European rival to Musk satellites tests stomach for cross-border champions

Three European aerospace companies want to join up to compete with Elon Musk’s SpaceX, setting up an early test of whether Europe is serious about creating global industrial giants or if national interests and the EU’s own competition rulebook will win out.

Airbus, Leonardo and Thales Alenia Space are exploring a joint venture to boost satellite production in an effort to compete with Musk’s Starlink and other global players, particularly on low Earth orbit satellites used in commercial telecommunications.

Italy’s Prime Minister Giorgia Meloni lamented in January that “there are no public alternatives” available at the moment, when quizzed at a press conference about talks with Musk on a €1.5 billion deal for secure telecoms with Starlink’s parent company, SpaceX.

The real question is “why Italy and Europe have not arrived on time in imagining public technologies for secure communications?” she added.

Given U.S. President Donald Trump’s capricious approach to foreign policy, which last week reportedly saw a U.S. satellite company cut off Ukraine’s access to imagery following an “administrative request,” it seems like a prescient question.

But without buy-in from governments such as Meloni’s, any attempt to create European industrial champions is doomed. A proposed €38 billion defense and aerospace merger between EADS and BAE Systems a decade ago, for example, was scrapped because of the failure of governments to agree terms.

Italy holds a 30 percent stake in Leonardo, which in turn owns 33 percent of Thales Alenia Space. 

While Paris is likely to be in favor of a deal, the ambitious tie-up faces headwinds from Germany, which feels like it is being eclipsed on space and satellites by France and Italy. Outgoing Chancellor Olaf Scholz recently opposed a different merger to create a pan-European giant between Italian bank UniCredit and Germany’s Commerzbank.

Regulatory nightmare

Leaders of the EU executive, by contrast, are in desperate search of an industrial winner. “Continental scale is our greatest, greatest asset in a world of giants,”  Commission President Ursula von der Leyen told the Davos World Economic Forum in January.

But the deal would need EU merger approval, and a tie-up between three of the bloc’s leading satellite manufacturers presents a major head-scratcher for the executive’s competition officials. Their current rulebook frowns upon deals that leave too few competitors in a market.

An Airbus-Leonardo-Thales Alenia Space joint venture — which goes under the working name of “Project Bromo” — would indeed compete with overseas players on satellites for commercial telecommunications. However, it would face limited to no competition for military and public procurement tenders in the EU, which are restricted to continental firms.

German space tech company OHB, which would be left as the only major rival for institutional contracts with the European Space Agency, for example, has already spoken out against the deal. OHB warns it threatens to create a monopoly that would harm customers and Europe’s industry.

“We are concerned about that merger, it impacts our … sourcing, supply chain and everything,” CEO Marco Fuchs told POLITICO, adding that the company would voice its concerns to the European Commission once the merger gets underway.

“I don’t think in terms of antitrust it’s possible or desirable to create a monopoly,” he said.

The specter of Siemens-Alstom also looms large. Back in 2019, then-Competition Commissioner Margarethe Vestager blocked a merger of the French and German train companies over competition concerns, refusing to buy the governments’ argument that Chinese competition made a tie-up crucial.

Since then, the mood music in Brussels has changed.

Competitiveness is now the overarching imperative and the Commission is under pressure to relax merger rules to favor the creation of champions, following Mario Draghi’s landmark report on European competitiveness last year. The additional prospect of slowing Musk’s business expansion in Europe could also be attractive to some.

“The space industry is evolving rapidly, with private entities like SpaceX’s Starlink dominating Low Earth Orbit satellite deployments,” said Zsuzsanna Benyo, the CEO of consultancy SpaceABC. The potential joint venture “represents a strategic opportunity for Europe to strengthen its presence in the satellite industry globally.”

But exactly how the EU’s competition chief Teresa Ribera will reconcile the bloc’s new industrial policy ambitions with enforcement of competition rules is still a big unknown.

At a French aerospace industry gathering in early January, Airbus CEO Guillaume Faury said that “uncertainty on EU authorities’ stance on antitrust rules” ran through the consolidation talks among the three companies. He hoped the EU would “facilitate the making of a champion.”

“We have always been in a tension between maximizing competition and maximizing competitiveness in Europe,” said Faury. “Today, with sectors which are strongly under pressure and potentially in existential danger, we have to go back to creating a real competitiveness of Europe and not maximizing competition in Europe.”

Airbus announced in December that it would cut around 2,000 jobs in its Defence and Space division, after its satellite production came under pressure from U.S. competition.

“If we are not able to scale up in sectors like space or defense,  we will remain marginal and we will not have the means to invest in the constellations or new technologies at the necessary height,” said Faury.

It’s not Europe’s only attempt to compete with Starlink.

Airbus and Thales, as well as OHB, are part of an open consortium that won a 12-year contract with the Commission to build IRIS², the EU’s multibillion-euro project for a cybersecure satellite system for spy agencies, governments and armies.

But the project has been rocked by tensions and Germany’s outgoing Vice Chancellor Robert Habeck wrote to the Commission last spring to try and stall it.

There’s a political awareness, however, that speed is of the essence.

“For years now, we’ve been working at European level on the IRIS² constellation, to produce our own secure satellite communications system,” French Renew EU lawmaker Valérie Hayer told a Brussels press briefing. “If member states start shopping elsewhere because we’re too slow for 1,000 reasons, obviously we’ve got a huge problem.”

Max Griera contributed reporting.