The merger, whose financial details were not disclosed, comes as Starlink and Amazon's Project Kuiper are racing to deploy satellite networks to offer broadband internet access in vast regions of the world lacking reliable connectivity.
Airbus, Thales and Italy's Leonardo said they aimed "to strengthen Europe's strategic autonomy in space, a major sector that underpins critical infrastructure and services related to telecommunications, global navigation, earth observation, science, exploration and national security".
It would not include space launchers such as Airbus's Ariane rockets, which, unlike the Falcon launchers of Musk's SpaceX, are not reusable.
Many Falcon flights have carried the more than 8,000 satellites that currently make up Starlink.
In response, the European Union is planning to create its own internet satellite constellation called IRIS2, set to become operational in 2030.
While it would have just 300 satellites, IRIS2 would focus more on "secure communications", European Space Agency director Josef Aschbacher told AFP in an interview this month.
"Europe needs it absolutely urgently," he said.
Thales said separately Thursday that an initial 100-million-euro ($116 million) engineering contract with satellite operators for IRIS2 would allow it to halt planned job cuts in its space operations.
- 'Excellent news' -
Annual revenues for the new European satellite group were estimated at 6.5 billion euros based on current operations, and its order backlog would represent over three years of projected sales.
It will be headquartered in Toulouse, southern France, where each company already has major production and R&D facilities.
If approved by regulators, the new project, called Bromo, would be operational in 2027, with Airbus owning a 35 percent stake while Thales and Leonardo would hold 32.5 percent each.
The companies build, deploy and service a range of telecommunications and navigation satellites that will underpin the rollout of high-speed networks worldwide.
"This partnership aligns with the ambitions of European governments to strengthen their industrial and technological assets, ensuring Europe's autonomy across the strategic space domain and its many applications," the CEOs of each company said in a joint statement.
Finance Minister Roland Lescure of France, which along with Germany and Spain owns minority stakes in Airbus, called the deal "excellent news".
"The creation of a European satellites champion will increase investments in research and innovation in a strategic industry and reinforce our European sovereignty in an area of intense global competition," he said in a statement.
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