Airbus & Air France Set To Benefit From New French State Aid

The French Minister of the Economy has today announced a €15 billion state aid plan for its beleaguered aeronautical industry. Airbus and Air France-KLM will benefit from the plan, which will allow the industry to be more competitive.

Air France, Airbus A380,
Air France and Airbus will benefit from a €15 bn aid package. Photo: Getty Images

Government announces €15 bn support package

Franceinfo reports that the Minister of Economy, Bruno Le Maire, has pledged €15 billion ($17 bn) of support for the French aeronautical sector. The recovery plan includes the €7 billion loan package already granted to Air France-KLM.

Small and mid-sized companies within the sector will also benefit from an initial €500 million endowment, rising to €1 billion in the longer term, for development. A further €300 million will go towards “robotization and digitization.” In addition, €1.5 billion will be invested in the research and development for a more environmentally friendly aircraft.

Mr Le Maire said,

We are declaring a state of emergency to save our aeronautical industry to allow it to be more competitive and more decarbonized by producing the green plane of tomorrow.”

Presenting the aid plan, he added that Europe would not sacrifice the place of Airbus on the world aviation market to Boeing or the upcoming Chinese manufacturer, COMAC. The Ministry of the Armed Forces is also accelerating its €600 million in orders for military planes, including those from Airbus. Three A330s are being converted into A330 MRTT supply aircraft.

Aid package to save 100,000 jobs

Around 300,000 workers are employed in the French aeronautical industry. Mr Le Maire said that without the immediate intervention of the government, a third of those jobs would have disappeared. He called on the sector to do everything possible “to avoid forced departures.”

Other measures that were put in place when the crisis began will continue to benefit the aeronautical sector. Guaranteed state loans, partial unemployment schemes and public guarantees for exports will all help to save jobs.

Airbus, A321 Manufacture, Toulouse
State aid plan could save 100,000 jobs. Photo: Getty Images

Achieving carbon neutral aircraft

The €1.5 billion of public funding that is devoted to “achieving a carbon-neutral aircraft in 2035,” will be invested over the next three years in research and development. Mr Le Maire declared the objective of developing new modes of propulsion for the future generations of aircraft with lower CO2 emissions.

Air France Plane Runway Getty Images
The French Government has said it will provide financial aid to Air France as it struggles amid the coronavirus outbreak. Photo: Getty Images

Terms of the bailout for Air France

In April, Air France secured €7 billion (7.6 bn) of essential funding to help it through the COVID-19 crisis. However, the terms attached to the deal meant the airline would be expected to cut its CO2 emissions in half in the next ten years. That would mean cutting domestic routes. It would also need to prove its profitability in the long term.

Mr Le Maire commented that Air France should continue to support Airbus with its future aircraft orders.

As for Airbus, the planemaker stated last week that it had not secured any orders for May. However, the company also suffered no cancellations. Airbus has hinted that it may sue airlines that do refuse to honor their contracts.

Will the €15 billion bailout save the French aeronautical industry?