One of the companies that never ceases to impress me is Safran. Not because it’s a hot stock. But because its business model is so structurally sound that I want to explain it to anyone who isn’t familiar with it yet.
$SAF (+3,44%) — Europe’s best business model that hardly anyone knows about
Safran builds engines. But that’s not how they make money.
The real business comes afterward—for decades. Every LEAP engine installed today on an Airbus A320neo or Boeing 737 MAX generates aftermarket revenue over its lifetime via RPFH contracts: Rate per Flight Hour. Safran gets paid every time the plane flies. Not just once, but for 20–25 years.
What the numbers say
In 2025, revenue grew to €31.3 billion—a 14.7% increase over the previous year, with record-high LEAP deliveries and a strong aftermarket. Operating profit rose by 26% to EUR 5.2 billion, with the margin expanding by 150 basis points to 16.6%. Free cash flow: EUR 3.9 billion—despite massive investments in new production capacity.
The Propulsion division—the heart of the business—delivers even more: in the first half of 2025, the Propulsion division’s operating margin stood at 23.3%, an increase of 3.4 percentage points.
Why things are just really getting started
The LEAP is still young. The engines began shipping in 2016—the first major maintenance cycles are only just beginning. Safran expects LEAP aftermarket revenue to more than triple between 2024 and 2028.
In 2025, 1,802 LEAP engines were delivered—a 28% increase compared to 2024. In the fourth quarter alone, the delivery rate rose by 49% year-over-year. Each of these engines represents a future aftermarket revenue stream that will not truly take off for another 5–8 years.
In the first quarter of 2026, revenue grew organically by 23%, with spare parts sales rising 29% and services increasing 43%. LEAP deliveries exceeded the 500-unit-per-quarter mark for the third consecutive time.
The 2028 Targets
Safran has raised its EBIT target for 2028 to €7.0–7.5 billion and plans to deliver approximately 2,600 LEAP engines that year. Cumulative free cash flow 2024–2028: approx. EUR 21 billion.
Currency hedging — the underestimated factor
Safran has a net USD exposure of approximately $16 billion per year — nearly all aviation contracts are denominated in dollars. 2026, 2027, and 2028 are fully hedged with a target exchange rate of EUR/USD 1.12. This means: currency volatility is largely out of the equation for the next three years. The result is predictable.
The Risk
Air traffic volume is the underlying assumption. Fewer flights mean lower RPFH revenue. Supply chain issues in LEAP production are a well-known issue—2024 was a difficult year, and 2025 is the catch-up year. Whether the ramp-up in 2026/27 goes smoothly remains a point to watch. And the strong euro remains a long-term structural headwind despite hedging.
Conclusion
Safran is not a cyclical stock. It is an infrastructure company packaged as an aircraft engine manufacturer. The installed base of LEAP engines, now exceeding 10,000 worldwide, represents a stream of annuity payments that is only just beginning to flow. Anyone who understands this also understands why the company beats guidance year after year—and why the 2028 targets may still be too conservative.
The stock is not a bargain. But anyone who values Safran as a traditional industrial stock is making the same mistake as someone who values Microsoft based on its CD-ROM margin. #stockanalysis
