UK and French satellite firms eye space race merger

TECH
UK and French satellite firms eye space race merger

What happened?
Yesterday French satellite company Eutelsat confirmed its in merger talks with British rival OneWeb. The deal would create a strong rival to Amazon and Elon Musk in the race for connectivity in space.

Space race
Musk’s SpaceX, with its Starlink project, and Amazon, with Project Kuiper, are the two most prominent companies in the race to create a giant satellite network beaming broadband internet back down to earth. It’s estimated that the “satellite connectivity” market could be worth about $16bn by 2030.

A union of Eutelsat and OneWeb, which was valued at $3.4bn in its last funding round, would strengthen their position to take on those two tech giants.

Political sensitivity
Both firms have governments as major shareholders. The British government rescued OneWeb from bankruptcy in 2020, taking a 20% stake. While the French and Chinese governments hold stakes of 20% and 5% respectively in Eutelsat.

According to sources close to the deal, the UK will keep special rights over OneWeb even after the deal is completed, including the right to veto clients for security reasons. The UK will also be able to veto business that could compromise the "Five Eyes" intelligence alliance, a joint cooperative of the major spy agencies of Australia, Canada, New Zealand, the UK and US that is frequently pitted against China.

Zooming out: Investors aren’t so keen on the tie up. News of the potential deal sent Eutelsat shares down nearly 17% as there are major concerns that the competition regulator could block the deal. And for investors Eutelsat is a stable, low-growth, cash generative business and a tie up with OneWeb - which needs $3bn in investment and has little revenue -  would be a risky and expensive strategy.

TRAVEL
Ryanair issues gloomy travel warning as it swings back into profit 

 

What happened?    
Yesterday Ryanair reported a €170m profit for the three months to the end of June, up from a €273m loss from the same period last year. But Europe’s largest airline, by passenger numbers, warned that it has “zero visibility” for the next 12 months and that rising fuel costs mean the days of cheap air fares could soon be over.

Travel is back but the recovery is fragile
After two years of Covid restrictions the travel industry has bounced back in 2022. In the past quarter Ryanair flew 45.5m passengers, 9% more than in 2019.

Ticket pricing for bookings for the July-September, typically Ryanair’s most profitable period of the year, are tracking ahead of 2019 levels.

But the industry is facing a series of headwinds
Airports have struggled to recruit enough staff to cope with the rebound in travellers leading to flight cancellations and chaos at airports. This disruption could weaken consumer confidence for booking foreign holidays.

The war in Ukraine and a resurgence in global demand following the easing of lockdown restrictions has caused an upswing in oil prices and as a result jet fuel. At the start of 2020 a barrel of crude oil was $40, it’s now around $100. Ryanair says a high fuel environment means the ‘days of the €9.99 fares are probably coming to an end’.

Not forgetting that Covid isn’t over. Ryanair says it’s hopeful that the high rate of vaccinations in Europe will allow the industry to fully recover. But there is a risk of new variants in autumn that could derail the recovery like Omicron did last year.