The aeronautical subcontracting market - France (2024)

1.2 The global market

Apart from France, which is a world leader across the industry's entire value chain, the aerospace subcontracting market brings together a number of OEMs and engine manufacturers from the four corners of the globe. The American conglomerate United Technologies (***). Aerospace activities account for around **% of this American giant's sales.

Lockheed Martin, Honeywell International, General Dynamics, Northrop Grumann and Raytheon are also major American players in the aerospace subcontracting market. Together, they generate sales of ***.* billion euros. Across the Channel, engine manufacturer Rolls Royce and equipment supplier BAE Systems are also among the world's leading aerospace suppliers, with sales of $**.* billion and $**.* billion respectively in ****. Finally, Italy's Finmecanica and Japan's Fuji and Mitsubishi Heavy Industries are also major players in the aerospace subcontracting sector. [***]

Among all the subcontractors in this sector, there are six main categories of manufactured parts and systems:

Engines Aerostructures (***) Equipment Avionics Systems/logistics On-board electronics

Global aerospace market size World, ****-****, in billions of dollars Source: ****

The chart shows the evolution of the global aerospace market size from **** to ****, with a remarkable recovery from the COVID-** crisis. In ****, the market peaked at $***.* billion, before falling to $***.* billion in **** due to travel restrictions and declining demand for air travel. ...

1.3 France, flagship of the aeronautics industry

France has established itself as a major player in the global aerospace industry, ranking second only to the United States. In ****, the sector generated sales of almost €** billion, with a trade surplus of over €** billion, according to Gifas. Sector leaders include giants such as Airbus, Safran, Dassault Aviation and Thales, which benefit from an order book equivalent to several years' production.

However, the industry also relies on a large network of subcontractors, mainly SMEs, many of which have yet to implement robust cybersecurity policies. These subcontractors are essential to the supply chain, but remain vulnerable to threats such as cyber attacks, which can weaken the entire industry. [***]

Aerospace industry production value France, Germany and the UK, ****-****, millions of euros Source: ****

Sales in the French aerospace sector will reach €** billion in ****. The civil sector accounts for **% of sales in the French aerospace sector, and **% are generated by the military sector. [***].

The French aeronautics sector is a strategic pillar of the economy, playing a major role in national growth. After being severely hit by the COVID-** crisis, the industry has staged an impressive rebound in ****, with sales reaching €** billion, up sharply on the €** billion recorded in ****. This upturn brings the sector close ...

2.1 Airbus and Boeing

Aircraft order book World, ****-****, in $ billions Source: ****

The chart shows the evolution of aircraft order book for Boeing and Airbus between **** and ****, in billions of dollars. Both manufacturers show continued growth, but Airbus stands out for its more marked acceleration. In ****, Boeing's order backlog was $*** billion, below that of Airbus (***). This dynamic was temporarily reversed in ****, with Boeing overtaking Airbus with $*** billion versus $*** billion.

In ****, Airbus regains the upper hand, reaching $*** billion against Boeing's $*** billion. This trend accelerates in ****, when Airbus reaches $*** billion, compared with $*** billion for Boeing. The gap between the two manufacturers is widening, with Airbus benefiting from stronger demand and more stable production capacity, despite supply difficulties and labor challenges. This shows that Airbus is better positioned to meet the growing needs of the market, and thus consolidates its leading position in the global aerospace industry.

Aircraft order book World, ****, in units Source: ****

The chart shows aircraft backlog and deliveries for Boeing and Airbus in ****, measured in units. Airbus recorded *,*** net orders, more than Boeing, which secured *,***. In terms of deliveries, Airbus delivered *** aircraft, compared with *** for Boeing. The total order book for both manufacturers reached *,*** units, with *,*** deliveries over the year.

According to the International Air ...

2.2 Military expenditure worldwide

Military aviation is a large part of the French aeronautics industry, accounting for around **% of its output by value. In ****, worldwide military spending reached more than *,*** billion dollars, a figure that has been rising steadily over the last ten years.

Military expenditure worldwide World, ****-****, Billions of dollars Source: ****

In addition, countries contribute as follows to this military spending:

Breakdown of military spending World, ****, in Source: ****

The United States accounts for almost **% of total military spending. It is followed by China (***). France ranks *th with *.*%.

On a national scale, the military programming law provides for an increase in the defense budget, which should benefit the aeronautics sector:

Military budget trends France, **** - ****, in billions of euros and in % Source: ****

The graph shows the evolution of the French defense budget from **** to ****, both in terms of amount (***) and percentage of GDP. There has been a steady increase in defense spending, from **.* billion euros in **** to **.* billion in ****, reflecting France's focus on strengthening its military capabilities in an increasingly unstable geopolitical context.

In ****, the budget represented *.**% of GDP. This increased to *% from ****, meeting the objective of the ****-**** Military Planning Law (***), which aimed to modernize the armed forces and make them "complete and ...

2.3 Air freight

Air freight activities within the European Union have made very little progress over the last ten years.

On a global scale, however, air freight transport, measured in billions of tonne-kilometres carried byICAO, has been rising steadily for the past * years, at a compound annual growth rate of +*.**% over the ****-**** period.

World air freight transport World, ****-****, billions of tonne-kilometres transported Source: ****

In ****, the air freight market showed notable resilience despite an uncertain economic context. Over the year, global freight demand, measured in cargo tonne kilometers (***). This figure reflects the strongest annual growth of the last two years, indicating a dynamic recovery in the sector.

Transport capacity, measured in offered load tonne kilometers (***) continued to point to a contraction in manufacturing output and new export orders, reminding us of the fragility of this recovery in certain economic sectors.

In short, although **** ended with slightly lower demand than ****, the end-of-year results, particularly in December, show that the recovery is not over yet.e, particularly in December, show that airfreight markets are on the road to recovery, with increased capacity and a gradual stabilization of demand.

Total transport expenditure by mode World, ****, in Source: ****

The graph shows the breakdown of global transport expenditure ...

2.4 Increase in air passenger traffic

The keystone of the sector, passenger air transport is set to grow over the next few years, rapidly surpassing its pre-pandemic level. This increase in air traffic represents a favorable environment for growth in the outsourcing sector over the next few years.

Air passenger numbers compared with **** World, **** - ****, as % of total Source: ****

3.1 Characteristics of the business fabric in the aeronautics sector

The aerospace market in France is structured around a dense ecosystem of over *,*** companies, ranging from major groups like Airbus and Dassault Aviation to SMEs and ETIs specializing in the subcontracting and manufacture of aeronautical components.

These companies design, produce and maintain civil and military aircraft (***), as well as manufacturing spare parts and providing maintenance services. The sector employs nearly ***,*** people, representing a wide range of skills, from operators to engineers specialized in mechanics, electronics and IT. By ****, sales in the aeronautics sector will reach €** billion, making this industry the leading contributor to France's balance of trade, with a surplus of €**.* billion by ****.

However, the sector faces major challenges, particularly in terms of recruitment, with **,*** positions to be filled by ****, in a tight labor market, as well as decarbonization and competitiveness issues in an increasingly competitive international context. [***]

Breakdown of companies and salaried employees in the aeronautical industry Grand Sud-Ouest region, ****, in % Source: ****

The graph illustrates the evolution of salaried headcount (***) in aerospace sector establishments in Occitanie between **** and ****. There has been a general increase in the number of employees in all segments of the sector, with estimated growth more marked in **** than in ****. For example, the aerospace sector as a ...

3.2 Value chain

The aeronautics supply chain involves several thousand companies, from parts manufacturers to maintenance and repair operators.

Parts manufacturers: IHI, Meggitt, ITP Aero, L* Technologies Sub-system manufacturers: Mitsubishi Heavy Industries, Kawasaki, TAI, GKN Aerospace Equipment and engine manufacturers : Thalès, Safran, UTC Aerospace Systems Aircraft manufacturers: Airbus, Boeing, Dassault Aviation Customers: AirFrance KLM, Lufthansa Aerospace AirFrance KLM, Lufthansa, GE Capital Maintenance and repair operators: AirFrance Industries, ATR

The aerospace industry is structured around manufacturers, generally large companies, who are the prime contractors; their supply chain is made up of suppliers, subcontractors and service providers in the aerospace sector.

Below is a simplified diagram of the industry:

Source: ****

3.3 Market structure

This study on the structure of the aeronautics market is based on a survey of *** companies, mainly SMEs and ETIs, to ensure geographical and sectoral representativeness of the value chain. The companies surveyed cover various segments, including aerostructure, mechanics, on-board systems, engineering and consulting. The survey is not limited to Gifas members, which means that it can reach a wider range of players, from Tier * to Tier * subcontractors, involved in services ranging from build-to-own to the development of new products.involved in services ranging from build-to-print (***), two key production modes in the aeronautics industry. The strong presence of VSEs and SMEs, mainly located in Occitanie, Nouvelle-Aquitaine and Île-de-France, shows the dependence of major contractors on a dense and diversified entrepreneurial fabric, with companies often specializing in high-tech or manufacturing niches.

Recruitment in the aerospace industry France, ****-****, in units Source: ****

The graph showing recruitment in the French aerospace industry between **** and **** reflects a restructuring of the sector's job market. The drop in recruitment in **** (***) corresponds to the immediate impact of the pandemic on the aeronautical industry, leading to a temporary reduction in demand. However, from **** onwards, the market picks up gradually, with *,*** new hires, peaking at **,*** in ****.

This rapid increase illustrates ...

3.4 Challenges for the subsidiary

Subcontractors often find it difficult to adapt to the demand for higher production rates, shorter delivery times, uncompromising quality control and downward pressure on prices.Manufacturers suffer"scissor effectthe "scissor effect" of lower production rates for older programs, before benefiting from the ramp-up of new programs(***).

An overheated production system

Production rates have to be stepped up to meet orders from major customers, and tensions are appearing in the highly mobilized production system (***). Indeed, adapting work tools to this new demand requires time to recruit, train personnel or install new equipment. The aerospace supply chain in the Greater South-West region is faced withthe limits of its production capacitythe average utilization rate in industry is **%, whereas the "sustainable" utilization rate for a production line is **%. [***]

Le Piston français (***) estimates that production rates will have to quadruple to meet its orders between **** and ****.

Smaller companies in particular lack working capital, and are hampered by the reluctance of lending institutions to expand their production facilities.

Recruitment difficulties

All the players in the sector deplore "the bad reputation of mechanical engineering", which is not attracting enough young people to these "short-staffed" professions: boilermakers, welders, fitters and electricians. In addition, SME subcontractors are finding it ...

3.5 Geography of subcontracting

Offshoring...

To minimize production costs and find new pools of skilled personnel, industry players often relocate part of their production abroad. On July *, ****, SAFRAN opened a new production site in Poland, for a total investment of €**m. This new plant employing *** people focuses on the production of a single part: low-pressure turbine blades. Subcontracting of production abroad takes place mainly in nearby European and Eastern European countries, as well as in Morocco, as can be seen in the following graph.

Geographical breakdown of outsourced aeronautical activity by region World, ****, as % of total Source: ****

4.1 The challenge of supplier ramp-up

Growth in the aeronautics market goes hand in hand with the need to increase the production capacities of the various suppliers in the aeronautics value chain. For Airbus deliveries, for example, the production rate of Tier * suppliers is still the limiting factor. [***] But it is above all SMEs that suffer from this acceleration.

In fact, the effect is all the more pronounced as this industrial fabric of sub-assemblies and other tier * and higher suppliers has only a very limited customer portfolio, with sometimes a single customer accounting for a third of their sales. These companies have to invest massively to increase their production capacity, sometimes resulting in strongly negative net results despite sales growth.

This is particularly true of Figeac Aéro, a major player in the aeronautical subcontracting sector. Although the company recorded sales growth of **.*% in the first half of ****-****, reaching ***.* million euros, it had to absorb substantial net losses, amounting to **.* million euros. This situation is largely explained by the massive investments the company had to make to meet the growing demand from major principals such as Airbus, while at the same time coping with inflation in raw material and energy costs. Despite these efforts, the margins ...

4.2 Decarbonizing the aeronautics sector

The decarbonization of the aeronautical sector is becoming a crucial issue in the face of the **** carbon neutrality objectives. Although the aerospace industry is still in the exploratory phase for radical decarbonization technologies, such as new propulsion systems or sustainable aviation fuels, significant efforts are being made.

In ****, only *% of companies in the aerospace sector were directly involved in projects linked to the decarbonization of aircraft and spacecraft. However, **% of them have implemented initiatives to improve their environmental performance, especially among the major manufacturers.

This sub-section is based on Insee's **** study (***) on the aerospace industry in the Greater West of France.

Involvement of companies in improving environmental performance, by type of project implemented France Grand Sud-Ouest, ****, % of total Source: ****

The graph shows that in ****, **% of aerospace companies in the Greater South-West region have implemented projects to improve the environmental performance of their production processes. A similar percentage (***) have focused on optimizing production premises and sites, reflecting efforts to make infrastructures more sustainable.

By contrast, projects specifically linked to decarbonization, such as carbon emissions reduction, remain marginal, with only **% of companies involved in this approach. Nevertheless, overall, **% of companies have launched at least one project aimed at improving their environmental performance, demonstrating ...

4.3 Lower working capital requirement (WCR)

In ****, the WCR of operators in the same sample fell by *.* days' sales compared with ****. This evolution is explained by a decrease in customer lead times and an increase in supplier lead times. However, inventories for these same companies increased in ****. Since ****, however, there has been an increase in this WCR.

[***] Customer, inventory and supplier lead times for aeronautical equipment France, Average ****-****, days sales Source: ****

[***] Operating working capital requirement France, ****-****, days sales Source: ****

This graph shows the evolution of operating working capital requirements (***). Overall, WCR has remained between *** and *** days, with moderate fluctuations. The highest value was reached in **** at *** days, while WCR fell to its lowest level in **** at ***.* days. These variations show a relative stability of WCR over this period, indicating that companies have globally maintained constant levels of working capital to cover their current operations, despite some upward or downward fluctuations depending on the year.

expected change in WCR at end ****, compared with end **** France, ****, in units Source: ****

The graph shows strong pressure on working capital requirements (***) expect a sharp fall in WCR.

This increase in WCR can be attributed to a combination of the upturn in activity in the sector and the costs ...

4.4 A sector with the wind in its sails despite struggling subcontractors

Subcontractors in the French aeronautics industry, who play an essential role in the production chain of major aircraft manufacturers such as Airbus and Safran, are going through a period of turbulence. While global demand for aircraft is experiencing a post-pandemic rebound, fueled by historic order books - Airbus is forecasting delivery of *** aircraft in **** - almosts **% of major subcontractors are in serious financial difficulty (***). [***]

This finding, based on financial statements for **** and shared by the Banque de France and the Groupement des industries aéronautiques et spatiales (***), highlights a major structural challenge for the industry[***]

The main challenge lies in the inability of these companies to rapidly adjust their production capacity in the face of increasing production rates imposed by major customers. While Airbus and Safran are pleased with the increase in their production rates, their suppliers are facing increased financial pressures, exacerbated by rising energy and raw material costs. For these SMEs, the equation is complex: they must invest massively to keep pace, but these investments often generate high levels of debt and insufficient self-financing capacity. The result is recurring losses, as in ****, when almost **% of major suppliers saw their financial results plummet. [***]

Despite a context of rising orders, the ...

4.5 Subcontractors take insufficient account of cyber risk

Number of cyberattacks by target in the airline industry France, ****, in units Source: ****

This graph shows the distribution of the *** cyberattacks recorded in the aviation sector in ****, highlighting the concentration of targets. Airports are by far the hardest hit, accounting for around **% of attacks, or *** attacks. This figure illustrates the strategic importance of airports as key targets for cyberattacks aimed at disrupting connectivity and destabilizing transport infrastructures.

Airlines come second, with *** attacks, or around **% of the total. They are prime targets for attackers seeking to steal sensitive passenger and flight operations data.

Equipment manufacturers suffered ** attacks, or around *%, underlining cybercriminals' interest in technology and innovation in this sector. Service providers, with ** attacks (***), are also targets.

Reservation platforms, air forces and other entities such as associations, frequent flyer programs, aviation schools and research institutes represent minor targets in terms of attack volume, together accounting for less than *% of incidents recorded.

These figures clearly show that the airline industry's critical infrastructures, such as airports, airlines and equipment manufacturers, concentrate the bulk of cyber attacks, reflecting their importance in the overall air transport ecosystem.

Type of attack carried out World, ****, in units Source: ****

This graph shows the ** countries most affected by cyber attacks on ...

5.1 Regulations

French law on subcontracting

In France, Law no. **-**** of December **, **** on subcontracting sets out the terms of organization between subcontractors and subcontracted parties. This law has been successively consolidated by several other laws and ordinances, the latest being ordinance n°****-**** of November **, ****, laying down the legislative part of the public procurement code. This is intended to bring together all the texts applicable to the various public procurement contracts in a single corpus. [***]

The case of subcontracting from a French company to a foreign company is specified in this document, published by French Airworthiness Directives.

EN**** standard:

This quality standard has recently been revised for the entire aeronautical sector. This iinternational standard, the most widely used in the aerospace sector, aims to take better account of the constraints weighing on the subsidiary's players, while guaranteeing ever-greater aircraft safety.

Among the major changes, the responsibility of each company is strengthened with regard to the detection of so-called counterfeit parts, which do not meet the initial specifications. "Afnor explains:"A company must ensure that the quality and safety of products and services supplied by external service providers is controlled, not only by the n-* supplier, but by the entire upstream supply chain. ...

5.2 Recent regulations

Order of August **, ****: (***)

The Order of August **, **** introduces a major update to the regulations governing ultralight motorized aircraft (***) and more powerful aircraft, thanks in particular to technologies such as electric motors. It's a bit like updates in other sectors, such as electric cars, where rules are adapted to incorporate innovations.

For pilots, this decree implies more advanced training, with courses on new technologies and stricter exams, rather like the evolution of licenses for new types of vehicle. The maintenance of these ULM-S is also reinforced, as they include more sophisticated systems. These new regulations aim to improve aircraft performance while ensuring a high level of safety, just like other decrees governing drone safety in France.

EPAS (***):

This European plan, drawn up by EASA, sets the priorities for safety and environmental protection in the aviation sector. It includes specific actions to reduce the sector's environmental impact, notably through the development of sustainable aviation fuels (***) and the improvement of air traffic management systems. [***]

6.1 Segmentation

The companies listed below represent a cross-section of France's largest aerospace suppliers, equipment and engine manufacturers.

6.2 List of companies included in the statistics

The various statistics concerning intermediate operating balances, working capital requirements and expense items presented in the "Supply analysis" section have been compiled from the financial data of the following companies:

ACE Aéronautique Aero ** Aero Gearbox International Alkan Alsenam Ami Metals France Athos Aéronautique Auxitrol Aviacomp Blanc Aéro Corse Composites Aeronautiques Creuzet Aéronautique Duqueine Fabrications Mécaniques de l'Atlantique Frégate Aéro Gardner Aerospace Mazeres Indraerp Issoire Aviation JCB Aero Kalistrut Aerospace Latelec Leach International Europe Malichaud Atlantique Mecahers Group Micro Mecanique Pyrénéenne MTI Novintec NSE P G A Electronic Rafaut Recaero Rexiaa Roxel france SKF Aerospace France SN Auvergne Aeronautique SOC Potez Aeronautique Sodern Souriau Spirit Aerosystems Tecalemit Aerospace The Gill Corporation Vision Systems

• Mecachrome Groupe
• Honeywell
• Figeac Aéro Groupe
• Latecoere
• Stelia Aerospace
• Le Piston Français
• Lisi Aerospace groupe
• Lauak
• Collins Aerospace
• Heli union
• CURTIL
• E.S.P.A.C.E
• GATTEFIN Ets
• Safran Groupe
• Zodiac Aerospace (Groupe Safran)
• INDUXIAL
• NEXTEAM Chatellerault - Ex Mecafi
• Nexteam Ventana
• ROSSI AERO
• Thales
• Sabena Technics (TAT Groupe)
• Expliseat
• Domusa Groupe
• Daher
• UUDS Aero
• Crouzet
• JVGroup - BT2i
• LFG Groupe
• Famat
• AMI Metals
• WeAre Group
• Vision systems