Executive Summary
Reported sales revenue for the French aerospace industry in 2019 grew to €74.3 billion, this is a 13% increase over 2018. The aerospace and defense aerospace industry exported approximately 84% of its consolidated turnover, and the civil sector represents 73% of revenues. Orders overall in 2019 were slightly up, to €61.9 billion.
However, since the Spring of 2020 there has been a very sharp downturn, which is reshaping the market in the immediate. Airbus has announced it will hold production down by 40% for at least the next 2 years, and has laid off 15,000 employees. This is impacting all parts of the aerospace supply chain deeply and has forced the cancellation of hundreds if not thousands of external service contracts by Airbus. MRO services and components and aerostructures are particularly affected. Despite the downturn, Airbus currently has a production backlog of 8 and a half years.
Five aircraft manufacturers account for the majority of the French market: Airbus (large commercial and military aircraft, drones, spacecraft), Airbus Helicopters, Dassault Aviation (high-end business jets, fighter aircraft, UAVs), ATR (passenger and cargo turboprop aircraft for regional transport, an Airbus JV with Italian firm Leonardo), and Daher (TBM and Kodiak light aircraft and business turboprops).
In defense, France and the United States are close operational allies, but France buys very little defense equipment from the United States and almost always FMS when it does - preferring to build its own equipment or partnering on a European level in order to maintain its strategic independence. France is very reticent to use components subject to ITAR in its defense supply chains.
The 2020 defense budget is €37.5 billion, an increase over the previous year, and the equipment acquisition share is about a quarter of that. The Ministry of Defense has accelerated a number of purchases for a value of about €832 million – tanker aircraft, surveillance aircraft, helicopters, naval drones – all French made.
Market Entry
Because of the breadth and depth of the aerospace industry in France, U.S. manufacturers often decide to use the services of a distributor or agent to reach out to the many potential customers. It is generally considered difficult to break into the business (with some exceptions based on product type) without local representation that can interface with the various layers of engineers, purchasers and supply chain quality managers. It is normal business practice in France for manufacturers’ representatives to work on retainer only or a mixed retainer/commission fee; rarely will an agent accept a commission-only contract to develop new business. U.S. firms must be prepared to invest significantly in their business development process over extended periods before generating any orders. AS9100/ISO 9001 certification would be considered the minimum requirement for doing business in the aerospace supply chain in France.
In general, the French aerospace market provides many opportunities (not necessarily in the next 2-3 years, but will again) and is considered extremely competitive. Potential new suppliers must target the right tier and understand clearly what their value added is compared to those already in place in the supply chain, and must understand they will be competing with companies from around the world, not just in France. Lead times to sales may be very long. Many major French firms like Safran, Airbus or Dassault are all present in the US and have sourcing offices there, which may be an easier path to receiving OEM approval.
France is also a challenging environment for American defense companies – it is extremely important to look “French”, or at least “European”, and to explore ways to increase local footprint, through local manufacturing or other French content. JVs or partnering arrangements will help, as firms benefit from the experience of the French company (instead of being a competitor) in its own market, and share costs and look French. It is extremely rare for the French MoD to purchase from a U.S. based supplier directly. A local partner or a physical presence is a necessity.
Current Market Trends and Demand
A major technology shift is taking place in aerospace in France – the current market difficulties and the resulting French Government aerospace assistance plan has accelerated it - and that is to move to producing a zero emissions aircraft by 2035, a very ambitious goal. It is usually new aircraft development, driving new design and technology requirements, which create opportunities for potential suppliers.
The best prospects for American firms in this market continues to be those associated with the manufacturing of new aircraft or engine models, or very technical products.
Opportunities
Aircraft Parts
Future aircraft will increasingly include more electric systems on board and will move to hydrogen as a primary fuel, although there are other technologies such as hybrid electric or biofuel options on the table in the interim. The decision on the technology to pursue to achieve a narrow body carbon neutral aircraft should be made in 2025, for a launch in 2027-2028 and entry into service by 2035. Airbus is looking to field a successor to the A320 or perhaps a regional aircraft. Other technologies of interest include Enhanced Vision Systems, other autonomous systems and specialty materials.
Airbus is also currently reviewing the approved Boeing list of suppliers in order to identify new potential suppliers. They are looking for redundancy, expecting industry consolidation to take place in the supply chain over the next 2-4 years.
Defense Products
France is one of the few nations in the world that maintains full spectrum military production capabilities, including fighter jets, nuclear submarines and aircraft carriers and ballistic missile production. Usually ranked as the 3rd or 4th major arms exporter in the world after the U.S., Russia and China, it is a small country with a big defense footprint. France is a strong supporter of its own and the EU’s technology and industrial base.
Because France is a major arms exporter, competing around the world with American platforms, the French MoD has instructed its prime contractors to actively seek ways to eliminate any products in their supply chains which require 3rd country authorization, such as products covered by U.S. ITAR regulations; the French government considers it is a commercial disadvantage for its defense sales to be contingent upon the U.S. government for export permission.
France has announced it will build a second aircraft carrier and is supposed to make the technology choices such as the type of propulsion system or catapults, among other things, during the summer of 2020.
Rotorcraft
Airbus Helicopters, the dominant manufacturer in France, is the rotorcraft used almost exclusively by the French military, Police, EMS and Gendarmerie.
As with commercial aircraft, the French Government is actively encouraging Airbus Helicopters and the aviation supply chain in France to design and field rotorcraft fueled by hydrogen.
Trade Events
Euronaval – Naval Defense, biennial in October
http://www.euronaval.fr
Aeromart Toulouse – Aero BtoB, biennial in December
http://www.euronaval.fr
JEC Composites Europe Show - Composite Manufacturing, annual in March/April
https://www.jec-world.events/
Paris Air Show – biennial in June
http://www.siae.fr/EN.htm
Eurosatory – Land and Land/Air Defense, biennial in June
http://www.eurosatory.com
Contact
Cara Boulesteix
Embassy/Consulate Location: Paris, France
Commercial Specialist
Cara.Boulesteix@trade.gov
+33 (0)1 43 12 70 79
