ROME/PARIS, Oct 21 (Reuters) - The board of Italy's

Leonardo gathered for a crucial meeting on Tuesday to

review a tentative deal to forge a new European satellite

manufacturer with its existing partner Thales and rival Airbus

, people familiar with the matter said.

Barring a late setback, the three companies could announce

as early as this week that they have reached broad alignment on

plans to pool their loss-making activities into a new venture to

fend off competitors led by Elon Musk, two of the people said.

However, after more than a year of tricky talks over the

balance of power, valuations, anti-trust issues and most

recently a political crisis in France, there is no guarantee of

a sign-off and the timing remains unconfirmed, they warned.

None of the companies agreed to comment.

Reuters reported on Monday that the three companies had

agreed the framework of a deal, subject to board and regulatory

approvals, with further detailed steps to be implemented later.

Once seen as pioneers of commercial space, Europe's top

satellite firms - Airbus and a pair of ventures

controlled by Leonardo and France's Thales - have been

dwarfed by tech rivals led by Musk's SpaceX and a deeper shift

in the market towards cheap satellites in low Earth orbit.

The talks mark the latest attempt to tie together fragmented

European assets and draw inspiration from a decision by France,

Italy and Britain to set up the missile maker MBDA in 2001.