UPDATE 1-Safran eyes Aubert & Duval under gaze of French state

(Recasts with French government comment, adds details)

PARIS, Oct 30 (Reuters) - French aerospace group Safran said on Friday it was closely monitoring superalloys supplier Aubert & Duval (A&D) as the French government pledged to keep its sensitive material technologies in France.

French mining company Eramet said in June it had launched a strategic review of its A&D subsidiary, after a third of its activity was cancelled by the coronavirus crisis, and would consider all options for the 113-year-old business.

French newspaper La Tribune later reported that Safran and planemaker Airbus were considering taking control of A&D to prop it up alongside Ace Aero Partenaires, an aviation recovery investment fund to which both have contributed cash.

A&D is seen as emblematic of the turbulence hitting suppliers in the Occitanie region, southwest France, where a total of 40,000 aerospace jobs are seen at risk.

Its advanced superalloys are used in engines for the French Rafale fighter and the LEAP commercial engine, co-produced for Boeing and Airbus by Safran and General Electric.

Airbus is also A&D’s biggest direct customer.

Industry sources say Airbus and Safran are the most likely contenders to take over A&D with the backing of the French government. But talks remain at an early stage with Airbus and Safran, which is also one of Boeing’s biggest suppliers, uncertain about how to structure any co-operation.

Airbus and Ace were not available for comment.

Safran CEO Philippe Petitcolin said on Friday it had placed A&D on a list of key suppliers when reviewing crisis exposure.

“Aubert & Duval is one those critical suppliers and so we’re watching very closely (its) future ... which seems a little complicated,” Petitcolin told reporters.

“We don’t seek to vertically integrate our supply chain but to ensure we can continue to produce in the long term,” he said.

“That’s our objective. Whether that means taking a stake, that’s possible, but there is also the (Ace) fund.”

The French finance ministry said A&D was of strategic importance for French industry especially aerospace and defence.

“Several expressions of interest have emerged since Eramet’s announcement this summer,” a spokesman said by email.

“If they are confirmed, these would be closely examined by the Eramet (board) where the government is represented. The government will be very attentive towards maintaining strategic know-how and industrial and human competencies in France.”

The French government owns 25.6% of Eramet, 12% of Safran and 10.9% of Airbus, though its role in the European planemaker is restricted to overseeing defence interests. (Reporting by Tim Hepher; editing by Jason Neely and Jane Merriman)