France Earmarks $17 Billion for Ailing Aerospace Industry

(Bloomberg) --

France unveiled an aerospace rescue plan to bolster European planemaker Airbus SE and its financially-strapped suppliers with measures aimed at preventing massive job losses and underpinning aircraft orders.

The sweeping aid package laid out Tuesday by Finance Minister Bruno Le Maire, worth about 15 billion euros ($17 billion), provides investment, payroll subsidies and credit guarantees to cushion the damage wrought by the coronavirus pandemic.

“We must save our aerospace industry,” Le Maire said, adding that 100,000 jobs are threatened and a recovery is likely to take two to three years. He rejected any idea that the measures would serve to reignite trans-Atlantic trade tensions over state support for commercial jet manufacturing, saying the U.S. and China are “massively” backing their own industries.

“We aren’t in the business of being the village idiots of the planet who would sit back and allow the disappearance of hundreds of thousands of jobs and expertise,” he said.

Airbus and its constellation of hundreds of French suppliers have been hammered by the economic fallout from Covid-19. New orders have dried up and the grounding of planes has hurt the sale of equipment and services. In France, the industry employs about 300,000 people and generates 58 billion euros in annual revenue.

Highlights of Plan:

• Funds worth as much as 1.3 billion euros to help suppliers modernize, consolidate
• Bolstering of export credit guarantees from France, U.K. and Germany for aircraft purchases
• One-year moratorium on guaranteed loan repayments for aircraft already on order
• 1.5 billion euros over three years for R&D in cleaner aircraft
• Military orders for jets, helicopters and drones.
• With some 110,000 workers already benefiting from payroll subsidies, program to be extended over “longer term”

Le Maire said job losses would be inevitable, but that the package is designed to get them done on a voluntary basis.

Airbus last week said it garnered no new orders and delivered just 24 new planes in May. European carriers Deutsche Lufthansa AG and Air France-KLM are getting state bailouts worth billions of euros after air travel was reduced to practically nothing at the height of the pandemic.

Airbus shares fell as much as 8.9%, and were down 7.3% to 75.90 euros by 12:14 p.m. in Paris trading. That’s after rising 44% over the previous six sessions partly in anticipation of the plan.

The government’s plan “is strong, adapted to the challenge,” said Airbus Chief Executive Officer Guillaume Faury on Twitter. “It will help us cushion the short term impacts, while preserving our capacity to rebound when the time comes.”

Airbus, along with engine-maker Safran SA, Thales SA and Dassault Aviation SA, will contribute to a fund to help the small and medium-sized companies hardest hit by the crisis. While they have limited access to commercial bank funding, some are considered strategic because they are also defense suppliers.

Greener Planes

Included in the package are 7 billion euros of loans and guarantees the government already extended to Air France-KLM. The funds are tied to a reduction in carbon emissions and services on its domestic routes. Le Maire has also said the carrier should be a “good customer” for Airbus.

The plan will back development of less polluting planes, including a successor for the best-selling A320 family of jets that could enter service from 2033, as well as a hybrid electric regional plane, a more fuel-efficient Airbus Ecureuil helicopter and less-polluting private jet.

Le Maire said a “political choice” had been made to back development of cleaner jets rather than some kind of cash-for-clunkers scheme to scrap older aircraft, which he said would be less efficient at lowering carbon emissions and would require European coordination.

The addition by Airbus of an assembly line in Toulouse for the A321 XLR hasn’t been derailed,” Le Maire said, but for it to go ahead “there needs to be orders.”

The rescue for the aviation industry comes as part of a series of stimulus packages worth about 40 billion euros that have included funds for tourism and the auto industry.

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