Dassault troubled over effects of weak dollar

 - July 7, 2008, 10:58 AM

Dassault Aviation CEO Charles Edelstenne is confident about the future of the French company’s broadening line of Falcons as it ramps up completion efforts for the 7X and prepares to launch its new super-midsize jet. But the pressure of a weakening dollar that is affecting all European aerospace companies is making the company cautious about future models.

In an interview with AIN, Edelstenne said the company has a backlog for 217 copies of the 7X. The completion process initially slowed deliveries of the airplane because “different customers chose different interiors and our U.S. plant was not able to complete the aggressive ramp-up in production that we wanted.” He reported that the company is working on the backlog and subcontracting completion to Duncan Aviation as well as Jet Aviation Basel.

In addition to adding the winglet-equipped Falcon 2000LX and 900LX to the product line, the company is ironing out the details of its super-midsize jet in anticipation of launch next year.

Edelstenne said it is too early to give name, specifications, price or choice of main partners of the company’s under-development super-midsize jet, codenamed SMS. So far the company has revealed only that Rolls-Royce will supply new 10,000-pound-thrust-class engines as power for the twinjet.

He explained, “More than 90 percent of the eight- to 10-seat long-range SMS’s characteristics have been defined and we are now selecting our main partners before launch, expected by the beginning of 2009 with full development beginning shortly thereafter.” He said the company would start taking orders for the airplane the same day it announces the details. The company expects the SMS to fly at the beginning of 2014.

He insisted that the SMS is “not a replacement” for the Falcon 50, arguing that if the market “wanted more Falcon 50s, it would have bought more when they were being produced.”

For Edelstenne, the business aviation market is good. “Until recently, it was two-thirds for North America but this has fallen and is now around one-quarter as demand in Europe, Russia, China, the Middle East and South America has exploded.”

The exchange rate between the dollar and the euro continues to be a “worrying reality,” posing a serious problem for France and other European aerospace countries. More than half of the company’s civil aircraft production takes place in Europe, but the airplanes are sold in dollars, which is detrimental to the bottom line. As a result, the company has had to move some of its activities to low-cost or dollar-zone countries.

He believes the civil market will continue to flourish. “The experts say the civil market is stable and good for seven to ten years. But the military side is erratic and it is difficult for a manufacturer to build only for a military market. And unless there is a complete reversal of geopolitics, I don’t see this situation changing.”

Edelstenne does not foresee any change in Dassault’s shareholding structure, under which Serge Dassault has the 50.55-percent majority stake and EADS has 46.3 percent. The group, he emphasized, is determined to maintain its independence and does not expect to be involved in any industry consolidation.