UPDATE 1-Airbus, Safran team up on response to SpaceX -sources

Sun Jun 15, 2014 7:47pm EDT

* Airbus, Safran set to form jv in space launchers -sources

* Move follows warnings over impact of low-cost rival SpaceX (Adds details, background)

By Tim Hepher and Cyril Altmeyer

PARIS, June 15 (Reuters) - Airbus Group and Safran are set to boost co-operation with a joint venture in space launchers, aiming to galvanize Europe's competitive response to U.S. low-cost rival SpaceX, people familiar with the matter said.

The heads of the two companies, both leading contractors on the Ariane space launcher, are due to meet French President Francois Hollande early on Monday, Hollande's office said, but no official reason for the meeting was provided.

Two people familiar with the matter said space would top the agenda, amid growing pressure from industrial groups for a shake-up of Europe's public-private system of building rockets.

The move is expected to involve closer partnership between Airbus Defence & Space, which builds the Ariane launcher, and the Herakles space propulsion unit of French aerospace group Safran, which makes its solid rocket motors.

It is the first concrete step towards consolidation after Airbus Group Chief Executive Tom Enders, speaking exclusively to Reuters last month, called for a shake-up to prevent Europe becoming "irrelevant" in the $6.5 billion space-launch industry.

His call for a bigger industry was triggered by the arrival of low-cost U.S. based Space Exploration Technologies (SpaceX), run by electric car mogul Elon Musk.

But industry sources say there have been disagreements with France's CNES space agency over the right strategy to adopt.

Musk's SpaceX company offers lightweight rocket launchers to send up communications satellites at lower prices than those currently on the market, including Europe's Ariane 5.

Europe aims to replace the Ariane 5 rocket launcher with an Ariane 6 by 2021, but is wrestling with complex structures behind the design, manufacture and marketing of space launchers as well as strict conditions on the national share of work.

Under the current system, government agencies such as CNES in France and the DLR in Germany design launchers, and pass the designs to Airbus Group to manufacture the product, which is then passed to a third party, Arianespace, to market.

Airbus Group owns around 30 percent of Arianespace, whose biggest shareholder is the French space agency, CNES. Safran owns just under 11 percent.

By seizing the industrial initiative, Enders and Safran Chief Executive Jean-Paul Herteman are effectively offering to lead Europe's fight-back against SpaceX but must also tackle sensitivities among public bodies involved, observers said.

Enders has likened the threat posed by SpaceX to a wake-up call that forced European planemaker Airbus to reorganize after rivals Boeing and McDonnell Douglas merged almost 20 years ago.

Without a new industrial set-up, Ariane 6 and the intermediary Ariane 5 ME will be a failure, he believes.

Les Echos newspaper, also reporting a new co-operation venture, said Airbus and Safran would propose a new technical configuration for Ariane 6 as part of the move. France and Germany have been at odds over the rocket's design, which must be resolved ahead of a ministerial meeting in December. (Editing by Gus Trompiz and Sandra Maler)

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