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Bill Radke: The defense contractor Northrop Grumman has dropped out of a major defense deal. Northrop Grumman and its European partner, Europe's EADS, parent of Airbus, say there's no point in pursuing the $40 billion deal. They say the Pentagon has rigged the bidding for Boeing. Marketplace's European correspondent Stephen Beard joins us live from London. Hi Stephen.

Stephen Beard: Hello, Bill.

Radke: I understand this is one of the largest deals in U.S. defense history?

Beard: That's right -- it's a contract to supply the U.S. Air Force with 179 air refueling tankers. These are the so-called flying gas stations. Northrup Gruman and EADS actually beat Boeing to win the contract back in 2008, but there was a big political backlash at the time. The contract was withdrawn and put out to tender again. Now, EADS and Northrup Grumman say we're pulling out because the bidding is skewed in Boeing's favor.

Radke: Skewed how, Stephen? What are they accusing the military of?

Beard: Well they say the DOD is already making it pretty clear that it favors the smaller Boeing tanker -- and that in spite of the fact that many analysts say the Airbus tanker may be a better plane. Howard Wheeldon, aerospace expert with the BGC Group, says EADS is right to feel aggrieved with the U.S. authorities:

Howard Wheeldon: I think it is regrettable, that what we are seeing here, and I fear, I loathe to use the word, but what we're seeing here is protectionism.

Pulling out of this potentially very lucrative contract is another big setback for EADS. Today it reported a net loss of about a billion dollars for last year, largely due to probelms with its super jumbo, the A380.

Radke: That's Marketplace's Stephen Beard in London. Thank you, Stephen.

Beard: OK, Bill.