French aerospace industry fears squeeze as output soars
By Tim Hepher and Cyril Altmeyer
PARIS (Reuters) - French aerospace suppliers face a "difficult" 12 months as they gear up for a sharp rise in production of short-haul aircraft at the same time as the output of older, bigger models declines, executives said on Wednesday.
The squeeze is not expected to reduce revenues this year but poses a challenging transition for the industry in France, where smaller players struggle to match the scale of some of their European rivals.
"We are facing a slight gap while we go through a phase of industrialisation, and that means activity is less encouraging," said Emmanuel Viellard, deputy chairman of fasteners manufacturer Lisi , speaking on behalf of the suppliers.
"2015 was mixed and 2016 will be difficult," added Bertrand Lucereau, CEO of spare parts supplier SECAMIC, referring to the challenges facing small and medium-sized enterprises (SME).
Both were speaking at a new year briefing as representatives of the French aerospace industry association, GIFAS.
France's 180,000 aerospace industry workers play a vital role in a global supply chain which is having to adjust to planemakers increasing their output of narrow-body jets like the Airbus A320 and Boeing 737 to record levels, following an order boom.
At the same time, output of wide-body models such as the Airbus A330 is fading, leaving a gap yet to be filled by incipient production of newer jets like the A350.
Adding to the pressure, Dassault Aviation has reported an unexpected 15 percent drop in 2015 deliveries of business jets.
Small industry suppliers blame France's tax code and labour laws for impeding their growth, leaving them exposed to such fluctuations in demand and making them ripe for consolidation.
For example, close to 100 companies are trapped below a threshold of 50 employees at which French law requires them to have a full-time works council, prompting some to reject new business rather than take on the extra costs, Lucereau said.
GIFAS says it is lobbying the French government to lighten administrative and tax thresholds that discourage companies from investing or transferring control of their businesses.
SMEs in France's aerospace sector have an average workforce of 100-120 people and revenues of 15 million euros, about a third of their counterparts in Germany, Lucereau said.
However, there are no systemic problems despite the heavy strain being placed on the supply chain and European suppliers have been boosted by the weaker euro, said GIFAS President Marwan Lahoud, strategy chief at Airbus Group .
French suppliers are preparing to make an assault on Asian markets at the Feb 16-21 Singapore Airshow, fortified by a 20-percent drop in the past two years in the value of the euro that should make Europe more competitive.
(Editing by Greg Mahlich)
