The UK Ministry of Defence (MoD) may cancel the Royal Navy's two £5.2bn aircraft carriers to cut costs.
BAE chief executive Ian King said the MoD had requested to look at scrapping one or both of the 65,000t replacement warships under construction.
"We are at a critical point with some programmes where if you cut back those programmes you would not be able to reconstitute that capability in the UK," he said.
The MoD is reviewing in order to cut its £36.9bn annual budget by 20% and the defence equipment is cumulatively £36bn over budget, according to the Daily Mail.
The two carriers, HMS Queen Elizabeth and HMS Prince of Wales, are due for launch in 2016 and 2018 respectively.