In the biggest shakeup in Europe's aerospace and defence sector in more than a decade, Britain's BAE Systems and Airbus-owner EADS said they are in advanced talks to create an industry giant that would overtake rival Boeing in sales and contend with shrinking defense spending in Europe and the US.
The proposed deal could kick-start a wave of consolidation in the sector, as companies vie for shrinking defense budgets.
Boeing CEO Jim McNerney said the Chicago-based aerospace leader isn't threatened by such a merger. "I don't see this as something that is going to threaten us fundamentally."
An EADS-BAE merger would create an entity with more balanced commercial and military operations, a model that Boeing has followed for some time.
While the complex deal faces obstacles, US government officials were not likely to block it, according to sources.