Paris Air Show

French aero industry must rally in crisis

 - June 8, 2009, 6:09 AM

French aerospace industry association GIFAS believes the current crisis will be long. It also has admitted that the immediate measures taken to reduce production rates will prove inadequate in the long term and that further steps will have to be taken if massive layoffs are to be avoided.

While a record 12,000 staff were hired in 2008 enabling 2,000 new jobs to be created in France, a drastic reduction is expected in new hires this year. GIFAS chairman Charles Edelstenne told a press conference last month that preservation of the supply chain is crucial to ensure that the country’s aerospace industry will be fully operational when the economy takes an upswing.

The results recorded by the French aerospace industry from January to mid-2008 reflect strong economic growth in the air transport industry but this changed drastically from last summer. Strong order books no longer provide guarantees for business among GIFAS members. “To do that [guarantee levels of business], customer orders must be transformed into deliveries,” said Edelstenne. “The longer this crisis lasts, the greater the risk of order cancellations. At the moment we are playing the situation by ear, but we are absolutely certain that the air transport base is solid and that need will pick up in step with global growth.”

In 2008 unconsolidated revenues among GIFAS members grew 4.7 percent to €37.1 billion ($50.1 billion), reflecting record orders over the past few years, mostly in the civil sector. Of this, exports increased 3.3 percent to a record €22.5 billion ($30.4 billion), while domestic income grew 7.1 percent to €14.6 billion ($19.7 billion).
Estimated total orders for 2008 fell 17 percent to €48.6 billion ($65.6 billion). Exports, which represent 74 percent of total orders, fell 22 percent to €35.9 billion ($48.5 billion), while domestic orders rose 1 percent to €12.7 billion ($17.1 billion). The French industry’s collective order book has grown by an average 9 percent each year over the last 15 years and the 2008 figure remains the fourth highest ever.
While the overall activity of equipment manufacturers increased by 6 percent to €10.1 billion ($13.6 billion) last year, the military side recorded a 4-percent decrease, while civil business increased by 8 percent. Exports increased 7 percent to €4.5 billion ($6.1 billion), while France accounted for 53 percent of total revenues. New orders in the equipment sector fell 7 percent to €9 billion ($12.1 billion).

As of Dec. 31, 2008, the French aerospace industry employed 134,000 people–up by 1.5 percent on the previous year. According to Edelstenne, new hiring in 2009 will be “drastically reduced” to some 3,000 to 4,000 to fill essential vacancies.

“The entire supply chain is affected by the present situation and further steps will be required to avoid massive layoffs,” the GIFAS leader warned. He said that the fund of approximately $6.7 billion earmarked to finance exports in the context of France’s aid package for its failed banking sector will certainly help, and he indicated that GIFAS is prepared to participate in discussions to define how these funds should be allocated. “Airbus and ATR partner countries must take the same initiatives in 2009 and the years that follow,” he said.

Edelstenne, who also is chairman and CEO of Dassault Aviation, demanded that France’s defense ministry invest directly to protect French jobs. Dassault has political ties to the conservative government of President Nicolas Sarkozy, but declining tax revenues and the need to bail out banks has left him with less room to maneuver in terms of further state assistance.

“Preserving the supply chain [consisting of small- and medium-sized companies] is crucial to ensure that our industry will be fully operational when the economy takes an upswing,” said Edelstenne. “Despite the situation, continuing to lay the groundwork to meet tomorrow’s challenges by innovating and identifying new technologies will make our products more competitive.”

Meanwhile, French aerospace manufacturers are continuing to invest more than 15 percent of revenues in research and development. “The government must follow suit,” insisted Edelstenne, who said that what has been offered so far is “still far from the one billion euros we require.”

GIFAS has welcomed the recent establishment of the Civil Aviation Research Orientation Council whose mission is to draft a 10-year civil sector technology road map. “Our products are competitive; we are already working on projects for 2020 and we have what it takes to come out stronger from this crisis,” Edelstenne said.