EU aerospace companies form alliance against Musk's Starlink. Is it too late?

European aerospace giants Airbus, Thales and Leonardo have agreed to merge their satellite manufacturing divisions into a single entity. The new alliance is designed to strengthen Europe's position in competition with Elon Musk's industry-dominant SpaceX amid growing pressure from the US and China and to reverse the backlog in the strategically important space sector. The project will be the largest aerospace alliance in Europe since 2001, Reuters noted.

Airbus, Thales and Leonardo have signed a memorandum of understanding to merge their loss-making satellite divisions. The merger is being created to counter the rapid growth of competitors led by Elon Musk's Starlink: it will be the largest merger of European aerospace assets since the creation of rocket maker MBDA in 2001, Reuters reported.

The new facility will have 25,000 employees across Europe and annual revenue of about €6.5 billion ($7.58 billion), based on 2024 figures. It will be headquartered in Toulouse, France, the joint statement said. Airbus will take a 35% stake, while Thales and Leonardo will each hold a 32.5% stake, according to the companies' statement. The joint structure should start operating in 2027, subject to the approval of European regulators, who have previously been skeptical of such associations, notes Reuters.

The companies expect that five years after the merger, the joint operations will generate "mid-triple digits" (around €400-600 million) of additional operating profit annually.

On the back of the news, Leonardo shares in Milan added 3.7% at the moment, Thales securities in Paris added almost 3% and Airbus added about 0.9%.

The alliance, named Project Bromo, will test Europe's ability to unite fragmented defense and space industries to compete more effectively with the United States and China, Bloomberg writes. The main goal of the project is to consolidate European satellite projects and strengthen the region's autonomy in an area that has become critical both from a commercial and geopolitical point of view, the agency notes.

The market the new structure is entering is already divided between major players such as Lockheed Martin, Boeing and SpaceX, but new European competitors are also emerging, including Germany's OHB and Belgium's Aerospacelab, WSJ notes.

According to the heads of Airbus, Leonardo and Thales, the new company will face stiff competition, but they emphasized that it is not too late to create it, as the demand for space services and infrastructure in Europe will grow in the coming years, WSJ reports. European countries are preparing to pour trillions of euros into strengthening the region's defense and independence, giving the three companies perhaps their last chance to create a full-fledged European space leader, Bloomberg adds.

"The initiative is definitely positive as it creates a European leader capable of competing globally and improves the profitability of a business <...> that has experienced problems in recent years," wrote analysts at Italian investment bank Equita, quoted by Reuters.

Negotiations between the three companies began back in 2024. Their goal is to replicate the model of cooperation of the European missile manufacturer MBDA, which is also owned by Airbus, Leonardo and BAE Systems, Reuters writes.

During this time, the project participants have been coordinating ownership stakes, capacity allocations and antitrust issues, WSJ added.

This article was AI-translated and verified by a human editor