Western Europe Aerospace & Defense: Challenges and opportunities in the European Space sector

Research evidence excerpt

Western Europe Aerospace & Defense: Challenges and opportunities in the European Space sector

Western Europe Aerospace & Defense

07 July 2026 Citi Research

Shape of the industry

Europe's traditional industry is dominated by a handful of large primes—Airbus

Defence & Space, Thales Alenia Space, ArianeGroup and Arianespace—while a

growing "New Space" ecosystem is emerging around small

launchers, constellations and data services.

Long-term growth is likely to be concentrated in LEO constellations, Earth-

observation platforms, defence space systems and sovereign communications

initiatives such as IRIS2 (a planned European multi-orbital sovereign

communication constellation), while traditional GEO communications remains

strategically important but exhibits lower growth characteristics. We believe

the launcher market will likely be challenged by the very low cost to orbit offered

by Space X and Europe may increasingly focus this as an important sovereign

capability and servicing esoteric orbits, rather than commercially competitive

against the very low cost US offerings.

Europe's space industry is transitioning from a legacy GEO-based industrial model

toward a broader ecosystem centred on LEO constellations, defence applications

and sovereign communications networks. Among the three value-chain segments:

• Launchers offer strategic importance but face the greatest economic

pressure.

• Satellite manufacturing remains Europe's strongest global competitive

advantage, led by Airbus and Thales Alenia Space but Europe needs to

successfully transfer from a bespoke, GEO model to a high volume

production LEO model.

• Satellite services provide recurring-revenue profiles providing

connectivity, Earth observation and government services, with Eutelsat,

SES and Telespazio.