France unveils €15bn in aerospace aid

French President Emmanuel Macron in the cockpit of an Airbus A400M, 19 June 2017. [Photo: EPA/Michel Euler / POOL MAXPPP OUT]

The French government on Tuesday (9 June) lifted the lid on a €15 billion support package for its lucrative but embattled aerospace sector. The scheme involves a €500 million investment fund for smaller companies and a plan to debut a carbon-neutral plane by 2035.

Minister for Finance Bruno Le Maire said that the package is primarily aimed at saving 300,000 direct and indirect jobs in the sector, as well as the 1,300 companies that are involved in aerospace’s massive supply chain.

“We are declaring a state of emergency to save our aeronautics industry so that it can be more competitive,” Le Maire told reporters in Paris. “If we hadn’t intervened right away, a third of the jobs in the sector would have disappeared.”

The €15bn announced by the government includes the €7bn already pledged by Paris to help national carrier Air France, as well as a slew of other measures including €300m in modernisation funding and an investment fund worth an initial €500m.

“The state and four major groups, Airbus, Safran, Dassault and Thales are creating an investment fund of €500 million from July to strengthen the finances of weakened SMEs and mid-caps, improve their competitiveness and support the consolidation of the sector,” Le Maire explained.

Aerospace’s complex network of manufacturers and suppliers have been hit hard by the coronavirus outbreak, which has curtailed air travel demand and sent a seismic shock through the order books of planemakers like Airbus and Boeing.

In and around the city of Toulouse – the site of Airbus’ headquarters – the industry supports an estimated 40,000 jobs, half of which are at risk according to labour market analysts.

Airlines around the world are facing bankruptcy and are looking to scale back existing and promised orders of new airplanes in order to shore up their finances.

As part of Le Maire’s plan, the state will work with banks and suppliers on how to manage the glut of extra parts created by the slowdown in production. It will also honour and even accelerate €600m of defence contracts placed with Airbus.

CEO Guillaume Faury said in an interview last week that he would like to see an EU-led ‘cash for clunkers’ scheme for the aviation industry, in order to build demand for new purchases.

“There is a lower level of demand so we need less planes, so let’s retire the old planes, the ones which are burning a lot of fuel and raising a lot of CO2 and support the faster transition to new planes by a support scheme,” the CEO told Politico.

“We think there’s a good business case for doing this for Europe,” Faury added.

The Air France bailout – already given the go-ahead by the European Commission’s competition services – will allow the airline to stick to its order of nearly 100 new Airbus planes, which includes 38 long-haul A350s.

Death of an aviation giant, as A380 feels virus bite

Coronavirus has hastened the demise of the Airbus A380 – the world’s largest airliner – as the aviation industry scrambles to adapt to lower demand for air travel, which has essentially made the double-decker super-jumbo a plane out of time.

Green flyers

France’s aerospace rescue plan also considers environmental targets, as it aims to preserve the country’s leading role in building planes and other aircraft, setting aside €1.5bn for research and development.

“With this support plan, France can therefore both save R&D jobs and skills in its aeronautical sector and approach the energy transition as a technical and industrial leader,” the government document reads.

To that end it sets the industry a target of launching a carbon-neutral successor to the market-leading A320 by 2035, demonstrating it by 2028. The plan suggests either developing engines that can run completely on biofuels and betting on hydrogen as a zero-emission fuel.

For regional flights, the plan targets an ultra-efficient hybrid-electric or hydrogen plane that would be able to operate over shorter distances. Airbus recently scrapped plans to demonstrate a hybrid aircraft next year due to the pandemic.

Coronavirus grounds Airbus and Boeing’s lofty plans 

Developments in the aerospace industry are falling by the wayside because of the coronavirus outbreak’s huge impact on the sector: US planemaker Boeing has abandoned international joint venture plans while European rival Airbus has nixed a project aimed at producing electric-powered aircraft.

Six EU transport ministers – from Finland, France, Germany, Luxembourg, the Netherlands and Spain – last week called on the Commission to define minimum criteria for sustainable aviation fuels, in order to boost production for cleaner alternatives to kerosene.

Pressure to clean up aviation’s environmental impact while the sector is rebuilding itself may push the EU executive into striking a harder line towards the industry, which has struggled to reduce greenhouse gas emissions due to increasing passenger numbers.

The Commission is currently looking into how to tax jet fuel, which is exempted from charges, as part of its attempts to update the bloc’s Energy Taxation Directive.

[Edited by Benjamin Fox]

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