France earmarks $17 billion for ailing aerospace industry

The French government unveiled a rescue plan for the struggling aerospace industry that includes billions of euros to support Airbus SE and its suppliers hard hit by the Covid-19 pandemic.

The measures, worth 15 billion euros ($17 billion), include export guarantees and credit relief for some new aircraft orders, as well as an extension of part-time work subsidies to help companies lower payroll costs, Finance Minister Bruno Le Maire said Tuesday. The package also contains loan guarantees already extended to Air France-KLM, a moratorium on some airline loan reimbursements and orders for military aircraft.

The aid is aimed at bolstering the European planemaker and its constellation of hundreds of French suppliers that have been hammered by measures to contain the coronavirus. New orders have dried up and the grounding of planes has hurt the sale of equipment and services. The industry employs about 300,000 people in France and generates 58 billion euros in annual revenue.

“We must save our aerospace industry,” Le Maire said, adding that 100,000 jobs are under threat in the next six months and the sector’s recovery is likely to be very slow.

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 5% to 77.84 euros by 9:39 a.m. in Paris trading.

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.

Included in the package are 7 billion euros worth 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. Finance Minister Bruno 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.

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.

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.

Gallois echoed Martin Vial, head of the country’s state shareholding agency known as APE, who has said the economic shock is taking its toll and that some 20 big companies that have been made vulnerable will undoubtedly need their capital bolstered.