Satellite merger of Airbus, Thales, Leonardo prevails; could erode Elon Musk's Starlink dominion

Satellite merger of Airbus, Thales, Leonardo prevails; could erode Elon Musk's Starlink dominion

The aim is to bind the region’s divided and struggling industry

Recent reports indicated that Europe's aerospace giants, Airbus, Thales, and Leonardo had reached a merger plan, code-named Projet Bromo, to pool their satellite-making activities to weaken the dominance of Elon Musk's Starlink.

While the initial plans for an announcement of the framework deal slipped, there seems no major obstacle and a deal appears to have been pushed back by 48 hours, barring an unforeseen and more substantive problem.

As an analyst opined, "The announcement is ready; that doesn't mean you don't have some last-minute details. It is industrially, technically and financially complicated.”

The talks between the entities are an attempt to bind the region’s divided and struggling satellite industry.

France’s Airbus and Thales, and Italy's Leonardo, have been hit by rivals led by Musk's SpaceX. They plan to combine satellite assets into a new holding company (with about one-third each) after a series of balancing payments.

However, the new structure could take up to two years to put in place the pending regulatory approvals. Earlier, such an attempt was marred by antitrust hurdles.

Realising that it was difficult to prosper alone in a space market during a dramatic transformation, the merger between the companies could create the largest manufacturer of commercial geostationary satellites.

According to 2010-25 global data from specialist advisory firm Quilty Space, they could surpass Maxar, Northrop Grumman, and Lockheed Martin with a third of the market. However, that space has declined due to the spread of small satellites in low Earth orbit, such as Starlink.

As Caleb Henry, research director of Quilty, explained, "Europe did have a commanding lead in a lot of geostationary satellite manufacturing, and arguably never lost it. It's just that this market has shrunk considerably in the face of these new titans of industry: the low-Earth-orbit broadband constellations."

Meanwhile, the companies could set out the broad structure and objectives of Projet Bromo without dwelling on details of corporate governance. It might be decided at a later stage, after standalone operations.

Earlier, the balance of power and the question of who appoints the chairperson, CEO, and CFO caused friction in past European aerospace mergers, including at Airbus. But, driven by losses and falling market share, there are indications of a strong commitment between the entities to cooperate on satellites.