PARIS – Airbus Group and Safran will form a 50-50 joint venture to produce a new family of launch vehicles that seeks to keep Europe competitive in the global market for lifting commercial and government payloads.

As leading contractors on the Ariane 5 heavy-lift rocket, the companies will retain key roles in their legacy activities, combining the expertise of Airbus Defense and Space (formerly Astrium) in launch vehicles and Safran’s propulsion work through its Snecma and Herakles motor divisions.

The agreement was formalized June 16 with the signing of a memorandum of understanding between Safran Chairman and CEO John Paul Herteman and Airbus Group Chief of Strategy and Marketing Marwan Lahoud in the presence of French President Francois Hollande, according to a release issued by the Elysee Palace the same day.

The agreement aims to capitalize on design work already underway for a next-generation rocket led by the European Space Agency (ESA) and French space agency CNES as they prepare for a key budget meeting in December, when the 20-nation ESA will decide whether to fund €1.2 billion ($1.6 billion) to complete work on a midlife upgrade to the Ariane 5 – the Ariane 5 ME – in time for a mid-2018 debut while financing a successor, the Ariane 6, which is tentatively estimated to cost €4 billion to develop by 2021.

"This is a major step toward the consolidation of industry," according to the Elysee announcement, which noted that the space sector supports some 16,000 jobs in France, notably at Airbus, Safran and European launch consortium Arianespace, which is majority held by the French state.

"The state co-shareholder of Arianespace will accompany the dynamic process initiated by Airbus-Safran and work in harmony with the new entity to prepare the future of the Ariane 6 launcher," the release said, adding that Arianespace President Stephane Israel, CNES President Jean-Yves Le Gall, Eutelsat CEO Michel de Rosen and ESA Director-General Jean-Jacques Dordain were present for the signing of the agreement.

With the first phase of the joint venture transaction expected to be complete before the end of the year, it remains to be seen how the combined entity will consolidate manufacturing operations or reduce its workforce.

As Ariane 5 prime contractor, Airbus is expected to play a lead role in Ariane 6 development. Smaller and less capable than the Ariane 5 today, Ariane 6 is designed to make use of the restartable Vinci cryogenic engine being developed by Safran’s Snecma motors division to power the upper stage of Ariane 5 ME. The current Ariane 6 design also incorporates solid-fueled lower stages likely to make use of technologies developed by Europropulsion, a subsidiary of Safran and Italy’s Avio that builds solid rocket motors for the Ariane 5 and ESA’s Vega light launcher.

However, ongoing differences over the design of the mostly solid-fueled Ariane 6 as well as new budget constraints imposed by some of ESA’s largest financial backers have thrown into question whether the current solid-liquid configuration will be palatable to ESA members, notably Germany, which as ESA’s second-largest financial backer is seeking a larger role in Ariane 6.

In the meantime, Airbus Group and Safran said the new joint entity will begin combining its respective civil program contracts and major launch vehicle activities in support of the new launcher’s development.

"Subsequently, industrial assets would be contributed over time in order to create a world-class, fully-fledged jointly owned competitive company," Airbus said June 16.