LONDON (Reuters) – Airbus is looking at opportunities to create scale in defence, space and particularly satellites markets, CEO Guillaume Faury said on Sunday.

Airbus and France’s Thales are exploring a tie-up of some space activities as new competition disrupts the sector, two industry sources said last week.

The sources said preliminary talks, first reported by La Tribune, were focusing on the companies’ overlapping satellite activities.

“We are looking at opportunities to create scale, and that’s true in defence, that’s true in space, and in particular on satellites,” Faury said, ahead of this week’s Farnborough Airshow.

“We would be happy to find ways to create scale in the space environment in Europe in general.”

Airbus and Thales Alenia Space, in which Italy’s Leonardo holds a 33% stake, are Europe’s largest makers of satellites for telecommunications, navigation and surveillance.

Demand for their geostationary satellites is increasingly under pressure as traditional manufacturers face competition from massive constellations of expendable satellites in low Earth orbit, like the Starlink network of Elon Musk’s SpaceX.

Airbus last month took a 900 million euro ($980 million) charge on its struggling space services business, on top of 500 million euros last year.

Faury told analysts at the time the company was “evaluating all strategic options” for its space business including restructuring, co-operation, a portfolio review and potential merger and acquisition options.