The French space industry increased its sales by 6 percent in 2004, to 2.9 billion euros ($3.7 billion), but remains in a fragile condition because of the lack of sustained government contracts and the continued weakness of the U.S. dollar relative to the euro, the French aerospace industries association, GIFAS, said.

“It is too early to say that the space sector is emerging from its crisis,” said Philippe Camus, GIFAS president and co-chief executive of Amsterdam-based EADS, Europe’s biggest aerospace company. “The sales in 2003 were particularly low, and the dollar continues to weigh on the industry.”

In an April 5 press briefing here, Camus and other GIFAS officials said the decline of the dollar is one of the most pressing problems for the French and European aerospace sectors. Most contracts with non-European customers — and even some within Europe — are written in dollars, making it difficult for euro-based businesses to compete.

“At $1.30 per euro, we are already in the emergency zone,” Camus said. “It is intolerable. We can purchase exchange-rate coverage but that does not change the phenomenon, and in any event, smaller companies do not always have this option.”

Antoine Bouvier, chief executive of satellite-builder EADS Astrium, said Europe’s space industry has responded to the dollar’s decline by reducing its workforce and streamlining its activities. After three years of declining sales, the effort is starting to pay off.

Bouvier pointed to the creation of EADS Space, which merged French, British, German and Spanish companies; and to the recent merger of Alcatel Space with the Alenia Spazio and Telespazio units of Finmeccanica of Italy.

While these moves have helped keep European companies in the hunt for export orders, Bouvier said the “extremely aggressive American competition” in a cheap-dollar environment has left European companies with limited opportunities.

He added that it is not easy for European companies to diversify their supplier bases to non-euro-based companies because of the time and expense of re-qualifying the new hardware for use on European satellites.

Camus said European space-hardware manufacturers hope the continent’s space policy now being crafted by the European Space Agency and the European Commission will lead to a sustainable increase in European space spending.

GIFAS said the European Defense Agency, which is scheduled to be fully operational later this year, offers hope for a coordinated European policy that leads to preferred-supplier legislation similar to what exists in the United States. Such legislation, GIFAS said, should lead to a policy in which Europe’s government aerospace sector is no more open to non-European suppliers than the United States is now to non-U.S. contractors .