Airbus, Leonardo and Thales have agreed to merge their satellite operations to create a European joint venture to compete with Elon Musk’s SpaceX.
The three aerospace companies have been in talks for months and the deal will create a single company that will employ 25,000 people with annual revenues of €6.5 billion, based on 2024 figures.
The venture is expected to become operational as early as 2027 and draws inspiration from the successful MBDA tie-up, which involved BAE Systems, Leonardo and Airbus combining to design and manufacture missiles.
Airbus will own 35 per cent of the new company, while Leonardo and Thales will each take 32.5 per cent stakes. The business will be based in Toulouse in the south of France.
The trio said this structure would deliver savings amounting to “mid-triple-digit millions” of euros in operating income five years after closing. Each home country will keep its existing capabilities, with no site closures planned, to address sovereign concerns.
Executives said that the decision was made in response to the disruption in the satellite sector made by the likes of SpaceX, as well as a big increase in government spending on space, particularly by the United States and China.
The shift from satellites in geostationary orbit (about 22,250 miles above Earth), an area that Europe has traditionally led, to low-earth orbit (100 miles to 1,200 miles above Earth), which has been championed by SpaceX’s Starlink among others, has been another driver behind the merger.
The European joint venture will compete with Elon Musk’s SpaceX
JOE BURBANK/ORLANDO SENTINEL/TRIBUNE NEWS SERVICE/GETTY IMAGES
Geostationary satellites orbit the Earth far higher than low-earth satellites, meaning they stay fixed above a single point on the Earth. The first geostationary satellite was placed in orbit in 1964 and was used to transmit live coverage of the summer Olympics from Japan to the United States.
Low-earth orbit satellites were first launched in the 1950s, but it was not until recently that they were able to challenge the effectiveness of geostationary alternatives.
Europe has generally struggled to compete in the low-earth orbit sector. Both Airbus and Thales Alenia Space, a joint venture by Thales and Leonardo that makes satellites and related equipment, have had to restructure their space businesses in recent years, with heavy job losses. These restructurings have been an important driver behind merger talks, which have been discussed since 2019.
While the concept of a European tie-up has been floated for years, the idea gained traction last year when top European Union officials called for a “paradigm shift” to keep the region competitive.
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OneWeb, one of Europe’s main competitors to Starlink, has seen its revenues rise over the past year, but Eutelsat, its French owner, has struggled to realise value from the service and has been weighed down by its geostationary legacy business. In August, the company reported a €1.1 billion annual net loss, compared with a €310 million loss the previous year.
“I think the difference of what we’re talking about here is the pace and the scale of our ambition,” a spokesman for Airbus said. “So if you really want to grow at the rate that we see the opportunity for, we think we can achieve much more by scaling and collaborating across Europe, more formally than we do currently.”
The new company will develop technologies and solutions for space infrastructure and services. Launch operations into space, an area in which Europe struggles to compete with the US, will not be part of the effort. Arianespace, Europe’s heavy-lift rocket launch company, will not be part of the combination.
Airbus will contribute its space systems and space digital business, while Leonardo and Thales will contribute their shares in Thales Alenia Space and Telespazio, a satellite operator co-owned by the pair. Thales SESO, the company’s optics division, will be part of the new joint venture.
Shares in Leonardo rose by €0.84, or 1.7 per cent, to €51.34 in Milan; in Paris Thales was up by €1.50, or 0.6 per cent, to €260.70, and Airbus rose by €1.45, or 0.7 per cent, to €207.25.
Behind the story
Plans to create a pan-European space champion have been drawn up and dropped several times over the past decade. The model has always been MBDA, the missiles business created in 2001 through the merger of parts of Aérospatiale, the French defence contractor, Alenia Marconi Systems of Italy and the Anglo-French consortium of Matra BAe Dynamics.
Space has proved more difficult even than cutting-edge defence technology. European governments were reluctant to cede control of the ability to make and deploy satellites and other space equipment, an ability deemed critical to protecting their sovereign interests. Long-running discussions nearly resulted in a deal in 2019, but faltered at the last minute.
This time round, however, the governments’ hands have been forced. Thanks largely to Elon Musk’s SpaceX — with help from other tech billionaires such as Amazon’s Jeff Bezos — America has raced ahead in space technology.
SpaceX’s reusable rockets and frequent launch schedule have made possible the deployment of big satellite constellations. Starlink, a division of SpaceX, has about 8,500 satellites in orbit, while Bezos’s Project Kuiper plans to put up more than 3,200 in the next few years.
To keep up, Europe’s space companies need to cut costs and show some commercial nous, rather than being led by domestic requirements. It is hard to say whether the new merged company will be free from such considerations, but it is at least a step in the right direction.
Ironically, Musk may provide a helping hand. His big new thing, the Starship rocket, may play to Europe’s strength in building large satellites. Starship’s big lift capability is likely to make them fashionable again after years of small being beautiful.
The next problem is Europe’s access to space. Arianespace, the joint venture between Airbus and Safran, the French engine maker, is excluded from the deal. It has a new rocket but is light years behind the pace and price set by SpaceX. Europe probably cannot countenance not having its own launch system, but it needs to work out how to make it competitive with the Americans.