Cuts could lead to another round of consolidation within the industry, Hudson said, particularly within small and medium-sized businesses.
Commercial aviation could also become a target area for acquisitions, she told Reuters, adding this is the sector BAE is most excited about due to relationships with industry partners such as Boeing.
Regarding sequestration, Hudson told reporter Andrea Shalal-Esa the company could lay off 4,000 out of more than 30,000 BAE employees based in the U.S.
The company may have to send layoff notices to all employees working on government contracts before the Nov. 6 presidential election, Hudson said in the interview, because it cannot isolate programs that would be affected by the cuts.
BAE and other large contractors have campaigned to help prevent the additional defense cuts under sequestration on top of the $487 million in cuts mandated by the Budget Control Act.
Half of the $1.2 trillion sequester scheduled to start Jan. 2 will come from defense if it happens.