A lot of the noise in the proposed €38bn merger between BAE Systemsand EADSis that it is all about the defence industry. That is a mistake. The jewel in this combination would be Airbus. Over 40 years it has come from nowhere to rival Boeingin commercial aeroplanes. Airbus accounted for two-thirds of EADS’s first-half 2012 revenues of €25bn, and half of its earnings before interest and tax. It has an order book of €500bn and net cash of €10bn. Why would a business riding an upswing in civilian aircraft wish to merge with an ex-growth defence company?

An obvious threat to Airbus from any merger is that management will take its eye off the ball. A legitimate criticism of Airbus is that its financial performance has lagged behind its technological prowess. Its operating margin after exceptional items was 3.3 per cent in 2011, about a third that of Boeing. It has faced costs from the delays to the A380 superjumbo. But Airbus looks to be overcoming those hurdles; EADS has targeted a 10 per cent margin across the company by 2015. That will require a fully focused management. BAE’s margins are higher – it is guiding for between 8 per cent and 14 per cent across the group for 2012. But it has spent the past few years cutting back and huge US defence spending cuts make the next few years uncertain. Bringing EADS’s military divisions into the picture will give BAE more heft but little extra earnings momentum. True, there is scope to squeeze out more profit – EADS’s Cassidian division has an ebit margin of just 4 per cent. But any gain will be, well, marginal.