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France Up in the Air In War Against Boeing

The most anticipated event at this year's 42nd Paris Air Show was not the spectacle of jet fighters doing backflips.

Rather it was post-lunch remarks by the new French prime minister, Lionel Jospin, that would signal whether France would support the consolidations in Europe's aerospace industry analysts say are needed to face up to giant American competitors.

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His answer was yes - but on French terms. "The future of the aeronautics and space industry on the Old Continent lies, above all, in the development of powerful European groups able to face American competition," Mr. Jospin told industry leaders near the close of the air show Saturday.

"No future program, whether civilian or military, can avoid the imperative of cooperation," he added.

But he did not utter the words European partners had been waiting to hear: that France's new Socialist government was willing to privatize key industries, especially Arospatiale, the French partner in Europe's Airbus Industrie consortium.

Industry analysts say that the key to the survival of European aerospace companies is not barking at American aerospace giant Boeing but developing stronger partnerships. And the key to expanding partnerships is to get the French government out of the aerospace business.

For France, the air show, a biennial celebration of the latest and greatest in the world's aerospace industries, has also been a celebration of its national prowess. France is the world's No. 3 missile producer and No. 3 space power behind the United States and the Russian-led Commonwealth of Independent States.

Unlike other European countries, France provides for the full range of its own national defense needs, primarily through state-owned enterprises. French aerospace companies employ some 100,000 French workers, along with 80,000 in jobs with industry subcontractors.

France's aerospace industry is largely state-owned and is isolated from the rest of the European industry because of French decisions to go it alone on many big defense programs. Unless France agrees to privatize and streamline, Europe's bid to compete head-to-head with the US will fail, analysts say.

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Europe has been slow to consolidate its defense and civil-aviation industries and now risks lapsing into a role as subcontractor for American companies, such as Lockheed Martin and Boeing. The likely merger of Seattle-based Boeing with McDonnell Douglas would create the world's biggest maker of civil and military aircraft.

Europeans have objected to the merger, arguing that an enlarged Boeing would drive the European consortium Airbus out of business. Europeans also object to recent long-term deals signed by Continental, Delta, and American Airlines to exclusively buy Boeing jets.

In January, the four European partners of Airbus Industrie agreed to create a single company to better compete with Boeing. "The first step ... is that governments realize the fundamental need to privatize the companies that will participate," said Wolfgang Piller, a member of the board of directors of Daimler-Benz Aerospace (Dasa), Airbus Industrie's German partner.

Germany Defense Minister Volker Ruehe called for the privatization the entire European defense industry. "It is clear that if we want to create European companies strong enough to face up to American competition, it is essential that these be private companies," he said during a visit to the air show Friday.

France's just-ousted conservative government had pledged to privatize Arospatiale, along with Thomson-CSF, the defense electronics group. Jospin and the Socialists campaigned to put these privatizations on hold.

On Saturday, Jospin argued that the French government had a strong role to play in companies such as Arospatiale and in a defense industry "essential for the sovereignty of our country."

The government will begin a "deep analysis" of these cases before reaching any decision, he told industry leaders.

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