Paris Air Show

Companies in Aerospace Valley brace for Airbus Power8 storm

 - June 12, 2007, 9:17 AM

France’s Aerospace Valley, with 94,000 jobs at 1,300 companies (including approximately 1,000 small and medium-sized enterprises– SMEs) and 8,500 research positions, has emerged on the industry map as Europe’s only true aerospace cluster. Aerospace Valley, the cooperative venture between Midi-Pyrénées and the neighboring southwest region of Aquitaine representing 61 SMEs, is again exhibiting here at Le Bourget in Hall 4.

But as a new French president and government take over following legislative elections this month, both regions have expressed concern about the effect on jobs and the local economy of Airbus’s Power8 restructuring plan. Some 4,300 of the 10,000 proposed job cuts at the European airframer would be in France and thousands more positions at its subcontractors could be axed.

Aerospace Valley, which the French government recognizes as one of the country’s “centers of industrial excellence” for aerospace and on-board systems, employs one in three of the country’s aerospace workforce and reports annual revenues of €10 billion ($13 billion). The Midi-Pyrénées region includes Toulouse, France’s fourth-ranking city with 120,000 students enrolled in three universities’ 13 prestigious engineering schools and a business school making it France’s second biggest university town. Aerospace is Midi-Pyrénées’s main industry, with 27,000 people employed at OEMs such as Airbus, ATR, EADS Socata, Safran and Thales, as well as major equipment manufacturers including Latécoère, Rockwell Collins, Liebherr Aerospace, Microturbo and Labinal. A further 32,000 people work at some 560 subcontractors located in the Midi-Pyrénées region.

According to Jean-Philippe Hanff, managing director of the Midi-Pyrénées Expansion Economic Development Agency, the region aims to create more than 40,000 to 45,000 new aerospace jobs by 2025. But Hanff expressed concern at the financial difficulties suffered by small and medium-sized suppliers and subcontractors since the Power8 was announced. At the same time, he told Aviation International News that the delays in the construction of the Airbus A380 had not had a major impact on firms as other Airbus programs such as the A350XWB and the A400M are progressing.

Hanff said difficulties for the SMEs had occurred since Airbus reorganized into an integrated unit and especially since the launch of the A380. The OEM has reduced the number of subcontractors, preferring instead to work through risk-sharing contracts, for which some SMEs struggle to find sufficient capital resources. At the same time, SMEs have struggled to keep abreast of technological developments in aerostructures, composites and virtual design engineering. He added that the Power8 plan will hit the SMEs hardest.

Martin Malvy, president of the Midi-Pyrénées region, has said his fears for aerospace jobs did not dissipate after a recent meeting with new Airbus chief executive Louis Gallois despite the latter’s assurance that the transfer of A320 single-aisle family final to Hamburg, Germany, would not take place for several years and that it would be replaced by more work from other Airbus products. Gallois confirmed that under Power8 there would be no straight redundancies at Airbus but he could not guarantee the fate of jobs at subcontractors. He recommended that SMEs get together to be more competitive and to prevent a shift in work to low-cost economies.

Malvy has told the French government it is not the region’s responsibility to solve Airbus’ problems but that they are having a negative effect on his region’s economy. He slammed the government’s plan to set aside ?40 million ($52 million) in annual repayable loans to SMEs this year and next as “clearly inadequate.” Malvy was no more reassured following new French president Nicolas Sarkozy’s trip to Airbus in Toulouse early May when he said that while he favors a national industrial policy, his government will not use its 15-percent stake in EADS to influence the Power8 plan.