group’s standards, the areas of environment, health, its competitiveness criteria and safety and human rights, along with SAFRAN the demands of the aerospace, the measures taken to prevent and HAS BEEN A MEMBER defense and space markets. minimize such risks. Signing Safran’s OF THE SME PACT Safran seeks to engage with suppliers Responsible Purchasing Charter SINCE 2010(1) through fair, long-term, mutually is one of the first commitments beneficial business relationships. undertaken by all suppliers.

SAFRAN, A RESPONSIBLE EMPLOYER

Developing Safran’s employer in aerospace-related subjects. draws up a list of the Top 500 attractiveness Safran also fields a dynamic companies voted the best places With more than 12,000 departures employee network of 260 “Safran to work by French employees. , graduates from and close to 15,000 recruitments Ambassadors” In 2019, Safran began an action plan selected schools and universities. per year, recruitment, integration specific to the United States, where and skills management challenges Through actions such as these, the employment market is more are of decisive importance to Safran. Safran has developed a recognized tense, Safran businesses are less well employer brand: 4th place in the Safran’s policy on constant known, and recruitment levels are on development of employer brand Universum “students” ranking, the high side, and to Morocco and and attractiveness is designed 7th place in the France Glassdoor Mexico, where needs arise for to help it draw in top talent. best-employers list, and 4th place Long‑term partnerships are forged in the annual ranking of the best developing Safran’s employer to strengthen ties with schools employers in France published by attractiveness and talent loyalty. and universities running courses business magazine Capital, which

EMPLOYEE SHARE OWNERSHIP With around 7% of its share capital (and 10.8% of voting rights) held by current and former employees at December 31, 2019, Safran is in the top five major French companies (CAC 40) with the most developed employee share ownership. Safran successfully encourages its employees holding share capital through permanent measures such as savings plans receiving employer contributions: 43% of Group employees worldwide hold Safran shares. This share ownership also entails the participation of two representatives of the employee shareholding funds in the activities of the Board of Directors. In 2020, Safran announced an international employee shareholding plan aimed at associating employees with the objectives, successes and performances of Safran, as well as strengthening the integration of employees joining 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.

(1) France scope (excl. Safran Aerosystems, Safran Passenger Solutions, Safran Seats, Safran Cabin).

3 7 I SAFRAN 2019 INTEGRATED REPORT STRATEGY AND BUSINESS MODEL

2019 KEY FIGURES Promoting diversity and inclusion With women accounting for 29% of the workforce, Safran has increased the number of initiatives for encouraging applications from women, developing gender balance in teams, and facilitating women’s 95,443 access to high-level positions. employees Safran is a founding member of (of which 29% women) Women in Engineering, a program that promotes careers for women in the engineering sector. Its action plan on improving the workforce gender balance sets four specific objectives for 2023: make equal opportunity a key factor in corporate transformation, develop a more Safran’s disability policy has four inclusive corporate culture, make key objectives: retaining employees 14,880 Safran more attractive to women with disabilities, hiring the disabled, new hires applicants, and increase the number working with sheltered workshops of women in executive positions. and disabled-staffed companies, In 2019, Safran obtained renewal and deploying the Afnor “disability- of the Gender Equality European friendly workplace” standard for & International Standard (GEEIS) the integration of disability into label at European level. all Group processes. 2.8% absenteeism rate 5.1% overall employment rate of disabled workers in 2019(1)

Safran is also active in social inclusion and professional integration for 37% young people. Under a Europe-wide of new hires were women in 2019 agreement, Safran commits to Group companies taking on apprentices totaling 5% of the workforce and interns another 5%. Young interns, Objective work-study trainees and 41% PhD graduates made up 11.6% by 2023 of the Group’s Europe-based workforce in 2019. 12% of senior managers were women in 2019

Objective 16% by 2023

(1) France agreement scope (excl. Safran Aerosystems, Safran Passenger Solutions, Safran Seats, Safran Cabin).

SAFRAN 2019 INTEGRATED REPORT I 38 STRATEGY AND BUSINESS MODEL

Plan ahead for tomorrow’s skills It is essential to keep pace with Training and skills development and fulfill employees’ aspirations far-reaching change in skill sets Each year, Safran’s strategic training By virtue of its position as a designer and business functions, against focuses are shared with all of the and manufacturer of global solutions a backdrop of rapid transformation: Group’s HR and managerial teams. in the aerospace value chain, Safran digital skills are taking on critical Safran University develops a full businesses generate new needs importance, in fields such as digital catalog of training courses, and in human resources with expert continuity, predictive maintenance, Group companies assess training and managerial capabilities. software, artificial intelligence, priorities in line with these focuses. The transformation that this entails additive manufacturing, Safran University acts as a key sets major challenges in terms of cybersecurity, data management vector for onboarding new hires, preparation and support. for new services, architecture, transforming the organization and Safran addresses these challenges industrial engineering and industrial instilling leadership across the Group. by anticipating future needs and data processing; It inducts new hires and brings fulfilling the aspirations of its organizational and managerial together Group employees from employees to ensure full workforce adaptations are a necessity, different companies, countries and commitment and optimum Group through collaborative management, generations, in a place that inspires performance. autonomous cross-functional pride and belonging in the Safran teams, multi-machining, multi-skills, community. internationalization of managerial It ensures skills development practices, etc.; and participates in the creation data processing is taking of interactive, mutually supportive on increasing importance in networks of executives who develop Safran’s well-established skills their transformative capabilities (in mechanics, avionics and and acquire and transmit the Group’s materials), which remain major values and culture. factors in Safran’s ability to stand out from the competition. At the same time, an ecological transition demands progress in other existing skills in areas such as power electronics, energy management, systems, navigability and new fuels. 2.3 million hours of training (on-site Career development and mobility For this reason, mobility practices and distance) worldwide in 2019 90% of employees attended are strongly encouraged and performance and career development acknowledged throughout Safran. interviews in 2019. Varied career- In late 2019, Safran began a program path propositions are available to extend its mobility policy to all employees, through career internationally, from several aspects: committees in operational entities develop a more extensive offering and Group cross-functional of international and cross-company 483,000 committees. career openings, giving fuller hours of training given Workforce fluidity and opportunities by Safran University access to wider-scale mobility in key performance areas for employees to switch jobs and for “strategic resources” locations seamlessly, to develop (i.e., high-potential profiles, existing skills and acquire new ones, experts and managers); is both a key to maintaining their improve mobility openings employability and a prerequisite by employment area to address for the Group’s transformation internal and external recruitment and agility. challenges in regions where the job 83% market is less supple, as in Mexico attendance at one or more training More than or Morocco; sessions during the year among all employees worldwide step up the action plan on development and acknowledgment 2,000 of expert capabilities. geographic mobility transfers in 2019

3 9 I SAFRAN 2019 INTEGRATED REPORT RISK MANAGEMENT

SAFRAN’S ENTERPRISE RISK MANAGEMENT SYSTEM AND ITS MONITORING

Safran operates a robust Enterprise Risk Management (ERM) system.

Safran’s ERM system has spawned and has become one of the Group’s and control of major risks is regularly a strong risk management culture key performance drivers. Full details updated by the risk committees of spanning all company processes. on Safran’s ERM system appear tier-one companies, the central Today, it enjoys very strong take-up in chapter 4 of the 2019 Universal corporate departments, and by all teams, in all units, at all levels Registration Document. ultimately the Group Risk Committee. throughout the organization, Identification, appraisal, processing

Chief Executive Ocer Board of Directors

Group Risk Committee Audit and (Chief Executive Ocer + 8 Directors) Risk Committee

Risk factor Half-yearly Annual report The Audit and Risk Committee information indicators on the reviews the risk mapping for publication ERM and the work related to the system main risks faced by the Group, as presented to it twice a year by the Risk and Group Risk and Insurance Department. Insurance Department The Committee reports to the Board of Directors on its risk management work at the same intervals. Half-yearly Annual report indicators on the ERM system

Central corporate Tier-one entities departments

Each tier-one company has a Risk Tier-two entities and joint ventures Manager who prepares a risk map and is in permanent liaison with the Risk and Insurance Department. Risk Managers are tasked with implementing the risk management The Risk and Insurance Department process for their entire operational reports to the Group Chief Financial scope, i.e., in their respective tier-one Officer. It comprises the Risk and It develops methodological companies and in their subsidiaries Insurance Department director techniques and processes to ensure and investments. and Corporate Risk Managers, consistent handling of risks by Each of Safran’s central corporate and is responsible for implementing tier-one companies and central departments also prepares a map the Group’s ERM system. corporate departments. of the main risks in its scope.

SAFRAN 2019 INTEGRATED REPORT I 40 RISK MANAGEMENT

MAIN RISKS

The risks identified by Safran as material are ranked by criticality (in terms of likelihood of occurrence and potential impact) in a limited number of categories, consistent with Safran’s three key assets.

Risks relating to the Group’s strategic development Risks relating to Group Technological risks operating activities Environmental and climate change risks Aircraft accidents Uncertainty regarding returns on investments Delays, program development Dependence on public procurement contracts and industrialization Acquisition and restructuring risks Quality and safety Human Resources risks of products and services Supplier and partner risks ASSET NO. 1 Health, safety and Risks relating to the environment environmental risks in which the Group operates Personal safety risks SUSTAINABLE Data confidentiality risks Political and geopolitical uncertainties INNOVATION Changing economic conditions (including the impact of Covid-19) • Self-funded R&T and R&D Risk of negative Impact of the aviation cycle • Patent portfolio Competition media coverage

Financial market risks CLIMATE STRATEGY Foreign currency risk Interest rate risk ASSET NO. 2 ASSET NO. 3 Counterparty risk Liquidity risk OPERATIONAL RESPONSIBLE EXCELLENCE CONDUCT • Responsible purchasing Legal • Factory of the future and regulatory • Health, safety, • Recruitment risks environment • No discrimination

FINANCIAL PERFORMANCE • Growth in adjusted revenue • Growth in service business • Growth in the recurring operating margin • EBIT to FCF conversion rate

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 February 18, 2020, Safran’s hedging portfolio totaled US$28.1 billion and provided visibility up to 2023.

4 1 I SAFRAN 2019 INTEGRATED REPORT CORPORATE GOVERNANCE

A BOARD OF DIRECTORS INCORPORATING BEST GOVERNANCE STANDARDS INTO ITS ACTIVITIES

Safran refers to the “Corporate Governance Code of Listed Corporations”, drawn up jointly by the French companies’ associations, AFEP and MEDEF. Safran’s Board of Directors determines its strategy and oversees its implementation.

Separation of the roles of Chairman of the Board of Directors and Chief Executive Officer Audit and Risk Committee Since 2015, the Board has chosen to separate the roles of Chairman of the Board of Directors Appointments and Board of Directors and Chief Executive Officer. Compensation Committee Thanks to this governance structure, the Company benefits from Innovation and the Chief Executive Officer’s Technology Committee managerial expertise and industry Chairman of the Board of Directors experience, as well as the Chairman’s international standing. The strong strategic fit of their profiles enables Chief Executive Ocer the Group to be governed Scientific Committee harmoniously, based on transparent relations between the Board of Executive Committee Directors and Executive Management and a balanced and respectful Compliance, Ethics and Anti-Fraud Committee distribution of their roles.

Lead Independent Director In 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 since the Company has separated the roles SUCCESSION PROCESS of Chairman of the Board and On November 4, 2019, at the recommendation of the Appointments and Chief Executive Officer. Compensation Committee, the Board of Directors appointed Olivier Andriès to succeed Philippe Petitcolin as Chief Executive Officer from January 1, 2021. Independent Directors Olivier Andriès has all the qualities and attributes required to head The aim of having independent up the Group. Directors on the Board is to provide In particular, he has built up solid experience over the past ten years, shareholders with assurance that first in Defense and Security between 2009 and 2011, and then in Propulsion since 2011 (Safran Helicopter Engines and Safran Aircraft the collegiate body of the Board Engines). Until taking office as Chief Executive Officer, he will stay on comprises members who have total as CEO of Safran Aircraft Engines, then take on specific assignments independence to analyze, judge, under the supervision of Philippe Petitcolin. The conditions for a smooth, take decisions and act, always in the orderly transition are therefore all in place. Company’s interests. Highly engaged Olivier Andriès was selected after a succession process that involved and involved in the Board’s work, their interviews and assessments of both internal and external candidates, freedom of judgment and expression compliant with best corporate governance standards, overseen by contributes to the quality of the the Chairman of the Board of Directors, Ross McInnes, and the Board’s discussions and decisions. Lead Independent Director, Monique Cohen. Their professional and personal experience provides an outside view that is beneficial for the Group.

SAFRAN 2019 INTEGRATED REPORT I 42 CORPORATE GOVERNANCE

AN EXPERIENCED BOARD OF DIRECTORS TAKING UP THE GROUP’S STRATEGIC CHALLENGES

BOARD MEMBERSHIP STRUCTURE CONSISTENT WITH SAFRAN SHARE OWNERSHIP

THE BOARD OF DIRECTORS SHAREHOLDERS AT DECEMBER 31, 2019 VOTING RIGHTS AT DECEMBER 31, 2019 (number of Directors) (percentage)

Employees 18.1 4 and employee shareholders French State Link Independent 8 to French 10.8 71.1 2 State(1) Employees Free float Chief Executive 1 Ocer Other 1 1 Chairman

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

Experience and specific duties Number The Board of Directors has a wide range of experience, exercised by Directors in different of Directors making it well equipped to deal with strategy and sectors and activities performance challenges. It regularly considers the desired Aerospace industry 11 Other industries 15 balance and diversity of its membership structure and that Innovation, R&T, Development, Engineering 13 of its committees. Its diversity policy is structured around International career and experience 11 principles and objectives related to the size of the Board, Strategy, competition and M&A 11 the representation of the Company’s various stakeholders, Finance and management control 11 Digital – New technologies 6 the proportion of independent Directors, the depth Governance and compensation 17 and fit of the directors’ skills and expertise, Human Resources – CSR 9 international experience, and gender balance.

COMMITTEES ADDRESSING THE GROUP’S STRATEGIC CHALLENGES (2019 key figures)

Audit and Risk Appointments and Innovation and Committee Compensation Committee Technology Committee 5 6 9 7 2 5 meetings members meetings members meetings members

82% 80% 98% 67% 90% 75% attendance independent(2) attendance independent(2) attendance independent(2)

(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 Annual General Meeting. (2) Excluding Directors representing employees and Directors representing employee shareholders.

4 3 I SAFRAN 2019 INTEGRATED REPORT CORPORATE GOVERNANCE

MEMBERSHIP STRUCTURE OF THE BOARD OF DIRECTORS AND ITS COMMITTEES

ROSS PHILIPPE HÉLÈNE HERVÉ JEAN-LOU McINNES PETITCOLIN AURIOL POTIER CHAILLOU CHAMEAU Chairman Chief Executive Director I W of the Board Officer representing I M employees C M M M

MONIQUE HÉLÈNE ODILE DIDIER LAURENT COHEN DANTOINE DESFORGES DOMANGE GUILLOT Lead Independent Director Chair of the Audit M I M Director representing and Risk Committee the French State Chair of the I W Appointments W and Compensation Committee I W

VINCENT GÉRARD DANIEL PATRICK ROBERT IMBERT MARDINÉ MAZALTARIM PÉLATA PEUGEOT Director Director Director Chair of Director appointed at the representing representing the Innovation representing recommendation of employee employees and Technology F&P the French State shareholders Committee M I M M M I M

I Independent C Chairman Audit and Risk Committee Appointments and Compensation FERNANDA SOPHIE Committee SARAIVA ZURQUIYAH 10 95% Innovation and Technology meetings attendance Director representing Committee I W employee W Woman shareholders M Man W

SAFRAN 2019 INTEGRATED REPORT I 44 CORPORATE GOVERNANCE

PROJECTED MEMBERSHIP PROJECTED MEMBERSHIP STRUCTURE AT THE CLOSE STRUCTURE AT THE CLOSE OF OF THE 2020 ANNUAL THE 2020 ANNUAL GENERAL GENERAL MEETING(1) MEETING(1)

(2) (2) 17 18 61.5% 64.3% members members independent independent

PROPOSITIONS presented to the Annual General Meeting of May 28, 2020

Appointment of an additional woman independent Director: • The Board of Directors will invite the shareholders to appoint Patricia Bellinger as an additional independent Director. Patricia Bellinger has all of the attributes that the Company has identified it is looking for in a new Director and that were sought in the selection process. In addition to her independent status, the Appointments Committee was particularly impressed with the depth and breadth of her career and her diverse experience, as well as her time in industry, her HR/Diversity/Talent Management expertise (in terms of both strategic and people-centric issues), her multilingualism, and her knowledge of French corporate governance. To allow this additional appointment, the shareholders are invited to amend the Company’s bylaws accordingly. • Shareholders’ acceptance of the Board’s proposals will raise the proportion of independent directors to 64.30%(2) and the proportion of women on the Board to 42.86%(3).

Appointments of two Directors representing employee shareholders: • The high rate of employee shareholding at Safran develops strong long-term alignment between Group employee and shareholder interests. This warrants the presence of two Directors representing employee shareholders, compliant with legislation and Company bylaws. As current directorships expire, new appointments of Directors representing employee shareholders must be put before the Annual General Meeting. • To ensure that employee shareholders are adequately represented, and also to promote diversity (particularly in terms of trade union representation) and gender balance in all of its components, the Board of Directors supports and recommends that the shareholders approve two of the four candidates proposed, by voting in favor of the appointment of Marc Aubry (chair of the largest employee shareholder corporate mutual fund [FCPE]) and Anne Aubert.

(1) Projected membership structure, subject to the adoption by the Annual General Meeting of May 28, 2020 of the draft resolutions concerning the Board’s membership structure. (2) In accordance with the AFEP-MEDEF Code, Directors representing employee shareholders and Directors representing employees are not taken into account when calculating the percentage of independent Directors. (3) In accordance with the Pacte Act, Directors representing employee shareholders and Directors representing employees are not included in this calculation.

4 5 I SAFRAN 2019 INTEGRATED REPORT CORPORATE GOVERNANCE

AN EXECUTIVE COMMITTEE IMPLEMENTING GROUP STRATEGY AND STEERING GROUP OPERATIONS

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

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 provides 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 18 members.

To maximize the Group’s strengths, Compliance, Ethics and which are integral to its success Anti-Fraud Committee Scientific Committee (see the previous section), the Executive Committee is supported This Committee is responsible Led by the Group Director of by a number of committees, for supervising employee compliance Innovation, the Scientific Committee including the Compliance, with the rules defined in the Ethical is tasked with helping Safran deploy Ethics and Anti-Fraud Committee Guidelines (upholding the law, a world-class scientific research and the Scientific Committee. engaging in proper business policy. It assesses, in particular, practices, protecting people and the excellence of scientific assets, etc.), as well as any updates partnerships and the relevance and revisions. of the long‑term R&T plan. This approach is sponsored by The Committee also contributes the Corporate Secretary, and to Safran’s technological difference the responsibilities are handled by identifying new areas of research. by the relevant departments The Committee comprises eight (for example, the Group Department top-level academics and holds three of International and Public Affairs plenary meetings a year. Recent work manages trade compliance and includes approximately 15 theme- export control). The Group’s based reviews in three major areas resources mainly include the Ethical (software and systems engineering, Guidelines, anti-fraud policies, materials and structures and sensors internal control procedures, and signal processing). These reviews processes and standards, and ensure the Group is advancing in a fraud prevention, awareness, the right direction. detection and assessment program.

SAFRAN 2019 INTEGRATED REPORT I 46 CORPORATE GOVERNANCE

EXECUTIVE COMMITTEE MEMBERS (At March 25, 2020)

PHILIPPE JEAN-PAUL OLIVIER STEPHANE BERNARD PETITCOLIN ALARY ANDRIES CUEILLE DELPIT Chief Executive CEO Safran Landing CEO Safran Aircraft Senior Executive VP Chief Financial Officer Systems Engines R&T and Innovation Officer

PASCALE STEPHANE ALEX CEDRIC NORMAN DUBOIS DUBOIS FAIN GOUBET JORDAN Executive VP Executive VP Human Corporate Secretary CEO Safran Nacelles CEO Safran Cabin Communications Resources

VINCENT JOHN JEAN-JACQUES FRANCK ALAIN MASCRÉ O’DONNELL ORSINI SAUDO SAURET CEO Safran Seats CEO Safran Executive VP CEO Safran CEO Safran Aerosystems Performance and Helicopter Engines Electrical & Power Competitiveness

MARTIN SEBASTIEN ALEXANDRE SION WEBER ZIEGLER 18 CEO Safran CEO Safran Senior Executive VP members Electronics Passenger International and & Defense Solutions Public Affairs

4 7 I SAFRAN 2019 INTEGRATED REPORT CORPORATE GOVERNANCE

A COMPENSATION POLICY SUPPORTING SHORT- AND LONG-TERM VALUE CREATION

CORPORATE OFFICER COMPENSATION POLICY

In the interests of the Group and its personal risk insurance plans short- and long-term performance, stakeholders, the compensation implemented by the Group. as assessed by the Board. policy must be competitive in order Compensation subject to to attract, motivate and retain the Chief Executive Officer’s performance conditions accounts best profiles and talent (which may compensation policy and structure for the largest percentage of come from within or outside the The structure of the Chief Executive the overall compensation package. Group) for key positions. Officer’s compensation package comprises fixed compensation, Chairman of the Board of Directors’ annual variable compensation, compensation policy and structure and performance shares awarded PAY RATIO(1) In line with his position as a under a long-term incentive In France, pay ratios between non‑executive Director and the (LTI) plan. specific duties conferred on him, the level of compensation The Chief Executive Officer of Safran’s corporate officers the Chairman receives fixed is covered by the supplementary (Chairman and Chief Executive compensation. pension and personal risk insurance Officer) and the average He does not receive any variable plans implemented by the Group. compensation of Safran’s compensation or compensation employees in 2019 were under a long-term incentive plan. The underlying aim is to closely 8 and 47 respectively. He does not receive attendance fees. align the CEO’s interests with those The Chairman is covered by the of the Group and its shareholders, supplementary pension and by achieving a balance between

CHIEF EXECUTIVE OFFICER’S RECURRING COMPENSATION STRUCTURE

≈ 69% Subject to performance conditions ≈ 38% Target ≈ 38% long-term incentive* In performance shares ≈ 31% (potential) Target annual ≈ 63% variable compensation In cash ≈ 31% Annual fixed compensation ≈ 31% Not subject to performance conditions

* Value at grant date in accordance with IFRS.

(1) See chapter 6 of the 2019 Universal Registration Document.

SAFRAN 2019 INTEGRATED REPORT I 48 CORPORATE GOVERNANCE

AN EQUIVALENT VARIABLE COMPENSATION POLICY IS ADAPTED FOR CERTAIN GROUP EXECUTIVES AND SENIOR MANAGERS

ANNUAL VARIABLE COMPENSATION LONG-TERM INCENTIVE PLAN – PERFORMANCE SHARES The Chief Executive Officer’s annual variable compensation is contingent on achieving economic This mechanism is well adapted to the Chief Executive and individual, financial and non-financial, quantitative Officer position given the level of direct contribution and qualitative performance objectives, consistent expected from him to the Group’s long-term with the Group’s overall business. performance. This system helps promote the alignment For 2020, the CSR-HR objectives cover measures of management’s interests with those of the Company and priority actions on the environment (deployment and shareholders. of low-carbon project, alignment of CSR policy Performance shares are awarded to the Group's and organization with the Group’s climate and top managers. The grant of these shares is subject environmental strategy), safety (further reduction to the attainment of demanding internal (ROI and in the frequency rate of occupational accidents) FCF)(2) and external (TSR)(2) performance conditions, and human resources (hiring-related initiatives: measured over three years. schools, gender balance and internationalization). LONG-TERM INCENTIVE (3) VARIABLE COMPENSATION OBJECTIVES(1) PLAN PERFORMANCE CRITERIA (as a %) (as a %) 33 30 Individual TSR 35 ROI 40 ROI 7 WC 20 35 FCF FCF

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

4 9 I SAFRAN 2019 INTEGRATED REPORT PERFORMANCE AND VALUE CREATION

SUSTAINABLE VALUE CREATION

Safran is convinced that in order to sustain prosperity, a company must create and share value with all its stakeholders.

By generating a positive contribution that it creates among all its portfolio and R&D efforts and for all its stakeholders and investing stakeholders: customers benefit shareholders receive attractive in technologies that will contribute from differentiating and competitive and sustainable compensation thanks to meeting aviation sector products serving their businesses, to a capital allocation policy that greenhouse gas emission employees enjoy attractive working seeks to provide, over the long term, commitments, Safran is preparing conditions and a social model where organic growth in our businesses. the foundations for its future growth. they share in profits, the environment The Group therefore shares the value benefits from the Group’s technology

Breakdown of value created in 2019

PURCHASING REVENUE AND OTHER COSTS(1)

VALUE GENERATED BY SAFRAN

EMPLOYEES(2) INVESTMENT FRENCH DEBT IN THE FUTURE(3) STATE (4) HOLDERS(5)

SHAREHOLDERS 55% 32% 12% 1% - TSR(6) 2005- Attractive social More than Taxes and duties One of the best 2019: +16.54% per year model founded €600 million The world’s best industry financial on giving employees in self-financed R&T technology serving signatures - Share buyback: a vested interest expenditure national security worldwide €1,076 million in Group results in 2022 and dissuasion in 2019

NB: Based on 2019 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) Income tax and other taxes and duties. (5) Cost of net debt and other financial income and expenses. (6) TSR: Total Shareholder Return corresponds to dividends plus the change in the share price.

SAFRAN 2019 INTEGRATED REPORT I 50 PERFORMANCE AND VALUE CREATION

KEY PERFORMANCE INDICATORS

Key sustainable innovation indicators 2018 2019 Number of employees in R&T Approximately 3,000 Approximately 3,000 R&D expenditure self-funded €1,226 million €1,337 million Number of initial patent requests More than 1,000 More than 1,200

Key operational excellence indicators 2018 2019 Number of production lines “of the future” in operation 16 22 30% 50% Percentage of sites certified HSE “Gold” (internal standard) Objective: all industrial sites by 2025 Capex (property, plant and equipment) €780 million €695 million(1) CFM56 in operation 31,500 31,802 LEAP backlog 15,329(2) 15,614 Lost-time accident frequency rate 2.9(3) 3.2 218,906 219,745 Scope 1 direct emissions (t CO eq.)(4) 2 Objective: 8% reduction by 2025(5) 374,691 386,495 Scope 2 energy-related indirect emissions (t CO eq.)(4) 2 Objective: 18% reduction by 2025(5) Total waste recovered and reused (in tonnes) 68,090 63,565

Key responsible conduct indicators 2018 2019 % of buyers trained in responsible purchasing methods (France) 43% 56% Number of employees 92,600 95,443 Annual recruitment 13,050 14,880 Purchasing volume sourced in France 53% 47% % sourced from small-, medium- and intermediate-sized companies 85% 83% Absenteeism rate – World 2.6%(6) 2.8% % of women in the workforce 28.5% 29.1% 12% 12% % of women senior managers Objective: 16% by 2023

Key financial performance indicators 2018 2019* Organic growth in adjusted revenue +10.4% +9.3% Growth in civil aftermarket (in USD) +12.2% +9.9% Recurring operating margin 14.4% 15.5% EBIT to FCF conversion 58.9% 51.9% €1.82/share Dividends €0/share** (41% distribution rate) * In light of the grounding of Boeing 737 MAX from March 2019. ** In response to the impact of the Covid-19 pandemic, Safran’s Board of Directors has decided not to propose to the Annual General Meeting of shareholders the payment of a dividend in 2020 for the 2019 financial year. In a spirit of responsibility vis-à-vis Safran’s stakeholders, this decision preserves the Group's resources in order to protect employees, maintain continuity of its operations, notably for its suppliers, support its customers and ensure liquidity in uncertain times.

Key governance indicators 2018 2019 Average attendance rate at Board meetings 95% 95% % of Chief Executive Officer compensation subject 69% 69% to performance conditions % of independent Directors on the Board of Directors 61.5% 64.3%(7) after the Y+1 AGM % of women on the Board of Directors after Y+1 AGM 40% 42.86%(7)

(1) Net of the cash inflow from the disposal of a tertiary property complex in the Paris region. (2) At March 31, 2019. (3) Zodiac Aerospace was excluded from the scope for calculating the lost-time accident frequency rate in the 2018 integrated report (2.2), and is now included: 2.9. (4) The indicators were revised in 2019; they are expressed in absolute value: t CO₂eq. They were in relative value (t CO₂eq./employee) in 2018. (5) Compared to 2018. (6) Excluding Safran Aerosystems, Safran Passenger Solutions, Safran Cabin, Safran Seats. (7) Assuming adoption of the resolutions at the Annual General Meeting of May 28, 2020.

5 1 I SAFRAN 2019 INTEGRATED REPORT OTHER SAFRAN PUBLICATIONS

IN FRENCH AND ENGLISH

CAPITAL MARKETS DAY 2019 UNIVERSAL 2018 REGISTRATION DOCUMENT www.safran-group.com, Finance section www.safran-group.com/fr, Finance section Presentation of the Group’s strategy and mid‑ and long-term Document prepared in accordance financial objectives (2018-2022). 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

ESSENTIALS www.safran-group.com/fr, Medias/Publications section

Institutional brochure presenting PRESENTATION an overview of Safran’s activities, OF SAFRAN products, results and commitments. www.safran-group.com, Group section

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

SAFRAN 2019 INTEGRATED REPORT I 52 CONTACT

FINANCIAL COMMUNICATIONS DEPARTMENT

Analysts and institutional investors Individual shareholders Tel.: +33 (0)1 40 60 80 80 Toll-free number (France only): 0 800 17 17 17 Monday to Friday, 9 a.m. to 5 p.m.

E-mail: [email protected] E-mail: [email protected]

SAFRAN 2, boulevard du Général Martial-Valin 75724 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: @iStock • Edu Van Gelder • Pascal Le Doare / Safran • CFM International Cyril Abad / CAPA Pictures / Safran • Helmy Alsagaff / CAPA Pictures / Safran • Patrick Boulen / Safran • Sylvain Cambon / Safran • Jean Chiscano / Safran • CS/CAPA Pictures • Adrien Daste / Safran • Eric Drouin / Safran • Alain ERNOULT - ERNOULT.COM / Safran • Julien Faure • Eric Forterre / Safran • Anthony Guerra / Safran • Gulfstream Aerospace • Franck Juery / CAPA Pictures / Safran • Thomas Laisné / Safran • Aurélie Lamachère / Safran • Guillaume Le Baube / Safran • Thierry Mamberti / Safran • Christophe Meireis / CAPA Pictures / Safran • Anthony Pecchi / Safran • Frank Rogozienski / CAPA Pictures / Safran • Christel Sasso / CAPA Pictures / Safran • Pierre Soissons / Safran • Raphaël Soret / Safran • Philippe Stroppa / Safran • Hervé Thouroude / Safran • Gérard Uféras / Safran • Christophe Viseux / CAPA Pictures / Safran

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

III I SAFRAN 2019 INTEGRATED REPORT Safran 2, boulevard du Général-Martial-Valin – 75724 Paris Cedex 15 – France Tel.: +33 (0)1 40 60 80 80 www.safran-group.com