After a long wait, France has finally resolved its internal defence and aerospace industry consolidation headaches. But in merging state-owned Aerospatiale with Matra Hautes Technologies to create Europe's second largest aerospace and defence group, making it fifth largest in the world, bets now appear to be off for the bigger prize - an all-European Aerospace and Defence Company. For the time being at least.
The cherished EADC would have been capable of taking the number one world ranking slot ahead of the biggest American rivals in the aviation, space and missiles sectors. So what happened?
The simplest explanation is that Europe's most powerful defence and aerospace companies have decided to merge along national lines instead, putting a temporary stop to the politically-inspired momentum for cross-border consolidation.
Recently, the French industry could hardly conceal its relief when British Aerospace rejected a merger deal with Germany's prime aerospace company DaimlerChrysler Aerospace (Dasa) for defence electronics and avionics giant Marconi. Now it has achieved an elegant restructuring of its own industry, France is in a comfortable position, awaiting further events.
France could now be in the vanguard of a renaissance of its aerospace industry after several painful years of restructuring. And with a new aerospace-to-missiles and space powerhouse ready to re-enter the marketplace as an efficient, commercially run, near-fully privately owned business, France has a number of options open and time to decide which it takes.
It could play the Aerospatiale Matra-Thomson-CSF merger trump card if the need to balance the New British Aerospace heavyweight in the UK became paramount. Privatised Thomson-CSF, having failed to win the hand of Marconi, has been left relatively isolated, its ambitions for a European defence electronics grand alliance now very limited. Nevertheless, its latest figures show that it is in good financial shape and the company already has a strong international presence through alliances and acquisitions and a wide portfolio of activities meaning it, too, need be in no rush to find a suitor outside of French soil.
But the likelihood is that France will continue to press for a pan-European solution to the so-called challenge from the USA which, due to historic Gallic distaste for privatisation, classes France among the least favourable European countries for industrial alliances.
A key option centres on an Aerospatiale Matra deal with Dasa, which already has extensive alliances with Aerospatiale and is in the throes of sealing its satellite alliance with Matra Marconi Space.
Reason enough, then, to believe a Franco-German tie-up might succeed this time. But Aerospatiale is still not sufficiently disengaged from the French Government for the likes of Dasa although France has said that a major reduction in its 44% stake in Aerospatiale Matra will not pose problems for the right suitor.
Continued championing of the European aerospace and defence industry cause by France will certainly be aimed at hindering New BAe from looking beyond its continental colleagues towards a transatlantic partnership, a move that would present the ultimate challenge to France's newly-revived industry. The chances are now, though, that New BAe, unable to find a means of merging with its French or German partners to the satisfaction of its shareholders, has already got its sights set across the Atlantic.
While Europe's Governments, including the UK, have called repeatedly for consolidation of the European industry, events have shown that they are being largely ignored, companies preferring instead to seek alliances that will bring the best results for their shareholders rather than trying to satisfy an ever-elusive political ideal. It may now be that only a contortionist could find a way to reconcile Europe's aerospace and defence industrial interests under a single roof. Two or three distinct European groupings with broad-based interests across the aerospace and defence electronics spectrum now appear likely with a European grand alliance an admirable, though impractical, goal.
Source: Flight International