By Tim Hepher and Cyril Altmeyer
PARIS (Reuters) - France’s Zodiac Aerospace (PA:ZODC) on Friday reaffirmed its preference for a tie-up with engine maker Safran (PA:SAF) and said chief executive Olivier Zarrouati had agreed to stay on "for a while" after offering his resignation to the board.
The aircraft seats maker announced the CEO's decision as it posted a fiscal first-half current operating loss of 12 million euros (£10.10 million), hit by its troubled aircraft interiors business.
It said its board had asked Zarrouati to remain in his post "for a while, focusing his action on the finalization and execution of the deal with Safran, if Safran and Zodiac come to a renewed agreement, which is what we want."
Speaking to reporters in a conference call, Zarrouati described the tie-up with Safran to create the world's third-largest aerospace supplier as "our priority scenario".
But he said an alternative scenario was necessary due to the headwinds faced by the $9 billion (£6.97 billion) merger proposal, which has come under fire from some Safran shareholders.
Talks with Safran are proceeding well, and Zodiac is waiting for Safran's conclusions on a supplementary due-diligence exercise which has now been completed, he said.
Zodiac plans to accelerate its restructuring in order to prepare one of the two scenarios, he said.
Zodiac forecast a 200-220 million euro current operating profit for the year to end August 2017 as a whole, implying a decline of up to 26 percent from the previous year's 269.6 million euros, compared with its most recent forecast of a 10-20 percent decline.
It has added "an extra layer of caution" to its evaluation of current operating income for 2016/17, said Zarrouati.
Zodiac has issued a series of profit warnings during a two-year industrial crisis at the company's seat factories.