The challenge was formidable: to build a combat aircraft intended to succeed the Rafale and the Eurofighter while meeting the specific requirements of each partner.

France required an aircraft capable of carrying nuclear warheads while remaining light enough for carrier-based operations, whereas Germany favored a larger airframe capable of carrying a heavier payload.

Compounding these design difficulties was a battle for leadership of the project, estimated at 100 billion euros, between Dassault Aviation and Airbus, the latter representing German and Spanish interests.

'German Chancellor Friedrich Merz and French President Emmanuel Macron discussed the project last week during a meeting in Montenegro and concluded that there was no prospect of breaking the stalemate', notes Chloé Lemarie, equity analyst at Jefferies.

According to DZ Bank, the likely termination of the Franco-German FCAS air combat program in its current form is ultimately a positive decision, as the differences between Airbus and Dassault were clearly insurmountable.

The note highlights that FCAS would not disappear entirely, as certain components such as the 'Combat Cloud' are expected to continue, while several scenarios remain possible for a future European combat aircraft.

According to the broker, the current financial impact for Airbus remains limited, amounting to the low hundreds of millions of euros. In a future configuration of the program, the group could even be entrusted with greater responsibilities.

The analyst confirms a Buy rating on Airbus shares, with an unchanged price target of 227 EUR.

'For Dassault Aviation, the short-term impact appears limited as the group already benefits from a record order book for the Rafale and is now concentrating its efforts on the F5 standard, expected by 2035. For Airbus, this decision ends several years of industrial gridlock but could also pave the way for other European collaborations in the field of future air combat systems', analysts at All Invest Securities noted this morning.

'Following the abandonment of the fighter component of the program, we continue to favor the French partners within the Rafale team, namely Dassault Aviation (Buy), Thales (Buy), and Safran (Hold), over the German participants MTU Aero (Buy) and Hensoldt (Buy)', Jefferies concluded.

This morning, Airbus shares are down 0.3% while Dassault Aviation is trading 1.1% lower in Paris.