Macron Is Set to Unveil Rescue Package for French Aerospace

(Bloomberg) -- France’s rescue plan for its pandemic-hammered aerospace industry includes incentives to develop less-polluting aircraft, an extension of part-time work subsidies and money targeted at developing aviation biofuels, according to people familiar with the matter.

Elements of the package, set to be announced Tuesday by President Emmanuel Macron, have trickled out over the past week. Finance Minister Bruno Le Maire said on May 31 that the government would create an investment fund to help struggling suppliers. On Thursday, he lifted the veil on another aspect, saying France will guarantee some Airbus SE aircraft orders to avoid cancellations.

The people, who asked not to be named before the plan is finalized, cautioned that some modifications could occur before it is unveiled.

A spokesman for the finance ministry declined to comment.

The aid package is aimed at the European jet manufacturer and a network of hundreds of French suppliers that have seen their business dry up following the grounding of fleets worldwide during the coronavirus pandemic. Many of the companies that have been hardest hit are small and medium-sized. While they have limited access to commercial bank funding, some are considered strategic because they are also defense suppliers.

The global plane-making industry is reeling from the health crisis that has left many airlines around the world struggling to survive, with European giants Deutsche Lufthansa AG and Air France-KLM getting state bailouts worth billions. Financially weak carriers could cut back on spending on new aircraft, while suppliers will also suffer from less maintenance and services on jets that have remained on the tarmac.

Airbus Guarantees

“In the case when an airline was about to order a plane, rather than it canceling the order to Airbus, the state will pay a guarantee for a year until planes start to fly again,” Le Maire said Thursday on France 2 television.

Airbus declined to comment on the plan. Chief Executive Officer Guillaume Faury has been promoting the idea of a so-called cash-for-clunkers program for aircraft.

The help for smaller companies reflects increasing worries within the government that vulnerable suppliers could become targets of foreign buyers. Incentives to invest in research into lowering aviation emissions would be in keeping with the European Commission’s so called green deal.

The French government has already extended loans and guarantees worth 7 billion euros ($7.9 billion) to Air France-KLM, tying the funds 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 for the aviation sector comes as part of a series of stimulus packages worth 40 billion euros that have included funds for tourism and the auto industry. Macron last month announced measures for carmakers such as a cash-for-clunkers program, incentives for consumers to buy electric vehicles and a fund for research, development and investment to modernize plants.

As the French economy starts to reopen following a strict lockdown period, warnings have multiplied about the effects on companies. Louis Gallois, chairman of the supervisory board of PSA Group, has said some big and medium-sized French companies will need state bailouts and the government will have to take stakes.

He echoed Martin Vial, head of the country’s state shareholding agency known as APE, who said last month the economic shock is taking its toll.

“We have identified about 20 very big companies that have been made very vulnerable by this crisis and that will undoubtedly need their capital bolstered,” he said in an interview on BFM Business. While declining to identify them, he said the agency plans to intervene in a “second wave” of support to make sure they remain solvent.

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