In France, the relationship between the government and the aerospace industry is very different from that in the United States. American firms compete to win contracts from the Department of Defence in Washington, relying on income from those contracts to stay in business. Yet even the largest such corporations remain in the hands of private individuals, including their stockholders.

By contrast, in France, the government owns the industry outright. In particular, the government owns 97 percent of that country's largest aerospace company, the firm of Aérospatiale. Officials in Paris thus have been free to use this industry as an arm of the state, to advance French interests. Yet experience has shown that, despite having the power of the state on their side, aerospace leaders have found that there is no substitute for responding to the demands of the market.

The story of Aérospatiale begins around 1950 with its corporate predecessor, SNCASE. The company was building a line of aircraft that were rather unexciting but brought steady business. These included the Languedoc airliner and two fighters, the Vampire and Mistral. The Vampire was British, being built under license; the Mistral used a jet engine, the Nene, from Britain's firm of Rolls-Royce. In sum, there was not an enormous amount of original thinking at SNCASE.

This changed in 1951 though, as the company began to build the Caravelle jetliner. The Caravelle was not the world's first jetliner, but it was the first to fly successfully. It had two engines and was built to serve short routes, which were quite numerous in Europe. Significantly, its design placed those engines at the rear of the airplane, behind the passenger cabin, rather than under the wings, which led to a noisier ride. Passengers could barely hear the engines, and the Caravelle became very attractive because it was very quiet. Its jet engines also gave a smooth and comfortable ride that was free of harsh vibrations.

Air France, the national airline, placed the first orders. That was to be expected; it too was an arm of the state. However, nearly every other major European airline also bought them. In a major breakthrough for France, America's United Airlines purchased 20 Caravelles. This broke with the practice of America's carriers, which together formed the largest market for airliners in the world, buying only American-built aircraft.

The first Caravelles entered service in May 1959. Two years later, they flew an array of European routes running from London to Casablanca in North Africa, while extending eastward to Moscow and to Tel Aviv and Damascus in the Middle East. In the United States, Caravelles were serving the important route from New York to Chicago. By then SNCASE had merged with another French planebuilder, Ouest Aviation, and had formed the powerful new firm of Sud Aviation. Having achieved great success with Caravelle, Sud now was ready for something new.

This took shape as the Concorde, a joint French-British attempt to build a supersonic commercial airliner. However, it ran into cost overruns and delays, largely because it was a political project. Four companies built it: British Aircraft and Sud, along with Bristol Siddeley and the French engine-building firm of SNECMA. However, all four were working as subcontractors to their governments, which meant that political leaders made the most important decisions. In particular, those leaders wanted the Concorde program to provide jobs for workers, so they set up two separate assembly lines, one in Britain and the other in France. Production facilities are among the most costly parts of a major aircraft program, and this decision brought a great deal of wasteful duplication.

In addition, the delays that ensued provided time for the Boeing 747 to emerge as a rival. This enormous jetliner was far slower than the Concorde but was very comfortable, and travelers liked its low fares. By contrast, the Concorde came along just in time for the oil crises of the 1970s, which sent the cost of jet fuel sky-high. The high-speed flight of Concorde was achieved by burning as much fuel as the vastly larger 747 used, yet Concorde carried only one-fourth as many passengers. Each of them then had to pay four times as much as a 747 passenger did.

Only two airlines ever purchased Concorde, and only in very small numbers. These were the national carriers Air France and British Airways. The Concorde, born in state decisions, ended the same way, as only the airlines of those governments cared to buy them.

Sud Aviation continued to expand, merging in 1970 with another rival, Nord Aviation, and with the missile and space group called SEREB. Together they formed Aérospatiale. By then, company officials had learned sharp lessons from the Concorde. They vowed that on their next attempt, they would build something that airlines actually would buy.

This next effort took shape within an international collaboration called Airbus Industrie, which brought in British Aerospace as a partner, along with a subsidiary of Germany's firm of Messerschmitt-Bolkow-Blohm. They proceeded to build the two-engine Airbus A-300 jetliner. It had the wide cabin of Boeing's 747, which was popular for its spaciousness.

At first, the A-300 looked like another flop. Few of them sold, while the French government continued to build these aircraft to provide jobs. Aérospatiale could not simply cut back production and lay off its workers, for French law required that such unemployed people were to receive 90 percent of their pay for a year, while retaining their extensive health benefits. As a result, Airbus Industrie was building planes that no one wanted.

Yet while the high price of fuel helped to kill Concorde, it saved Airbus, because the A-300 burned less fuel. It had rivals in triple-engine wide-body airliners—the Lockheed L-1011 and the McDonnell Douglas DC-10. But the A-300 had one less engine and hence was lighter in weight, which is why it used less fuel.

The A-300 had other advantages. Having only two engines, it was less costly to purchase. The tri-jets had mounted an engine in the tail, but the A-300 avoided this. Hence it could fit more fare-paying passengers into its cabin. The A-300 soon drove the DC-10 and L-1011 from the market. This success opened new doors for Airbus, which launched new projects and went on to challenge Boeing for leadership in aviation.

Aérospatiale also showed leadership in space flight. A European effort of the 1960s sought to build the Europa launch vehicle, a three-stage rocket with separate stages built in Britain, France, and Germany. All flight tests failed, partly because there was no central authority that could tell these sovereign governments what to do. Then in 1973, officials of Aérospatiale stepped in.