European aerospace companies Airbus, Leonardo, and Thales have announced they will merge their space businesses.

The new joint venture, named “Project Bromo,” will be established in Toulouse, France, and will employ approximately 25,000 people across Europe.

The share distribution among the three companies has already been determined, but the project must overcome several hurdles, including a competition review by the European Commission.

The European companies face fierce competition from the American company Starlink, which has successfully entered the European space market. Airbus, Thales, and Leonardo all reported losses last year.

The EU recently presented a draft EU space law aimed at harmonizing the EU space market and imposing compliance costs on foreign companies. This situation is creating new tensions with the US.

German-French-Italian partnership

European space companies Airbus (Germany/France), Leonardo (Italy), and Thales (France) presented a preliminary agreement last Thursday to merge their space businesses into a new joint venture.

The new, expanded company will focus on satellite manufacturing, space systems, and services, aiming to compete with Chinese and US companies, particularly Starlink, a subsidiary of Elon Musk’s SpaceX.

Known as “Project Bromo,” the company will be based in Toulouse, France, employ around 25,000 people across Europe, and generate an annual revenue of approximately €6.5 billion.

In terms of ownership, Airbus will hold a 35% stake, while the other two companies will each have a 32.5% share.

The new company will be modeled after Europe’s leading missile manufacturer, MBDA, which was founded in 2001 by Airbus, BAE Systems, and Leonardo. The British companies BAE Systems and Airbus each own 37.5% of MBDA, while Leonardo holds a 20% stake.

Approval from the European Commission is required

The negotiations, which have been ongoing for over a year, are still in the preliminary stages; the project still has to overcome some formidable obstacles.

First, the governments of France, Germany, and Italy must approve the alliance. The current unstable political situation in France could further complicate the process. Additionally, merging the businesses of three major European rivals presents significant practical challenges.

But the biggest hurdle is passing the European Commission’s competition review; in the last decade, several attempts by companies to merge their satellite operations have failed due to antitrust concerns.

The merger could also mean that the European Space Agency’s (ESA) opportunities to award satellite contracts will be limited, as feared by ESA’s Director of Operations, Rolf Densing.

However, the rise of the Starlink network may prompt the Commission to approve the merger, as European companies would otherwise face the threat of extinction.

Competition with Starlink is the main goal

The three European companies have already been severely affected by the sharp decline in demand for traditional geostationary telecommunications satellites, located 36,000 kilometers above the Earth.

The launch of Starlink’s high-speed broadband network in low Earth orbit also threatens the internet connectivity market for European competitors.

Since 2023, Airbus has recorded costs of over €2 billion from unprofitable space contracts and even announced 2,000 layoffs last year.

Thales Alenia Space (TAS), a joint venture in which Thales holds a 67% stake and Leonardo 33%, announced layoffs of approximately 1,300 jobs over the past two years.

On the other hand, Starlink has successfully established itself in Europe, particularly due to its operations in countries like Ukraine, where it maintains the country’s internet connectivity using about 50,000 terminals.

At the beginning of the year, Starlink was about to sign a €1.5 billion contract with Italy for encrypted communication systems, but the project was halted following protests.

Competition in space: The US is not pleased with the EU’s moves

For some time, the EU has increasingly recognized space as a strategic domain and even proposed a new EU space law in June of this year as part of its new space strategy.

The draft law aims to create a single space market for the EU by harmonizing fragmented national regulations, but the law is criticized by the US as anti-competitive.

Under the law, a US space company wishing to do business in the EU would have to comply with the EU’s technical, cybersecurity, and environmental standards, which would lead to additional costs of between €100,000 and €1.5 million.

In an analysis commissioned by the US government, the International Center for Law & Economics, a scientific economic research center, classified the compliance requirements as a “non-tariff barrier” (NTB) according to World Trade Organization (WTO) principles.

Of course, the law is currently just a proposal and is not expected to come into force before January 1, 2030.

Dependence on the US in space continues

Juliana Süß, an expert at the Security Policy Working Group of the Berlin-based German Institute for International and Security Affairs (SWP), points out that the EU is currently “extremely dependent on the US” in the space sector.

According to Süß, this dependence on US space capabilities ranges from exploration, communication, and navigation to early missile detection and the use of the US GPS navigation system for German Taurus cruise missiles.

Consequently, earlier this month, the EU presented a new 2030 Defence Readiness Roadmap, which places special emphasis on, among other things, the development of a European air defense and space shield.

Work on the two shields is planned to begin in the second quarter of next year, with Germany aiming to take a leading role in this effort.

According to German Defense Minister Boris Pistorius, the German government aims to establish a comprehensive “space security architecture” and plans to allocate €35 billion for the expansion of military space capabilities by 2030.

This is part of Chancellor Friedrich Merz’s intention to make the German Armed Forces (Bundeswehr) the strongest conventional armed forces in Europe.