Latecoere Urges Supplier Mergers as Airbus, Boeing Plot Jets
Latecoere SA CEO Francois Bertrand
Latecoere SA Chief Executive Officer Francois Bertrand, seen here, said, “Consolidation must happen for economic reasons.”. Caroline Blumberg/Bloomberg
Latecoere SA Chief Executive Officer Francois Bertrand, seen here, said, “Consolidation must happen for economic reasons.”. Caroline Blumberg/Bloomberg
Latecoere SA Chief Executive Officer Francois Bertrand, seeking a partner for the aircraft-components supplier, said his industry must consolidate before Airbus SAS and Boeing Co. renew their narrow-body jets in coming years.
The world’s two largest aircraft makers prefer larger suppliers, and size would help parts makers shoulder the burden of investments needed for the next generation of single-aisle planes, Bertrand said in an interview yesterday.
“There’s just not a lot of critical mass out there, things are splintered,” the executive said at Latecoere’s headquarters in Toulouse, France. “Consolidation must happen for economic reasons.”
Both Airbus and Boeing are studying options to upgrade their bestselling single-aisle jets, which form the backbone of the civil aviation industry. Options range from an all-new plane, an endeavor that would likely cost $10 billion or more, or equipping the existing Airbus A320 and Boeing 737 aircraft with more fuel-efficient engines at a fraction of the price.
Bertrand predicted new models may come in five years at the earliest. Airbus and Boeing both plan to make a decision on their next moves this year.
Airbus Sales Chief John Leahy has said Airbus is unlikely to bring out an all-new plane before the middle of the next decade in order to reap the benefits of advanced materials and engines. Boeing Chief Financial Officer James Bell told investors at a conference last month that customers “haven’t shown a real interest” in the re-engineered airplane.
Complicated Mergers
Europe has more than 20 companies making structural parts for commercial aircraft, Bertrand said. In the U.S., by contrast, the field has been winnowed to just two, Spirit Aerosystems Holdings Inc. and Triumph Group Inc., which owns Vought Aircraft Industries, the executive said.
Still, consolidation in Europe may be complicated by the fact that suppliers often provide parts for military equipment, making cross-border mergers politically delicate, he said.
Latecoere is a supplier of doors and wiring. Bertrand said his company would take an active role in narrowing the number of companies in his field. One attempt failed three years ago, when Airbus parent European Aeronautic, Defence & Space Co. sought to sell factories in France, Germany and the U.K.
Aborted Sale
Bertrand’s company bid on the two French plants where the nose cone for Airbus planes are made, before a declining dollar and the approaching recession led Airbus to suspend the process. Airbus instead split the French and German plants into separate subsidiaries in 2008 to facilitate an eventual sale. Bertrand said he remains interested in the French assets.
Latecoere won’t start talks with prospective partners until business recovers in 2011 from the slump in business and regional jet sales in the last two years, the CEO said. Latecoere does more than half its business with large plane makers, with the rest from companies including Empresa Brasileira de Aeronautica SA, or Embraer, the fourth-largest plane maker, and Dassault Aviation, maker of Falcon business jets.
Latecoere may be an at advantage to drive consolidation because the company has a better chance to raise money as a listed company, Bertrand said.
“Consolidation can only be done in times of growth,” he said. “So we’re preparing, we’re open to all scenarios.”
To contact the reporters for this story: Andrea Rothman in Toulouse, France, via aerothman@bloomberg.net
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