An Update on French Defense Industry in the Lockdown: Furloughs and Dividends


By Pierre Tran

Paris – Dassault Aviation has suspended its €212 million ($232 million) dividend on financial year 2019, withdrawn its business forecast for 2020, and placed some staff on furlough in response to disruption caused by coronavirus.

“To support Dassault Aviation in this unprecedented crisis, the board decided today that no dividend should be paid to shareholders for financial year 2019,” the company said April 1 in a note to staff posted on its website.

That cancellation of dividend is the latest in a drive by French companies to conserve cash to fund wage bills, maintain idle factories and finance a gradual industrial restart.

Dassault follows airliner builder Airbus and engine maker Safran, which have respectively suspended dividends of some €1.4 billion and around €1 billion.

Electronics company Thales declined comment.

The economy minister, Bruno Le Maire, called March 30 on companies to suspend dividends if those firms benefited from the state-backed furlough system.

“Set an example,” Le Maire said on BFM TV. “If you are using the furlough, do not pay dividends…”

France holds some 11 percent of Safran and 25.68 percent of Thales.

Under the French furlough, the government partly funds the reduced salary paid to staff temporarily laid off in the lock down against Covid-19. Companies pay part of the salary.

“Companies need to hold on to the maximum amount of cash to finance the recovery,” said Hervé Guillou, chairman of Gican, a trade association for naval companies and former executive chairman of Naval Group. Companies also need to pay executives, who are not covered by the furlough system.

Talks are under way to decide payment while on furlough and a new work schedule, Dassault said in the staff note. Staff who are not working from home or not returning to the factory from April 3 will be on furlough.

Work on the production line will gradually start April 3, with work teams assigned to high priority programs.

Dassault withdrew its business forecast for this year, which had already expected lower sales compared to a buoyant 2019. The company had planned to pay a dividend of €25.4 per share.

The company had expected to deliver 13 Rafale and 40 Falcon business jets this year, down from 26 fighter jets shipped last year. The forecast sale of Falcon jets for 2020 had been unchanged at 40 units.

Safran withdrew March 26 its 2020 forecast and cancelled a dividend of €2.38 per share.

“In a spirit of responsibility vis-à-vis Safran’s stakeholders, this decision preserves the group’s resources in order to protect employees, maintain continuity of its operations, notably for its suppliers, support its customers and ensure liquidity in uncertain times, “ the company said in a statement.

Safran also set up a new €3 billion credit line with banks.

Airbus cancelled its dividend of €1.8 per share and set up a new credit line of €15 billion, giving access to €30 billion of liquidity. The company also suspended voluntary top up payments to pension.

The Dassault family, which receives significant income from the dividends, thanked the top managers, executive chairman Eric Trappier and chief operating officer Loic Segalen, for the steps taken in the lock down.

The family gave “full and complete support,” the April 1 staff note said.

The family holds 62.3 percent of Dassault Aviation, and voting rights of 76.9 percent.

Payment of dividends, furloughs and high pay have sparked controversy in the UK. The founder of easyJet, Stelios Haji-Ioannou, last month received £60 million in dividends, as the low-cost airline placed 4,000 staff on furlough and grounded the entire aircraft fleet.

In the Premier football league, Newcastle United stopped paying its non-playing staff, leaving them to apply for the government-backed furlough scheme. Meanwhile, while soccer players stayed on full pay, reported to be an average £40,120 per week, the BBC reported.

The furlough scheme meant taxpayers would fund 80 percent of wages of the non-playing staff, who would remain on the Newcastle’s payroll.

In France, almost 400,000 companies and four million workers have registered for furlough, which pays 70 percent of salary, afternoon daily Le Monde reported.

Some 4,032 people have died in hospital from the virus, with more than 9,600 patients in the Ile de France region around the capital, straining the medical facilities, the report said.

Featured photo: French Economy Minister Bruno Le Maire addresses a conference on February 15, 2018 at the Economy Ministry in Paris. (ERIC PIERMONT/AFP/GETTY IMAGES)