French aerospace awaits 2011 recovery

Farnborough Air Show » 2010
July 21, 2010, 1:02 PM

For French aerospace industry association GIFAS the crisis year of 2009 was a “year of resilience” and 2010 is “a year of transition,” with air traffic increasing again powered by low-cost companies and the emerging nations. GIFAS chairman Jean-Paul Herteman said he is “confident that 2011 could be a year of recovery for our industry, but it will not come sooner.”

According to GIFAS, air traffic is increasing, the emerging nations are growing and manufacturing is rising gradually. The association also hopes that France’s national “Great Loan” stimulus plan will help pilot schemes to ensure the industry’s future (see box). But despite a recently improved dollar/euro parity, the exchange rate has weighed heavily on GIFAS members and is “still the main threat” to the French aerospace industry.

Herteman, who is also CEO of an aerospace equipment supplier Safran, told AIN that the French aerospace industry is the country’s main exporter, producing a ?14 billion surplus last year. “Every year GIFAS companies devote 15 percent of their revenue to research and development,” he said. “This heavy investment and our requirements for high performance have positive consequences on other sectors of the economy and influence the whole country through transfer of technology and job creation.”

While 2009’s economic crisis did not spare our industry, he said the decline was limited to an estimated 2.2 percent drop in revenue to ?35.8 billion from the record set in 2008. In a difficult economic environment the French aerospace industry maintained its market share with exports accounting for 80 percent of consolidated revenues. Despite a 23-percent drop, ?37.3 billion, orders last year again remained higher than annual revenue. Strong progress in the space sector and also in defense and security electronics compensated for the fall in civil aerospace orders. The order book still represents the equivalent of four years’ activity for the profession.

In 2009 the French aerospace industry directly employed 157,000 people. While 38,000 employees were hired since 2006, 7,000 of them were taken on last year, thus limiting aerospace job losses to 2 percent. This, said Herteman, was due largely to many projects needing high-level skills in medium- and long-term programs.

Recruitment is expected to be about the same this year followed by a slow ramp-up in 2011. “Our companies are not necessarily delocalizing work but supporting new developments outside the country that keep the top engineers and designers in France,” he said. The industry’s vertical organization limited industrial failures and the defense budget has had a stabilizing effect.

According to the GIFAS chairman, the main threat to the industry in France and in Europe is still the euro/dollar exchange rate. “We are not happy with the process of attack on the euro,” he said. “Historically the average rate over the very long term is around ?1.20 to ?1. This is not a weak rate and at the moment the present level is not bad news for our industry. But the rate between 2007 and 2009 was $1.41 to ?1 and the euro/dollar level over the last few years remains of concern to all.”
According to Herteman, every 10 cents that the euro rises above this “balanced” rate means an average 2 percent loss in operating profit on revenue, and for some even more. “Over the last three years this makes more than ?4 billion in lost earnings, or the equivalent of two years’ self-financed research and development or 7,000 jobs a year not created in France,” he concluded, calling for political intervention to regulate exchange rates.  

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