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PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHFR #0334/01 0681424
ZNR UUUUU ZZH
P 091424Z MAR 09
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC PRIORITY 5704
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 PARIS 000334 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR FOR MARTYN 
COMMERCE FOR ELLIOTT, CABLE CODE 6950 
STATE FOR KOCH 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EIND ETRD FR
SUBJECT: FRANCE: SUPPORT FOR AERONAUTICAL SECTOR 
 
REF: A) State 10592 B) Paris 0287 
 
¶1.  (SBU) Summary: GOF and industry officials tell 
us that a decision on the nature and timing of any 
launch aid for the A350-XWB (REF A) would likely 
follow the outcome of the WTO dispute panel on 
Airbus subsidies.  Separately, the GOF has made 5 
billion euros in credit available for Airbus trade 
financing through four banks under its financial 
crisis response package.  Airbus also appears to 
benefit indirectly from government-sponsored venture 
capital funds, training programs, business advisory 
services, and research and development programs 
aimed at bolstering France's aeronautical sector. 
End summary. 
 
CRISIS JUSTIFIES SHORT-TERM EXPORT FINANCING 
-------------------------------------------- 
 
¶2.  (SBU) On January 26, State Secretary for Foreign 
Trade, Anne-Marie Idrac, announced that large Airbus 
clients were unable to obtain bank financing, 
particularly USD financing, due to the financial 
crisis.   She said the GOF could not let a temporary 
lack of liquidity threaten 30 billion euros in 
exports, the sector's workforce, and Airbus' 
capacity to compete with Boeing.  To ensure 
deliveries for existing Airbus orders, the GOF is 
making 5 billion euros available to prime lenders 
Calyon, BNP, Societe Generale and Natixis.  The GOF 
argues that banks' unwillingness to lend, despite 
GOF-backed credit guarantees, necessitated this 
action (REF B).  Unlike U.S. ExIm Bank, GOF and EADS 
officials point out, French export credit agency 
COFACE does not have direct lending authority. 
Boeing France President  Yves Galland told us the 5 
billion euros will help Airbus get through a 
difficult economic environment that Boeing faces 
also, and suggested it would not give Airbus an 
unfair competitive advantage. 
 
WAITING MODE FOR A350 LAUNCH AID 
-------------------------- ----- 
 
¶3.  (SBU) EADS Senior VP for Strategic and Business 
Denis Verret told us recently that no decision has 
been made to grant GOF subsidies of any type to 
Airbus for financing research and development of the 
A350XWB. Any launch aid, he clarified, would take 
the form of a reimbursable loan.  He implied that 
launch aid was under discussion among stakeholders, 
including Germany, but that discussion was only in 
its initial stages.  He noted the general consensus 
was to wait for WTO dispute panel findings expected 
later this year.  Emmanuel Glimet, Staff Director 
for State Secretary of Foreign Trade Anne-Marie 
Idrac, expressed similar views in a mid-February 
meeting. 
 
¶4.  (SBU) Press reports and one Paris-based industry 
observer note that Airbus had budgeted for A350XWB 
development, but costs in 2008 were higher than 
expected and the company's lower cash reserves were 
insufficient to cover overruns.  EADS executives 
announced January 13 in a press conference in Wales 
the company must curb investment expenses and re- 
orient the provisional 2008 cash surplus of 9 
billion euros towards customer financing, as 
airlines seek alternative sources in a credit- 
squeezed market. 
 
Pointing the Finger at Boeing 
----------------------------- 
 
¶5. (SBU) EADS VP Verret bemoaned the fact that 
Airbus has "no Pentagon and no NASA" to finance its 
R and D.  He claimed that the 787 Dreamliner was the 
direct result of USG funded programs in composites 
and would be the most heavily subsidized Boeing 
product to date. 
 
OTHER LONGER TERM SUPPORT SOURCES 
-------------------------------- 
 
¶6.  (U) The GOF, in collaboration with corporate 
partners, continues to use a host of financial and 
business advisory support channels to develop the 
 
PARIS 00000334  002 OF 002 
 
 
aeronautic sector.  In July 2005, state-controlled 
CDC Entreprises, EADS and Safran launched Aerofund 
(50 million euros) to consolidate and develop 
European aeronautical subcontracting.  A venture 
capital fund targeting SMEs developing new 
technologies, Aerofund allows the GOF to work within 
European rules that make it hard to invest public 
funds directly in non-listed companies of 
"strategic" sectors.  A variety of suppliers and 
sub-contractors on the A380 and A400 projects are 
beneficiaries of Aerofund I equity investments.  In 
July 2008, Airbus, CDC, and Safran, announced the 
launch of Aerofund II (75 million euros).  The fund 
provides capital and funding to help suppliers and 
start-ups innovate, grow and become industrial 
partners with Airbus. 
 
¶7.  (SBU) Aerofund II is part of a broader support 
plan for the aeronautic sector announced by Prime 
Minister Fillon in October 2007.  The 345 million 
euro plan included reimbursable state loans to SMEs 
and assistance for training, innovation, market 
advisory services and production chain organization 
assistance, as well as an estimate of the tax 
benefits derived from the Sarkozy's R and D tax 
credit.  PM Fillon also authorized government- 
sponsored investment and guaranty funds to promote 
SME growth and strategic alliances.  The GOFQs 
cluster policy aims to consolidate sector-specific 
know-how, commercial interests and educational 
institutions within particular regions.  As part of 
the 2007 aeronautic industry plan, the GOF linked 
three aeronautical "competitive clusters" located in 
the Bordeaux-Toulouse aerospace valley. The GOF 
announced in 2008 it would invest a total of 1.5 
billion euros available (over three years) to be 
divided among its 71 technology clusters, largely to 
help finance R&D efforts. 
 
¶8.  (SBU) In a Le Monde interview on February 20, 
EADS CEO Gallois said the creation of venture 
capital and state support plans for key industries 
(aeronautic, aerospace, and defense) should be 
anchored in long-term EU policy.  Gallois echoed GOF 
calls for a European Research and Development 
program and an expanded SME market for the 
aeronautic industries.  Boeing France President 
Galland told us this is quite typical of Gallois who 
"shamelessly" takes every opportunity to prepare the 
terrain for possible future state or EU support 
programs. 
 
STATE STRATEGIC FUND STEPS IN 
------------------------------ 
 
¶9.  (SBU) To help the aeronautical sector survive 
the current economic downturn, the GOF announced in 
November 2008 that its Strategic Investment Fund 
(FSI), in partnership with Aerofunds I and II, would 
subscribe to a 17 percent capital increase in 
family-owned Daher Group for 80 million euros(REF 
B).  The capital increase, finalized on March 4, 
will allow the family-based Daher to invest 445 
million euros in the aeronautics sector over the 
next five years, according to media reports.  In 
November 2008 Daher and EADS announced they had 
reached agreement for the former to acquire a 70 
percent majority stake of Socata from EADS.  The 
Daher-Socatra partnership will foster business 
aviation via joint projects, "particularly on the 
A350XWB", said EADS CEO Louis Gallois in a press 
release. 
 
PEKALA