France unveils €15bn aid package for aerospace industry

France has unveiled a €15bn support plan for the aerospace industry, warning that 100,000 jobs were on the line after Covid-19 saw borders close and travel curtailed as governments sought to stem the spread of the virus.

The plan, which includes support already announced by the state, “is commensurate with the violence represented by the crisis at the start of the year and its lasting impact on air traffic”, Bruno Le Maire, French finance minister, said at a press conference on Tuesday morning. 

“If the state doesn’t intervene straight away then one-third of the jobs in the sector could disappear,” he added.

The aerospace sector employs 300,000 people in France either directly or indirectly and brings in €58bn in revenues every year. 

The French economy has been hit hard by the pandemic. On Tuesday, the French central bank predicted that the economy was set to contract by more than 10 per cent this year even though it would start to recover in the second half.

Unemployment was expected to rise from 8.4 per cent last year to a four-year high of 10.1 per cent this year and then to hit 11.7 per cent next year, the bank said. By contrast the German economy was expected to shrink by about 6 per cent.

Bruno Le Maire: ‘If the state doesn’t intervene straight away then one-third of the jobs in the sector could disappear’ © Eric Piermont/AFP/Getty

Companies across the aerospace sector and throughout the supply chain are struggling as orders have been cancelled and cash flow has dried up. Airbus, which is based in Toulouse in the south of France, has already slashed production by a third and industry leaders are warning that low levels of demand could last for years.

France’s plan includes a €7bn loan package already announced for airline Air France-KLM, €300m to modernise the supply chain and an investment fund starting at €500m, which aims to climb to €1bn, designed to help the development of small and medium-sized industries. 

The fund will start with €200m from the state, €200m from companies such as Airbus, Thales and Safran, and another €100m from the fund manager.

The government is putting €1.5bn on the table over three years for research into greener aircraft, while strengthening existing schemes for the sector such as unemployment support and export credit guarantees. It is also accelerating planned military orders that were to take place in the coming years.

Mr Le Maire said the country “must save our aeronautical industry and avoid any loss of position relative to the US’s Boeing and China’s Comac.

The already announced a €7bn loan package for Air France-KLM, the Franco-Dutch airline, is made up of a €3bn direct loan from the state and €4bn provided by commercial banks but guaranteed by the government.

This is the third sector-specific support plan after an €18bn package for tourism and €8bn in support for the auto industry and comes ahead of the government’s third budget update on Wednesday, which will take account of crisis spending due to the impact of the pandemic.