By Tim Hepher

(Reuters) – The head of the European Space Agency (ESA) has said the region’s space industry needs the muscle to compete globally, warning Europe risks falling behind in the new space race.

Major European satellite makers are looking at teaming up as they face competition from Elon Musk’s Starlink, with Airbus this week announcing 2,500 job cuts in defence and space.

In an interview, ESA Director General Josef Aschbacher declined to be drawn directly on the preliminary merger talks but said ESA wanted an industry capable of competing on the world stage balanced with good value for European taxpayers.

“I know that we have the capacity and excellence of the European industry. What I’m more worried about is … how and what does Europe need to succeed on the global stage?” he told Reuters at a global space meeting in Milan this week.

“My goal … is to make sure that we develop a solid, robust European space industry that can serve our own citizens’ needs, but also be a success on the world market,” he said.

Talks between satellite rivals Airbus and Thales, which also include Thales’ Italian space partner Leonardo, emerged in July in the wake of disappointing results in the sector and a series of charges at Airbus.

The manufacturers have traditionally been geared towards one-off satellites in geostationary orbit, deploying ambitious but costly technology. They face increasing competition from small satellites in low Earth orbit built at much lower cost.

Previous efforts to combine the satellite activities of Airbus and its main rival Thales Alenia Space, two-thirds owned by Thales and one-third by Leonardo, have run up against opposition from the European Commission, industry sources say.

Telespazio, in which Leonardo owns two thirds and Thales the rest, competes with Airbus in satellite services.

ESA is Airbus’ largest space customer.

Fast-growing competition has triggered a regulatory debate over whether the market is a global or European one.

“It is really for industry to organise itself as it sees fit, but from a European Space Agency’s point of view, I will always accompany industry’s processes to be successful,” Aschbacher said.

“Being successful means using taxpayers’ money in the best possible way to create a maximum impact for our industry for European needs, and obviously also to put them in good conditions for the global competitive base.”

Aschbacher was speaking at the International Astronautical Congress, which ends on Friday after China showcased a rock sample from the moon’s far side earlier this week.

Elsewhere, global attention was captured by the novel capture of a rocket’s booster back to its launch pad using giant mechanical arms, during a test flight of SpaceX’s Starship.

“Europe needs to accelerate its activities in space, needs to raise its profile, needs to raise its ambition, otherwise we will risk falling behind,” Aschbacher said.

ESA this week launched its ‘Moonlight’ Project to provide communication and navigation services for more than 400 future missions planned by space agencies and private companies.

(Reporting by Tim Hepher; Editing by Mark Potter)