France's export-heavy backlog will be delivered by a supplier base whose owners are retiring and whose shares are changing hands. The state has just built new tools to keep critical knowledge in France, and they turn supplier succession into a board question.
Andy Demir · 16 October 2026 · 11 min read
Executive Summary
France goes into 2027 with a backlog that leans heavily on exports: 165 of the 208 Rafales Dassault Aviation still had to deliver as of the end of June 2026 were for foreign customers. Delivering it depends on thousands of smaller suppliers, and the sector's own association reports that 44% of their leaders are over 60. The industrial data point in both directions, with Trendeo counting a net loss of 63 factories in 2025, while the government barometer shows defence, aeronautics and space adding sites. The state has responded by tightening its hold on know-how. Nearly half of the foreign investments it authorised in 2025 were subject to conditions; a declaration regime for specialists with critical knowledge starts on 1 January 2027, and an EU screening regulation follows in 2028. My reading is that over the next year, know-how conditions and customer-backed succession will become a normal part of supplier transactions. The option worth a board's time is to list the small suppliers whose ownership or technical records put a critical process at risk, and to agree on a continuity plan for the most important ones before a sale or retirement sets the timing.
In This Essay
- The backlog leans on exports
- An industrial base growing and thinning at once
- Ownership has become an industrial instrument
- A building is not a capability
- Know-how lives in records as well as people
- Know-how conditions will become routine in supplier deals
- The succession list I would put on the board agenda
- Questions for the C-Suite and the Board
- References
The backlog leans on exports
Dassault Aviation's half-year presentation of 22 July 2026 shows how far France's combat-aircraft business now depends on foreign customers. As of 30 June, 208 Rafale aircraft remained to be delivered, 165 of them for export, and the first deliveries to the United Arab Emirates were scheduled for the end of 2026. More may follow: in July, France and Ukraine concluded a roadmap for Kyiv to acquire 16 Rafale aircraft, and India's Defence Acquisition Council has decided to enter into direct negotiations for 114 aircraft. Neither is yet a firm order. At home, the French state has asked Dassault to move 20 of its own deliveries from 2031-2032 to 2033-2034, thereby leaving more room in the schedule for export customers (Dassault Aviation, 2026).
The UAE ordered its 80 aircraft in 2021, years before the 2026 conflict involving the United States, Israel and Iran, during which Iran struck targets across the Gulf states. Gulf buyers may weigh their suppliers differently as their security relationships change, but the existing backlog makes the industrial case without that assumption (Binnie, 2026). A practitioner with long experience of offset programmes put the consequence to me plainly in a recent conversation: France has won a great deal of Gulf business, and the people and production behind it do not grow at the speed of contract signatures. Export customers buy decades of support along with the aircraft, so they are buying the continuity of the companies that hold the processes.
That is where I would place the French question for 2027. The general problem of converting orders into accepted output applies across Europe, and I examined it for Germany in the delivery-capacity constraint in Germany's 2027 programmes. France adds a sharper version of it. A large part of its backlog spans a decade or more, while many of the small companies that hold critical processes are approaching a change of ownership. Whether their knowledge stays with the programmes is now a question of ownership, succession and records as much as of capacity.
An industrial base growing and thinning at once
The sector as a whole is strong. GIFAS, the French aerospace industry association, reported 2025 revenue of €85.6 billion, up 11.9%, record exports of €59.4 billion, and €88.6 billion in orders, with civil aeronautics at €63.3 billion, defence at €22.3 billion, and space at €5.3 billion. Employment rose 3.1% to 230,500, with 21,300 recruitments in 2025 and another 20,000 planned for 2026. These figures cover the association's members and were published in 2026; they describe the industry entering this year, not its 2026 results (GIFAS, 2026a, 2026b).
Beneath the totals, the structure is ageing. GIFAS notes that 44% of leaders of small and medium-sized companies in the sector are over 60 and has set up a working group on succession. It also reports that the supply chain is improving operationally and financially while tensions remain in segments most exposed to cost and capacity constraints (GIFAS, 2026a). A strong order book and a retiring generation of owners can coexist for years. The moment that matters for a customer is the day a founder sells, closes, or hands over a company that has a proven process nobody else has.
National data show the same mixture of growth and erosion. Trendeo, a commercial data provider, reports a net loss of 63 factories in 2025, its worst balance since 2014, with closures up 32%, concentrated in food manufacturing and metallurgy, and weighing most heavily on smaller units. The government's industrial barometer, which also counts significant expansions and contractions, reports a positive balance of 19 overall and 19 in defence, aeronautics and space. The two measures use different scopes, so the useful reading is not which is right but where they diverge: smaller industrial units in adjacent trades are under pressure while the sector's larger sites expand (Trendeo, 2026; Directorate General for Enterprise, 2026).
Cash timing adds to the strain on small owners. In its November 2025 report on the 2026 defence budget, the Senate finance committee's rapporteur projected deferred defence payments of about €8.6 billion by the end of 2026 and noted that, where the state does not pay subcontractors directly, delays can travel down the chain. The updated programming trajectory, agreed by the joint parliamentary committee and voted on by the Senate on 30 June 2026, raises defence payment credits to €63.3 billion in 2027 on the basis of the programming law, with an additional €36 billion in resources for 2026 to 2030 (French Senate, 2025, 2026). More money is coming. For an owner near retirement, the gap between a funded order and the cash it releases can still make a sale look more attractive than another expansion.
Ownership has become an industrial instrument
The state has strengthened its instruments in three steps. France's foreign-investment screening report for 2025 records 418 filings, and nearly half of the investments it authorised carried conditions, such as keeping sensitive activities in France, protecting know-how and information, adapting governance or keeping the state informed. Refusals remain rare. An EU screening regulation adopted on 17 June 2026 will apply from January 2028, and France is adapting its framework by the end of 2026 (French Ministry of Economy, 2026). The updated programming law adds a third tool aimed at people rather than shareholdings: in the text agreed in June, specialists with critical know-how who work in protected sites must, from 1 January 2027 and for five years after leaving, declare paid work for non-European employers or entities they control (French Senate, 2026).
| Instrument | What it covers | Timing |
|---|---|---|
| French foreign-investment screening | Acquisitions in sensitive sectors; conditions on activities, know-how, information and governance | In force; 2025 report published September 2026 |
| Know-how declaration in the updated programming law | Specialists with critical knowledge in protected sites taking paid work for non-European entities | From 1 January 2027, five years after leaving |
| EU foreign-investment screening regulation | Common minimum scope and coordination across member states | Adopted June 2026; applies from January 2028 |
Sources: French Ministry of Economy (2026); French Senate (2026). Self-made summary; the declaration regime needs an implementing decree.
These instruments protect capability from leaving. They do not, on their own, keep a small supplier healthy. A condition attached to an acquisition can preserve a process in France while the business still lacks a successor, capital for new equipment or the customer commitments that justify investing. Conditions also change the economics of a sale: a buyer facing obligations on governance and know-how may offer less, and an owner may then prefer to wait, which leaves the underlying succession problem in place.
A business contact who travelled through several French industrial areas this year described premises standing closed or largely empty, and raised a concern I hear more often in conversations with industry practitioners: that some acquisitions of small suppliers end with equipment and know-how leaving the site. I have not been able to verify any specific case, and I treat it as a reason to examine particular transactions, not as a finding about who buys French suppliers or why. The legal tools above exist precisely because the concern is taken seriously.
A building is not a capability
The difference between a site and a capability helps explain how vacant workshops and aerospace bottlenecks can be a few hours apart. A closed plant may still offer floor space, power and some machines. It rarely offers calibrated tools, an approved quality system, current customer qualification, secure handling of technical data or the people who understand a difficult process. The address is available immediately; the capability becomes available only after a successful conversion, which takes time, money, and a customer willing to requalify the work.
Ownership changes can also add capacity. Dassault and Tata Advanced Systems agreed in June 2025 to build Rafale fuselage sections in Hyderabad, the first Rafale fuselage production outside France, with first sections expected in India's fiscal year 2028 and output of up to two complete fuselages a month. Dassault now describes the arrangement as a dual production source (Dassault Aviation, 2025, 2026). Cross-border participation, done deliberately, can strengthen a programme. What determines the outcome in each case is whether the transaction retains the knowledge, records, and customer relationships that make the process work, and the investor's nationality alone does not settle that.
European partners fit the same logic. A qualified supplier in another member state can take over a process from a retiring owner and act as a second source, provided the French customer retains design authority and configuration control. The practical route for an incoming supplier, as I described for Germany, is to take responsibility for a defined piece of work rather than offer general capacity. The European Commission's Readiness Roadmap 2030 points in the same direction, aiming to reduce critical dependencies and build an EU-wide market for defence equipment, though its milestones signal direction rather than funded orders (European Commission, 2025).
Know-how lives in records as well as people
Succession plans usually focus on the owner and a few key technicians. In aerospace and defence, much of the knowledge also sits in records: process specifications, qualification evidence, non-conformance histories, tooling definitions and the reasons behind past design decisions. When those records are incomplete or kept informally, a change of ownership can result in the loss of knowledge, even if every employee stays.
That makes controlled digital tools part of the succession question. France is building sovereign options for sensitive data. In the National Assembly debate of 7 May 2026, the armed forces minister said the defence AI agency, AMIAD, had put into service Europe's first military computer for classified data. Dassault Aviation reports a sovereign internal AI deployed in its own data centres, and S3NS, a French law company wholly controlled by Thales that delivers Google Cloud technology, said in 2025 that Thales had chosen it for sensitive data and applications (French National Assembly, 2026; Dassault Aviation, 2026; S3NS, 2025). These are official and vendor descriptions rather than independent assessments, and they serve large organisations first.
For a small supplier, the useful step is more modest: organise the technical records of its critical processes so that a successor, a buyer or a customer can rely on them, with clear rules on who may access them. AI retrieval tools can help once the records exist and are trusted. They cannot reconstruct knowledge that was never written down, and an answer that cannot be traced to an approved source has no place in a qualified process.
Know-how conditions will become routine in supplier deals
My reading is that over the next twelve months, know-how conditions and customer involvement will become a normal part of transactions involving small French aerospace and defence suppliers, and I hold that view with moderate confidence. The calendar supports it: the declaration regime from 1 January 2027, first Rafale deliveries to the UAE at the turn of the year, the strategic review of the updated programming law schedules for July 2027, the presidential election, and the EU regulation in January 2028. I would expect more primes and tier-one suppliers to take minority stakes, back management buy-outs or arrange record transfers in critical suppliers, and the share of conditional authorisations in the next screening report to stay at or above the 2025 level. Suppliers with documented processes and a credible succession plan stand to gain bargaining power; owners without them may find buyers more cautious and customers less patient.
The strongest counter-argument is that the market is already handling this. GIFAS reports an improving supply chain; private equity and family offices are active buyers in industrial niches; and screening may deter the capital small suppliers need, so additional conditions could slow rather than secure succession. That risk is real and argues for customers to engage with a sale early rather than rely on conditions at the end of it.
I would revise the view if the 2026 screening report, due around September 2027, showed a falling share of conditional authorisations, if successions in the sector passed without visible customer involvement or supply disruption, or if the declaration regime were delayed or narrowed in its implementing decree. Visible prime investments in small suppliers, a rising share of conditions and published outputs from the GIFAS succession working group would confirm it.
The succession list I would put on the board agenda
Were I part of the discussion at the board of a French prime or tier-one supplier with a long export backlog, the option I would put forward is one a chair could minute: identify the small suppliers whose owner, ownership or technical records put a critical process at risk, and agree a continuity plan for the five to ten that matter most before a sale or retirement decides the timing. This would sit alongside existing supplier-risk reviews and shift attention from delivery performance today to who will hold the process in five years.
In the first 90 days, procurement, programme management and quality would build the list from information the company already has or can openly request: owner age and succession intentions, ownership structure, single-source exposure, and the state of process records. By six months, each priority supplier would have an agreed path, whether a customer-backed buy-out, a minority investment, a records transfer and second source, or a European partner prepared to take over the work, with one owner inside the company for each case and the chief procurement officer accountable for the list. By twelve months, the evidence would be evident in documented processes, signed agreements, and requalification plans, and the board would see the share of backlog value resting on suppliers without a plan fall.
The economics are mostly about avoided cost. A supplier loss without warning means requalification, expediting, inventory, and late-delivery exposure, while a planned transition spreads those costs and keeps the customer informed. The size of the benefit depends on the company's own exposure and should be estimated from its data, not borrowed from an industry average. The timing favours acting this winter, before the declaration regime starts in January 2027 and while export deliveries are still being scheduled. Delay changes the options rather than the destination: once an owner has agreed to a sale, the customer can only respond, and screening conditions protect the state's interest more than the prime's delivery schedule.
The trade-off is real. Investing in suppliers ties up capital, can raise questions about supplier independence and competition, and may discourage other buyers if a customer's involvement appears to be control. I would advise a lighter approach, limited to records transfer and early dialogue, where a supplier's succession is already clear or where the process is easy to requalify elsewhere. Where it is neither, the order book is only as secure as the knowledge behind it, and France's backlog will be delivered by the companies that maintain that knowledge.
Questions for the C-Suite and the Board
Which of our critical processes depend on a supplier whose owner is likely to sell or retire within five years? The answer, prepared by procurement with programme leads, shows where succession risk sits inside the backlog.
How complete and transferable are the technical records behind those processes? A quality director's view of specifications, qualification evidence and decision histories shows whether knowledge would survive a change of owner.
Would we rather invest in, partner with or requalify away from each high-risk supplier? The CFO and CPO can compare the cost of each path to that of an unplanned transition.
How would the 2027 know-how declaration regime and screening conditions affect a sale we care about? Legal and corporate development can show where conditions protect the programme and where they might deter a suitable buyer.
Which European partner could take over a defined process if a French supplier closed? The answer tests whether a successor exists before it is needed.
What evidence would tell us our succession plans are working? Agreed indicators, such as documented processes, signed agreements and backlog value covered by a plan, let the board judge progress calmly.
References
Binnie, J. (2026, May). Iran conflict 2026: Egypt deploys Rafales to UAE. Janes. https://www.janes.com/defence-intelligence-insights/defence-news/air/iran-conflict-2026-egypt-deploys-rafales-to-uae
Dassault Aviation. (2025, June 5). Dassault Aviation partners with Tata Advanced Systems to manufacture Rafale fighter aircraft fuselage for India and other global markets [Press release]. https://www.dassault-aviation.com/wp-content/blogs.dir/1/files/2025/06/Press-Release_Dassault-Aviation-partners-with-TASL.pdf
Dassault Aviation. (2026, July 22). Press conference: 2026 half-year results [Presentation]. https://www.dassault-aviation.com/wp-content/blogs.dir/2/files/2026/07/WEB-Slides-of-the-2026-half-year-Results-Conference-Copie.pdf
Directorate General for Enterprise. (2026, March 29). Baromètre industriel de l'État : en 2025, les extensions d'usines portent la réindustrialisation avec un solde positif malgré un contexte international dégradé [Press release]. https://www.entreprises.gouv.fr/espace-presse/barometre-industriel-de-letat-en-2025-les-extensions-dusines-portent-la
European Commission. (2025, October 16). Readiness Roadmap 2030. https://defence-industry-space.ec.europa.eu/eu-defence-industry/readiness-roadmap-2030_en
French Ministry of Economy. (2026, September 28). Contrôle des investissements étrangers, quel est le bilan pour 2025 ? https://www.economie.gouv.fr/actualites/controle-des-investissements-etrangers-quel-est-le-bilan-pour-2025
French National Assembly. (2026, May 7). Compte rendu de la deuxième séance du jeudi 07 mai 2026. https://questions.assemblee-nationale.fr/dyn/17/comptes-rendus/seance/session-ordinaire-de-2025-2026/deuxieme-seance-du-jeudi-07-mai-2026
French Senate. (2025). Projet de loi de finances pour 2026 : Défense (Rapport général n° 139, tome III, annexe 8). https://www.senat.fr/rap/l25-139-38/l25-139-3815.html
French Senate. (2026, June 30). Séance du 30 juin 2026 : Actualisation de la programmation militaire pour les années 2024 à 2030. https://www.senat.fr/seances/s202606/s20260630/s20260630001.html
GIFAS. (2026a, May 6). Résultats 2025 : une filière aéronautique et spatiale solide qui maintient son cap vers l'avenir. https://gifas.fr/news/resultats-2025-une-filiere-aeronautique-et-spatiale-solide-qui-maintient-son-cap-vers-l-avenir
GIFAS. (2026b, September 24). Septembre 2026 : aéronautique et spatial, une rentrée placée sous le signe de l'emploi. https://www.gifas.fr/news/septembre-2026-aeronautique-et-spatial-une-rentree-placee-sous-le-signe-de-l-emploi
S3NS. (2025, May 14). S3NS accélère son développement vers le Cloud de Confiance. https://www.s3ns.io/actualite/S3NS-accelere-developpement-cloud-de-confiance
Trendeo. (2026, February). Parution de notre bilan 2025 de l'emploi et de l'investissement en France. https://www.trendeo.com/fr/blog/parution-de-notre-bilan-2025
About Andy Demir
Andy Demir is the editor of SwissTechnic and writes on strategy, international growth and capital in aerospace, defence, space and advanced technology. Drawing on a career in commercial leadership, the analysis examines how technology, sovereignty and industrial capability shape competitive power and long-term value.
