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French jet engine-maker Safran warned that an increase in European defence spending must benefit the region’s supply chain, and that the continent should be “careful” not to buy more US equipment.
“It’s positive news for the defence industry that European countries are going to increase their defence spending but we must be careful,” said Safran chief executive Olivier Andriès.
“Today, [European spending] is essentially done for the non-European industries and, primarily, American.” He added there would “probably be pressure from the new US administration to go even further” as Europe increases defence spending.
European governments’ spending on US arms has been a sore point for many of the region’s contractors, which are calling for more of the defence budgets to be allocated to local procurement.
The comments come as Nato secretary-general Mark Rutte said he expected European members to raise defence spending to “north of 3 per cent” of GDP and as world leaders gathered at Munich’s security conference.
Defence accounts for about a fifth of Safran’s revenues. The company supplies M88 engines for Dassault’s Rafale fighter jets, and also provides equipment for military helicopters.
Andriès said he wished to increase its defence business but the operations needed more “visibility” on long-term investments as Europe enters a “war economy”.
“We’re ready to respond to the needs and to do it quickly . . . simply, to invest, we need visibility,” he said.
To expand its defence business, Safran would “aim to develop our footprint in other countries, because it’s a way to access other countries’ defence markets”, he said.
He said this could be done through expanding Safran’s operations or through partnerships, noting that India, the US, north and eastern Europe were among the countries the company was looking at.
The comments came as Safran reported record revenues and profits for 2024. Revenues rose to 18 per cent to €27bn, while operating profits rose 30 per cent to €4.2bn.
Safran raised guidance for its earnings and free cash flow on the back of higher than anticipated servicing activities for its CFM engines, the best-selling systems used by Boeing and Airbus.
However, its forecast excluded the potential impact of anticipated tariffs from US President Donald Trump’s administration. The company has half of its sites outside of France, including in Mexico and Canada, which would be vulnerable to Trump’s threats of a trade war.
Asked about tariffs, Andriès said it was “very difficult to quantify the impact but there is potentially an impact because we are a global business”.
The sector’s supply chains have already struggled to recover following the Covid-19 pandemic and increased global tensions risk hitting Safran’s international supply chain. Safran already has at least two providers for each part it uses, and no country represents more than 50 per cent of the supply of a single piece, Andriès said.
Safran shares were up 1 per cent on Friday.
