0913 airbus
A businessman walks past an advertisement for Airbus during the second day at the Farnborough International Airshow in Hampshire, southern England, on July 10, 2012. - 

Jeff Horwich: Things could get interesting in the global business battle between aerospace and defense contractors in the U.S. and Europe. Europe's airline kingpin -- that's EADS, parent company of Airbus -- is in merger talks with the continent's biggest defense contractor, BAE systems. That could put U.S. leaders Boeing and Lockheed Martin playing a little defense themselves.

Here's Marketplace's Stephen Beard.

Stephen Beard: The planned merger is in Europe, but it’s largely prompted by what’s happening in the U.S. If it goes ahead, it will give EADS a boost in its long rivalry with Boeing. The new merged European group would have sales far outstripping those of the American company. And for British Aerospace -- a major supplier for the Pentagon -- the deal would offer diversification away from the U.S. defense market.

Trevor Greetham of Fidelity Investments.

Trevor Greetham: British Aerospace is very much linked into defense, and defense in the U.S. in particular. And there will be defense cuts in the U.S. probably next year. Therefore, it’s an area they are looking to kind of get some exposure away from.

But this is very far from a done deal. It’s about defencs and aerospace, so governments will be closely involved. The U.S., the U.K., France and Germany will all effectively have to approve the merger.

In London, I’m Stephen Beard for Marketplace.